International Journal of Scientific & Engineering Research, Volume 5, Issue 3, March-2014 1363

ISSN 2229-5518

The Linkage Between Innovation and Services

Muhammad AlEnzy

Abstract— Innovation would be the rule of thumb that facilitates the achievement of gaining competitive advantages and accomplishing excellenc e among others. Innovation starts from the early stages of recruiting people who can innovate new process to result in novelty and creative outcomes that fulfill the customer’s demands [3]. Innovation can results in increased market share, revenues, profits, reduced costs, and other significant implication that any firm would work to achieve. However, innovation is likely to have some atmospheres of uncertainty, risk taking, and entrepreneurial actions. And that would quietly require special conditions on both aspects of management and organizational culture [6]. Therefore, there is a need for exploring those conditions and managerial practices that can boost innovation in such firms that perceive innovation as a building block for their whole road map. And that would reveal more facts regarding innovative practices from both parties the firm (the product / service) and the consumer (the feedback). Moreover, an investigation as also required revealing the factors that might become barriers for innovation boosting, which result in poor performance and deficiencies.

Index Terms— Linkage, innovation, services, practices, strategic advantages, management, value.

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1 INTRODUCTION

Nowadays, getting survived in the marketplace is not enough and forms a real risk to those who would perceive it that way. And that is because of the high increasingly competi- tion over the different industries and among variable players. Thus, the trick and the main recipe of gaining advantages from competition instead of disadvantages and following others is to be different from other players in the market in line with cus- tomer’s needs and trends.

Moreover, the call of being differentiated and distinguished
from others is alarming all the time during your presence in the
marketplace. Therefore, to produce and deliver different out-
comes to customers require some sort of different internal pro-
cessing of resources inside the firms, and that what we need to call as innovation [4].
Innovation would be the rule of thumb that facilitates the achievement of gaining competitive advantages and accom- plishing excellence among others. Innovation starts from the
early stages of recruiting people who can innovate new process to result in novelty and creative outcomes that fulfill the cus- tomer’s demands [3].
Innovation can results in increased market share, revenues, profits, reduced costs, and other significant implication that any firm would work to achieve. However, innovation is likely to
have some atmospheres of uncertainty, risk taking, and entre- preneurial actions. And that would quietly require special con- ditions on both aspects of management and organizational cul- ture [6].
Therefore, there is a need for exploring those conditions and managerial practices that can boost innovation in such firms that perceive innovation as a building block for their whole road map. And that would reveal more facts regarding innova- tive practices from both parties the firm (the product / service) and the consumer (the feedback). Moreover, an investigation as also required revealing the factors that might become barriers for innovation boosting, which result in poor performance and deficiencies.

2 INNOVATION PRACTICES

In 2004, Frank Hull studied an issue related to innovation prac- tices in service sector compared to those in manufacturing sec- tor. In the study, concurrent engineering and contingency theo- ry were examined through a composite model called “Troika”. The model does involve the three issues of organization, pro- cesses, and tools in such a way that intended to increase the novelty and innovation of service development. Figure 1.0 rep- resents the Troika model, by which the model elements are in- teracting and affecting each other [1].

Figure 1.0: The Trioka [1]
On the left side of the model, the operating part is considered in terms of people working in cross functional teams, processes required to achieve required goals, and tools that boost the cycle of achievement.
However, in order to examine the viability of the Troika, some hypotheses were set as follows:
“Hypothesis 1: Interaction effects among the troika
Hypothesis 1a: The greater the deployment of IDC, the greater
the positive effect of ESI organization on performance out-
comes.
Hypothesis 1b: The greater the deployment of CIT tools, the greater the positive effect of ESI organization on performance outcomes.
Hypothesis 1c: The greater the deployment of CIT tools, the greater the positive effect of IDC performance outcomes.

