The Handbook of Service Innovation

We begin by asking: what is innovation, and note the problems of defining both context and novelty in the usual essentialist answers. Within the literature, nonetheless, a range of types of innovation is identified, which we delineate. One way of trying to address the critique of innovation as essentialist is to try and demarcate degrees and dimensions of innovativeness. Given the specificity of this Handbook with service innovation, we next consider this particular type of innovation, looking especially at the literature associated with the view that

profit

is increasingly to be found in what is termed Service-Dominant (S-D) logic. We conclude the chapter by reiterating some problems in innovation research that any further extension of the term to “service innovation” will have to contend with.

Services are fast overtaking manufacturing to form a dominant proportion of the world economy. Service innovation is increasingly seen as a vector of sustainable growth and competitive advantage at the firm-, industry- and economy-level. Innovation started evolving as a key discipline of research over the twentieth century. Initially, innovation research was predominantly focused on science and technology and the new product development approach for commercializing ideas and inventions mainly in the manufacturing industry. With the increasing growth of services in today’s organizations and economy, the importance of understanding service innovation concepts and practices has been on the rise. Over the last two decades, researchers have hence been directing attention to innovation in the context of services. Today, service innovation has evolved into a vast field encompassing the study of intangible processes and dynamic interactions among technological and human systems that lead to managerial and organizational change in services. The literature on service innovation is expanding into a diverse and cross-disciplinary body of knowledge scattered across economics, marketing, organizational science, and management perspectives. The purpose of this chapter is to cut through this complexity and diversity in the streams of extant service innovation literature, and provide a holistic overview of the literature in this rapidly growing field. Organized across three broad themes: Overview of Service Innovation, The Dynamic and Systemic Process of Service Innovation, and Management of Service Innovation; this chapter presents a consolidated guide to the service innovation concepts and practices.

Open service innovation enables business service firms to realize service innovations through engaging in external partnerships. The results of a review of studies investigating open innovation in a business service context indicate that prior work (1) primarily drew on a learning lens to explain service innovation and (2) adopted three levels of analysis, that is,

alliance

,

alliance portfolio

, and

network

, resulting in three disconnected research streams. In this chapter, we review each research stream and suggest future research opportunities. In addition, we suggest that factors tied to the three analysis levels directly and interactively influence service innovation. Therefore, we propose a multi-level open service innovation framework that can guide future research.

An increasingly global and connected market environment sees many service providers struggling to find a competitive position and to grow their business sustainably. The shift from a product-dominant logic to a service-dominant market logic pressures businesses to look for new and effective ways of engaging with customers throughout the innovation process. At the same time, managers are faced with so called ‘wicked problems’ that call for more creative problem solving and lateral thinking in corporate innovation practices. In this chapter we discuss how recent developments of open innovation and design thinking can be applied to services and assist in service innovation. We explore how the co-creation of value is itself a service innovation, and the simultaneous impact of such co-creation practices through relational conversations with customers and a broad range of stakeholders. Co-creation becomes an element of the service offering, drawing customers into the value web and blurring the boundaries of the firm. We do this by discussing three cases as examples of open co-created innovation, and reflect on implications for service innovation, especially where propriety of the service innovation may be ambiguous. In comparison with existing open innovation frameworks, we propose a co-creation approach to open service innovation that goes beyond common ‘inside out’ or ‘outside in’ dichotomies.

Given the fuzzy nature of services, it proves challenging to describe precisely what element of a renewed service offering can be regarded as innovative. Many existing characterizations are criticized for being too limited to capture distinctive features of new services accurately. This chapter describes the possibilities offered by a multidimensional approach to service innovation. Adhering to differentiated frameworks of where novelty can occur allows for comprehensive measurement and comparative analyses across sectors. Additionally, a multidimensional approach provides a basis for the application of system and complexity theory to service innovation. The rich but largely unexploited potential of this perspective is illustrated by testing a hypothesis regarding the relation between radicalness and innovation performance. Using survey-data from 341 firms, we operationalize a multidimensional conceptualization of service innovation and show that firms renewing a higher number of dimensions indeed tend to yield a higher percentage of their turnover from innovation. Further implications of treating services as multidimensional systems are discussed.

