Developing new business-to-business professional services: What factors impact performance?

Business-to-business professional services has been a high growth area for over a decade. Increasing complexity and high technology characterizes this sector, making new product development both essential and risky for firms. Surprisingly little research has been done to understand the industrial professional services sector and, in particular, to discover what factors lead to new product success or failure, however. This article reports the results of an investigation that examines how professional services firms develop new products and what factors impact the performance of these ventures.     

Differential Potency of Factors Affecting Innovation Performance in Manufacturing and Services Firms in Australia

Whether or not industrialized nations are experiencing a fundamental shift from a manufacturing- to a service-based economy may be a matter of debate. However, the service sector is clearly growing at an explosive rate, particularly in comparison with manufacturing. With this in mind, we need to better understand how the successful development of new services differs from that of new products. Such understanding requires identifying the critical success factors for new service development (NSD), as well as contrasting them with the factors underlying successful new product development (NPD). Kwaku Atuahene-Gima describes the results of a study comparing the innovation activities of Australian services firms and manufacturers. The study explores managers' perceptions of the factors necessary for successful NSD and NPD. In addition to comparing the differing perceptions of managers of services firms and manufacturers, the study highlights implications of these differences for managers striving for improved NSD. Services and manufacturing firms focus on similar factors for improving innovation performance. However, the relative importance of those factors depends on the type of firm. The critical factor for services—the importance accorded to innovation activity in the firm's human resource strategy—ranks third in importance for manufacturers. Manufacturers focus primarily on product innovation advantage and quality. In contrast, service innovation advantage and quality ranks third in importance for service firms. Surprisingly, technology synergy is found to have a negative effect on new service performance. If a new service is a close fit with a firm's current technologies, competitors will likely be able to quickly imitate the new service. As a result, NSD efforts based on technology synergy will not provide a competitive advantage. Compared to manufacturers, successful service firms must place greater emphasis on the selection, development, and management of employees who work directly with the customer. Through effective self management, these contact personnel shape the quality of the customer relationship. In addition, their close contact and potentially long-term relationships with customers make such employees an important source of new ideas in the firm's NSD process. Such relationships also cast contact personnel in a make-or-break role in the launching of new services.     

Sectoral Heterogeneity in New Service Development: An Exploratory Study of Service Types and Success Factors

The service industry is of fundamental relevance for the economies of industrialized countries, as the service industry produces the highest growth in the gross domestic product. In this regard, new service development (NSD) represents a critical resource for competitive survival and a decisive factor of growth in the service industry. However, service firms across many industries are increasingly faced with the challenge of determining how best to manage their development of new service offerings. Although researchers have shown growing interest in NSD issues, this area is still underutilized. Furthermore, although the heterogeneity of the service industry has been emphasized for years, the current body of research on NSD mainly focuses on specific service environments, providing data that are often not comparable across different service sectors. Additionally, there is no study to date that comprehensively examines innovation activities and the relevance of service innovations’ success factors within different service industries. The aim of this exploratory study is to establish a more balanced picture of the nature of innovation activities in terms of NSD characteristics and success factors in the heterogeneous service industry. From this perspective, this paper begins with an examination of the factors that contribute to the success of NSD. Based on a meta‐analysis of new service success factor studies, 17 different success determinants are classified and aggregated to service‐related success determinants. Subsequently, a cluster analysis of 1016 service companies is used to identify different service innovation types. For the service sector, four service innovation types are determined: efficient developers, innovative developers, interactive adopters, and standardized adopters. Furthermore, based on interviews with service innovation managers, the previously identified success factors are examined for each innovation type using a standardized survey. Finally, based on the results of this exploratory study, the paper concludes with recommendations for NSD management and research propositions for each service innovation type. These propositions support innovation managers to successfully manage service innovations for the innovation type they are operating in.     

High-Technology Service Innovation Success: A Decision-Making Perspective

Successful innovation is crucial for firm survival in high-technology service industries. This article reports on an empirical study, exploring internal innovation success factors—success factors associated with the innovating firm's competencies—by taking a decision-making perspective. The likelihood of innovation success is associated with the systematic reduction of decision-making uncertainty, as a result of organizational information gathering, diffusion, and processing activities. Effects of interfirm differences are investigated in the new service development phase of the innovation process. Cross-sectional data were collected about 251 innovation projects from companies in Europe, the United States, and Japan. Innovation success is found to be related positively and directly to how well informed and knowledgeable decision-makers are. Furthermore, the study provides evidence that a market orientation contributes as an internal success factor: An organizational climate favorable to information sharing powerfully mediates the positive effects of intelligence gathering with respect to customers and technology. The effects of competitor orientation carry a negative sign, and managerial seniority appears not to play a major role in this turbulent business. Managerial and research implications are provided.     

