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Business Horizons (2013) xxx, xxxxxx

Available online at www.sciencedirect.com

www.elsevier.com/locate/bushor

EXECUTIVE DIGEST

From goods to great: Service innovation in a


product-dominant firm
Lance A. Bettencourt a,*, Stephen W. Brown b

a
Partner, Service 360 Partners LLC & Distinguished Marketing Fellow, Texas Christian University, U.S.A.
b
W.P. Carey School of Business, Arizona State University, P.O. Box 874106, Tempe, AZ 85287-4106, U.S.A.

KEYWORDS Abstract Increasingly, service innovation is a source of competitive differentiation


Services; for product-dominant companies such as manufacturers, distributors, and retailers.
Service innovation; However, the relative intangibility of services has led to uncertainty concerning how
Customer jobs; to apply product innovation expertise to the services space. We argue that meaningful
Consumption chain; service innovation by a product-dominant company must begin with the recognition
Customer research that services are solutions to customer needs. As such, the primary goal of a product-
dominant company seeking service innovation should not be to innovate service.
Rather, it should be to help customers get a specific job done better or to help them
get more jobs done. To this end, we offer three approaches for companies seeking new
service innovation based on how customers define value.
# 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All
rights reserved.

1. Service innovation for all IBM, which has come to recognize the possibilities
that service innovation offers not only to support
Service innovation is not the exclusive domain of product offerings but also as stand-alone offerings
service companies. In fact, the significance of service to satisfy customer needs. In the past two decades,
innovation is growing among both product and service IBM has grown services revenue from $10 billion in the
firms (Neu & Brown, 2005). Indeed, service innova- early 1990s to more than $50 billion currently.
tion by a product-dominant companysuch as a With todays competitive realities, product- dom-
manufacturer, distributor, or retailerenables the inant companies must find ways to innovate value-
company to improve customer relationships, capture added services that complement their product port-
a larger share of revenue, differentiate itself from folio. This type of service innovation is not easy to
the competition, increase revenue stability, and ul- achieve, as the relative intangibility of services
timately better satisfy customer needs (Brown, has led to uncertainty concerning how to apply
Gustafsson, & Witell, 2009). Consider the case of product innovation expertise to the services space.
Speaking to the challenge, noted innovation expert
Henry Chesbrough (2005, p. 44) asked: Without
* Corresponding author
tangible products to prototype and focus on, how
E-mail addresses: lance@service360partners.com can we determine whether were designing what
(L.A. Bettencourt), stephen.brown@asu.edu (S.W. Brown) customers want? Inasmuch as service innovation is

0007-6813/$ see front matter # 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.
http://dx.doi.org/10.1016/j.bushor.2013.01.008
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2 EXECUTIVE DIGEST