Knowledge Intensive Business Services or KIBS are defined as customized and innovative business services. In this chapter, we argue that not only innovation and customization are complementary in KIBS, but also that replication via standard and modular services determines a KIBS firm’s performance. Using fuzzy sets qualitative comparative analysis (fs/QCA) on a sample of 319 KIBS firms, we explored the best-performing configurations resulting from a combination of different service innovations with different service types. In doing so, we separately considered product and process innovations and four different types of services (customized, standard, standard with minor customizations, and modular). Our results emphasize the complementarity between process innovations and service standardization on a firm’s profitability, while highlighting the complementarity between process innovations, service customization, and modularity of a firm’s growth. The work described in this chapter contributes to the KIBS literature and provides deeper insights into the interaction between innovation and service types.

Services dominate our societies, and for many firms, concentrating on services is a method to cope with the challenges of price-based competition. This is especially true for manufacturing firms that decide to become more service-oriented. In this context, service innovation or new service development is a highly important task. Whereas the process of new service development itself has already been researched extensively, there is still limited research on the kinds of

competences needed to foster successful service innovation

. This chapter develops a conceptual framework that helps firms to evolve crucial competences for a systematic service innovation process. The service-dominant logic and the competence-based perspective are used as theoretical foundations for this competence framework. The framework distinguishes between

employee

,

organizational

,

network

, and

community competences

. It provides both a structure for firms to systematically analyze and improve crucial competences for service innovation, as well as a research roadmap for future work on service innovation competences.

The importance of innovation for companies to gain competitive advantage is widely acknowledged. While earlier studies have emphasised the critical importance of idea assessment as part of the new product and new services development process, the topic has been under-represented in academic research recently. In this paper, we aim to provide an overview on the depiction of idea assessment in services research. For this, we start by exploring the representation of the topic in question in recent service innovation capability frameworks. On a more operational level we reflect service-related publications on criteria, information sources, group compositions and approaches for idea assessment. Finally, by reporting on a case study with a German financial services provider, we introduce serious games and enterprise crowdfunding as two novel approaches for assessing service ideas. Overall, we find that internal, service providing staff should play a major role in the assessment of service ideas. Surprisingly, classical portfolio management approaches making use of deliberation in small management boards seem to be the predominant method discussed in the literature and applied in practice. Mechanisms which are designed to involve larger crowds into idea assessment exist, however, are not yet widespread. The two novel approaches show promising avenues for involving service providing staff into idea assessment in a motivating way.

In order to exploit the emerging opportunities in the marketplace or in society, service organizations are increasingly interested in new innovation models and effective innovative practices. The involvement of users and stakeholders is an essential aspect in these models. This is also the basis of the service-dominant (S-D) logic. This framework replaces the traditional producer-centric view with an actor-to-actor perspective and considers the integration of resources an essential activity in the co-creation of value. Even though S-D logic has apparent implications for theorizing about service innovation, managerially-oriented research in this area is at an early stage. Product- and producer-centric practices and in-house R&D are still the focus of innovation studies, and they also dominate innovation efforts in organizations. The particular interest of this chapter concerns the integration of user-based and employee-driven perspectives in innovation. The two perspectives have until now developed separately, the latter having very few linkages to the S-D logic discussion. However, grassroots-level employees are in a key position as receivers of user insights and as collaborators with users. We suggest a

new integrated approach

by analyzing the user–employee interaction in innovation both theoretically and in two empirical cases.

Identifying opportunities for service innovation and exploiting them requires novel capability building in the rapidly changing business environments. This study extends the existing literature on dynamic capabilities in service innovation by operationalizing the capabilities of sensing and seizing new opportunities. The purpose of this chapter is to examine how futures thinking and design thinking can facilitate service innovation from the dynamic capabilities point-of-view. As a result this chapter provides a conceptual framework for service innovation process that is grounded on foresight and service design. To synthesize the literature into a new conceptual framework, this chapter is based on a large body of literature from four burgeoning fields of study: dynamic capabilities, service innovation, foresight, and service design. The key point the chapter wishes to make is that a forward look at new methodological perspectives in service innovation is needed and that integrating the methods and tools of foresight and service design to the service innovation process provides a promising new avenue to future success.

