I’m always on the look out for ways of discovering service innovation. Especially if I can do that in a more systematic manner than, say, innovation competitions.
Gallouj & Weinstein have an interesting model. They define the output of service as a set of external characteristics. Achieving those is through a combination of customer and provider competences. Perhaps together with some technical characteristics as well.
After a quick look at the model we’ll jump straight in with an example. We look at how the Swedish Swish payment service can be described as service characteristics. Then we look at what each characteristic means and any gotchas there are. Finally we explore the four common interaction patterns: intangible service, intagible service with co-creation, tangible service with co-creation, and self-service. And we article look how a goods can be described in this model (if we agree with service-dominant logic via that a goods is just a distribution mechanism for service).
Having a more formal model to describe services is useful in two ways. First we can describe and understand a service avoiding ambiguities of written text. And secondly, we can use it to hunt for new innovations. In fact, we use this model to describe service innovation in my article Service Innovation – the basics.
- We can summarise our definition of service as:
- A solution (offering) to a job a customer wants to fulfil
- occuring as interactions between the customer and a combination of service provider elements
- those elements are employees, goods, or systems of the provider
- Gallouj and Weinstein’s model of services is made up of
- external characteristics – this is the solution/offering as seen from a customer’s perspective
- technical characteristics – this items used internal to the service delivery. This can be goods or systems of the provider.As well as processes etc.
- provider competences – the individual skills of the provider employees needed to deliver the service
- customer competences – the individual skills the customer needs to have in order to co-deliver the service
- We find four common patterns of interactions of service characteristics used in a service
- intangible service – seeing a doctor
- intagible service with co-production –
- tangible service with co-production –
- self-service –
Let’s start by remembering how we are defining a service.
What is a service – a description
Remember our preferred definition of what a service is? For easiness, I show it again in Figure 1.
Whilst this is a nice description, I want to see if I can tighten it up a little. And that means getting a little more formal and mathematical-ish. But hopefully not in a scary way.
What is a service – a more formal description
We can pull out of our definition above a few things. First there is a description of the solution to a customer problem. “I need to pay someone by transferring money instantly from my bank account to theirs”, for example. And to do so, I, the customer, need to interact with something. Perhaps the solution providers employees. And/or physical resources/goods/systems of the service provider. Such as the mobile application to be used in requesting the money transfer.
And this is what the model in Gallouj and Weinstein’s Innovation in Services paper introduces. Have a look at Figure 2.
It may look a bit daunting at first sight. But I’ll walk you through it.
Let’s match the model back to our definition. First of, over on the right hand side we have the external characteristics. This lists the characteristics of our service solution (or offering), i.e. the description of the service. Secondly, over on the far left we have the customer competences . These are the skills and resources the customer needs to bring to the service delivery.
The other two components of the model, in blue, are related to the provider. First, what provider competences are brought to the service delivery by the providers employees. Second what resources/goods/systems of the service provider will be used internally to the delivery of the service – the technical characteristics.
Arrows between characteristics represent the interactions. And the notion of co-creation is represented by placing the customer and provider competences together. In a way reminiscent of matrix multiplication.
Not all services will have all interactions. The simplest service, for example, is one where only the service providers competences give rise to the external characteristics – Figure 3 – seeing a doctor, for example.
Before we go into detail on these characteristics, let’s take a few moments to look at an example
An example of a service described in our model
Swish is a popular mobile application in Sweden. This service’s offering is to guarantee an instant and secure transfer of money between 2 bank accounts using mobile telephone numbers as a proxy for the accounts. That’s to say you can easily send 500kr to +46 708 99128. It is used for both consumer-2-consumer and consumer-2-business payments. And is a substitute for cash and credit/debit cards.
In Figure 4 I’ve tried to capture this service as our model’s set of service characteristics. (it’s integer to be illustrative rather than 100% correct).
As you can see in Figure 3 the external characteristics are instant payment, secure and at no fee. A neat summary of the service offering.
