and successfully commercialize new products, services or processes, see e g. Herstatt et al. 2007b Opportunities presented by the globalization
products, processes and/or services (Tiwari, 2007 Innovations usually do not take place in a given, static environment.
consumer in the form of cheaper and/or better goods and services. â€oeconsumption is the
services which are adapted to the local needs and tastes of those markets Providing innovative products with enhanced utility may help firms strengthen their
distribution and after-sales services; see e g. Dangayach et al. 2005) and Spielkamp & Rammer (2006.
services faster Develop products and services cheaper Develop better products and services Improve competitive position
Enhance profitability, strengthen stability Quality Costs Time Develop products and services faster Develop products and
services cheaper Develop better products and services Improve competitive position Enhance profitability, strengthen stability BARRIERS TO INNOVATION IN SMES
CAN THE INTERNATIONALIZATION OF R&d MITIGATE THEIR EFFECTS R. Tiwari and S. Buse (October 2007) Page 8 of 31
more informal manner and confronted with fewer intra-firm hierarchy levels than large firms, SMES seem to be, in many respects,
better placed for innovations than their large counterparts. This potential edge in normal course, should enable them to develop
Manufacturing, Maritime Economy, Medical Equipments, Logistics, and Services sector To reduce the time needed to fill out the questionnaire,
Services; 11 %Electronics 16 %IT; 19 %Media; 3 %Logistics; 21 %Aviation; 3 %Maritime; 6 %Machinery
or services to meet new market demand, introducing new processes to improve productivity, developing or applying new marketing techniques to expand sales
sample of 870 SMES from both manufacturing and services sectors These SMES have been found engaged in variety of businesses and to
expansion of product, services and markets, making of new ways of product development and establishing new
to both manufacturing and services sectors. A total of 870 SMES from across the country participated in the study that
Services SMES Sector Mean Std. Dev Manufacturing 1. 5461 1. 28777 To replace products Services 1. 0696 1. 19622
Manufacturing 2. 3775 1. 04685to improve product quality Services 1. 6917 1. 32562 Manufacturing 2. 2247 1. 11048to extend product
range Services 1. 5143 1. 26809 Manufacturing 2. 2989 1. 13428to open up new markets or increase
market share Services 1. 6289 1. 27987 N 870 To assess whether the sampled SMES were involved in any
activities related to R&d, managers were asked about their response on a dichotomous scale. The result is shown in Table
in the services industry. The results of the study do indicate that the innovation is essential
services, with the aim of strengthening the innovation capacity of SMES and creating value on the
European dimension that lead to radical changes in how business (product, processes, services marketing etc.
tailored services and projects (innovation management capacity building, IPR management, etc†networking and mobilization actions for innovation service providers and policymakers (i e. exchange
IPORTA 2-Increasing the quality of IP advisory services to SMES...15 INNOSUP-4-2014:
1-Establishing services â€oeenhancing the innovation management capacity of SMES€ in the Enterprise Europe Network...
innovation support services to SMES. In addition the analysis of current SME innovation activities and their future development are covered themes by innovation in SMES.
services, marketing etc. is done. It will launch the company into new markets, promote growth, and create high return on investment.
sector in which it is presented (new products, processes, design, services and technologies or new market applications of existing technologies.
In addition, in phase 3, SMES can benefit from indirect support measures and services as well as access to the financial facilities supported under Access to Risk Finance of this work
innovation support services. However, SMES receiving innovation support often remain dissatisfied with the services they receive;
while at the same time the public expects a higher return from the support provided. While major new drivers for SME innovation, like online
established support services assist mainly clearly defined technical projects within single enterprises. Public support pays much less attention to the creation of favourable ecosystem
regional services. Generally, the actions are designed to provide opportunities to Member States and regions to enhance their services through collaboration,
peer-learning and uptake of new approaches. In addition several actions will focus on the identification, further
of long-term internationally competitive goods and services that require combining different competences and innovative solutions.
or significantly improved products (goods and/or services), processes, new marketing methods, or new organisational methods â€,
In particular, the services offered by this helpdesk should follow closely the recommendations stemming from a document prepared as a follow-up of the external
The services offered by this helpdesk should follow closely the recommendations stemming from a Commission document prepared as a follow-up of the external evaluation of the
for initial IPR services as established e g. through analysis of helpline requests, or feedback from trainings and from cooperating business services organisations
Depending on the demand of the target group the activities may be provided in the most demanded EU languages.
