the secret to true service innovation

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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.bW.P. Carey School of Business, Arizona State University, P.O. Box 874106, Tempe, AZ 85287-4106, U.S.A.cM.J. Neely School of Business, Texas Christian University, TCU Box 298530, Fort Worth, TX 76129, U.S.A.

1. Truly innovative service innovation

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

decreased spending leads to a decline in economicactivity and intensified competition among rivalfirms. As such, service innovation has become amajor source of competitive advantage for compa-nies cultivating the ability to use knowledge gleanedfrom customers, competitors, and their own capa-bilities to create meaningful and distinctiveservices.

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

Business Horizons (2013) 56, 13—22

Available online at www.sciencedirect.com

www.elsevier.com/locate/bushor

KEYWORDSServices;Service excellence;Service innovation;Strategy;Service research

Abstract The secret to true service innovation lies in shifting focus away from theservice 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 thatthis has constrained firms’ innovation capabilities by limiting new ideas. In order totruly innovate, firms must expand their focus beyond existing services and servicecapabilities to address the fundamental needs of their customers, including the jobsand outcomes those customers are trying to achieve. By further focusing serviceinnovation on developing shared solutions with customers, firms are better able tocreate breakthrough service offerings and processes. This will result in value co-creation that is both meaningful to customers and uniquely differentiated fromcompetitive offerings. To this end, we present a four-step process for firms to guidejob-centric service innovation.# 2012 Kelley School of Business, Indiana University. Published by Elsevier Inc. Allrights reserved.

* Corresponding authorE-mail addresses: [email protected]

(L.A. Bettencourt), [email protected] (S.W. Brown),[email protected] (N.J. Sirianni)

0007-6813/$ — see front matter # 2012 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.http://dx.doi.org/10.1016/j.bushor.2012.09.001


easy to achieve, as the intangible nature of serviceactivity and the active participation of the customerin producing the offering has led to uncertaintyabout 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 thisstrategy will be misguided if the firm’s innovationapproach is too short-sighted to make a real differ-ence for customers–—or to be truly differentiated intoday’s marketplace.

As firms work to uncover the most effective ways toinnovate, service experts have swarmed into the fieldto assist them, offering models for understandingcustomers’ expectations, improving companies’ de-sign processes, and removing variability from theservice development process. While resourceful,these efforts have mainly led to incremental serviceimprovements, 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 currentlyemployed (e.g., service blueprinting, moments-of-truth, service quality research) propose to help com-panies improve their service offerings in the design orimplementation stages of service development (Bit-ner, Ostrom, & Morgan, 2008; Thomke, 2003). Whilethis can be helpful, in actuality, these approacheshave limitations in the area of identifying andprioritizing opportunities for ground-breaking serviceconcepts. Creating revolutionary service requiresgenuine innovation that is anchored in true customerneeds, not simply enhancing existing serviceofferings.

To truly innovate, firms must expand their short-sighted focus beyond existing services and servicecapabilities to address the fundamental needs oftheir customers, including the jobs that customersare trying to achieve and the outcomes that they useto 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 activeengagement in order to fully understand theirneeds. Adjusting the firm’s innovation focus awayfrom the service solution and back to the customerwill result in value co-creation that is both mean-ingful to customers and uniquely differentiatedfrom competitive offerings (Gummesson, 1995).

2. How companies get serviceinnovation wrong

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

service as the unit of analysis, rather than on thefundamental 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 mysteryshoppers, point-of-purchase and trailer satisfactionsurveys, and annual service quality surveys. By de-sign, these approaches can only assess currently-offered solutions; that is, they evaluate serviceofferings that have already been proposed. Theresults from this research can only improve extantcompany offerings, not provide a better under-standing of customer needs or invent new ways ofsatisfying 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 cartbefore the horse. When conducting service qualityresearch, for example, managers must ask them-selves: ‘‘What’s the point of evaluating a solutionwhen we’re still not sure what the problem is? Whatare our customers trying to achieve?’’ For example,current approaches to service quality researchmight uncover the fact that retail customers valuea knowledgeable sales associate. Aha! This type offinding leads company managers to believe that theycan improve their service offerings by making suresales associates are knowledgeable. This may behelpful initially, but unless managers learn whycustomers value a knowledgeable sales associate–—particularly what it is that customers expect a knowl-edgeable sales associate to help them with (Avoidingmismatching outfits? Keeping current with fashiontrends? Finding particular items quickly?)–—theywill continue to make less-than-optimal decisionsregarding improvements to service offerings.

