Service innovation: Embracing design thinking in the business model

As Prof. Christopher Tucci of EHL’s Executive MBA program would have us know, “no matter what sector you are in, no matter what kind of company you have, services are more and more important, but they are messy”. This is the challenging backdrop against which companies are turning to service innovation to set themselves apart from the crowd. Even if companies are able to tame the complexities of service provision, simply developing a new product-service bundle is no longer enough. Today’s market requires services to be thoughtful and human-centered. Rethinking their business models gives companies the chance to take a step back from how things have been done so far and embrace the principles of design thinking to shape their future.

The challenges of service provision and service innovation

Compared with product-based businesses, those that rely more heavily upon service provision face a unique array of challenges. Without claim to exhaustiveness, these challenges can be boiled down to:

• Intangibility

In the absence of any palpable or tactile property of service deliveries, the assessment of a service’s value is more challenging compared to product offerings. In that sense, services are evaluated on the basis of their performance rather than product characteristics. Consequently, customers must be given confidence in a service to be feel encouraged to engage in a service purchase.

• Simultaneity

Service provision and consumption occupy the same timeframe. This means that it is impossible to split up supply and consumption, with the service provider inseparably bound to the customer at that very moment. This not only increases the onus on staff (or, as the case may be, the technological interface) to represent the company well, as well makes the customer an integral part to the service concept and delivery.

• Perishability

Services are available during a pre-defined window of time, after which the prerequisite resources, processes and systems may no longer be available. Think rail travel: once the train has left the station, that connection is no longer an option for would-be travelers to consume. When it comes to service provision, you only get one opportunity to make a good impression.

• Variability

Even if a customer was to request the exact same service he or she enjoyed the previous week, this week’s service would be slightly different due to unavoidable variations in peripheral factors. Against this backdrop, businesses must strive to provide excellent service at all times. They may even embrace this lack of absolute replicability by offering customized services.