increasingly considered a vital element of a firms how customers define value. It can introduce new
competitive strategy (MacDonough, Zack, Lin, services that help the customer (1) get more jobs
& Berdrow, 2008), guidance is needed to help done, (2) get a focal job done better, and (3) get jobs
product-dominant companies create value-added ser- related to product usage or consumption done. Lets
vices that can directly impact the bottom line and consider each of these options in turn.
truly differentiate the company in the marketplace.
Sustainable service innovation must begin with the 2.1. Help the customer get more jobs
recognition that services are solutions to customer done
needs. They are a means to an end, not an end in
themselves. We hire consulting services to identify Customers have many jobs that they are trying to
operational improvements. We hire trucking services get done. Some are closely related to the companys
to transport goods. We hire support services to trou- current products, and many of these offer opportu-
bleshoot an equipment malfunction. The customer nity for service innovation. Because jobs are inde-
doesnt value any particular service solution; what pendent of todays solutions, the customer may not
the customer values is the ability to get a job done be using a particular solutionlet alone a service
well (Bettencourt, Brown, & Siriani, 2013; Christen- solutionto get the job done. All that matters is
sen, Anthony, Berstell, & Nitterhouse, 2007). As such, that the customer wants to get the job done. When a
the primary goal of a product-dominant company company collects a detailed set of jobs that cus-
seeking service innovation should not be to innovate tomers are trying to get done, it often discovers
service. Rather, it should be to help customers get a many for which there are currently no solutions.
specific job done more effectively, reliably, conve- Therefore, a focus on the many jobs that customers
niently, or affordably, or to help them get more jobs are trying to get done truly opens up a companys
done. It is only a secondary goal to provide an essen- service innovation possibilities.
tially intangible service to help customers in this way. The case of PetSmart serves as a good example.
This is service innovation based on how customers Known until 1989 as PetFood Warehouse, the retail-
define value (Bettencourt, 2010; Gummesson, 1995). er helped customers do the job of providing their
Once the company has a proper understanding of pets with food and related items. Gradually, PetS-
customer value, it can then systematically discover mart came to expand its mission to encompass
service innovation opportunities and develop the in- lifetime care for pets, which increased its opportu-
ternal processes and capabilities that will enable it to nity to help customers get many more jobs done via
outperform the competition in a sustainable manner. new services. These services now include full-ser-
vice pet salons, in-store vet clinics, pet training
services, PetsHotel (a pet daycare service), and
2. How to discover service innovation the Smart Nutrition Selector. These services help
opportunities customers take care of such jobs as grooming a pet,
taking care of a pets health needs, caring for a pet
As shown in Figure 1, a company has three options when away from home, and providing a pet with
available to it for new service innovation based on proper nutrition, respectively. Since 2000, when

Figure 1. Approaches to discovering service innovation opportunities

New Jobs Focal Job Consumpon Chain Jobs

Objecve: Discover new or Objecve: Discover ways to Objecve: Discover ways to


related jobs that a service can help the customer get a focal help the customer with jobs
help the customer get done job done beer with new or related to product
improved services ownership/usage
Focus: New or related
customer jobs Focus: Value criteria on a focal Focus: Value criteria on a
job specic job related to product
usage or consumpon

Focal Job for Focal Job for


which a Current which a Current
Product is Being Service is Being
Hired Hired
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EXECUTIVE DIGEST 3

PetSmart adopted the vision statement To provide treatment options), preparation for the procedure
Total Lifetime Care for every pet, every parent, (e.g., learn the approved treatment parameters for
every time and refocused its strategy on providing the laser), and postoperative care (e.g., support
services to fulfill this vision, revenue from services patient compliance with post-op guidelines), any
has grown more than 20% per year on average. one of which would be a suitable basis for new value-
An effective approach to uncovering jobs for added, stand-alone services.
which new services might be hired entails identify-
ing a customer groupwhether the company al- 2.2. Help the customer get a focal job
ready serves it or notand deciding on the done better
context or responsibility area in which to capture
jobs (e.g., jobs related to taking a trip, jobs related Although a product-dominant company may help
to caring for a pet). These jobs are often captured in customers with multiple jobs, many opportunities
an area that reflects a higher level of abstraction of for service innovation focus on helping the customer
the jobs for which current products or services are get a focal job done more effectively, reliably,
being hired. For example, if the company currently conveniently, or affordably. To get a given job done,
offers products such as pet food and supplies, as is customers may use both products and services. In
the case with PetSmart, then an abstracted area in fact, the optimal solution is often a combination of
which jobs might be captured is caring for a pet. A product and service, working together. Consider
search in that area would reveal many important, how the ClearPlay DVD player weds technology
but not well-satisfied jobs that the company could and services to help the customer get a focal job
target with new services. A subtle variation of this done better. The DVD player helps families get the
approach is to consider the other jobs that custom- job of watching movies together done through fil-
ers are trying to get done before, during, and after ters, created on a movie-by-movie basis, that elimi-
using a specific product. For example, the OnStar nate unwanted profanity, excessive violence, and
car security system supports many other jobs that nudity from the movie-watching experience based
drivers want to get done when using a car, such as on the preferences of the individual. An annual
contacting emergency services, obtaining roadside service membership provides unlimited access to
assistance, and determining which route to take. filters for new movie releases that can be quickly
The jobs that customers are trying to get done downloaded from the Internet.
can be uncovered by asking a few simple questions As this example shows, a product on its own often
that tie back to the definition of a job; that is, a goal fails to address all the outcomes or value criteria
customers want to accomplish or a problem they are that customers are hoping to achieve when they are
trying to resolve (Ulwick & Bettencourt, 2008). doing a job (Bettencourt & Ulwick, 2008). Thats
Customers should be asked: where services come in. When a product partners
with a service, its capabilities are expanded in a way
 What are you trying to accomplish in this job area that helps the customer to get more of the job done.
or during this time period? For example, Kroll Ontrack launched ESI Consulting
in 2007 to address lawyers concerns that relevant
 What are your goals and objectives? documents might be excluded from capture during
document discovery. ESI Consulting complements
 What problems are you trying to prevent or Kroll Ontracks award-winning discovery technology
resolve? and software products by offering clients expert
guidance in the various phases of the document
 What are you trying to determine or decide? discovery process. To ensure that all documents
are captured, ESI Consulting assesses each clients
 What would the ideal solution help you to get data storage methods, puts together an electronic
done? discovery response plan, and helps the client devel-
op policies and guidelines for managing the entire
In the case of a manufacturer of LASIK equipment, data discovery process.
for example, we asked LASIK techs what jobs There are at least two lessons we can learn from
they were trying to get done before, during, and these examples. First, a focus on the entire job for
after a treatment. What clinical decisions were which a product is hired will naturally point to
they trying to make, and what problems were they service innovation opportunities. Second, taking a
trying to resolve? By asking these questions, we broader, rather than a narrower, view of the job the
found more than 50 jobs in such diverse areas customer is trying to get done is more likely to
as patient counseling (e.g., inform a patient of reveal service innovation opportunities. If service
BUSHOR-1030; No. of Pages 7

