Busix

EXECUTIVE DIGEST

The secret to true service innovation

Lance A. Bettencourt a,*, Stephen W. Brown b, Nancy J. Sirianni c

a Partner, Service 360 Partners LLC, & Distinguished Marketing Fellow, Texas Christian University, U.S.A. b W.P. Carey School of Business, Arizona State University, P.O. Box 874106, Tempe, AZ 85287-4106, U.S.A. c M.J. Neely School of Business, Texas Christian University, TCU Box 298530, Fort Worth, TX 76129, U.S.A.

Business Horizons (2013) 56, 13—22

Available online at www.sciencedirect.com

www.elsevier.com/locate/bushor

KEYWORDS Services; Service excellence; Service innovation; Strategy; Service research

Abstract The secret to true service innovation lies in shifting focus away from the service solution back to the customer. Rather than asking, ‘‘How are we doing?’’ managers must ask, ‘‘How is the customer doing?’’ For far too many businesses, service innovation means making incremental improvements to existing services. While a focus on improving current services certainly has its place, we indicate that this has constrained firms’ innovation capabilities by limiting new ideas. In order to truly innovate, firms must expand their focus beyond existing services and service capabilities to address the fundamental needs of their customers, including the jobs and outcomes those customers are trying to achieve. By further focusing service innovation on developing shared solutions with customers, firms are better able to create breakthrough service offerings and processes. This will result in value co- creation that is both meaningful to customers and uniquely differentiated from competitive offerings. To this end, we present a four-step process for firms to guide job-centric service innovation. # 2012 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.

1. Truly innovative service innovation

As the service economy increasingly dominates glob- al business, product and service firms are seeking to advance their service offerings not only to retain customers, but also to stay ahead of rivals (Jana, 2007). Successful service innovation approaches are especially relevant in a slow economy, where

* Corresponding author E-mail addresses: lance@service360partners.com

(L.A. Bettencourt), stephen.brown@asu.edu (S.W. Brown), n.sirianni@tcu.edu (N.J. Sirianni)

0007-6813/$ — see front matter # 2012 Kelley School of Business, I http://dx.doi.org/10.1016/j.bushor.2012.09.001

decreased spending leads to a decline in economic activity and intensified competition among rival firms. As such, service innovation has become a major source of competitive advantage for compa- nies cultivating the ability to use knowledge gleaned from customers, competitors, and their own capa- bilities to create meaningful and distinctive services.

In today’s challenging business environment, however, it is no longer enough to merely deliver a quality service to customers in a timely manner. Instead, companies must find ways to innovate en- tirely new service offerings that their customers will find valuable. This type of service innovation is not

ndiana University. Published by Elsevier Inc. All rights reserved.

14 EXECUTIVE DIGEST

Figure 1. Traditional approach: Service as unit of analysis

easy to achieve, as the intangible nature of service activity and the active participation of the customer in producing the offering has led to uncertainty about how to innovate new services (Chesbrough, 2005). Yet, service innovation is increasingly consid- ered a vital element of a firm’s competitive strategy (MacDonough, Zack, Lin, & Berdrow, 2008), and this strategy will be misguided if the firm’s innovation approach is too short-sighted to make a real differ- ence for customers–—or to be truly differentiated in today’s marketplace.

As firms work to uncover the most effective ways to innovate, service experts have swarmed into the field to assist them, offering models for understanding customers’ expectations, improving companies’ de- sign processes, and removing variability from the service development process. While resourceful, these efforts have mainly led to incremental service improvements, such as increasing store hours or en- hancements to loyalty programs (Berry, Shankar, Parish, Cadwallader, & Dotzel, 2006). A primary rea- son this is the case is that most methods currently employed (e.g., service blueprinting, moments-of- truth, service quality research) propose to help com- panies improve their service offerings in the design or implementation stages of service development (Bit- ner, Ostrom, & Morgan, 2008; Thomke, 2003). While this can be helpful, in actuality, these approaches have limitations in the area of identifying and prioritizing opportunities for ground-breaking service concepts. Creating revolutionary service requires genuine innovation that is anchored in true customer needs, not simply enhancing existing service offerings.