Knowledge-Intensive Business Services (KIBS) are specialized suppliers of intermediate inputs with expertise in locating, developing, combining, and applying generic knowledge to specific needs. The sectors in which these firms operate have experienced extraordinary growth over the last two decades both in terms of employment share and of value added, and are often referred to as key hubs within the modern knowledge-based society. This chapter offers a review of scholarly perspectives on the growth trajectory of KIBS, and elaborates an empirical analysis to explore in detail commonalities and differences across this diverse group of sectors.

One of the principal drivers of productivity growth is innovation, which includes not only technological but nontechnological innovations. A key element of nontechnological innovation is skills which drives a large part of productivity improvement at the organizational level. Scholars have enunciated that innovation in services is brought to market through collaboration, asset orchestration, technological adoption, and knowledge-based competencies. To this effect, the role of human capital in promoting service innovation is identified in the innovation literature. Further, service innovation in a service ecosystem is centered on the

resource

-

based

definition, where services are treated as an application of competencies, making use of knowledge, skills and experience of all stakeholders. In addition, the

process

-

based

definition of service highlights the important role customers play in the service production process, where the customer themselves are an input to the service delivery process. Amidst resource limitations and acute competition, service firms need to therefore not only upskill the human talent of their employees and customers, but also reconfigure, renew, and redeploy resources and capabilities on an ongoing basis. This indeed highlights the importance of capabilities required to facilitate the creation of sustainable competitive advantage, which are not ubiquitously available in large proportion amongst service organizations. It is in this context that we identify and explore in this chapter the role played by service firms’ learning capacity to deploy operational and dynamic capabilities across service systems. This chapter highlights an entire suite of dynamic capabilities which are made up of higher order competencies, such as relationship capital, organizational learning, collaborative agility, entrepreneurial alertness, innovative capacity, and customer engagement, which are instrumental to service firms for innovation.

This chapter discusses the role of the emergent technology Web 3.0 (Semantic Web) in service innovation, addressing technological-options dimension of the den Hertog (

2000

) service innovation model, and technology as vector of influence of the Nayar-Lanvin innovation framework (2013). Semantic Web is a new technology, still emerging, and has wide innovation impacts in domains like health care, research, marketing, and IT itself. It is a major step forward in Web evolution and is already finding application in consumer technology such as mobile phones (Siri in iPhones, for example), and not just in esoteric research. Web 3.0 could also help develop geographic variations in the nature of innovation. At the core, Semantic Web is a means to improve interoperability between systems, applications, and data sources. Emerging personal computing paradigms such as ubiquitous and mobile computing will benefit from better interoperability, as interoperability is an enabler of higher degree of automation of tasks that would otherwise require end-user intervention.

Firms are seeking new avenues for organizational agility in response to rapidly changing market environments. Research literature in strategic management indicates that firms may gain a competitive advantage in such situations by concentrating on their dynamic capabilities—i.e., product flexibility and agility in organizational transformation in response to rapidly changing market conditions and customer requirements. Service-oriented computing (SOC) has emerged as an architectural approach to flexibility and agility, not just in systems development, but also in business process management. There is, however, a lack of critical research assessing the practical usage of SOA as a technology and business infrastructure, and its efficacy in achieving organizational agility. This chapter examines the conduits through which service-oriented architectures (SOAs) may exert influence on dynamic capabilities within firms, and then empirically investigates this relationship in the context of organizations. The results could potentially assist in evaluating if and how the adoption of service-oriented architectures may help achieve key dynamic capabilities, giving the enterprise a competitive edge.

Health care is the largest service sector in many economies worldwide, but it lags behind other industries in the use of efficient and innovative approaches to both patient care and service organization. Thus, innovative, disruptive models of healthcare delivery that leverage current information, communication,and decision technology platforms in novel ways have the potential to change the practice of healthcare delivery and management. To satisfy the growing demand for medical care, several new models are currently being developed and piloted, such as online medical consultations, which do not rely on face-to-face visits as the sole model of care delivery. Alongside, the current patient-centered care imperative has also resulted in the use of portal technologies, among others, to inform, engage, and empower the patient in shared decision making. In this chapter, we briefly introduce different types of digital service innovations in health care and provide some details about these current streams of care delivery innovations, particularly in the primary care setting given its broad influence on overall healthcare services. Furthermore, we focus on the potential of online care delivery that includes web portal services for patients and online medical consultations beyond simple email communications between patients and physicians. We conclude with a brief discussion of the implications of these models for the future of healthcare delivery in the digital age.