ï Establish support services and cooperation structures with intermediaries (like the regional consortia of the Enterprise Europe Network and system of National Contact
IPORTA 2-Increasing the quality of IP advisory services to SMES Specific challenge: Managing Intellectual Property rights (IPR) is a difficult task, especially
services to SMES Scope: This project is undergoing an evaluation. The future project should build on top of
better services to SMES, including providing information on the business use of European level rights (Unitary Patent, European Trade mark, Community design.
individual inventors and how to offer services to this target group. The initial pilot implementation of new services by NIPOS can be included as well as the update of the
analysis of current SME needs for IPR support services. The future beneficiary consortium should take care of the joint website www. innovaccess. eu
Upgraded or new services and trainings for the target group will be provided by the national IP offices to be implemented either by the NIPOS themselves or by the business support
providers. Where needed professional legal attorneys should be trained to tailor their advice and to build IPR strategies matching the needs and resources of SMES
service providers†intellectual asset services in conjunctions with NIPOS 70%of the provided grant should be spent on joint actions described above directly with the
Commission services IPR projects: IPR helpdesks and the transatlantic portal The project should be operational for a period of 48 months
ï Upgrade or create new services and trainings for the target groups according to the needs of SMES.
-directly benefitting from the upgraded or new services and trainings ï Existing IP, like the common website (innovaccess),
knowledge, skills and innovation support services from both public and private service providers across Europe more effectively accessible for SMES
and award the label might provide services to participating managing entities of innovation voucher programmes which enhance the quality of delivery or manage
ï Increase the range and quality of services available to SMES ï Enhance the opportunities of excellent researchers and other specialists to transfer
benefitting from support the programmes still often remain dissatisfied with the services received 15 The PRO-INNO Europe'INNO-Partnering Forum'(IPF,
Innovation support services are addressing this challenge traditionally by two interventions that are combined often:(a) the provision of networking
Social media and other web-based services challenge these existing approaches and ask for their revision The british †connect†platform is the first publicly financed innovation platform on the web
generation of support services that assist to create value from online collaboration with a group of contacts and potential partners (â€oeassistance to online collaboration for innovationâ€
ï make such new services accessible for enterprises in sectors that are typically not yet benefitting from innovation support
currently providing brokerage services in established networks or SME agencies Service designs and qualification profiles shall be formulated independently from a particular
Tests of services shall be undertaken on platforms that are open and bring together already a critical mass of enterprises and innovation stakeholders
ï New services assisting online collaboration for innovation help SMES to access a broader range of potential innovation partners and mobilise them in a timely manner
the services of Enterprise Europe Network †is enhanced ï Resources in public innovation support are reoriented from information and brokerage
be implemented by the Commission services HORIZON 2020 †WORK PROGRAMME 2014-2015 Innovation in SMES
Awareness of these initiatives should be expanded and the services supporting them professionalised At the same time financial and management reporting need to catch up with the logic of open
-initially proposed services to be developed to the target group and to a relevant part of the legal profession
IPORTA 2-Increasing the quality of IP advisory services to SMES INNOSUP 6 †2015:
1-Establishing services â€oeenhancing the innovation management capacity of SMES€ in the Enterprise Europe Network
services to beneficiaries to address this need The Enterprise Europe Network is a European-wide network of public, public-private and
private providers of support services to SMES established for the period 2008-14 under the
of innovation support services. The network is most well-known for services related to partnering for business and innovation.