To truly innovate, firms must expand their short- sighted focus beyond existing services and service capabilities to address the fundamental needs of their customers, including the jobs that customers are trying to achieve and the outcomes that they use to measure success (Bettencourt, 2010; Heskett, 1987). Broadening the strategic viewpoint to en- compass the jobs and outcomes that service offer- ings must help customers satisfy requires active engagement in order to fully understand their needs. Adjusting the firm’s innovation focus away from the service solution and back to the customer will result in value co-creation that is both mean- ingful to customers and uniquely differentiated from competitive offerings (Gummesson, 1995).

2. How companies get service innovation wrong

As shown in Figure 1, current approaches to service improvement constrain innovation by focusing on

service as the unit of analysis, rather than on the fundamental needs of the customer (Bettencourt, 2010; Christensen, Cook, & Hall, 2005). For exam- ple, service quality research identifies service im- provement opportunities through the use of mystery shoppers, point-of-purchase and trailer satisfaction surveys, and annual service quality surveys. By de- sign, these approaches can only assess currently- offered solutions; that is, they evaluate service offerings that have already been proposed. The results from this research can only improve extant company offerings, not provide a better under- standing of customer needs or invent new ways of satisfying them. As far as innovation is concerned, we find three basic issues with traditional ap- proaches to service innovation.

2.1. The cart before the horse

First, focusing on a service solution puts the cart before the horse. When conducting service quality research, for example, managers must ask them- selves: ‘‘What’s the point of evaluating a solution when we’re still not sure what the problem is? What are our customers trying to achieve?’’ For example, current approaches to service quality research might uncover the fact that retail customers value a knowledgeable sales associate. Aha! This type of finding leads company managers to believe that they can improve their service offerings by making sure sales associates are knowledgeable. This may be helpful initially, but unless managers learn why customers value a knowledgeable sales associate–— particularly what it is that customers expect a knowl- edgeable sales associate to help them with (Avoiding mismatching outfits? Keeping current with fashion trends? Finding particular items quickly?)–—they will continue to make less-than-optimal decisions regarding improvements to service offerings.

EXECUTIVE DIGEST 15

2.2. Constraining innovation thinking

Second, focusing on a service solution constrains innovation thinking. Continuing with the aforemen- tioned retail example, having discovered that their customers are dissatisfied with the sales associates’ level of knowledge, retail clothing managers may feel the only available option is to hire, train, and reward more knowledgeable sales associates. In contrast, if they try to find out what problem or problems their customers are hoping to solve–—or, to put it another way, if they try to find out what jobs customers are trying to get done or what outcomes customers are hoping to achieve–—the field of pos- sibilities opens up (Ulwick & Bettencourt, 2008). Suppose, for instance, that company managers dis- cover the outcome customers are most interested in achieving is speeding up the process of creating outfits. Potential solutions might then include not only knowledgeable sales associates, but also inter- active kiosks, helpful signage, product arrange- ments and merchandise displays showing potential outfits, clothing redesign, clothing labeling, and many other possibilities.

2.3. Reinforcing the status quo

Third, focusing on a service solution reinforces the status quo. Customers seek out service for a reason; they want to accomplish something. One could say that customers have a job to get done, and they are hiring the service to help them accomplish it (Chris- tensen, Anthony, Berstell, & Nitterhouse, 2007; Ulwick & Bettencourt, 2008). When managers think of offering services only on already-established pat- terns, it limits the number of jobs the service can help customers get done, and it inhibits understand- ing the limitations of the current service offering for helping the customer to satisfy their needs. Con- tinuing with our retail clothing example, some man- agers tend to think about their customers only in terms of current encounters within their stores; but that means they miss other, novel ways of serving those customers outside of the store. If the company managers thought about customers’ broader desire to manage a wardrobe and all that entails, they might discover opportunities to help customers not only with figuring out what types of outfits to pur- chase, but also with what to do with outdated clothing or putting together outfits from clothing they already own. Service quality research generally reinforces the status quo because it asks customers, ‘‘How are we doing?’’ when really what companies need to ask is, ‘‘How are you doing?’’ By shifting the question to focus on what the customer is trying to achieve, managers are better equipped to upset the

status quo by creating value with the customer, and not just for the customer. In considering the cus- tomer’s entire experience of building a wardrobe, and not just shopping for a single outfit at the store, retail managers in the aforementioned example can impact the customer’s entire experience with a shift to their service innovation approach (Prahalad & Ramaswamy, 2003).