Business-to-business and consumer-to-business transactions in the banking industry have witnessed a dramatic shift in the method of payment over the last two decades. This rapid growth had been initially fuelled by the early adoption of electronic payments such as credit and debit cards but now with the advent of mobile and internet technologies, non-cash transactions have grown even more rapidly. These technological developments have spurred a range of service innovations within the banking industry that has not only improved consumer convenience and reduced staffing and bank operating costs, but also increased the need for greater vigilance around security and fraud detection. This rapidly changing technology is also facilitating the entry of new payment providers in the financial sector with innovative products to meet the changing needs of consumers and businesses. The consequence is a rapidly changing banking industry.

This chapter explores the intrinsic characteristics of services and service systems and presents systemic approach to produce service innovations. The chapter consists of elaborating the characteristics of services and the principles of systemic development, discussing service matrixes, service systems, service strategies and business models, and special challenges related to the development of services and service innovations. Services are always produced in service systems consisting of combination of service personnel and information systems. Customers are involved in these systems by interacting with the front end of service organization. The key issue in service development and innovation is to build the right architecture to capture all aspects of service systems from customer relations to back office information systems. The desired user experience is created by all aspects of service systems including the contact with personnel, the user interface, and the trustful and efficient information system. In the chapter, we present an approach that starts from the needs of people and through categorization of service types and service strategy types develops understanding about service systems and their dynamics. The proposed approach also provides insights into design thinking and its implications to service development and radical service innovation.

Product-Service System (PSS) innovations represent a promising approach to sustainability, but their implementation and diffusion are hindered by several cultural, corporate, and regulative barriers. Hence, an important challenge is not only to conceive sustainable PSS concepts, but also to understand how to manage, support, and orient the introduction and diffusion of these concepts. Building upon insights from transition studies (in particular, the concepts of Strategic Niche Management and Transition Management), and through an action research project, the chapter investigates the role of design in introducing sustainable radical service innovations. A key role is given to the implementation of socio-technical experiments, partially protected spaces where innovations can be incubated and tested, become more mature, and potentially favor the implementation and scaling up process.

This chapter provides an overview of select literature on servitization, introduces and defines the concept of servitization, and shows why servitization is becoming a required strategy for manufacturing firms. It discusses the key aspects of servitization as innovation along several different dimensions. The chapter also touches upon what type of services manufacturing firms can offer, as well as the key journeys towards a fully servitized manufacturing firm, and key challenges on these journeys. Servitization is increasing rapidly, and is likely to continue to do so since both the defensive and offensive drivers of servitization are increasing in strength. The literature also points out that the transformation process into a servitized manufacturing firm is both a complex and complicated one, and failure rates are not insignificant. On the positive side, opportunities abound to offer services throughout the value chain, but care has to be taken to ensure that the manufacturing firms’ business model is modified to ensure the implemented service activities are profitable.

Innovation is about introducing something new. It occurs when we see the possibilities and opportunities others are missing. Sometimes, in order to see and understand our world better, we have to remove ourselves from a direct relationship with the subject we are observing and instead rely upon abstractions for needed distance, a new perspective and objectivity. For this study, an ARCHITECTURAL lens is applied to the field of Service Design to provide a new perspective on the subject and create the needed conditions for innovation. First, products and services are defined and architecture is positioned as a hybrid field with qualities of both. Next, architectural lessons from the Greeks and Romans are related to service design to provide criteria for approaching and assessing services. Finally, five architectural typologies are analyzed and used as service design models. These typologies offer insights and considerations not found in current service design methodologies, ideally providing the newness needed to foster innovation.