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Hypothesis 2: Interactions of the magnitude of innovation tar- geted by the strategy
Hypothesis 2a: The more the strategy targets novelty, the great- er the positive effect of ESI organization on performance out- comes.
Hypothesis 2b: The more the strategy targets novelty, the great- er the positive effect of IDC process on performance outcomes.
Hypothesis 2c: The more the strategy targets novelty, the great- er the positive effect of CIT tools on performance outcomes.
Hypothesis 3: The greater the strategy of novelty, the greater the interaction between (a) ESI and IDC, (b) ESI and CIT, and (c) IDC and CIT.” [1].
In addition, in order to compile the study a sample of around 58 large firms was drawn, using a questionnaire that is intended for concurrent methods being used there in the firms.
Results showed that ESI was having a significant impact on performance and CIT was having a moderate effect on perfor- mance. In contrast, IDC was having insignificant effect on per- formance [frank].
Nevertheless, the interaction between both ESI and IDC was resulting in a significant effect on performance indicators (time/cost index and product innovation index). Despite to this, CIT has no interactions with other elements in the troika, and that does contract with the results in goods firms [1].

3 INNOVATION IN MANUFACTURING AND SERVICE

SECTOR

In 2005, Joe Tidd, John Bessant, Keith PavittInnovation tried to attempt the management part of innovation “Managing Inno- vation”, where they perceive innovation as opening up new markets or new needs. Not only that; it also means offering existing products or services using new ways [11].
Despite a global shift in textile and clothing manufacture to-
wards developing countries the Spanish company, Inditex
(through its retail outlets under various names including Zara)
have pioneered a highly flexible, fast turnaround clothing op- eration with over 2000 outlets in 52 countries.
It was founded by Amancio Ortega Gaona who set up a small operation in the west of Spain in La Coruna – a region not previously noted for textile production – and the first store opened there in 1975. Central to the Inditex philosophy is close linkage between design, manufacture and retailing and their network of stores constantly feeds back information about trends, which are used to generate new designs [11].
They also experiment with new ideas directly on the public, trying samples of cloth or design and quickly getting back indications of what is going to catch on. Despite their global
orientation, most manufacturing is still made in Spain, and they have managed to reduce the turnaround time between a trigger signal for an innovation and responding to it to around
15 days [11].
the Karolinska Hospital in Stockholm has managed to make radical improvements in the speed, quality and effectiveness of its care services – such as cutting waiting lists by 75% and cancellations by 80% – through innovation.5 In banking the UK First Direct organization became the most competitive bank, attracting around 10 000 new customers each month by offering a telephone banking service backed up by sophisticat- ed IT.
A similar approach to the insurance business – Direct Line – radically changed the basis of that market and led to wide- spread imitation by all the major players in the sector. Inter- net-based retailers such as Amazon.com have changed the ways in which products as diverse as books, music and travel are sold, whilst firms like e-Bay have brought the auction house into many living rooms.
Nowadays, the lead-time between the launching of two certain products has been so short in such a rapid response markets. Where the competition in the market plays a very critical role in pushing some firms to respond to other players, otherwise, the firm will miss the trip!
However, customer’s needs and preferences are being chang-
ing with no prior alarm and notice, where the first who re-
spond to that call will gain the advantage. Likewise, new regu-
lation trends and policies might play a similar role, for exam- ple, being committed to some measures for environmental issues can facilitate creating a new product that is fulfilling that goal, whilst others can still think about that regulation as a challenge.
The same story applies for services, and that mean breaking the traditional and usual picture of offering services. Because any player can easily come with new and innovative way of serving that lead to his / her competitive advantage and lead to your competitive disadvantage.

