Work in Progress

The Big Picture…

It’s time to revisit and update den Hertog’s 20 year old model of service innovation. It says a service innovation affects some combination of dimensions (concept, client interface, delivery system and technology). As well as the linkages, called capabilities, between them.

den Hertog's original service innovation model - a service innovation can include 4 dimensions: new service concept, new client interface, new delivery systems and technology options
The original den Hertog service innovation model (2000)

That model came from looking at service innovation in Knowledge Intensive Business Services (KIBS), such as lawyers, accountants, consultancies etc. I want to apply it in the wider context of service in general. As well as reflecting a service-dominant logic view. Whilst there, I want to fold in more recent theories, such as Christensen’s job-to-be-done theory and Blue Ocean Strategy.

With that in mind, I propose the following updates:

  1. Uplifting technology dimension and tech capabilities as encompassing everything
  2. Introducing a data dimension together with data exploitation capabilities
  3. Including an ecosystems dimension and partnering capabilities as encompassing aspects
  4. Taking into account that service innovation – in the service concept and client interface dimensions – needs to help a client get a job done and/or remove a hindrance
  5. Noting that Blue Ocean’s strategy canvas can help us with the comparison aspects that den Hertog refers to
  6. Introducing the need to minimise resistance to innovation

Resulting in the following model:

My updated den Hertog Model

Before we jump into describing my proposed updates, let’s quickly remind ourselves of den Hertog’s original model.

Reviewing den Hertog’s 4-dimensions services innovation model

I take a deep look at den Hertog’s 4-dimension model of service innovation (in Figure 1) over in this article.

But in short, a service innovation occurs in a combination of one or more dimensions – new service concept (a new value proposition), new client interface (where the service meets the client), new service delivery systems (processes, people, organisation etc) and technology options (tech push/pull that might be enabling the innovation).

den Hertog's original service innovation model - a service innovation can include 4 dimensions: new service concept, new client interface, new delivery systems and technology options
Figure 1: Den Hertog’s original 4-dimension model of Service Innovation

And linking the dimensions are three capabilitiesHR, marketing & distribution, and organisational capabilities. These relate to the execution capability of the organisation.

Finally, not shown in figure 1, are the comparisons. These compare each dimension with the existing situation. For example, the new service concept should be compared to the characteristics of existing and competing services.

My Updates to den Hertog’s 4-dimension model

20 years is a very long time. And technology is now undoubtedly a driving enabler behind “Service is eating the world“, often backed up by the exploitation of data.

We live in a world where we need a better definition of innovation.

Figure 2: An updated definition of innovation

It is a world that needs to addressing Christensen’s Job to be done and removing hindrances. A world where Kim & Mauborgne’s Blue Ocean Strategy. One where we recognise value is co-created, where we can only offer a value proposition, and where a service is the co-ordination of resources (which may not all be in your organisation). And where minimising innovation resistance is essential (though often forgotten)

I believe we can subtly update den Hertog’s 4-dimension model to reflect this modern world. Arriving at the model shown in Figure 3.

Figure 3: Updated service innovation model

The updates I make are:

  1. Uplifting technology dimension as encompassing everything, and highlighting there are technological capabilities of the organisation
  2. Introducing data as a dimension, together with the capabilities the organisation has to exploit that data
  3. Introducing Ecosystems as an encompassing dimension; together with the capabilities of partnering
  4. Taking into account that service innovation – in the service concept and client interface dimensions – needs to help a client get a job done and/or remove a hindrance
  5. Noting that Blue Ocean’s strategy canvas can help us with the comparison aspects that den Hertog refers to
  6. Introducing the need to minimise resistance to innovation

Let’s start with uplifting the technology dimension.

Uplifting Technology and Technical Capabilities

Whilst den Hertog linked linked his 4th dimension of technology to the other three dimensions, he appears to give it less prominence. This might be due to the time he was writing in or that his main focus was knowledge intensive based services.