Design integration programs have been established and supported by governments of nations around the world, including the UK, Korea, Denmark, Taiwan and New Zealand. The UK’s 2005 Review of Creativity in Business, commissioned by the Chancellor of the Exchequer and conducted by Sir George Cox of the Design Council, alerted attentive countries to the idea that design can enable innovation as the conduit between creativity and application. Design integration programs aim to increase the competitiveness of business through the application of design services and design thinking within the business model. Typically design integration programs provide auditing, mentoring and business modelling with selected companies to plan and implement strategies to utilise professional design services and apply design thinking methods to develop new products, services or processes. This chapter will review four government supported programs in Australia aiming to integrate design capabilities to stimulate business innovation and contribute to economic growth. The program reviews will consider the policy discourse, strategies, and instruments used within the four design integration programs. The chapter will conclude with a discussion of opportunities and limitations of design integration programs and provide some recommendations for the development of future programs.

Service innovation is focused on customer value creation. At its core, customer-centric service innovation in an increasingly digital world is technology-enabled, human-centred, and process-oriented. Service innovation requires a cross-disciplinary, holistic, and end-to-end approach to new service design and development (NSD). In particular, it calls for a service strategy-aligned integrative design framework for NSD. This chapter proposes such a framework to systematize service innovation design steps, end-to-end, from strategy to customer experience design to deliver on the espoused customer value proposition. From analysis of the extant literature, the paper correlates the underlying theories and principles of disparate, but interrelated, aspects of service design thinking: service strategy, concept, design, experience and architecture into a coherent framework for NSD, consistent with the brand value. Application of the framework to NSD is envisioned to be iterative and holistic, accentuated on continuous organizational and customer learning. The preliminary framework’s efficacy is illustrated using a simplified telecom case example.

This chapter reviews various concepts captured under the term Circular Economy, drawn together from various service innovation perspectives. The circular economy is built on the principle that all intermediary outputs that are of no further use in the firm’s value-creating activities are provided as inputs into other firm’s value-creating activities. The chapter identifies complexities around monetising value, monetising non-monetary benefits, different attributes that consumers and customers’ value in the services space, and the substitution effects that services can have on product sales. From insights and methodologies developed in the service design area, combined with the ability to measure and compare alternative attributes from a value performance point of view, it is identified that further research is needed to facilitate both a higher adoption and a greater success rate among services developed. The chapter explores service innovation in the circular value chain as a growing domain of activity, and points towards a need for development of an appropriate business model framework within a circular economy for firms to engage in service innovation and delivery.

The pursuit and achievement of success in service innovation constitutes a critical strategic imperative for many organizations. Yet, service providers typically encounter a myriad of issues and challenges when attempting to develop and deploy new strategies, means, and offerings. Among the most vexing of issues and challenges for service providers is the determination of how best to manage their services and servicing innovation efforts. Leveraging empirical findings obtained through field-based examination of the innovative initiatives of North American symphony orchestras, we highlight critical service firm operations strategy and operational system-related principles that providers must collectively manage in an orchestrated manner in order to strategically benefit from their systematic services and servicing innovation efforts.

This chapter is about co-creative practices that can be used for the purpose of service innovation. It starts with an introduction to our core assumption that innovation is a deliberate activity and can be enabled and triggered through staged co-creative practices. The main reasons for co-creative practices are first, bringing different people together to share, make sense and to collaborate, and secondly, to rethink current and explore future possibilities. In line with Kelley’s ideology, “You can prototype just about anything. What counts is moving the ball forward, achieving some part of your goal”. We highlight the open-ended exploration practices familiar to designers, in which the practice of identifying problems goes hand in hand with creating solutions. The basis for exploration in this chapter is in engaging people in reflective and creative dialogues, and to situate activities in order to set frames for reflection. In practice, the co-creative practices emerge and evolve in a non-linear progress of stages that are partly overlapping and in relation with each other. This chapter, however, is organised through the use of four lenses: (1) insight generation, (2) concept exploration and development, (3) converging towards a specification and (4) transformative and implementation processes. The chapter introduces a number of examples and applied co-creative practices from various fields of service design. They address the co-creative character of many well-known tools such as role playing, context mapping, design games and experience prototyping. Finally, the chapter sums up the main considerations for the applications of co-creative practices, defining the purpose, utilising co-creative characters and developing facilitation capacity.