The Enterprise Europe Network is a therefore a suitable structure to introduce services â€oeenhancing the innovation management capacity of
SMES€ and make available to SMES higher quality innovation support services where these are absent or unaffordable on local markets
It is proposed that all information and partnering services of the network, including those specific to Horizon 2020, will be financed under the COSME programme in order to reduce
the administrative complexity of projects. A contribution of Horizon 2020 to the Network should exclusively be allocated to new and additional innovation support services, like those
enhancing the innovation management capacity of SMES This action will establish and provide the above mentioned services addressing in general
SMES with significant innovation activities and in particular the beneficiaries of the SME instrument. The services will be provided in the current Enterprise Europe Network in the
year 2014 and as distinct element of the Enterprise Europe Network (2015-21. To that end
services to address recognised gaps. The assessment could be based on the IMPÂ rove methodology or methodologies already introduced in the regions that comply with the
This open call will include the requirement †Provision of services to enhance innovation management capacity of SMES, in particular to the beneficiaries of the SME instrument†in
and its services in the regional ecosystem of SME support in order to minimize market distorting effects.
of SMES receiving the services as compared to a control group. Innovation processes will be conducted more efficient and more effectively
capacity assessment and support services in all regions across Europe. In an increasing number of regions the initial introduction in the context of the described action will lead to
Several Member States have integrated services provided by the IMPÂ rove academy in their national/regional SME support system or expressed their interest to do so in the future
delivery of the coaching and mentoring services related to the SME instrument in three respects: First, by providing a capacity building environment for the innovation advisors (staff
and the †services enhancing the innovation management capacity of SMES€ HORIZON 2020 †WORK PROGRAMME 2014-2015
beneficiaries of the SME instrument and the services †enhancing the innovation management capacity of SMES€ Furthermore the support provided would secure the quality of the
capacity assessment and consulting services in all regions across Europe. In an increasing number of regions the initial introduction in the context of the Enterprise Europe Network of
SME internationalisation support agencies to provide better services to their clients that allow them to capture the potential of reverse innovation
and services that are attractive to customers and can make a business stand out among the competition.
Making such support services available more widely will improve business†ability to use design as a driver for innovation.
Enterprise and industrial innovation opportunities, in terms of products, services and organisational innovation, and innovation processes are getting more diverse by the
services). ) Awareness and training material shall be produced based on cases studies for agencies in charge of designing and/or delivering innovation support programs for (i) training
be implemented by the Commission services 22 This activity directly aimed at supporting the development and implementation of evidence base for R&i
be implemented by the Commission services HORIZON 2020 †WORK PROGRAMME 2014-2015 Innovation in SMES
processes and services developed by industry, SMES and first time industry applicants This study will assess to what extent the pilot has been implemented in 2015, its first year, in
the impact of the Programme in terms of new products/processes/services introduced into the market two years after the project's completion.
products/processes/services, difficulties faced to go to the market. Moreover, the study will analyse the complementarities in terms of impacts for the participants in Eurostars-1 projects
enhanced provision of services for consumers and businesses; and possibly, demonstration and motivational effects. Determinants of rates of enterprise creation at the
market†s supply of such services and providing hands-on focused courses â Integrate the local development dimension into the promotion of entre
access through markets for goods, services, intellectual property rights and human resources. They must also participate in networks, particularly those that nurture the
of universities and knowledge-intensive services in cluster Figure 3. Types of innovative networks 1. Belgium, Denmark, France, Germany, Ireland, Italy, Netherlands, Norway
advisory services, markets and regulation, and dispute resolution processes. This will require active collaboration among governments, international agencies and the private
and to develop products and services geared to high-growth nascent and existing entrepreneurs Promoting e-business adoption by SMES
requirements, advisory and support services for SMES and dispute resolution procedures â Enhance incentives for new public-private partnership initiatives that would
use of broadband services require policies that: promote effective competition and continued liberalisation in infrastructure, network services and applications across
different technological platforms; encourage investment in new technological infrastructure, content and applications and ensure neutrality across competing and developing
services, should be stimulated Digital products, information services and interaction with government in areas such as procurement, regulatory
compliance and tax offer SMES important potential efficiency gains and marketing opportunities. While the potential
services and applications. Where the needs exist, and without preempting private initiative or inhibiting competition, complement private investment with
government services to enterprises should be used as a tool to improve efficiency of government interactions and operations with SMES
services, both public and private (e g. provision of market product and process information, accounting, market
access the public and private support services they need â Offering some form of monetary incentive to multi
â€oecross Cutting Review of Government Services for Small Businessesâ€, Department of Trade and Industry, September 2002, URN 02/1324
Tax agencies (support services) 81 Department for Environment, Food and Rural affairs grants, advice, in kind support) 3 120
Census of Manufacturing and Services (2001) for the size distribution. Community innovation survey (CIS) for the presence of innovation activity (2002-2004
3. 2 Why Add Services?..13 3. 3 Definition of Services...14 3. 4 Types of Product-Related Services...