3. A better approach to service innovation

What companies need is an approach to innovation that enables them to identify opportunities for breakthrough service offerings that is not con- strained by current or proposed service solutions. A job-centric approach to service innovation does just that. As the phrasing implies, this approach focuses not on customers’ evaluations of current offerings, but on the job that customers are trying to get done. It looks deeply into why customers presently hire service solutions and then expands this view to con- sider related customer jobs and more encompassing customer processes (Bettencourt & Ulwick, 2008; Ulwick, 2002). This is the type of innovation that allows Zipcar customers to easily pre-pay, reserve, use, and then return fully fueled and insured short- term, shared cars, alleviating the worry and hassles of borrowing vehicles from friends and relatives for shopping, errands, and other brief tasks. Zipcar tran- scends the rental market’s typical model of longer- term contracts and add-on fees for liability insurance and gasoline. By fully understanding its customers’ needs for quick trip transportation and desired has- sle-free outcomes, Zipcar has been able to transform these clients’ entire car rental experience and gain market share against competing entrenched players.

In its simplest form, this approach to service innovation involves four steps, as shown in Figure 2. To begin, Step 1 requires active partner- ship with customers to uncover what jobs they are trying to accomplish by hiring services in the first place. Next, Step 2 necessitates that service-pro- viding firms dig deeper to find out if these jobs are a part of some larger process that can be tapped into to create additional customer value. Then, Step 3 entails that firms learn about the opportunities that currently exist to get these customer jobs done–— including capturing the right type of customer needs to ensure that their inputs are not only correct, but also useful for guiding meaningful service innova- tion. Finally, Step 4 involves identifying and then applying resources to create value for both the service-providing firm and its customers to achieve genuine service innovation.

16 EXECUTIVE DIGEST

Figure 2. Job-centric approach: Customer job as unit of analysis

To illustrate these steps, we’ll take a detailed look at how Abbott Medical Optics (AMO) has ap- proached service innovation with success. AMO, which operates in more than 25 countries, is a provider of medical device technologies for vision improvement. Its ophthalmic product line includes lenses, insertion systems, laser vision correction systems, and other devices for both cataract and refractive surgery procedures. Like many compa- nies, AMO operates in markets in which product differentiation is limited and competitors quickly copy innovative products. In such markets, second- ary sales, service, and support mechanisms assume added importance for gaining and retaining custom- ers. In the medical device market, these secondary support offerings target not only the physician user, but also surgical nurses and materials managers who are responsible for purchasing and replenishment. Although AMO is pursuing service and support in- novations that target each of those customer groups, the materials managers are the ones who have been most directly impacted by company services.

In late 2005, AMO decided to apply the same scientific rigor to service innovation that it had long applied to the innovation of vision technologies. Angelo Rago, then-senior vice president of global customer services, knew that AMO required a unique approach if it truly sought to differentiate on the basis of excellent service. He realized that AMO needed to break the cycle of incremental service improvements that resulted in the company’s virtu- ally identical (to its chief rivals) service delivery mechanisms and support services. Moreover, em- ployees within the firm recognized that sales were being lost to competitors due to poor customer service. In the following sub-sections, we introduce our four step model and illustrate how it was used to guide service innovation at Abbott Medical Optics.

3.1. Step 1: Determine what job or jobs customers are trying to get done by using current services and support

Step 1 requires research to uncover what job or jobs customers are trying to accomplish by hiring

EXECUTIVE DIGEST 17

the firm to provide services. It is important to note that this process goes beyond merely asking cus- tomers what they want in a service, because–—as many service innovation managers know–—most customers have a limited frame of reference (Ulwick, 2002). Instead, this step involves scan- ning every customer-firm touch point and asking the right questions to learn what customers are trying to accomplish when they hire the services provided by the company, as well as deeply probing to reveal underlying reasons provided in customers’ responses. This type of active investi- gation and learning helps firms uncover blind spots in order to develop a company-wide peripheral vision (Day & Schoemaker, 2005), allowing them to more fully understand the value their customers receive from company services.