In our customer competences we see a common situation. We have two customers: the payer and the payee. Both need some competences in order to use the service. For now we keep one list of customer competences. But we could turn one list into two, or three, or whatever is needed.
The provider competences are empty. This might sound strange, but provider competences are the individual skills brought to the table. And there are no interactions with employees in this service. Things you might have thought of as provider competences, such as build and operate a mobile application, are in fact better seen as technical characteristics.
Now we have the service characteristics we can look at the interactions that take place. These you can see in Figure 5.
Here in Figure 5 we’re quite detailed. For example we are saying that customer competence C’1 interacts with technical characteristic X2. Which in turns leads, with some others, to external characteristic Y1. Or in English: the payer and payee know how to link the phone numbers to bank accounts; the system can perform that action; and the outcome sports the secure payment between two bank accounts.
OK, with that simple example under our belt you hopefully have a more comfortable feeling about this model. Now we dig a bit deeper to see some of the nuances.
Experiencing the service: the External Characteristics
We, as end users, experience a service through the services external characteristics (sometimes called the final characteristics). Normally we write the list of external characteristics down as (Y1 Y2 … Ym). And in Figure 1, you can find them over on the right hand side. Although, when we are not so interesting in particular items in the list, we might just write Y for short. With the intention that Y = (Y1 Y2 … Ym).
You can think of these as characteristics such as the performance, opening hours, the job done etc. And we can relate these back to the external marketing promise of the marketing services triangle. Or the new service concept of our services innovation model. As such, we can consider the business model as part of these external characteristics. And so a change in external characteristics relating to the business model could be considered a business model innovation.
Next we have the competences used in delivering the service, C and C’.
Bringing competences to bear: end user and organisation working together to deliver the service
If you look to the left of the model we see an important aspect of services captured. This is that both the end customer and provider usually work together to provide the service.
In general we say that the provider’s competences are brought to the service delivery. And the end user may bring competencies too, but not always.
If you look again at Figure 1, you’ll see we list these end user competences as C’ = (C’1, C’2,…C’q), and the provider competences as C = (C1, C2,…Cp). The q and p recognising the imbalance in competencies both actors usually bring in service delivery. We show the co-value generation by having the two competence lists together in the model.
Competences are individual
A point to understand is that competencies are associated with individuals. They are skills an individual has. And they are not the processes, routines or ways of working the organisation has. Those, in this model, are technical characteristics.
It could be that beneficial aspects of users’ skills/competences later get captured as routines for the benefit of the whole organisation.
Types of competences
Provider competences, according to Gallouj & Weinstein, are roughly categorised as:
- scientific and technical competences
- internal and external relational competences
- combinatory or creative competences (i.e. those that combine technical characteristics into coherent sets and subsets)
- operational (or manual) competences.
Individuals in the provider get these competences from various sources. Often they come from the repeated interaction with customers. Though they are originally sourced from education, training, and experience.
New customer competences implications
An interesting aspect of end user competencies is that innovations may require the end user to gain new competencies. And that has an implication to the provider. The provider may need to exert considerable effort to help the end user gain these competences. Or the provider may choose (need?) to hold off rolling out an innovation until the size of the end user change is reduced. For example the end user gains those needed competencies, or similar, in another market/industry. Otherwise the provider risks being a victim to innovation resistance (in worst case outright rejection).
Using Technical Characteristics: the products, processes, people, places involved
Last, but not least, we have the technical characteristics of the service. We define these as the tangible and intangible assets used internally to deliver the service. By tangible I mean scissors and hair dryer of the hairdresser. And intangible I mean the processes and frameworks business consultants use to provide advice.
Also included are the servicescape including (digital) client interfaces.
There’s a subtlety here too. The technical characteristics may be defined/constrained by someone in your ecosystem. For example, your client interface might be a mobile application. Now you are impacted by Android and iOS user interfaces and the choices the handset developer makes (in positive and negative ways). It will be interesting to watch how this plays out as we head towards virtual worlds and increasing augmented/artificial reality.