14 EXECUTIVE DIGEST

Figure 1. Traditional approach: Service as unit ofanalysis


2.2. Constraining innovation thinking

Second, focusing on a service solution constrainsinnovation thinking. Continuing with the aforemen-tioned retail example, having discovered that theircustomers are dissatisfied with the sales associates’level of knowledge, retail clothing managers mayfeel the only available option is to hire, train, andreward more knowledgeable sales associates. Incontrast, if they try to find out what problem orproblems their customers are hoping to solve–—or, toput it another way, if they try to find out what jobscustomers are trying to get done or what outcomescustomers 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 inachieving is speeding up the process of creatingoutfits. Potential solutions might then include notonly knowledgeable sales associates, but also inter-active kiosks, helpful signage, product arrange-ments and merchandise displays showing potentialoutfits, clothing redesign, clothing labeling, andmany other possibilities.

2.3. Reinforcing the status quo

Third, focusing on a service solution reinforces thestatus quo. Customers seek out service for a reason;they want to accomplish something. One could saythat customers have a job to get done, and they arehiring the service to help them accomplish it (Chris-tensen, Anthony, Berstell, & Nitterhouse, 2007;Ulwick & Bettencourt, 2008). When managers thinkof offering services only on already-established pat-terns, it limits the number of jobs the service canhelp customers get done, and it inhibits understand-ing the limitations of the current service offering forhelping the customer to satisfy their needs. Con-tinuing with our retail clothing example, some man-agers tend to think about their customers only interms of current encounters within their stores; butthat means they miss other, novel ways of servingthose customers outside of the store. If the companymanagers thought about customers’ broader desireto manage a wardrobe and all that entails, theymight discover opportunities to help customers notonly with figuring out what types of outfits to pur-chase, but also with what to do with outdatedclothing or putting together outfits from clothingthey already own. Service quality research generallyreinforces the status quo because it asks customers,‘‘How are we doing?’’ when really what companiesneed to ask is, ‘‘How are you doing?’’ By shifting thequestion to focus on what the customer is trying toachieve, managers are better equipped to upset the

status quo by creating value with the customer, andnot 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 canimpact the customer’s entire experience with a shiftto their service innovation approach (Prahalad &Ramaswamy, 2003).

3. A better approach to serviceinnovation

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

In its simplest form, this approach to serviceinnovation involves four steps, as shown inFigure 2. To begin, Step 1 requires active partner-ship with customers to uncover what jobs they aretrying to accomplish by hiring services in the firstplace. Next, Step 2 necessitates that service-pro-viding firms dig deeper to find out if these jobs are apart of some larger process that can be tapped intoto create additional customer value. Then, Step 3entails that firms learn about the opportunities thatcurrently exist to get these customer jobs done–—including capturing the right type of customer needsto ensure that their inputs are not only correct, butalso useful for guiding meaningful service innova-tion. Finally, Step 4 involves identifying and thenapplying resources to create value for both theservice-providing firm and its customers to achievegenuine service innovation.

EXECUTIVE DIGEST 15


To illustrate these steps, we’ll take a detailedlook at how Abbott Medical Optics (AMO) has ap-proached service innovation with success. AMO,which operates in more than 25 countries, is aprovider of medical device technologies for visionimprovement. Its ophthalmic product line includeslenses, insertion systems, laser vision correctionsystems, and other devices for both cataract andrefractive surgery procedures. Like many compa-nies, AMO operates in markets in which productdifferentiation is limited and competitors quicklycopy innovative products. In such markets, second-ary sales, service, and support mechanisms assumeadded importance for gaining and retaining custom-ers. In the medical device market, these secondarysupport offerings target not only the physician user,but also surgical nurses and materials managers whoare responsible for purchasing and replenishment.Although AMO is pursuing service and support in-novations that target each of those customergroups, the materials managers are the ones whohave been most directly impacted by companyservices.

In late 2005, AMO decided to apply the samescientific rigor to service innovation that it had longapplied to the innovation of vision technologies.Angelo Rago, then-senior vice president of globalcustomer services, knew that AMO required a uniqueapproach if it truly sought to differentiate on thebasis of excellent service. He realized that AMOneeded to break the cycle of incremental serviceimprovements that resulted in the company’s virtu-ally identical (to its chief rivals) service deliverymechanisms and support services. Moreover, em-ployees within the firm recognized that sales werebeing lost to competitors due to poor customerservice. In the following sub-sections, we introduceour four step model and illustrate how it was used toguide service innovation at Abbott Medical Optics.