In executing Step 1, managers should ask ques- tions, including: What goals are customers hoping to achieve in working with company representatives and departments? What are customers seeking to accomplish when they access the firm’s website? What problems are customers trying to resolve in utilizing the firm’s service and support apparatus? By focusing on the jobs customers need to get accom- plished, we eliminate worry over neglecting latent or unarticulated requirements; customers under- stand the challenges of their own situation and are able to state their needs in the frame of how they currently get jobs done–—even before a poten- tial service innovation exists (Bettencourt, 2009). For example, a hospital asking these questions of patients would discover various reasons they are contacted for support, including determining op- tions to address a health problem, selecting a healthcare provider, scheduling healthcare ser- vices, receiving treatment, and understanding the impact of a health issue.

In the case of AMO’s cataract business, there are a number of employees who have service and support interactions with its customers’ materials manag- ers. These include account managers, call center employees, and field service staff. In seeking service innovation opportunities, initial queries of both internal AMO staffers and materials managers fo- cused on why customers utilized a given service mechanism; that is, the goal was to know what customers were seeking to accomplish in their in- teractions with an account manager, a call center employee, or when they contacted technical field service. The primary goals included placing orders and resolving problems relating to product delivery, invoicing, and returns. The materials managers also had service encounters with AMO’s ‘materials’ at other points; for example, when receiving orders and reviewing invoices.

3.2. Step 2: Determine whether the jobs for which customers are hiring current services are part of a larger process

Customers’ jobs are extremely varied in their com- plexity: they can be as simple as locating a specific type of information or as complex as developing a financial investment portfolio. Interestingly, simple jobs are more often than not steps in larger pro- cesses or more complex jobs. This fundamental truth provides the basis for bringing structure and predictability to the service innovation process. As processes, the beginning and end points of a cus- tomer job can be identified, the metrics by which customers judge how well the job is executed can be uncovered and measured, and the overall method can be improved by developing offerings that help the customer execute the job more effectively and efficiently.

This insight has important implications for service innovation because if the jobs for which customers have hired a company’s service are part of a larger process, it is likely that there are other elements in that larger process that have been overlooked by the company’s managers–—and by their competitors, too! By considering those other elements and by broadening the scope of the services it is willing to offer, a company can surge ahead of the competi- tion. Consider consumers who turn to banking ser- vices such as checking accounts and credit cards to help them with jobs like receiving money, paying bills, and making purchases. They are really en- gaged in a broader process of managing day-to- day cash flow. In speaking with consumers about the steps in this process, it quickly becomes evident that banks have overlooked opportunities to help consumers plan spending, ensure that money is available when needed, and keep spending on track. Armed with that information, a bank can innovate new service offerings to take advantage of those opportunities.

In essence, Step 2 of our model requires that managers dissect the jobs for which their customers hire their services, software, and products. This helps better understand how these jobs fit into more complex customer processes. This step also entails finding out what jobs customers are trying to do overall–—not just the small tasks they are doing presently to get there–—and can be facilitated with the use of job mapping, which breaks jobs down into a series of steps (Bettencourt & Ulwick, 2008). These discrete steps can unveil hidden opportunities for new service offerings and can revolutionize a firm’s way of doing business. As increased competi- tion encourages firms to restructure their organiza- tions around customer groups and needs–—rather

18 EXECUTIVE DIGEST

than their own internal functions, products, and services (Day, 2006)–—truly aligning service offerings around customers’ jobs and how distinct segments of customers get the job done can help firms grow even closer to their customers, move ahead of rival firms, and shape the competitive landscape of the future.

In the case of AMO, materials managers were asked what other responsibilities they had that related to managing ophthalmic supplies. Their an- swers revealed that the jobs of placing orders, receiving orders, and resolving order problems–— jobs that were primarily addressed through service interactions–—were actually just steps in the more encompassing process of replenishing ophthalmic supplies. That larger process also involved evaluat- ing new products and returning products to the vendor, as well as determining supply needs of ophthalmologists, monitoring inventory, and even physically breaking down product shipments. By considering the larger process, AMO was able to adopt a customer-oriented view of the market rath- er than an internal-oriented view, a perspective that opened up the possibility of new, truly differ- entiated service offerings.

