The Exciting World of Services Innovation Date:   Monday , December 31, 2007 Governments of most developed countries are spending billions of dollars on innovation to improve the quality of life of their citizens as well as to make their local industries more competitive in a Flat World. Most countries including India are seeing a growing services-sector contribution to GDP. For example, in the U.S. 84 percent of all the businesses are in services industries and accounted for nearly 85 percent of U.S. employment. Although the service sector in India does not have as large a proportion of GDP, its contribution has been growing rapidly. In 2005 the agriculture sector contributed to 24 percent of GDP, manufacturing contributed 31 percent and the service sector contributed to about 45 percent of the GDP. Hence it is important to focus efforts on Services Innovation as well. Services Innovation is mainly about creating newer experiences for the consumer using new technology, changed processes and more importantly, improved human factors. It is the design and delivery of new services, more efficiently in a fail-proof manner. Information and Communication Technologies (ICT) have been great enablers of Service Innovation. “Self Service”, one of the best service innovations has been made possible mainly because of advances in ICT. Services meant innovative use of the technology for automation, efficiency and productivity improvement. Most ICT users are now trying to leverage technology for creating new and unique experiences for their customers. So the expectation from technology is not only efficiency and productivity but design and creation of innovative new services as well. Professional services companies including IT services and solutions providers have a great opportunity to spearhead these innovation services. The growing global services economy offers several opportunities. For instance, by 2030 it is estimated that the working population as a percentage of total population in most countries will be on the decline. In India it will continue to go up. So, innovative Elderly Care will be a much-needed service in many countries. Design services will be another major opportunity, as an increasing need for customized products and services will necessitate shorter product cycles and a need for flexibility. Consumer goods such as cell phones, automobiles, and fashion accessories and tourism offer ample exemplification of these opportunities. Another example is that of design intensive manufacturing. The current often repeated model is that of “manufacturing in China and services from India”. However there is now new emerging thinking that talks of India becoming a hub of design intensive, low volume manufacturing. Design will be a major service that will actually create new manufacturing opportunities. Other examples include services around intelligent buildings, energy efficient environments, E-health networks, personalized food and intelligent transportation. Indian organizations can innovate in services not only to exploit those innovations within the country but to export those service innovations as well. Similar to India, the European Union has diversity in language, culture, consumption habits, climate and geographical terrain. India can be a good test bed for a variety of products and services that need heterogeneity. One such example is the case for clinical trials. Pharmaceutical and Biotech companies in India can leverage India’s vast genetic pool of patients and apply cutting edge information technology for drug discovery and discovery of new chemical and biological entities. They can also accelerate clinical trials in a far more cost effective manner. Services also offer excellent opportunities for entrepreneurs. Unlike in new product ventures, service organizations have low entry and exit barriers. Further, most product companies would need some element of customization for the product to be adopted by the customer and this would lead to a lot of opportunities for service organizations. Alternate delivery models such as Software-as-a-Service and Software Assembly also offer myriad opportunities for small service providers along the service delivery process. Characteristics of Innovation in Services Is Co-Creation intensive: All innovations require enhancement in features or added benefits, improvements in process and changes to the organization. Innovation in manufacturing is driven by product and process innovation and, to a lower extent, on organizational innovation. However service innovations offer more opportunities for organizational innovation as services have a large element of people interaction. Unlike products, services are intangible in nature and cannot be stored or inventoried. Services are information intensive and customer participation is a necessary condition for consumption of service innovation. Customers in many cases cannot own services as opposed to products. Therefore service innovation is “co-creation” intensive to a larger extent. Requires effective Knowledge management: As innovations in services are more people driven, organizations need to invest more in training and continuous enablement of employees. Service innovations are knowledge driven and have a higher degree of collaboration in comparison to manufacturing. They also involve influencing a larger ecosystem of alliance partners and customers. Encourages creation and re-use of service platforms: Organizations should also develop a services platform which gives rise to multiple services just as product companies try to offer multiple products from one product family platform. Needs innovative exploitation and commercialization models: Each new service definition or offering will have its own business and commercialization model requiring a different set of ecosystem partners and pricing models. From a professional’s perspective Observation is a key competence needed. Professionals in a services organization have a unique opportunity to become an innovation partner for the client. They work closely with clients and have an opportunity to understand their unmet needs and identify new opportunities. High degree of soft-skills, cultural acclimatization and empathy to client needs would be key competencies needed. So is cross-pollinating or leveraging. People work on a variety of domains and technology platforms within a services organization. They have an opportunity to cross leverage their knowledge. Collaboration is a key strength. Innovation requires leveraging the experiences and learning of multiple groups within the organization. The delivery of a service requires the successful inter-working of various stand-alone components developed by various teams within an organization. An ability to visualize and deliver innovative application of ICT will be an asset. An important skill needed is the ability to innovatively apply ICT for creating unique new experiences for the consumer of services. While opportunities are both numerous and exciting, the current knowledge of systematic methods for services-innovation is still incomplete. More work is needed to create a proper science (as some call it) of Services-Innovation. To innovate in services requires a totally collaborative ecosystem that involves clients, supply chain partners, value chain partners as well as universities and research institutes. Universities especially need to look at new models of research. They should be able to define new research areas and problems where exploitation strategies for the research outcomes would be ‘technology transfer to new services firms’ rather than a ‘technology transfer to products’. Themes for collaborative innovation and research should be around larger issues that face society or an industry, so that the efforts are synergized and solutions can be found for problems that cannot be solved by individual players. To conclude, there exists a growing opportunity to exploit ICT to create unique new experiences for consumers. Indian IT service providers and ICT companies have the opportunity to take the lead in providing these innovative services. The areas of services design and services modeling are still evolving and will therefore continue to throw up new and exciting challenges for anyone employed in this sector. The author is VP - Software Engineering and Technology Labs, Infosys Technologies. He can be reached at Infosys@infosys.com