ServiceFriday: Number One in Innovation – How Service Firms Can Sustain Innovation

ASU has been ranked number one in innovation by U.S. News & World Report for four consecutive years now. But how exactly does one institution continue to lead in innovation? To help answer, a similar question can be applied to the service industry: How can some service firms be the innovation leader in their industry, time and again, while others cannot?

A study recently published in the Journal of Services Marketing focused on this question and chose innovator Singapore Airlines (SIA) as the sole participant in a longitudinal case study spanning a 30 year period. The goal was to analyze and interpret the varying components of a leading, innovative service firm.

The researchers conducted interviews with senior and middle management, and also recorded field notes from observations, annual reports, archival records, industry reports, academic publications, and prior case studies on SIA. The results attributed SIA’s continued service innovation success to two broad categories: Institutional foundations and innovation-related dynamic capabilities.

Researchers discovered that the institutional foundations consisted of innovation climate, human capital, and resource configurations. The climate at SIA is steered by leadership that is unrelenting in stressing the importance of innovation, which resulted in a “strong innovation culture”. SIA’s investment in their human capital included rigorous and well-developed recruitment, training and development, employee engagement, and incentives. Through constant reconfiguration of company resources, SIA was able to adapt to “changing customer requirements, competitor activity and technology.”

Results indicated the existence of four broader aspects of dynamic capabilities that assisted SIA’s sustained service innovation: Embracing ambidexterity (e.g. SIA’s innovation department emphasized both service innovation and costs), institutionalizing learning and knowledge integration (e.g. SIA “embedded” employees, customers, suppliers, contractors, and design firms in the feedback process), orchestrating collaboration (e.g. SIA’s partnership with Panasonic for redesigning its’ in-flight entertainment system), and reinventing customer value (e.g. SIA became the first airline to put a double bed in a business class).

“Finally, an important and to us somewhat surprising finding is that the three identified institutional foundations and four dynamic capabilities seem to be stable over time. While terminology, technology, and contexts changed, the basic underlying foundations and capabilities remained largely constant.” researchers discovered.

Managerial implications

Service innovation grants firms a competitive advantage in their respective industries so management would be wise to implement change in order to create sustained service innovation. First and foremost, managers should focus on institutional foundations, starting with visionary leadership that builds a culture of innovation.

Second, they suggest managers examine and build the four categories of dynamic innovation capabilities within their own organization. Managers should:

• Evaluate their current strategic orientations and embrace organizational ambidexterity.
• Establish a framework for developing and managing knowledge and enhance the learning processes within the organization.
• Invest in collaborative ideation processes involving all relevant stakeholders internally (especially frontline employees) and externally (e.g. customers, business partners).
• Foster a culture of discontent with current services and solutions to constantly reinvent the customer value “offered in ongoing incremental innovation and periodic break-through new services.”

Learn more on how to sustain innovation by reading the full article at the Journal of Services Marketing. (A fee may apply.)