Innovating Services
The MIT Sloan Management Review has recently published an article by innovation pioneer Henry Chesbrough that today’s innovators will not want to miss. Called “Bringing Open Innovation to Services,” the article challenges all business leaders — even those who deal with products — to think of their business as a service provider. With services comprising more than 70% of aggregate gross domestic product and employment in the Organization for Economic Cooperation and Development countries, it’s time for a shift in vision.
To do so, says Chesbrough, requires moving away from a traditional product-oriented value chain and embracing an alternative approach to the customer which focuses on the fact that even when a customer buys a product it is often not the product itself the customer seeks but rather the effect that the product produces.
Chesbrough explains that in a services value web, there is not a simple linear process of material inputs being transformed into outputs and then shipped off to the customer. In such a sequence, service comes at the end of the process, just before the product gets to the customer. Instead, there is an alternate process that involves the customer and results in a customer experience. Open innovation works somewhat differently in services businesses, in part because the role of the customer is different in such businesses. Services are intangible by nature, so that customers often cannot specify exactly what they want. It is often much harder to measure the services that are delivered. And different customers might experience the same service differently.
Many open innovation concepts apply readily to services. Both core types of open innovation — outside in and inside out — can be applied to services, according to Chesbrough. But there are plenty of barriers to be aware of.
To review Chesbrough’s suggestions, as case studies from companies from LEGO to IBM and tips he provides, read the full article here. For a more in depth exploration of the topic, Chesbrough’s new book, “Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era,” will be available in January.
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