ServiceFriday: When Success Does Not Predict Success – Barriers to Innovation
Success breeds success. The old saw might seem logical, but it does not always play out in the services market. In fact, service firms that are already productive with existing services may not be able to replicate that success with new service innovation.
“Being productive in existing services increases a firm’s willingness to innovate new services proactively but decreases the firm’s capabilities of bringing these services to market successfully,” the researchers write. The finding is the result of an analysis of all service introductions in a single financial services market in Finland over a 14 year period.
Researchers discovered that highly productive service firms tended to be very proactive in pursuing innovation but lacked the capability to successfully introduce the services. The reason, they discovered, is connected to their accomplishments. “Managers at firms with high existing service productivity might be blinded by their achievements … when introducing new services,” researchers write. They found that productivity success created a gap between managers’ expectations and their actual market-oriented capabilities.
The researchers also found that firms with broad customer bases operating in mature markets may have trouble “matching their innovations to specific customer needs and carefully developing the innovations instead of relying on the demand of an already established market.”
Managerial implications
The research identifies three insights for service firms:
- Although innovation is challenging in firms that are already highly productive, firms that are not productive in their current operations can find opportunities to grow and succeed through innovation.
- Managers at highly productive firms may counteract the issues identified in this research by leading service innovation projects with caution and should warn their organizations against being “excessively optimistic” in launching those activities.
- Firms can reduce the risk of missing their goals for innovation by focusing on closely defined customer groups (versus the broad customer base) and targeting growing markets (versus mature) when introducing new services.
For the full article, see the Journal of Service Research. (A fee may apply.)