14 3. 5 Mini-Cases...18 3. 6 Differences between Products and Services...21 3. 7 Innovation in Product-Based Services...
22 3. 8 Role of Information technology (IT) in Product-Related Service Innovation...24 3. 9 Do Manufacturing
and Service firms Innovate Differently?..28 3. 10 The Customers†Role in Product and Service Development...
28 4. 0 INNOVATION MODEL AND TOOLS FOR TOTAL SOLUTION DEVELOPMENT...32 4. 1 Models for New Product Development and New Service Development...
Services Embedded in Product Sale...43 5. 2 Phase II: Services Provided to the Installed Base...
48 5. 3 Phase III: Services Based on Customer Relationship...49 6. 0 RECOMMENDATIONS FOR THE MEP NETWORK...
52 6. 1 Introduction...52 6. 2 Current Skills within the MEP Network...52 6. 3 Statement of the Key Problems...
Figure 3. 2 Market Penetration of Services...17 Figure 3. 3 Comparison of NPD, NSD and TSD Processes...
how small and medium-sized enterprises (SMES) develop new products and services. Our team extensively reviewed the literature for concepts and research on new product and service
and services. They must offer their customers something different than their competitors offer in order to avoid the same low-margin trap that they now face.
and services that allow more efficient and effective use of the products that they currently sell.
new services is uncharted territory for most SMES. Their service experience is limited often to offering customers free or below-cost installation, training, and maintenance.
offer services that can make their products yield greater total return over their useful life than can
These services include customization of products to specific customer uses, training for optimal performance, product disposal,
The above mentioned services require SMES to form deep and trusting relationships with their customers so that they can co-discover ways to make the best use of their products,
and implement ideas for new services. Our literature review led us to propose a â€oetotal solution development†model that synthesizes existing new product and new
or services of varying type and degree can be appropriate for different SMES in different industry sectors or product life cycle stages.
-related services that complement the sale of a firm†s current products 2. 1 Generalizations about SMES and Innovation are Difficult to Make
through distributors than do SMES that sell products or services directly to other businesses They also must devote more time and attention to market research and advertising and generally
services, if convinced that a supplier can do a better job, and thereby allow them to concentrate
Small customers are candidates for services too Ashton et al. 2003) advise SMES to consider segmenting their markets to identify small
SMES services more than low-end customers 2. 2 Types of Innovation that SMES Undertake SMES can introduce process innovation to enhance the capability of their production processes
innovation in section 3 where it relates directly to adding new services that complement existing
customized products perhaps supplemented with services. The same SME is unlikely to be nimble enough to modify its strategy to match the evolution of life cycle stages, especially at its
intimacy are ways to do this, especially in delivery of industrial services. Scale should be sought by geographical expansion to similar (â€oenarrow but deepâ€) product markets, not by product-line
of customer intimacy is especially appropriate for SMES that pursue industrial services to complement the sale of their products
Another option for SMES is to perform industrial services that their customers currently perform or propose new services that will help them operate more efficiently.
The most well known industrial services are maintenance and provision of spare parts. We will provide a much longer
list of such services in the next section of the report. If SMES are allowed to work closely with
their customers, they might be able to propose new services to perform by observing â€oepoints of
pain†(Gustafsson and Johnson, 2003) that perplex and frustrate their customers when they use their product or other firm†s products.