3.3. Step 3: Determine what opportunities exist to help customers get these jobs done

Step 3 seeks to uncover opportunities to help cus- tomers get their jobs done better, faster, or more affordably. To do this, a company must first be sure to capture the right types of customer needs on the jobs to be accomplished. It is important to note that these are not service quality expectations, not am- biguous quality descriptors, and not fuzzy emotions. Rather, they are the outcomes that customers use to measure success at each step in getting the job done. Employing metrics that are relevant, regard- less of how the customer is getting a job done, enables a company to look past current service offerings and develop adaptive foresight to position the company to stay ahead of the competition (Zeithaml et al., 2006).

So, for example, in sketching out customer re- quirements relating to the job of obtaining auto insurance benefits, the typical route would entail learning customers’ expectations of specific service delivery channels (the agent channel, the Web channel, or phone interactions). Instead, our rec- ommended approach involves focusing on the out- comes that customers are trying to achieve in completing the job (Ulwick, 2002), regardless of the method of achieving it. From the insurance customer’s perspective–—and, ultimately, from

the perspective of innovation–—the mode of inter- action with the insurer matters less than getting a claim processed with few contacts, little time to provide necessary information, and with low prob- ability that the claim is denied. Once these out- comes are known, a company must then prioritize them; that is, they must determine which outcomes customers consider both important and not well- satisfied by the solutions currently available.

Returning to our ongoing example, once AMO had a customer-oriented view of the replenish- ment process in mind, the next step was to break down the process into its various elements to uncover the outcomes by which materials manag- ers judge value in replenishing ophthalmic sup- plies. At a high level, the process included 10 core steps, including evaluating new products, main- taining supply inventory, determining supply re- plenishment needs, placing an order, receiving supply orders, and returning product to the ven- dor. However, at a more detailed level, there were over 40 sub-steps into which the higher-level steps could be divided and over 80 outcomes across the entire process. The job of placing an order, for example, includes outcomes related not only to submitting product information to the vendor, but also gathering product documentation, being made aware of product availability, and verifying order status. Importantly, these outcomes are not described in terms of a particular manner of achieving them, but purely in terms of the desired result, which means that opportunities to improve the outcomes are not dependent on particular service delivery approaches.

With a detailed list of outcomes in hand, AMO then polled a representative sample of materials managers. Outcomes that the materials managers considered both important and unsatisfactorily achieved represented opportunities for AMO, as these were the needs the company could target with new and improved service offerings. It is im- portant to note that not all the opportunities re- vealed to AMO related to processes that AMO and its competitors considered the domain of service com- petition. For example, there were several meaning- ful opportunities related to determining lens replenishment needs, such as receiving ophthalmol- ogists’ lens requests on time, determining which lenses are required to support upcoming case re- quirements, and ensuring that a lens order is placed far enough in advance of a scheduled case. Had AMO followed a traditional service-focused approach to identifying opportunities for innovation, the company certainly would not have uncovered these gaps; its service and support efforts were not directed at helping customers determine lens

EXECUTIVE DIGEST 19

replenishment needs, only at fulfilling replenish- ment requests.

3.4. Step 4: Invest time, talent, and resources in value creation that will be most meaningful to customers and most differentiated from competitors

Once a company has prioritized its customers’ out- comes, it can then focus time and resources on pursuing the most promising opportunities. Because opportunities are not defined in terms of service excellence, the avenues of exploration are not re- stricted to particular service delivery approaches or even to service as a solution at all. Rather, our job- centric innovation model provides the direction companies need to innovate on the two distinct service innovation fronts (Berry et al., 2006): (1) innovation in how service is delivered, and (2) inno- vation of new offerings that satisfy the core benefits being sought by services customers. Similarly, prod- uct companies that follow this approach to innova- tion may find opportunities for service solutions to complement their products. Table 1 addresses this kind of service innovation.

Step 4 completes our service innovation approach by calling for the investment of time, talent, and

Table 1. How product companies can identify service

What approach should a product company take to reveal customers? Over the past few decades, most product comp traditional offerings have matured and as they have sough Gustafsson, & Witell, 2009; Neu & Brown, 2005). Unfortun guidance for expanding into services because their insight product offerings.