4 INNOVATION ELEMENTS IN PRACTICE

There are specific elements for innovation, which can be com- bined in the coming 4Ps:
1. Production Innovation: making new changes in products or services that the firm offers.
2. Process Innovation: making changes in the way /
style that products or services are being made.
3. Position Innovation: making changes in the environ- ment where the product or service will be launched and introduced.
4. Paradigm Innovation: making changes in the mental or conceptual model that specify what the firm is do- ing.
Some times you need to develop a product that has gone though several phases of introducing till it lasts, and that may be clear in car manufacturing, where they make some gradual

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modification till the model is obsolete and the turn is due for introducing the new model that has radical innovation and changes [2]. In 2006, Jeroen Jong and Patric Vermeulen inves- tigated the determinants of product innovation in small firms. They were interesting in exploring the differences across the service and goods sectors in terms of producing innovative outcomes [11].
A sample size of 1,250 small firms was drawn over 7 indus- tries. In the study, the focus was considering the practices that a firm would perform in order to come up with innovative outcomes whither in service or manufacturing firms.
The following indicators were used in analyzing the innova- tive practices among small firms, which might vary from one firm to another [11].

 Recent product introduction (new to the firm)

 Recent product introduction (new to the industry)

 Innovative practices:

o Managerial focus

o Documented innovation plans

o The use of external networks

o Market research

o Inter-firm cooperation

o Involvement of first line staff

o Training and development pro-

grams” (Jong and Vermeulen,
2006).
However, the investigation over those industries showed that
recent product innovation is common over the industries in
21% of the sample. One important fact Jong and Vermeulen have come up with is that “Our most interesting finding is that the various models confirm our suspicion of the determinants of product innovation being different across in-
dustries.”[11].
For instance, a managerial focus on innovation was signifi- cantly connected to new-to-the firm products in five out of seven sectors, but not in manufacturing and financial service firms. In such highly innovative firms, a managerial focus to- wards innovation might happen by default, and therefore not be a significant practice.
With the exception of training and education programs, all innovative practices had significant regression coefficients in only a subset of the industries we have investigated.”
Nowadays, to get competitive advantages in any industry have become a prerequisite for sustainable growth and future profitability. And that would be achieved through innovation, organizational change, and entrepreneurial initiatives. Moreover, special traits of leadership have to be there to sup- port the construction of such a climate or a culture of innova- tion and creative outcomes [8].
Their study is intended to test the connections and relation- ships of organizational innovation and other related factors such as leadership and culture. And that study was conducted for the dedication of Australian private sector firms.
A random sample was drawn to collect the required data to
test the hypotheses of the study through a customized ques- tionnaire that serves the study purpose. A sample of 1,158 managers was determined to compile the entire study.
Where the questionnaire was designed to explore the percep- tions and the practices of those managers and how it might form an impact on the organizational culture and innovation as well.
The hypotheses were as follows [8]:
“Hypothesis 2: Articulating a Vision will be the factor of trans-
formational leadership most strongly (and positively) related
to a competitive, performance oriented organizational culture.
Hypothesis 3: The transformational leadership factor of Set- ting High Performance Expectations will be positively related to a competitive, performance oriented organizational culture.
Hypothesis 4: A competitive, performance-oriented organiza- tional culture will be positively related to climate for organiza- tional innovation.
Hypothesis 5: A competitive, performance-oriented organiza- tional culture mediates the relationship between transforma- tional leadership and climate for organizational innovation.” [8].
The above stated factors in the hypotheses are called trans- formational leadership factors which were examined with it correlations with other factors like competitiveness and per- formance orientation.
However, both factors of articulating a vision and providing individual support were having a positive correlation with organizational innovation. In addition, the factor of vision articulation was strongly connected with competitive and per- formance oriented organizational culture, and that would support the second hypothesis.
Moreover, setting high performance expectations was posi- tively correlated with organizational culture as expected in hypothesis 3. And the end they came up with a positive corre- lation between competitive and performance oriented organi- zational culture with the climate of organizational innovation, as expected in hypothesis 4. And that was mediating the rela- tionship between three transformational factors and organiza- tional innovation as expected in hypothesis 5 [8].
The study was contributing and enhancing the enrichment of leadership and organizational behavior, and that was achieved through the illustration of the transformational lead- ership factors and its correlations.
The study suggests that for the purpose of enhancing organi- zational innovation, leader and mangers should focus more on articulating the organizational vision, providing individual support, and focus on lesser high performance expectations [8].