In many economic sectors the users of existing products are the largest source of innovation, particularly so in the service industries. Users as an important source for innovations combined with the advent of web 2.0 have increased interest in online innovation tools. Nevertheless, the understanding of how to systematically generate, converse and exploit user and customer knowledge in the service development process remains limited. The purpose of the paper is to present a framework of capabilities and related management practices to the effective management of different types of online service innovation tools. The framework highlights the development of three types of service innovation capabilities and related processes: (a) online service exploration capability in order to find, direct and motivate users to contribute, (b) online service conversion capability in order to select, develop and appropriate users’ contributions, and (c) online service exploitation capability in order to transfer, integrate and combine users’ contributions into service offerings. In order to effectively utilize online service innovation tools a company need to develop these capabilities and related management practices. The framework and the management practices are built mainly on previous research on customer co-creation, user innovation and online innovation tools but also on case studies performed by the authors. The framework and management practices will be illustrated by a case study on a major telecom operator company’s use of an innovation web site in order to generate ideas, test and design prototypes of new mobile services.

It is not clear what kind of customer involvement leads to optimal service innovation. An integrative approach is needed so as to link the practices of how a firm involves customers in service innovation to the advantages it is seeking. We apply previous research into service-dominant (S-D) logic and open innovation in order to study the practices for involving organizational customers in service innovation. Our empirical research is based on case studies on six globally operating technology companies known for their innovativeness and service-oriented business with their organizational customers. We describe customer involvement practices based on their openness as

in

-

house development and supplier co

-

operation

,

development based on customer insight

,

co

-

development with customers

, and

development by customers

. We find that, in addition to obtaining information, ideas, and development partners, these customer involvement practices are used for

shaping the context of value co

-

creation, fostering network effects, living with contingency

, and

engaging in business with meaning

. We also contribute by bringing the research streams of S-D logic and open innovation closer together.

In a broad sense, service offshoring is a specific type of service innovation because companies engaging into service offshoring will have to inevitably make changes in a number of areas, including internal procedures, business model, service delivery, technology, target customers, service content, legal environment of service, and so on. In addition, service innovation may also drive service offshoring, in that innovative service companies are more likely to internationalize and be successful that way. Effectiveness of service offshoring is largely determined by whether the company is able to choose the ‘right’ foreign location to perform the service. In this book chapter we extend research on location choice of service offshoring to the subnational level. We examine the patterns of distribution of offshoring activities in China, and determinants of the location selection at the city level. Our empirical study confirmed that the location of offshoring of services firms in China is highly influenced by location-specific factors, in particular the presence of a large educated workforce in the city.

This chapter examines the innovative evolution of Ireland’s internationally traded services sector in the context of the increased significance of servicing international markets by foreign companies in Ireland. The policy adjustments made to ensure that Ireland continues to be a competitive location for such activity are enhanced by service innovations arising from the public sector. Some of the difficulties of understanding the innovative reconfiguration of multinational subsidiary activity involved in internationally traded services relates to traditional conceptualisations of services as being a distinct sector of activity mainly confined to a specific domestic economy. Ireland provides an interesting case study of growing involvement in internationally traded services, with multinational subsidiaries under increased pressure to be more innovative in servicing international markets through service innovations across borders. Innovative tax policies together with innovative managerial practices such as transfer pricing have enabled multinational subsidiaries in Ireland to evolve their operation more globally as well as remain profitable in a relatively high cost location.

One of the challenges for any firm is a sustainable approach to value creation. As firms aim to create additional value for their clients, their output comprises a combination of supplementary service activities supporting the development of, or increased utility of, a good or a service. However, products comprising goods and/or multiple service components are complex and add to the logistical and operational challenges of product delivery across international markets. Although the use of innovative technologies for international service delivery is available to the firm, some degree of direct interaction may still be required for various types of supplementary services, such as customised design, installation, maintenance and on-going after-sales service support. By undertaking an exploratory case study of four Australian firms, operating in industrial markets, this chapter seeks to assess the use of service innovative technologies in the delivery of supplementary services to international clients. For all case study firms, the delivery of supplementary services formed an important component of their international strategy. In particular, the provision of maintenance services was assessed by senior management as their company’s competitive advantage. A key finding is a preference for direct delivery of services, in conjunction with technology. This is for two reasons—first, not all service-related problems can be successfully resolved via technology; second, is for the firm to retain the ability to provide customer relationship building, specifically for the purpose of enhancing value creation.