If we now take a wider view of all service and reflect on our current world, then we observe that Service is eating the world. With apologies to Horowitz’s view that “software is eating the world”, it is actually service, mostly powered by software (technology).

Figure 4: Moving the Technology Dimension to have a stronger focus as well as including Tech Capabilities as a capability of the organisation

And so, I move the technology dimension to be all-encompassing across the other dimensions (see Figure 4). Yes, this is a subtle change, but one that reflects the role of technology today.

Additionally, I introduce tech capabilities. It’s not entirely clear to me that den Hertog had that in mind in the original model; now it is clear. Imagine you decide to implement an innovation based on blockchain or machine learning. To successfully do so, your organisation needs access to the tech skills involved. Of course, you could hire them in or partner to acquire those skills.

Den Hertog’s later 6-dimension model moved technology options to be part of the new delivery system dimension. Actually, he creates a new delivery system (technology) dimension separate to the new delivery system (organisation, process, people)) representing the original dimension. However, that risks missing that technology is used both in the new service concept and the new client interface. And that it might be the client that brings the technology to the service. For example, using a mobile app requires the client to bring that mobile device to the service provision.

Another increasingly important dimension in service innovation is the exploitation of data.

Introducing data as a key dimension

They say data is the new oil (though some might argue it is not). I think it is hard to not see data as important. It drives deep learning, artificial intelligence, recommendation engines. All of which require vast amounts of data to be useful. You can use it for setting operational and strategic directions. And usefully to see the impact of your innovations. (A/B testing etc).

Figure 5: Adding Data as a dimension along with data capabilities as a capability

And so, I introduce Data as a dimension, linked to the other three dimensions and supported by our uplifted technology dimension.

Along with having data as a dimension, I introduce the need for data exploitation capabilities. These are your organisation’s skills in collecting, exploiting and understanding data. Your strategists, data scientists, AI/machine learning engineers, etc.

You can acquire data from your customer interactions. Alternatively, you can buy data sets (in some cases, there are datasets available for free). Or, you can ally with partners to get access to their data for the length of the alliance.

Including the Ecosystem as a dimension

A service is the co-ordination of resources to create a value proposition. Those resources might be owned by the provider – the goods, web-site and shopping cart of an online retailer). Or they might be bought – credit card processing or smoother payment service such as Klarna. Or they might come from an alliance – how the goods are shipped to the customer.

This is well known in economics as transactional costs economics. Where you want to minimise the potential for “hold-ups”. But we could perhaps enhance a little in our service mindset to talk about perception. Customers tend to link the whole chain together – buy something from Amazon and any delivery problems often get seen as Amazon.

This is why Amazon, for example, looks to extend their service vertically to deliver themselves. This aims to remove the potential for delivery companies to hold Amazon to ransom. But equally allows Amazon to give better customer experience.

Figure 6: Including Ecosystem as a dimension, along with the associated partnership capabilities of the organisation.

I, therefore, as did den Hertog in his later 6-dimension model, include partnerships and alliances (under the heading Ecosystem) as a dimension. And, similar to the technology dimension, I see this as an all-encompassing dimension (see Figure 6).

Along with this new dimension come some new capabilities. This time it is the capabilities your organisation has relating to identifying, evaluating, forming and maintaining partnerships and alliances.

Beyond these updates, it is useful to understand where my new definition of innovation fits in – where we help beneficiaries make progress.

Helping Beneficiaries make progress

Innovation, according to my definition, helps “beneficiaries make progress” in a manner” better to which they can now”. This reflects both Christensen’s Job to be done theory as well as resolving hindrances (which means doing a job better than something else, including nothing).

If your innovation does neither of those, then, sorry to say, what is the point of it? It is never going to help the customer (the beneficiary). So we need to always keep this in our minds when looking for and explaining innovations.

Figure 7:

This is applicable to the service concept and client interface. But not (directly) to the service delivery system. That is because the client doesn’t interact with the delivery system. Making changes there will consequently have no impact. [this needs revisiting – could, for example, speeding up the delivery system be beneficial to client without making any interface change?]

We can also see where Blue Ocean strategy fits into our picture.

