CHAPTER 2.LITERATURE REVIEW
2.1 Service Innovation in SME Sector
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CHAPTER 2.LITERATURE REVIEW
This chapter will illustrate the current conditions of the relevant researches to give a whole picture of the state of the art. There will be three sections within this chapter:
service innovation, alliance, and interaction patterns respectively. Firstly, we will describe the current knowledge of service innovation and the importance it is to SMEs;
a comparison of the existing theory will be given to state the possible problems of current research too. The second section will depict the linkage between service innovations and alliance, and the corresponding researches about the benefit and managing issues of alliance. The last section within this chapter is the introduction of interaction and interaction patterns, and an explanation between alliance and interaction and how interaction works for SME’s service innovation will be stated.
Relating to the information system research framework in Figure 1.3, section 2.1 (service innovation current researches) will depicts the current status of service innovation of SMEs, to reinforce the environment part of the IS research framework of this research in more theoretical way; section 2.2 and 2.3 will serve as the knowledge foundation and the supporting theory base of the framework.
2.1 Service Innovation in SME Sector
Due to the changing trend of the world, service sector are getting higher portfolios in the economic, relating researches thus populated to follow this tide of changing.
Service innovation is one of the major topics of these popping researches (Djellal et.
al., 2003 ; Tidd and Hull, 2003); innovation brings competency to business, and is especially important in the world of servicisation (Toivonen & Tuominen, 2009). Ten types of service innovation was proposed by Doblin group (Insight, 1999), are
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depicted in following Figure2.1.
Figure 2.1 10 types of Innovation (Adapted from Insight, 2007)
However, these researches of service innovation do little help to the business, and much service company’s service innovations are still limited to types like holding the stores open for more hours, or starting an e-commerce campaign (Berry et al, 2006).
One of the reasons for the limited help of these innovation related research is because the innovation in service and in products is different from the very basic; that is, the value is created by manufacturer in products, but co-created by both consumer and provider in service (Vargo & Lusch, 2004). Compared to the highly developed innovation methodology in manufacturing, the notion of service innovation is not yet integrated well with other existing theories (Johnson et al, 2000). A very important concept was proposed by Tatikonda and Zeithaml (2001) which said that service innovations requires more interaction between development and the delivery process than product innovations. However, existing famous service design/innovation methodology rarely views from the lens of interaction, or some only takes little into account, the following table2.1 listed the comparison.
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Table 2.1 Comparison of existing service design/innovation tools Service design and
innovation tools
Concept/ Design Principle Focus & Features
Service Blue Printing
(Flies & Kleinaltenkamp, 2004)
Embed blueprint technique into service designing, differentiating process, rapid prototyping to capture the customer’s needs.
True demand of the customers
TRIZ
(Altshuller, 1999)
Formalized and intensive guidance tool that uses 40 inventive principle to compose a service innovation
Problem formulation
SEE
(IDEAS, 2008)
A mixed method of above mentioned three service innovation tools
Problem Formulation Customer Observation
Moreover, two features were not listed in above table 2.1. The first is that these service innovation tools require intensive training to use; TRIZ requires discipline of problem formulation, SEE method requires the same training too; service blueprinting needs the user be very familiar with the process and process modeling; design thinking as the most un-structured method requires people that are innovative and good at observation. For big companies, training lessons can be arranged; high quality human resource can be hunted, but not for SMEs (Kaufmann & Todtling, 2002), due to their company size and resources.
Secondly, while SMEs are easily affected by the environment, it will be helpful if the service innovation theory could take the environment more into consideration; in
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store to contact its customer directly, their website could be developed well by using the blueprinting skills, but might not notice the possibility that creating a direct connection with customers could ignite its retailer’s anger, and cause the total sales decreases. Big companies with abundant analyst might be aware of this due to their training in business knowledge and are in no need of support, but SMEs could possibly incautious about this issue without proper reminding. By using system thinking theory, and considers in the way of interacting with other entities, it will be more easily for them to avoid the pitfall.However, SME sector plays an important role in economy all over the world. In the Greater China region, 95% of employed people are in SME’s section in Taiwan according to Ministry of Economic Affairs in 20101; in China, 60% of the GDP are contributed to SMEs, and 80% of employed people in the city are in SME’s section according to Ministry of Industry and Information Technology of the People's Republic of China2 reports in 2009. SMEs portfolio in United States are not lesser than SMEs in Greater China region, according to U.S. Small Business Administration and the Office of International Trade 3, SME sector employs 99.5% of all employer firms in 2008; and in EU, 99.8% of employed firms are SMEs (Eurostat, 2008). This makes a clear notion: SME sector plays a very important role in the economy, and shall not be ignored. However, base on our previous arguments, aforementioned service innovation tools might not cover every aspect of SMEs service innovation needs.
1 Ministry of Economic Affairs, 2010,
http://www.moeasmea.gov.tw/ct.asp?xItem=9504&ctNode=689&mp=1
2 Ministry of Industry and Information Technology of the People's Republic of China, 2009 http://www.miit.gov.cn/
3 U.S. Small Business Administration and the Office of International Trade, 2008 http://www.sba.gov/
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Concluding this section, we state two problems of current researches in previous paragraphs, which are: (1) service innovation tools needs to be based on interaction because the nature of service, (2) based on the importance of SME sector in economic and their difficulties, an easier and guidance free service innovation tool is necessary to fulfill this existing gap. This section supports the environment part as the current technology of the IS research framework by indicating the current available service innovation techniques for SMEs and its insufficiency, and the following two subsections - alliance and interaction patterns - will illustrate the fundamental theory of this research’s knowledge base.