3.1. Step 1: Determine what job or jobscustomers are trying to get done by usingcurrent services and support

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

16 EXECUTIVE DIGEST

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


the firm to provide services. It is important to notethat this process goes beyond merely asking cus-tomers what they want in a service, because–—asmany service innovation managers know–—mostcustomers have a limited frame of reference(Ulwick, 2002). Instead, this step involves scan-ning every customer-firm touch point and askingthe right questions to learn what customers aretrying to accomplish when they hire the servicesprovided by the company, as well as deeplyprobing to reveal underlying reasons provided incustomers’ responses. This type of active investi-gation and learning helps firms uncover blind spotsin order to develop a company-wide peripheralvision (Day & Schoemaker, 2005), allowing them tomore fully understand the value their customersreceive from company services.

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

In the case of AMO’s cataract business, there are anumber of employees who have service and supportinteractions with its customers’ materials manag-ers. These include account managers, call centeremployees, and field service staff. In seeking serviceinnovation opportunities, initial queries of bothinternal AMO staffers and materials managers fo-cused on why customers utilized a given servicemechanism; that is, the goal was to know whatcustomers were seeking to accomplish in their in-teractions with an account manager, a call centeremployee, or when they contacted technical fieldservice. The primary goals included placing ordersand resolving problems relating to product delivery,invoicing, and returns. The materials managers alsohad service encounters with AMO’s ‘materials’ atother points; for example, when receiving ordersand reviewing invoices.

3.2. Step 2: Determine whether the jobsfor which customers are hiring currentservices are part of a larger process

Customers’ jobs are extremely varied in their com-plexity: they can be as simple as locating a specifictype of information or as complex as developing afinancial investment portfolio. Interestingly, simplejobs are more often than not steps in larger pro-cesses or more complex jobs. This fundamentaltruth provides the basis for bringing structure andpredictability to the service innovation process. Asprocesses, the beginning and end points of a cus-tomer job can be identified, the metrics by whichcustomers judge how well the job is executed can beuncovered and measured, and the overall methodcan be improved by developing offerings that helpthe customer execute the job more effectively andefficiently.

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

In essence, Step 2 of our model requires thatmanagers dissect the jobs for which their customershire their services, software, and products. Thishelps better understand how these jobs fit into morecomplex customer processes. This step also entailsfinding out what jobs customers are trying to dooverall–—not just the small tasks they are doingpresently to get there–—and can be facilitated withthe use of job mapping, which breaks jobs down intoa series of steps (Bettencourt & Ulwick, 2008).These discrete steps can unveil hidden opportunitiesfor new service offerings and can revolutionize afirm’s way of doing business. As increased competi-tion encourages firms to restructure their organiza-tions around customer groups and needs–—rather

EXECUTIVE DIGEST 17


than their own internal functions, products, andservices (Day, 2006)–—truly aligning service offeringsaround customers’ jobs and how distinct segmentsof customers get the job done can help firms groweven closer to their customers, move ahead of rivalfirms, and shape the competitive landscape of thefuture.

In the case of AMO, materials managers wereasked what other responsibilities they had thatrelated 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 serviceinteractions–—were actually just steps in the moreencompassing process of replenishing ophthalmicsupplies. That larger process also involved evaluat-ing new products and returning products to thevendor, as well as determining supply needs ofophthalmologists, monitoring inventory, and evenphysically breaking down product shipments. Byconsidering the larger process, AMO was able toadopt a customer-oriented view of the market rath-er than an internal-oriented view, a perspectivethat opened up the possibility of new, truly differ-entiated service offerings.

3.3. Step 3: Determine whatopportunities exist to help customers getthese jobs done

Step 3 seeks to uncover opportunities to help cus-tomers get their jobs done better, faster, or moreaffordably. To do this, a company must first be sureto capture the right types of customer needs on thejobs to be accomplished. It is important to note thatthese are not service quality expectations, not am-biguous quality descriptors, and not fuzzy emotions.Rather, they are the outcomes that customers use tomeasure success at each step in getting the jobdone. Employing metrics that are relevant, regard-less of how the customer is getting a job done,enables a company to look past current serviceofferings and develop adaptive foresight to positionthe 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 autoinsurance benefits, the typical route would entaillearning customers’ expectations of specific servicedelivery channels (the agent channel, the Webchannel, or phone interactions). Instead, our rec-ommended approach involves focusing on the out-comes that customers are trying to achieve incompleting the job (Ulwick, 2002), regardless ofthe method of achieving it. From the insurancecustomer’s perspective–—and, ultimately, from