Gustafsson and Johnson (2003) suggest viewing â€oeproducts as services waiting to happen†The next section develops these themes further by exploring in depth one potentially attractive
innovation path for SMES, namely the addition of services to product offerings 13 3. 0 SERVICE INNOVATION IN MANUFACTURING COMPANIES
One way that SMES can achieve such growth is by adding services to or around their products and this section reports on such new opportunities.
3. 2 Why Add Services There are many reasons why the addition of services can provide significant growth
opportunities, greater stability, and higher profit margins to SMES (Reinartz and Ulaga, 2006 Among these reasons are
•Adding services can help consolidate and protect the core product businesses of an SME
Services can differentiate a company from competitors and establish closer relationships with customers. It is relatively easy for a competitor to provide a better and/or lower cost product
3. 3 Definition of Services There are several different definitions of service found in the research literature.
3. 4 Types of Product-Related Services Servicing the Installed Base. In describing the service elements provided by manufacturing
industrial services, service strategy in manufacturing, product-related services, product-services, or after-sales services.
SMES are motivated to develop these services in order to complement their existing product base as well as to enhance revenues.
This is done by showing customers the importance of services during the life of a product.
In the past, many services have been offered as add-ons in order to make a sale, but the product was the main source of revenue.
Servicing the installed base requires firms to make services a higher priority. A firm†s installed base (IB) refers to its products that are
currently in use. For example, one of Hewlett-Packard†s installed bases is printers. Although Hewlett-Packard†s servicing is in terms of a product (i e.,
, the ink cartridge), the model still stands. The company sells a product that is its main source of revenue (i e.,
IB services include all services 15 that are needed to keep the product functioning properly throughout its life-cycle.
firm can develop new services for its existing market, and it is also less risky than other
The firm must collectively learn to value services and how to manage the service process.
covering all services over an agreed period. This transfers the risk of equipment failure to the
service provider and focuses on relationship-based services centered around the product and operational availability and response time in case of failure.
It is now pertinent to list the different classes of services that can be added around a product sale
onetime services. They may in fact be of considerable value to customers yet are bundled in â€oefree-of-charge†because of perceived or actual competitive pressures.
Following Oliva and Kallenberg (2003), we arranged these services into four clusters (see Table 3. 1). These authors suggest that firms must master product-based services first before
graduating to comprehensive and relationship-based services. Firms that don't do this usually fail at transitioning to services.
Two of these clusters involve migrating from a transactional to relationship-based approach with customers (vertical path) and the other two involve migrating
from selling services focused on single products to selling comprehensive services in which the firm†s products and ancillary products and services are embedded (horizontal path
As firms seek to increase their service offerings and gain access deeper into their customer†s
value chain to offer more complete solutions, it is critical for them to understand both their
Figure 3. 2 Market Penetration of Services 18 3. 5 Mini-Cases The first â€oemini-case†illustrates how a supplier of a commodity product changed its business
Moreover, it buys support services in volume, and its database of trip costing enables the company to accurately quote
Additionally, services can help to establish â€oecustomer lock-inâ€. Customers, by foregoing certain tasks, increase their dependence on their suppliers.
later delivery of products and services Mini-Case Example#2: General Fasteners, a supplier of components to the
It provides both products and services. In addition by taking over the front-end skilled design work, GF€ s customers have need no to
In many cases, the addition of complementary services such as scheduled maintenance, remote monitoring of performance, benchmarking,
Services demand closer relationships with customers, sometimes requiring regular on-site engagement. These interactions can uncover unmet needs,
products and services that would not normally be encountered with a more â€oearms-length†product-sale relationship
The company may also innovate entirely new services. The latest information technology standards and infrastructure can be used to provide services that were conceived not even by
customers until their providers innovate. For example, using advanced data collection and data mining tools, coupled with real-time data collection over the Internet may provide a whole new
services more effectively, c) provide fast turn-around service or even on-line help that reduces service time and costs.
would be readily adding services to their product portfolios. However relatively few manufacturing companies have introduced services to their product offerings.