Since the outbreak of the Global Financial Crisis (GFC), businesses and governments in developed economies are more focused on a single metric than ever before: sustainable affordability. The survival depends on cutting back on the wasteful ways of the past, and is an opportunity for reinvention through, perhaps, creative destruction (Schumpeter and Backhaus

2003

). Consequently, an opportunity to learn and adopt more frugal and sustainable ways in innovating has emerged. In this chapter, we provide a framework based on lessons in frugal innovations derived from emerging market experiences. Frugal innovation results in affordable products and services through minimizing the use of resources or by leveraging them in new ways (Govindarajan and Ramamurti

2011

; Bound and Thornton

2012

; Radjou et al.

2012

). The lessons from successful frugal innovations in emerging countries are important—they provide a continuous and sustainable innovation approach—and help businesses and governments in the developed economies stay relevant to their stakeholders. Besides, more inclusive services innovation—as seen in examples from India, China, Africa, and other emerging countries, may ultimately ensure established businesses have a way of providing “good enough” service experiences, at low cost, and more importantly, in shortest time to benefit.

This chapter addresses the management of the service innovation process in the public sector. Traditionally, innovation activities have been viewed in economic terms as the allocation of resources to innovation, while scholars have consigned the innovation process itself to a “black box.” Service users and frontline staff are the most common sources of innovation in the public sector. Service co-design and co-production, in consultation with citizens, is a radical method of public sector renewal. This chapter discusses how the local government sector can use change management to better benefit from user-driven innovation in public sector renewal, with examples provided from the United Kingdom, Denmark, and Finland, who are pioneers in user-driven innovation. In addition, these new forms of user-democracy are linked to budgeting and decision-making routines related to public services. Empirical data were drawn from the Finnish Customer-oriented Service Network Project in Helsinki, referred to as the Lauttasaari Project, which is discussed in detail in terms of change management, decision making, and innovation management.

This chapter critically examines innovations and ‘reforms’ in university service provision and their management, focusing on Australia as illustrative of broader global trends associated with the integration of higher education (HE) into the international market economy. We argue that more than the usual economic, technocratic approaches to service innovation are required because of the complexity and unpredictability that characterize the entire field of knowledge-based services. Instead we establish an interdisciplinary social science-based approach drawing from critical organization studies and complexity perspectives. To apply our alternative framing of both the issues and the intellectual tools required for effective analysis, we examine three dimensions of innovation, those in the policy, governance and academic work processes through which Australian universities have been transformed over the last 25 years. Our contribution suggests that dominant approaches to university ‘reform’ risk diminishing the creativity and critical investigation skills required for these institutions to advance service innovation and emerging forms of

society

, not just a ‘knowledge-based’ and ‘service-oriented’

economy

.

The operating environment of the public sector has undergone a fundamental shift towards a more competitive nature. As these changes accelerate, they are exerting considerable pressure on the government in terms of rising costs and ever-increasing need for innovative service offerings. In order to shed light on these contemporary challenges, this chapter will review and analyse a number of innovative service delivery modes observed in practice, including joint ventures with the private and not-for-profit sectors, public private partnerships, contracting out, franchising, and the use of social bonds and collaborative services. By presenting a new ‘business model’ designed specifically for decision makers in the public sector, this chapter will equip the readers with the means to better understand and manage public service innovations in the increasingly challenging environment.

The last four decades have witnessed increasing research, policy discourse and the investment in government programs to foster innovation within the private sector manufacturing and service industries. Despite the adoption by many governments of the language of complexity theory and systems thinking in business and organisational management, and a growing awareness of the breadth of contexts and outcomes resulting from the innovation process, a broader commitment to investments in supporting skills development and capacity building for service innovation in businesses have yet to catch up. This chapter examines the factors that have contributed to the perpetuation of a limited conceptualisation of the forms in which innovation contributes economic value, and the government policy instruments invested into foster and sustain a diverse regional innovation system. This tangle of academic discourse, policy rhetoric and government programs aimed to support innovation will be examined through a case study of South Australia’s strategic plan and the agencies charged with fostering and supporting innovation in the state.