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

Returning to our ongoing example, once AMOhad a customer-oriented view of the replenish-ment process in mind, the next step was to breakdown the process into its various elements touncover the outcomes by which materials manag-ers judge value in replenishing ophthalmic sup-plies. At a high level, the process included 10 coresteps, including evaluating new products, main-taining supply inventory, determining supply re-plenishment needs, placing an order, receivingsupply orders, and returning product to the ven-dor. However, at a more detailed level, there wereover 40 sub-steps into which the higher-level stepscould be divided and over 80 outcomes across theentire process. The job of placing an order, forexample, includes outcomes related not only tosubmitting product information to the vendor, butalso gathering product documentation, beingmade aware of product availability, and verifyingorder status. Importantly, these outcomes are notdescribed in terms of a particular manner ofachieving them, but purely in terms of the desiredresult, which means that opportunities to improvethe outcomes are not dependent on particularservice delivery approaches.

With a detailed list of outcomes in hand, AMOthen polled a representative sample of materialsmanagers. Outcomes that the materials managersconsidered both important and unsatisfactorilyachieved represented opportunities for AMO, asthese were the needs the company could targetwith 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 itscompetitors considered the domain of service com-petition. For example, there were several meaning-ful opportunities related to determining lensreplenishment needs, such as receiving ophthalmol-ogists’ lens requests on time, determining whichlenses are required to support upcoming case re-quirements, and ensuring that a lens order is placedfar enough in advance of a scheduled case. Had AMOfollowed a traditional service-focused approachto identifying opportunities for innovation, thecompany certainly would not have uncoveredthese gaps; its service and support efforts werenot directed at helping customers determine lens

18 EXECUTIVE DIGEST


replenishment needs, only at fulfilling replenish-ment requests.

3.4. Step 4: Invest time, talent, andresources in value creation that will bemost meaningful to customers and mostdifferentiated from competitors

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

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

resources by both the firm and its customers to fullyrealize the opportunities uncovered in previoussteps. Defining value as it is identified and usedby the customer requires not only changing theway the firm works with customers, but also impactscustomer thinking, participation, and capabilities(Michel, Brown, & Gallan, 2008). Further, this typeof innovation involves changing the customer’s roleas a user, buyer, or payer who seeks ‘value-in-exchange’ to that of an active contributor who alsoreceives ‘value-in-use’ from their participation inthe value creation process (Michel, Brown, & Gallan,2008; Vargo & Lusch, 2004). This process is challeng-ing, but worthwhile, as viewing the customer as anactive player allows the firm to harness customercompetence, which ultimately benefits both orga-nizations (Prahalad & Ramaswamy, 2000). It is alsoat this point that models of service design andevaluation (e.g., service blueprinting, service ex-perimentation, experience audits, service qualityresearch) 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 insales, technical support, customer service, accountspayable, logistics, and IT infrastructure to generatesolutions for the leading opportunities. This process

EXECUTIVE DIGEST 19

Table 1. How product companies can identify service innovation opportunities

What approach should a product company take to reveal opportunities to provide value-added services to itscustomers? Over the past few decades, most product companies have considered this question as markets for theirtraditional offerings have matured and as they have sought ways to deepen their customer relationships (Brown,Gustafsson, & Witell, 2009; Neu & Brown, 2005). Unfortunately, most traditional innovation models offer noguidance for expanding into services because their insights are largely constrained to adding features to currentproduct offerings.

The service innovation model introduced in this article identifies unmet customer needs independent of the solutionused to satisfy them, which means it can also help product companies uncover value-added service opportunities. Itdirects a product company to explore consumption processes that complement the jobs for which the company’scurrent products are being used — perhaps by inquiring into what larger processes or jobs current product usage fits.Once this more encompassing job is recognized, the company can identify which outcomes related to the job aremost unmet. Those outcomes offer the best opportunities for the company to create service innovations that willdeepen its relationship with its customers. Additional inspiration for potential service offerings can come fromexpanding the definition of customer so it includes not only primary product users, but also those responsible forproduct setup, maintenance, purchase, and disposal–—often distinct individuals in a business context.