There are some noticeable exceptions, such as IBM and GE of course. But even these large companies have
report examines the differences between products and services and how innovation practices differ substantially between the two.
complicated when a company attempts a hybrid model of products plus services, where the organizational, cultural,
3. 6 Differences between Products and Services As SMES are used to thinking in terms of physical products,
services. Services are in fact inherently different from products in a number of key attributes (de
Jong and Vermeulen, 2003; de Jong et al. 2003 •Intangibility: this characteristic best differentiates products from services.
Services are intangible and often, but not necessarily manifest themselves together with the customer On the other hand, products are a) more often shipped to the customer,
b) are developed with limited customer input, and even then, at the formative stage of development, c) the
services tend to be heterogeneous; that is they are customized to the specific needs of the recipient.
Services are perishable and are created usually as they are used, whereas products can be made ahead of time and held in inventory or within a distribution supply
Services can be more readily combined into customized packages compared with product features. This differentiates
products from services and makes them more difficult to imitate by competitors, thus increasing competitive advantage.
When we categorize different classes of services, it is clearly seen that, in many instances,
The distinction between products and services is often unclear. For example, software service providers may offer homogeneous products that are produced not
and manufacturers increasingly offer products that are accompanied by services, such as repair and maintenance (de Jong et al.
) Products and services can be viewed as a continuum because many products have embedded services in them and vice versa (Johne and Storey
1998). ) At one end of the continuum are physical products that are exchanged for payment. The
continuum are services that consist of dialogues between service providers and clients, e g consultation or therapy.
Services such as banking and insurance are further along the continuum because the client receives a product, e g.,
Services such as transportation telecommunications and courier mail require systems that are designed, developed, and optimized for performance or delivery of the service
3. 7 Innovation in Product-Based Services We have seen that services have a number of attributes that are inherently different from
products. Based on these findings, we now examine the similarities and differences in the innovation processes needed for each type
Due to the labor intensive nature of services typically service innovations require much less capital investment.
for the development of new services (Brouwer and Kleinknecht, 1997. Technology is also less important for the development in new service as many times the face-to-face relationship
success of new services than on new manufactured products We start by reporting on the research literature covering both product and service innovation
•Research on â€oehybrid†innovation models combining services with products is extremely limited, again led primarily by European teams.
create unique services or products can be a powerful way of adding value and keeping out
services in â€oevegetation management†to businesses rather than homeowners DBI Services (www. dbi. com) learned by listening carefully to customers that
businesses have greater and more complex needs than homeowners. For example, â€oeclass I†railroads are regulated by the federal government on the
customized services supported with proprietary information systems. Source Warren and Susman, 2004 Customer Lock in: Information can be shared between customers and suppliers so that each
region to service, funds the local marketing, sales and delivery services after paying an entry fee of about $1 million to Chemstation.
the overall effectiveness of developing new services. Teams appear to enhance the firm†s NSD
generation of new ideas, accelerating the development of new services based on those ideas, and generally supporting the firm†s goal of rapidly bringing new service offerings to market
surprising based on the specific attributes of services that were mentioned earlier (see section 3. 6), such as intangibility and imitatability
their services based on customer feedback, etc. Product innovations are made also in gradual and incremental forms,
In order to develop services that customers find valuable, it is important to have customer input Although this will be discussed in greater detail in section 4,
products and/or services. Once these unmet needs are uncovered, the firm and its customers should work together
build new products and/or services that are valuable to the customer. It is critical that the firm
or services that they don†t find valuable for their firm. New products and/or services must be developed to add value to the
customer. (Gordon et al. 1993 29 Figure 3. 5 below is adopted from Gustafsson and Johnson (2003) and links the evolving
Firms in the middle region of the figure offer discrete services usually on a fee-per-event basis
Ideas for services may be offered to customers on a fixed-term contract basis. Customers are active participants in the NSD process and in service delivery
In addition, new services may not have defined as clearly yardsticks, as new products do, against which a fixed gate could be associated
In contrast to new product development, most new services are developed in an ad hoc fashion de Jong et al.