Delivering the Service: competences and characteristics working together
Finally we can look at the delivery of the service. And we see that it is done through a combination of the competencies and the technical characteristics, in order for the end user to experience the external characteristics. There are a few combinations that can occur, and in Figure 2 I show the four most common.
I’ve updated the terminology lightly sine we now talk about co-creation rather than o-production.
Let’s look at these four common ways, starting with a pure intangible service.
An intangible service
A good example of an intangible service is when we need some legal advice. Here the external characteristics would relate to getting particular advice on legal issues. They might include whether the business model is hourly-based, no-win-no-fee or pro bono. You can envisage that the advice given is going to be heavily reliant on the training and experience the lawyer has (his competences, C). But is unlikely to mae use of any of our, as a customer, competences (C’).
I also include some technical characteristics in my view of an intangible service. Whilst there are unlikely to be any tangibles used in the service directly, there is always the client interface. And in this case, it could be the offices the lawyer has. Or even the web site they have that dispences simple advice.
Gallouj & Weinstein suggest this as well as this type of service being an intellectual one, such as consultancy. It could be a manual service such as emptying waste baskets, or a masseur using only their hands. They also point out that the provision and quality of the service (Y) is highly dependent upon the ability to implement and organise the provider competences (C). As such, innovation in organisational design is important.
Pure intangible service with co-creation
More commonly though a service will be driven by combining customer and provider competences. In the eyes of Service-dominant logic the beneficiary of the service is always involved in value co-creation. For example, engaging a head hunting firm to fill a role. In such a service both actors bring different competences to the delivery. Without either the service has no value. As a customer you know the role you are looking for. Whereas the head hunting company has the individuals who can find a selection of potentially right people for you.
This type of service is likely to have some process/routine behind it in the ways of working of the head hunter firm. The client interface is likely to be in an office. We could also argue that there is a third actor as the head-hunter has two “customers”. First the customer who hires them to find someone. Second the people being head-hunted.
Tangible service with co-creation
We can think of tangible service with co-creation as the full blown version of a service. Here we have co-creation by combining actors’ competences as well as tangible technical characteristics to deliver the service.
Let’s imagine you are an architect that wishes to build something. You have your architecture competences and need to find a building service that has competences in building. They’ll also of tangibles in the form of bricks, tiles and machines to dig holes and construct things.
There are also services where there are no provider competences involved. These are the so-called self-service services.
In such cases it is a combination of customer competences (C’) and technical characteristics (X) that provide the experience (Y). There are no provider competences involved.
An example is self-service checkouts in supermarkets. Here the customer uses the scanning system to scan their goods and pays. No supermarket staff need to be involved.
An aside: goods in service-dominant logic
[I wonder if this is coming too early?] When we later look a service-dominant logic we’ll find that goods are seen as distribution mechanism for services.
We might think, for example, that a chocolate bar is just a goods that we buy as we are hungry for something sweet. in SD-logic we would see a chocolate bar as providing a service. The chocolate bar is fulfilling a customer’s need to have a sweet nourishment.
We can explain this with this model. The chocolate bar maker has used their provider competences (C) to create a goods (X) that “freezes” this sweet nourishment service. The external characteristic is now tied to that X. I show this with no explicit co-creation. But it could be argued that with the high volume of turnover of sweet nourishment services that usage figures quickly feedback if the goods is delivering the service or not.
So, there we have it. A more formal way of describing a service. And one that appears to work for all types of services we can think of.
It’s important to remember that provider competences relates to individuals. Whereas the processes and routines that may give a strategic benefit are classed as technical characteristics. Which also includes goods that are used in the internal delivery of the service.
And also that customer competences need to be acquired by the customer to use the service. This implies you might have to perform some form of training. Alternatively, a customer may gain a competence in another market/industry that they expect to use in yours.
We use this model when we look at what innovation in service means.