The service innovation model introduced in this article ident used to satisfy them, which means it can also help product c directs a product company to explore consumption proces current products are being used — perhaps by inquiring into Once this more encompassing job is recognized, the compa most unmet. Those outcomes offer the best opportunities deepen its relationship with its customers. Additional insp expanding the definition of customer so it includes not onl product setup, maintenance, purchase, and disposal–—ofte

Consider the following illustration of this approach in actio opportunities for next-generation printers. However, beca product solution, HP was able to determine which opport opportunities should be addressed with services, and which this point, HP looked at the job of printing a document from the perspective of ITstaffers, and the job of managing print overlapping opportunity between users and maintainers co printer errors. To address this area of opportunity, HP dev feedback within the printer as well as complementary serv regarding a printer error in order to provide guidance with t or replacement parts.

resources by both the firm and its customers to fully realize the opportunities uncovered in previous steps. Defining value as it is identified and used by the customer requires not only changing the way the firm works with customers, but also impacts customer thinking, participation, and capabilities (Michel, Brown, & Gallan, 2008). Further, this type of innovation involves changing the customer’s role as a user, buyer, or payer who seeks ‘value-in- exchange’ to that of an active contributor who also receives ‘value-in-use’ from their participation in the value creation process (Michel, Brown, & Gallan, 2008; Vargo & Lusch, 2004). This process is challeng- ing, but worthwhile, as viewing the customer as an active player allows the firm to harness customer competence, which ultimately benefits both orga- nizations (Prahalad & Ramaswamy, 2000). It is also at this point that models of service design and evaluation (e.g., service blueprinting, service ex- perimentation, experience audits, service quality research) become valuable.

Returning to our example, once AMO had a prior- itized list of opportunities to pursue for the replen- ishment process, it gathered together managers in sales, technical support, customer service, accounts payable, logistics, and IT infrastructure to generate solutions for the leading opportunities. This process

innovation opportunities

opportunities to provide value-added services to its anies have considered this question as markets for their t ways to deepen their customer relationships (Brown, ately, most traditional innovation models offer no s are largely constrained to adding features to current

ifies unmet customer needs independent of the solution ompanies uncover value-added service opportunities. It ses that complement the jobs for which the company’s what larger processes or jobs current product usage fits. ny can identify which outcomes related to the job are for the company to create service innovations that will iration for potential service offerings can come from y primary product users, but also those responsible for n distinct individuals in a business context.

n. Hewlett-Packard (HP) used this approach to discover use the opportunities identified did not presume a unities should be addressed with products, which

opportunities might be addressed with both. To get to a user perspective, the job of maintaining a printer from ing costs from the perspective of a purchaser. An area of ncerned the process of trouble-shooting and resolving eloped both product concepts such as enhanced sensor ice concepts such as automatic data transmission to HP echnical support and automatic ordering of repair and/

20 EXECUTIVE DIGEST

allowed the company to develop plans and actions of both an evolutionary and revolutionary nature–—to improve current service and support operations without being constrained by a particular approach to service delivery, and to provide value to custom- ers in unexpected ways. To illustrate these points, consider the following improvements and innova- tions identified by AMO.

3.4.1. Innovation in how service is delivered: Regional customer care teams In assessing the timely resolution of material man- agers’ questions and problems, AMO’s research in- dicated that the company’s service delivery approach needed to be revamped; the extant prac- tice bore a serious design flaw. Because materials managers experienced varied problems–—including issues with delivery, lens consignments, invoicing, and returns–—they were often unsure of who to con- tact to get a particular problem resolved. Frequently, several erroneous contacts were made before the proper party was located, resulting in delays. Further

Table 2. Four step job-centric service innovation mode

Step

1. Determine what job or jobs customers are trying to get done by using current services and support

� Scan custo services ar

� Ask the rig

� Deeply pro 2. Determine whether the jobs

for which customers are hiring current services are part of a larger process

� Determine are part of

� Identify be are trying

� Break dow through jo

3. Determine what opportunities exist to help customers get these jobs done better

� Capture cu entire cust

� Ensure out from a cus

� Determine but poorly

4. Invest time, talent, and resources in value creation that will be most meaningful to customers and most differentiated from competitors

� Focus firm

� Consider in what servi

� Transform active cont

� Harness cu benefits to

complicating matters, resolving a given problem might involve several people throughout the organi- zation and multiple layers of approval.