for example,(1) new services can be imitated by competitors, and thus require a quick response and less formal process,(2) no natural milestones for review, unlike for new products.
products or services; instead it posits that a firm should let customer needs dictate the type of
products, and they could certainly explore how to add new services to these products to address
Unlike products, many services are delivered by individual employees and the quality of service can vary greatly depending on the training and
, patent search, new use of existing products/services, competitors, upstream and/or downstream channel members) or collaboration (e g.,
each component (sometimes borrowing from existing products/services that target a component but in a different context),
characteristics of services. A solution involving product and service combinations should also take this into consideration
but the products/services are delivered through (some) regular channels/contacts. This could include direct marketing, mini
This is particularly true in new services as they are much easier to imitate and subject to less legal protection
Due to the nature of services, managers should be prepared to scale up quickly to preempt potential competitors
services. We will start by assuming that SMES have little initial experience with selling services
so that we can discuss the entire journey that these firms may have to take. SMES with moderate
experience in selling services can start the journey at their current level of capability and take
Services embedded in product sale Phase II Services provided to the installed base Phase III
Services based on customer relationship Path from Product-Centered to Service-Centered Business Transition Issues •Add product-centered
services •Consolidate services into a single unit •Staff and train service sales force •Develop incentives
measures, rewards for selling services •Build a serviced -centered culture •Base business model on quick response and
customization •Shift downtime risk from customer to service supplier •Transition from transactional to
relational selling •Base business model on low cost and convenience over product life •Extend customer
Services Embedded in Product Sale The journey from product-centered to service-centered offerings usually starts by adding
product-centered services to the sale of existing products, e g.,, maintenance, spare parts installation and training.
such services allows the firm to develop response capability, reputation and image with customers. It also gives the firm experience in working with customers between sales,
In order to assure that services receive the attention they deserve, firms should consolidate all services into a single department,
and give its manager profit and loss responsibility (Gebauer et al.,, 2005; Oliva and Kallenberg, 2003. Consolidation allows the firm to concentrate on
with such companies as they provide a guideline for SME managers that wish to add services
but challenging number of services per month as a revenue goal, or socializing with x
services and customer relationships. Rewards can be tangible in the form of monetary bonuses or they can be less tangible in the form of recognition, promotions or empowerment.
resulting from understanding the benefits and results of pursuing services. Although employee -push might be sufficient initially,
sales people view products as the main source of revenue and services as add-ons that are
must view services as the main source of revenue; services can no longer be performed for free but must be priced according to the value they add to the customer (Oliva and Kallenberg, 2003
Thus, sales people need to be trained to eagerly sell services, not just products (Johne and Storey
1998 Firms also may need to hire new personnel to staff the new service department. If the firm
employees to sell services. External marketing is about portraying the firm†s image to customers, but before employees can make that portrayal they must be sure of its existence, a
One of the most prevalent reasons for failure among firms focusing on developing new services
New services cannot be developed effectively in isolation of customers. Front-line employees, the ones who commonly work the most closely with
of the inseparable nature of services, front-line employees shape the quality of a customer relationship. de Brentani (2001) concludes that having a highly trained workforce that has an
intimate knowledge of the customer plays an important role in the success of new services
Innovative new services can result from this. Similarly information sharing among employees should be encouraged so as to generate more ideas to
Services Provided to the Installed Base The next step is to extend services from the sale of existing products to providing services to the
firm†s installed base or even to its competitors†products. The latter is especially opportune if
competitors do not offer such services or offer inferior service. Potential service revenue from one†s own
offer services where its installed base is most dense, but supplement these services elsewhere with a 24/7 help desk and self-diagnostic software where applicable
Up to this point, the firm†s business model need not shift dramatically, but further steps will
Phase III should not be made until the firm has mastered thoroughly selling services with current sales or to its installed base.
their customers a fixed-term contract for services. Customer interaction in this phase should include employees creating a friendly and helpful atmosphere for the customer.