Sailing to Blue Oceans

Blue Ocean Strategy’s strategy canvas is a useful tool for us to find service innovations. It essentialy helps us perform the dimension comparisons that den Hertog talks of.

Let’s imagine we’re a new photo-sharing social site, called Snap. And we’re going to compete with Instagram and Facebook. Oh, we’re also back in 2017.

On the strategy canvas, we use the x-axis to list industry characteristics. And on the y-axis, we plot the relative strengths of our competitors plus ourselves. For our example, we might identify it looks like Figure 8.

Figure 8: Several photo-sharing social sites as viewed in the Blue Ocean Canvas

You’ll notice that Snap (in yellow) has quite a different profile to Facebook and Instagram. Some aspects, such as “use in the moment” are raised; others such as “ease of use” are lowered. There are even aspects that Snap eliminates – such as “view past content”. And we could find some characteristics to create. Just having a difference is not the point, the point is it is these differences that were driving Snaps growth – teenagers loved the fact it was hard to use (friends found new features and spread as word of mouth) and that past content was not viewable (no pressure to perform).

Figure 9: Blue Ocean strategy canvas in relation to the updated

The link to our model comes from remembering den Hertog’s model had comparisons as well as considering Gallouj & Weinstein (1997) work. This later work views a service as a set of characteristics, which I look at in “A model for describing a service and better still systematically discovering service innovations“).

And we can loosely think of a new service concept, new client interface and new delivery systems as comprising most of those characteristics. Therefore, we can draw these characteristics on the Blue Ocean strategy canvas. And from there apply Blue Ocean’s Four Action Framework (raise, lower, eliminate, create) to explore for innovations.

But, we nearly always forget about innovation resistance. And we should not.

Minimising Innovation Resistance

We often forget (or don’t even realise we need to address) innovation resistance. There are three types of innovation resistance: postponement, rejection and opposition. And they are driven by the adopters’ perceived physical, economic, functional, and social risks. As well as the innovation challenging traditions & norms, usage patterns or perceived image. This is summarised in Figure 9. And detailed in my article “Innovation Resistance“.

Figure 10: Hierarchy of Innovation Resistance

It is important that we minimise innovation resistance in our innovations. And we do so at the service concept and client interface dimensions. It might be argued that it should also be addressed in the technology dimension. I would that as technology dimension encompasses the previous two, it is better to think of there. It is rare that a technology innovation doesn’t drive/enable a new concept/client interface.

Figure 11: Addressing innovation Resistance in the service innovation model

However, we also need to address innovation resistance between the client interface and delivery system. If we are unable to reduce resistance to innovation in the delivery system, it is likely to impact the client interface (where people are involved in the delivery system).

Using the model

We can summarise our updated model as shown in Figure 12.

Updated den Hertog service innovation mode; with Technology, Data and Ecosystem as new dimensions, and tech, partnership and data exploitation as new capabilities. We also fold in Job-to-be-done theory, hindrance maps, blue ocean and addressing innovation resistance.
Figure 12: The updated den Hertog model

There are a variety of ways we can use this model. And I have an article on each:

  • Describing an innovation
  • Searching for innovations in a systematic manner
  • Understanding the complexity of an innovation’s implementation in an organisation
  • Engineering down innovation implementation complexity
  • Justifying enabling projects
  • Portfolio management

**** Heavy Editing below this ****

Wrapping up

Den Hertog’s 4-dimension model from 2000 is a perfectly serviceable model for service innovations. However, in the 19+ years since publishing, the world has changed and some updates only add to its usability.

We added a new dimension (data) and promoted an existing one (technology). This reflects the technology/data-driven world we find ourselves in. We also introduced the need to describe what the business does in a non-myopic way. Doing so helps us spot the growth opportunities that are needed for innovation and which innovation can drive. Finally, we recognise that partners/alliances are key to service delivery. However, we keep them as part of the “new delivery system” rather than create a new dimension.

The extended model is highly versatile. And this article links to several articles where we show this.

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