After becoming aware of this weakness in service delivery, AMO developed the concept of regional customer care teams. These teams bring together–— in one location–—specialists in accounts receivable, contracts, ordering, and equipment. Physical prox- imity enables coordination and rapid communica- tion among different functional areas; this new system provides materials managers with a single point of contact within AMO. Members of each customer care team learn about the roles and re- sponsibilities of other team members to further enhance the efficiency of problem resolution. Next, each team assigns one person responsibility for customer issues that require additional research, such that customers with tricky problems no longer have to navigate unknown internal processes. AMO’s service delivery system now truly reflects its cus- tomers’ needs. In the year following these service delivery changes, AMO’s Net Promoter Score

l

Actions

mer-firm touch points for insights on why current e hired

ht questions of customers

be to reveal what customers are trying to achieve

if the jobs for which current services are hired a more encompassing job process

ginning and end points of the job customers to get done

n the customer job into a series of steps b mapping

stomer outcomes at each step in the omer job

comes are forward-looking measures of success tomer perspective

which customer outcomes are important, satisfied

time, talent, and resources on unmet customer needs

novations both in how services are delivered and ces are delivered

the customer’s role from the buyer to a more ributor in the value creation process

stomer competence to provide symbiotic both organizations

EXECUTIVE DIGEST 21

increased by nearly 10%, and, in 2007, it was awarded the prestigious Omega Management North- Face ScoreBoard Award for the first time.

3.4.2. Innovation of new offerings: Schedule- planning and inventory management software Historically, service delivery/support by AMO and its competitors stayed out of the back room of surgical eye centers, presuming this to be the ‘customer’s space.’ Upon examining the job that materials man- agers were trying to get done, however, AMO real- ized that such a front-office/back-office distinction was artificial. Company executives were particular- ly intrigued to learn that materials managers often received requests for lens orders from ophthalmol- ogists too late for standard ordering and replenish- ment. Because this had to do entirely with the processes of the surgical center, it had not occurred to AMO–—or its competitors–—to address the issue. The job-centric approach to service innovation, though, prompted the company to take a more encompassing look at its customers’ needs.

This fresh insight led to the development of an advanced schedule-planning and inventory manage- ment software module, designed to aid materials managers with timely and effective lens replenish- ment. The system allows ophthalmologists or their assistants to input case needs and scheduling infor- mation data. The system then analyzes those needs, available inventory, and shipping requirements, and makes order recommendations–—even automatically generating orders to cover known case needs! Fi- nally, the system also generates status reports for materials managers to help them determine what actions need to be taken to ensure the availability of lenses for a surgical case.

4. The lesson learned

As illustrated herein, breaking free of service myopia and adopting an approach to innovation that focuses on customers’ true needs enables companies to not only envision service delivery improvements, but also develop entirely new service offerings. This method allows managers to focus attention and resources on what matters most to customers.

As summarized in Table 2, genuine service innova- tion derives from understanding the job that custom- ers are trying to get done, understanding the outcomes that customers use to define the successful execution of this job, and then determining which outcomes are opportunities to guide the creation of breakthrough service innovations. By adopting this approach, a firm can establish service innovation priorities that are most consistent with its capabili-

ties and technology know-how, rather than merely reacting to customers’ ever-changing desires for the latest must-have feature or copying the actions of competitors. When a customer job–—not the service itself–—is the focus, service innovation efforts be- come structured, predictable, and ultimately quite rewarding for both the company and its customers.

Appendix. Research Methodology

In addition to working with dozens of companies using a job-centric approach to identify service innovation opportunities (e.g., Abbott Medical Optics (AMO), State Farm, California Healthcare Foundation), we collected 26 case studies (e.g., Hewlett-Packard, IKEA, Zipcar) to understand how firms are approaching service innovation. Among these case studies are several companies that are exemplars of service innovation focused on the customer job, and several that are not. Ultimately, both types of case studies informed our thoughts on the limitations to current service innovation processes, and our recommendation of a model that shifts the innovation focus away from the service and back to the customer.

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