Success Factors for Service Innovation: A Meta‐Analysis

Service sectors form a considerable part of the world economy. Contrary to the logical assumption that service innovation research should represent a significant share of all innovation research, the vast majority of innovation studies focus on products as opposed to services. This research presents a meta‐analysis of the antecedents of service innovation performance conducted on 92 independent samples obtained from 114 articles published between 1989 and 2015. This research contributes to our understanding of service innovation in three major ways. First, this is the first meta‐analysis that specifically assesses the relative importance of antecedents of service innovation performance, while also pinpointing the differences in meta‐analytic findings between antecedents of service and product innovation performance. Although there are some universal success factors that transcend the boundaries between services and products, the presence of marked differences implies that it would be wrong to treat the development of new services and new products as the same. Second, the meta‐analysis demonstrates that the antecedents of service innovation performance are contingent on the sector context (i.e., explicit versus tacit services). Comparing results between products and services, and between tacit and explicit services, there appears to be a continuum where explicit services sit interstitial between tacit services on one side and products on the other. Third, the meta‐analysis compares and contrasts the antecedents of two dimensions of service innovation performance (i.e., commercial success and strategic competitive advantage). Previous meta‐analyses treated these two dependent variables collectively, which falls short of identifying issues that may affect management decisions when faced with different objectives. Additionally, this research investigates the effect of several other moderators (i.e., culture, unit of analysis, journal quality, and year of publication) on the relationships between the antecedents and service innovation performance. The results are discussed in relation to their implications for research and managerial practice.     

Do We Have to Get Along to Innovate? The Influence of Multilevel Social Cohesion on New Product and New Service Development

In this study, based on the Comparative Performance Assessment Study survey conducted by the Product Development Management Association, the authors develop and test a model which considers the antecedents and performance outcomes of social cohesion, a seemingly critical organizational factor in new product development (NPD). Using a sample of over 450 innovation and product development professionals from North America, Europe, and Asia, social cohesion is conceptualized and tested across three levels—within team cohesion, between team cohesion, and between firm cohesion. The results of a structural equation model indicate several differences between the antecedents of the varying forms of social cohesion. A post hoc exploration of the difference between goods‐ versus service‐dominant firms provides a clearer picture of cohesion's influence on innovation outcomes. Specifically, within team and between team cohesion are positively associated with new services performance, while for traditional goods‐based NPD, within team, between team, and between firm cohesion all appear to be positively related to performance. The findings suggest that high social cohesion is not always optimal and that managers should focus on specific types or levels of social cohesion as opposed to thinking about social cohesion as a one‐dimensional construct. The findings also suggest that goods‐ and service‐centric firms can use different tactics or strategies to drive social cohesion and, ultimately, new product performance, and that innovation managers may need to allocate resources differently depending on the nature of the market offering being developed. The paper also presents several implications for theory and practice, as well as future research directions related to the various levels of social cohesion and their influence on new product and new service performance.     

Heading for new shores: Do service and hybrid innovations outperform product innovations in industrial companies?

This study investigates the financial outcomes of product, service, and hybrid innovations in industrial markets. To date, empirical research has focused on product innovations, yet industrial firms are increasingly competing with innovative services to maintain their competitive edge. This study assesses the financial impact of service and hybrid innovations compared with more traditional product innovations. We develop a unique data set that combines information on companies' innovation activities with objective financial data. From a sample of 348 German industrial firms, the analysis reveals that service innovations do not outperform product innovations in industrial markets. A focus on service innovations only pays off in highly price-conscious markets. In contrast, hybrid innovations, referring to the simultaneous market introduction of new products and services, have a positive effect on firm performance above and beyond pure product innovations. This effect is particularly pronounced in competitive markets and under conditions of high customer concentration. In sum, this study demonstrates that hybrid innovations outperform both, pure product and service innovations in industrial markets.     