Consider the following illustration of this approach in action. Hewlett-Packard (HP) used this approach to discoveropportunities for next-generation printers. However, because the opportunities identified did not presume aproduct solution, HP was able to determine which opportunities should be addressed with products, whichopportunities should be addressed with services, and which opportunities might be addressed with both. To get tothis point, HP looked at the job of printing a document from a user perspective, the job of maintaining a printer fromthe perspective of ITstaffers, and the job of managing printing costs from the perspective of a purchaser. An area ofoverlapping opportunity between users and maintainers concerned the process of trouble-shooting and resolvingprinter errors. To address this area of opportunity, HP developed both product concepts such as enhanced sensorfeedback within the printer as well as complementary service concepts such as automatic data transmission to HPregarding a printer error in order to provide guidance with technical support and automatic ordering of repair and/or replacement parts.


allowed the company to develop plans and actions ofboth an evolutionary and revolutionary nature–—toimprove current service and support operationswithout being constrained by a particular approachto 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 teamsIn assessing the timely resolution of material man-agers’ questions and problems, AMO’s research in-dicated that the company’s service deliveryapproach needed to be revamped; the extant prac-tice bore a serious design flaw. Because materialsmanagers experienced varied problems–—includingissues 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 theproper party was located, resulting in delays. Further

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

After becoming aware of this weakness in servicedelivery, AMO developed the concept of regionalcustomer 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 newsystem provides materials managers with a singlepoint of contact within AMO. Members of eachcustomer care team learn about the roles and re-sponsibilities of other team members to furtherenhance the efficiency of problem resolution. Next,each team assigns one person responsibility forcustomer issues that require additional research,such that customers with tricky problems no longerhave to navigate unknown internal processes. AMO’sservice delivery system now truly reflects its cus-tomers’ needs. In the year following these servicedelivery changes, AMO’s Net Promoter Score

20 EXECUTIVE DIGEST

Table 2. Four step job-centric service innovation model

Step Actions

1. Determine what job or jobscustomers are trying to get doneby using current services and support

� Scan customer-firm touch points for insights on why currentservices are hired

� Ask the right questions of customers

� Deeply probe to reveal what customers are trying to achieve

2. Determine whether the jobsfor which customers are hiringcurrent services are part ofa larger process

� Determine if the jobs for which current services are hiredare part of a more encompassing job process

� Identify beginning and end points of the job customersare trying to get done

� Break down the customer job into a series of stepsthrough job mapping

3. Determine what opportunities existto help customers get thesejobs done better

� Capture customer outcomes at each step in theentire customer job

� Ensure outcomes are forward-looking measures of successfrom a customer perspective

� Determine which customer outcomes are important,but poorly satisfied

4. Invest time, talent, and resources invalue creation that will be mostmeaningful to customers and mostdifferentiated from competitors

� Focus firm time, talent, and resources on unmet customer needs

� Consider innovations both in how services are delivered andwhat services are delivered

� Transform the customer’s role from the buyer to a moreactive contributor in the value creation process

� Harness customer competence to provide symbioticbenefits to both organizations


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

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

This fresh insight led to the development of anadvanced schedule-planning and inventory manage-ment software module, designed to aid materialsmanagers with timely and effective lens replenish-ment. The system allows ophthalmologists or theirassistants to input case needs and scheduling infor-mation data. The system then analyzes those needs,available inventory, and shipping requirements, andmakes order recommendations–—even automaticallygenerating orders to cover known case needs! Fi-nally, the system also generates status reports formaterials managers to help them determine whatactions need to be taken to ensure the availability oflenses for a surgical case.

4. The lesson learned

As illustrated herein, breaking free of service myopiaand adopting an approach to innovation that focuseson customers’ true needs enables companies to notonly envision service delivery improvements, but alsodevelop entirely new service offerings. This methodallows managers to focus attention and resources onwhat 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 theoutcomes that customers use to define the successfulexecution of this job, and then determining whichoutcomes are opportunities to guide the creation ofbreakthrough service innovations. By adopting thisapproach, a firm can establish service innovationpriorities that are most consistent with its capabili-

ties and technology know-how, rather than merelyreacting to customers’ ever-changing desires for thelatest must-have feature or copying the actions ofcompetitors. When a customer job–—not the serviceitself–—is the focus, service innovation efforts be-come structured, predictable, and ultimately quiterewarding for both the company and its customers.

Appendix. Research Methodology

In addition to working with dozens of companies using ajob-centric approach to identify service innovationopportunities (e.g., Abbott Medical Optics (AMO), StateFarm, California Healthcare Foundation), we collected26 case studies (e.g., Hewlett-Packard, IKEA, Zipcar) tounderstand how firms are approaching serviceinnovation. Among these case studies are severalcompanies that are exemplars of service innovationfocused on the customer job, and several that are not.Ultimately, both types of case studies informed ourthoughts on the limitations to current serviceinnovation processes, and our recommendation of amodel that shifts the innovation focus away from theservice and back to the customer.

References

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the secret to true service innovation

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