5 INNOVATION AND SERVICES MIX

Recently, the direction toward service orientation is becoming a demanding factor for making sustainable financial positioning and market controlling [6, 7]. However, services in general have

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higher profit margins and more stable input for business reve- nues. Another factor to support this orientation; is the custom- ers’ needs. Where is has been shown that customers are requir- ing more services. Another important aspect is that services are said to be “not easy” to imitate, which can save the innovation context for a certain company to gain competitive edges over other players based on that sort of un-copied innovation in ser- vices [6].
In 2004, a discussion was going on with Paul Horn, IBM vice president for research at that time. Paul was asked about a big problem that he is facing at that time and he replied: “I can't sustain a significant research activity at IBM if our research is not relevant to more than half of the company's revenues going forward”. And that is because he admitted himself that most of IBM’s revenues are from services rather than products [7].
However, that problem of how to sustain innovative services that can stabilize the revenues are faced most of the companies and even countries, where services represent more than 70% of the total gross domestic product and employment in the Organ- ization for Economic Cooperation and Development Countries.
The following list can illustrate the recent goals and challenges that are faced by companies with regards to innovation [9].
Priority Top innovation “Goals for 2010”: Increase product revenue.
Decrease product cost.
Decrease product development cost.
Increase value of Intellectual Property (IP).
Top innovation “Challenges for 2010”: Product pricing/cost pressures  .
Short windows for new product introduction. Increased competition. 
Globalization of markets.
With regards to IP, the patents battles are being very common nowadays, and that is because of one the innovation goals to companies is to increase the value of IP, for example, the mil- lions spent in between Apple and Samsung on patents competi- tions and battles [10]. Moreover, for product pricing and cost pressures; this also can be seen very clearly among the tech companies where both innovation and price are the main key factors to control the market wit, where Apple for example, is thinking of lowering the iPad mini prices to be more competi- tive with other players like Samsung and Nexus [11].

6 CONCLUSION

Obviously, innovation does impact on the firm and the marke as well. But, innovation can be always linked with uncertainty and risks of offering and making something that might not get what is expected and with even strong market research and surveying.
And the secret is how to turn those uncertainties into knowledge base, by which all the resources well input and get an output to and from that base. Managing innovation is not an easy job; otherwise anyone can come with innovative ideas in a daily basis and cover up the market.
Ultimately, a firm has to look for its potentials of innovation, process it, exploit it, and learn from it and that would lead to an
improving knowledge base.

REFERENCES

[1] Frank M. Hull, (2004), Innovation Strategy and the Impact of a Com- posite Model of Service Product Development on Performance, Jour- nal of Service Research.

[2] Managing Innovation, Joe Tidd, John Bessant, Keith Pavitt, Wily-

2005.

[3] Heizer , J. & Render, B. (2005). Operations Management. New Jersey: Pearson Prentice Hall.

[4] James C. Sarros, Brian K. Cooper, and Joseph C. Santora, (2008),

Building a Climate for Innovation Through Transformational Lead- ership and Organizational Culture, Journal of Leadership and Organ- izational Studies.

[5] Kaplan R. & Norton D. (1996). The Balanced Scorecard. Harvard

Business School Press.

[6] Oliva R., Kallenberg R. (2003). Managing The Transition From Prod- ucts To Services. International Journal of Service Industry Manage- ment 160-172.

[7] Chesbrough H. (2011). Bringing Open Innovation To Services. Sloan

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[8] Lee J. & AbuAli M. (2010). Innovative Product Advanced Service Systems (I-PASS): methodology, tools, and applications for dominant service design. International Journal of Advanced Manufacturing Technology.

[9] Wijnberg N. M. (2004). Innovation And Organization: Value and Competition in Selection Systems. European Group of Organization- al Studies.

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