The firm might also consider offering consultation services to help its customers develop their own diagnostic and response capabilities
Services Based on Customer Relationship The next step is to shift from sale of individual products to sale of services embedded in
products, comprehensive services or integrated solutions (Wise and Baumgartner, 1999. The first option is primarily an engineering solution in which services that the customer previously
performed are embedded now in the product or at the interface between simpler and previously isolated product components.
The value proposition is that technology can substitute for the customer†s current service personnel.
product†s context of use and need for ancillary services, and require a more radical transformation in the business model.
and ancillary services that relate to the effective use of their products. This presents an opportunity for market segmentation and focus
on customers with the greatest need for the firm†s services. Firms can recognize the need for
new services by studying how the customer uses or consumes the firm†s current product and
and transform them into new services replaces or creates activities up and down the value chain. Firms that already have an effective
We propose going a step beyond NPD or NSD because of the nature of the type of services that
What can we learn about the development of new services from the five mini-cases discussed in
These are traditional services, but a natural offering for a company that sells such sophisticated
of complementary services around manufactured products. This strategy can provide higher operating margins, greater revenue stability and, most importantly, heightened barriers against
consulting services provided by MEP †Operational, Marketing, Funding, and Business Planning. Each story was put into one of the categories based on the following criteria
We have seen also that the addition of services around manufacturing products can have major benefits in terms of increased revenues, profits and creating barriers to competitors.
although adding services may seem, at first, a rather easy expansion of current business, many companies have experienced great difficulties in managing these changes.
the potential of changing their business model to include services and all that it entails; and even
to provide outreach services in the field of change management and service addition •Providing tools to this community
•Access to â€oestories†that illustrate clear cases that show how moving into services has
Journal of Services Marketing 16 (6): 515-534 Discusses stages in new service development and the use of customer input
"Designing services with function analysis."Hospitality Research Journal 20 (1): 73-100 Discusses the use of functional analysis in new service development
"Developing new services for hospitals: A suggested model.""Journal of Health care Marketing 7 (2): 35-44
"Developing New Services: Improving the Process Makes It Better.""The Journal of Services Marketing 3 (1): 15
Discusses the new service development process in banks, hospitals and insurance companies Branzei, O. and I. Vertinsky (2006."
"Innovative versus incremental new business services: Different keys for achieving success."The Journal of Product Innovation Management 18 (3): 169-187
overcome when offering services Gordon, G. L p. F. Kaminski, R. J. Catalone C a. di Benedetto.
and market services that create customer value Gray, C. 2002.""Entrepreneurship, resistance to change and growth in small firms."
"Services innovation: Successful versus unsuccessful firms.""International Journal of Service industry Management 4 (1): 49-65
Industrial services strategies: The quest for faster growth and higher margins Provides an in depth discussion of industrial services
Moore, G. 2004.""Darwin and the demon: Innovating within established enterprises.""Harvard Business Review 82 (7/8): 86-91
"Managing the transition from products to services "International Journal of Service industry Management 14 (2): 160-172
Describes the extent of integration that is desirable for products and services. Also discusses implementation issues in transitioning from a product-only to a product/service
Customer oriented industrial services, Helsinki University of Technology, BIT Research Centre Discusses the creation of industrial service innovations that add value to the customer
Services-based strategy "Harvard Business Review 68 (2): 58-64 Discusses the need for services as well as strategy.
There needs to be a change in mindset from just manufacturing to manufacturing and services
Quinn, J. B. and T. L. Doorley (1988.""Key policy issues posed by services.""Technological
Forecasting and Social Change 34: 405-423 Describes the issues relating to services and policy formation
Rae, J. M. 2005. Analysis of data from the U s. Bureau of Economic Analysis. A. Warren
"Designing services that deliver.""Harvard Business Review 62 (1): 133 -139 Discusses characteristics of services.
The reason that services fail is that there is a lack of systematic method for design and control
Simon, H. 1992.""Lessons from Germany's midsize giants.""Harvard Business Review 70 (2 115-123
Tether, B. S. 2005) â€oedo services innovate (differently? Insights from the European Innobarometer Surveyâ€, Industry and Innovation, 12,2), 153-184
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