A framework of brand value in B2B markets: The contributing role of functional and emotional components

The creation of value is admittedly a critical task for marketers regardless of industry. This paper focuses on a type of value that has traditionally been perceived as irrelevant to industrial markets and argues that brand value facilitates the progression from goods and services value to relationship value. To address the limited amount of research on B2B branding from the suppliers' point of view, we complement insights gained from a literature review with ten exploratory interviews with B2B supplier managers, and develop a framework of brand value applicable to industrial markets. This identifies both the functional (i.e., quality, technology, capacity, infrastructure, after sales service, capabilities, reliability, innovation) and emotional qualities (i.e., risk reduction, reassurance, trust) important for the development of industrial brand equity. Situational (e.g. nature of the purchase) and environmental factors (e.g. the economic situation) affecting suppliers' perceptions of the importance of brand in a B2B context and the role of functional versus emotional brand qualities are discussed. The value of the brand as a driver for the development of business to business relationships is also highlighted. The framework provides a basis for B2B practitioners to build their brands in such a way as to make a functional as well as an emotional connection with buyers that is more likely to lead to a supplier–buyer relationship.     

The Augmented Service Offering: A Conceptualization and Study of Its Impact on New Service Success

Unlike companies that produce tangible goods, service firms typically cannot rely on product advantage as a means for ensuring the success of a new service. Developing a competitive response to a tangible product may require significant investments of time and effort. In many cases, however, competitors can easily duplicate the core elements of a firm's new service. This fundamental difference between new products and new services means that managers who hope to find the keys to new-service success must look to factors other than sustainable product advantage. Chris Storey and Christopher Easingwood suggest that managers must understand the totality of the service offering from the customer's perspective. They explain that the purchase of a service is influenced not only by the service itself, but also by such factors as the service firm's reputation and the quality of the customer's interaction with the firm's systems and staff—in other words, by the augmented service offering (ASO). Using the results of a study they conducted in the consumer financial services industry in the U.K., they identify the components of the ASO, and they examine the relative contributions of these components to the success of new services. In their model, the ASO comprises three elements: the service product, service augmentation, and marketing support. The core of the ASO—the service product—includes such dimensions as product quality, product distinctiveness, and perceived risk. The study's results suggest that improvements in the service product open up new opportunities for the firm, but have only modest effects on sales and profitability. Rounding out the ASO model are service augmentation and marketing support. Service augmentation encompasses such dimensions as distribution strength, staff-customer interactions, and reputation. The customer recognizes and responds to these elements of the ASO, but they are not part of the product core. Marketing support involves those marketing and management actions that affect the quality of the product and its augmentation, even though customers typically are not aware of them. These elements include knowledge of the marketplace, training of contact staff, and internal marketing. Enhanced service augmentation has significant effects on profitability and sales for the firms in this study, but it does not offer enhanced opportunities. The marketing support elements contribute significantly to all aspects of performance for the firms in this study.     

Critical path method for introducing an industrial product

New product development continues to be a vital evil for most organizations. Considerable attention has been directed toward this function in the consumer goods field but relatively little research has been directed toward this critical task for producers of industrial goods. Industrial goods marketing managers seem to agree that error at the announcement/ introduction phase of the new product development process is responsible for the greatest number of new product failures. This article suggests use of the critical path method to ensure success at this crucial stage.     

Innovative versus incremental new business services: Different keys for achieving success

In companies where new product development plays an important strategic role, managers necessarily contend with a portfolio of projects that range from high technology, new‐to‐the‐world, innovations to relatively simple improvements, adaptations, line extensions, or imitations of competitive offerings. Recent studies indicate that achieving successful outcomes for projects that differ radically in terms of innovativeness requires that firms adjust their NPD practices in line with the type of new product project they are developing. Based on a large‐scale survey of managers knowledgeable about new product development in their firm, this study focuses on new business‐to‐business service projects in an attempt to gain insights about the influence of product innovativeness on the factors that are linked to new service success and failure. The research results indicate that there are a small number of “global” success factors which appear to govern the outcome of new service ventures, regardless of their degree of newness. These include: ensuring an excellent customer/need fit, involving expert front line personnel in creating the new service and in helping customers appreciate its distinctiveness and benefits, and implementing a formal and planned launch program for the new service offering. Several other factors, however, were found to play a more distinctive role in the outcome of new service ventures, depending on how really new or innovative the new service was. For low innovativeness new business services, the results suggest that managers can enhance performance by: leveraging the firm's unique competencies, experiences and reputation through the introduction of new services that have a strong corporate fit; installing a formal “stage‐gate” new service development system, particularly at the front‐end and during the design stage of the development process; and ensuring that efforts to differentiate services from competitive or past offerings do not lead to high cost or unnecessarily complex service offerings. For new‐to‐the‐world business services, the primary distinguishing feature impacting performance is the corporate culture of the firm: one that encourages entrepreneurship and creativity, and that actively involves senior managers in the role of visionary and mentor for new service development. In addition, good market potential and marketing tactics that offset the intangibility of “really new” service concepts appear to have a positive performance effect.     

Ordered to Innovate: A Longitudinal Examination of the Early Periods of a New Product Development Process Implementation in a Manufacturing Firm

Firms can generate rather long‐lasting growth spurts through continuous innovation. Moreover, literature suggests that, when growing organically, firm performance is enhanced through a revenue expansion emphasis encompassing new‐to‐the‐world or new‐to‐the‐firm physical goods or service augmentations. This organic approach usually outperforms cost‐reduction programs, which often yield minor improvements to existing products; or an emphasis on simultaneous revenue expansion and cost reduction. While this finding has the major implication that firms should focus and generate more radical new products for long‐term success, there is need for research that investigates how firms should implement the strategy change to organic growth via innovation. The authors present a case study, which suggests that in the short run, it might be better to commence a revenue expansion strategy by focusing on incremental new product development (NPD) efforts, rather than focusing too much on new‐to‐the‐world or new‐to‐the‐firm products. Moreover, analyses of the rich, multimethod data, collected over a two‐and‐a‐half‐year interaction with the focal firm, illustrates that to increase success prospects of an organic innovation strategy, managers should not only engage incrementally innovative new product projects initially, but also ensure proficiency in commercializing the new product with cross‐functional NPD teams. Thus, in early stages of organization transformation, the merits of the organic growth strategy will be swiftly demonstrated, the cross‐functional teaming skills are learned and tested, and the new strategy becomes institutionalized. While somewhat contradictory to other studies on this topic, this more evolutionary exploration provides a new perspective for organizational change, especially when a firm is ordered to innovate. In conclusion, the insights gleaned in this study shed light on the journey from stagnating firm to a successful serial innovator via formalized NPD process implementation.     

New Product Development For Service Companies

It is well known that services differ from manufactured goods in a number of significant ways. Services are largely intangible, produced and consumed simultaneously, heterogeneous and perishable. These differences can lead to changes in service management. Christopher J. Easingwood has investigated how new products development practices in service organizations may reflect these differences. He has profiled practices found in a sample of service companies in the United Kingdom on topics ranging from idea generation to post-launch assessment, together with the strategic role and organizational location of new products. A number of special characteristics of the new product activity in services companies are identified. For instance, the number of new product introductions may be restricted due to customer and staff confusion when faced with a proliferation of service products. Test markets are used primarily to ensure the proper functioning of the service rather than to provide a base for a national sales projection. These and other characteristics appear to be appropriate adaptations to the special features of services. They are part of a pattern that shows some of the ways that service companies have adapted the new product development process to meet unique problems in the service environment.     

Removing the fuzziness from the fuzzy front-end of service innovations through customer interactions

Customer interaction in new service development has a positive impact on the performance of new services. In addition, prior studies recognize the importance of the fuzzy front-end stages of new service development. Yet, the researchers have not taken the next step to explore the relationship between these two key areas of service innovation. To address this critique of the literature, the process of customer interaction in the fuzzy front-end of new service development is investigated by conducting a rigorous qualitative field research involving 26 financial services firms. The findings suggest that the fuzzy front-end can be much less ‘fuzzy’ if customers are involved in the front-end stages of new service development.     

Does an extrinsic reward for R&D employees enhance innovation outcomes? Evidence from a Japanese innovation survey

This paper examines the effects of extrinsic rewards for R&D employees on innovation outcomes based on evidence from a Japanese innovation survey. Theoretical and empirical studies present conflicting findings regarding the relationship between extrinsic rewards and innovation outcomes. This article seeks to shed light on the relationship between rewards and outcomes, as represented by the development of new products and services and their technological superiority and profitability. The analysis produced the following findings. First, companies that have introduced an evaluation system based on R&D performance are more likely to develop new products and services. The introduction of the evaluation system brings about success in product innovation with greater technological superiority. Second, monetary compensation has a negative impact on the development of new products and services and technological superiority. Third, these effects vary with the company size. Small- and medium-sized companies achieve higher technological superiority with performance-based evaluations. Large companies tend to adversely impact the development of new products and services and their technological superiority with monetary compensation.     

Managing Knowledge for Innovation: The Case of Business‐to‐Business Services*

The present study builds a typology of organizational knowledge in business services and empirically examines the effects of knowledge on innovation performance. It is suggested that firms differ with respect to their knowledge creation approaches and that these approaches have implications for firms' innovation activities. A conceptual framework of knowledge assets with degrees of tacitness and collectiveness as the principal axes is used to ground the empirical analysis. The organizational knowledge framework is empirically operationalized using survey data from 167 business service firms and supplementary case study evidence from 16 other firms. It is found that business service improvements and new service introductions are significantly associated with collectively held knowledge, such as codified service solutions or team‐based competences and procedures. In contrast, relying solely on tacit knowledge held by individuals may hamper innovation. The results also suggest that tacit collective knowledge is more closely associated with new service introductions, whereas explicit collective knowledge is associated with service improvements. Tacit collective knowledge is thus conducive. A managerial implication is that new service introductions necessitate team competences and routines, whereas incremental service improvements are more likely if procedures are in place to codify services into explicit solutions or technologies. Thus, the knowledge management approach should depend on the strategic orientation of the service firm toward continuous improvement of existing services or development of completely new services.     

Telecommunications infrastructure facilitating sustainable development of rural and remote communities in Northern Australia

Telecommunications access in the rural and remote areas of Australia has come under considerable scrutiny in recent years. In the past decade, various Federal Government reports and inquiries have citied inadequate infrastructure, lack of service provision, the high cost of access and “thin” markets as key impediments. Whilst these difficulties are not restricted to rural and remote Australia, they tend to impact disproportionately on regional communities, notably in education and health service provision. Particularly at risk are the indigenous communities in rural and remote regions of Australia.In this paper telecommunications infrastructure is perceived as the lynch-pin for achieving sustainable economic and social development. It is suggested that without appropriate development of information infrastructure, the disparities already experienced by rural and remote communities will be further exacerbated as the reliance of goods and services over computer-mediated networks increases.The paper offers a new paradigm that will assist in maintaining a competitive telecommunications environment and facilitate the sustainable social and economic development of rural and remote communities.     

Generating new service ideas: the use of hybrid innovation tools to reflect functional heterogeneity of services

In many cases, new services are developed based on incremental innovation. Thus, how to identify functional characteristics and how to differentiate new service development are two critical questions. However, previous research has ignored the functional heterogeneity of service when using innovation tools for new service development. In response, we suggest a hybrid approach to differentiating the method of generating new service ideas. A Kano model is first employed to identify whether functional characteristics are core or peripheral, after which different methods are applied for each function. For core functions, a case‐based reasoning approach is used, which focuses on identifying similarity; for peripheral functions, we suggest instead a modified zigzagging approach to identify creative functions. To present the working of proposed approach, we conducted a case study using Appstore application, IreaditNow, and show how to generate alternatives for both core services and peripheral services.     

Identifying industrial new product success: Project NewProd

What is the key to success in industrial product innovation? This question is frequently posed, and many authors and managers have speculated as to which critical factors or variables decide the fate of new industrial products. What is missing in the debate is evidence based on actual new product successes and failures. Project NewProd is an investigation that was designed to fill this void. In this article we report the results of a study into a large number of successful and unsuccessful new products, project NewProd, whose goal was to identify the determinants of commercial success in industrial product innovation.     

Collaborative approaches to public sector innovation: A scoping study

In the last 15 years, European countries have invested considerable resources to provide e-government services. Despite of its increasing availability, its level of adoption has not been satisfying. On the other hand, over the last years, coinciding with the web 2.0 trend, the e-government services co-produced by citizens start to appear, often without the support, acknowledgement and even awareness of the government. This trend stems from a well-established tradition of offline co- production of public services, i.e. services provided by the voluntary sector, but brought to an unprecedented scale thanks to the advent of web 2.0. Still, the concept remains not well-defined and its impact is not yet well studied. The paper explores on a limited sets of cases what does it mean to collaboratively deliver online public services; what are the success factors based on the cases under study and what are the incentives for service providers (other than public administration), citizens as users and public administration. The authors propose an ostensive definition of the collaborative delivery of public services: collaborative public services are created and run by government, civil society or by private sector building on the re-use of government data or citizens data. Those services are focused on public goods delivery (e.g. health, education, public transport) and are meant to change the traditional government services by engaging in an open dialogue with public administration about the best way to deliver those services. The analysis of six case studies of innovative collaborative online public services suggests that the online collaborative public service delivery increases its quality with the users׳ growth contrary to the traditional offline service delivery. The study results indicate that the current developers interest lies in delivering complementary services to the government run services rather than substitutive services. The authors propose also the initial list of success factors, enabling conditions, and benefits for all main stakeholders (users, innovators and public administration).