4 EXECUTIVE DIGEST

Figure 2. Illustrative job map for administering anesthesia


Dene Locate Prepare Conrm

Pull drugs,
Formulate the Prep the paent Verify
anesthesia
anesthesia and equipment readiness &
supplies, and
plan for surgery procedure plan
equipment

Wake the Adjust the


Monitor the
paent and medical and Administer
paent
transfer to post- temperature anesthesia
condion
op care therapy

Conclude Modify Monitor Execute

innovation is the goal, for example, it is better for a our client, a leading provider of surgical equipment
medical device manufacturer such as DePuy to de- and supplies. We defined the job as administer anes-
fine the surgeon job as treat the patient condition thesia. So construed, the job was broad enough to
rather than more narrowly as replace a hip joint. It span complementary solutions and encompassed job
is the broader job definition that is more likely to steps from formulating the anesthesia plan to trans-
reveal service innovation opportunities. ferring the patient to post-operative care, as illus-
To uncover opportunities to help customers get trated in Figure 2. Anesthesiologists, for example,
focal jobs done better, a product-dominant compa- desired several criteria related to the step of formu-
ny should begin by mapping the customer jobs for lating an anesthesia plan. They included:
which its current products or services are being
hired, using as a guide the universal set of steps  Quickly determining surgeon requirements for
that customers must accomplish (Bettencourt & patient anesthesia.
Ulwick, 2008). These steps include defining goals
and resource needs for the job, locating required  Quickly determining how an anesthesia plan
inputs, preparing or evaluating inputs or the job should be adjusted based on the patients partic-
environment, verifying readiness or choices, exe- ulars (e.g., age, allergies, diseases).
cuting the job, modifying job execution, making
required adjustments, and concluding the job.  Ensuring that an anesthesia plan only requires
Next, for every step in a customer job, the company drugs that are available at the facility.
should uncover and prioritize the criteria that cus-
tomers use to measure the successful execution of a These value criteria do not presume a particular
job (Ulwick, 2002; Ulwick & Bettencourt, 2008). For solution. Either a product or a service innovation
each step in a job map, customers should be asked: or bothcould satisfy them.

 What makes [this step] time-consuming or slow? 2.3. Help the customer get jobs related to
What makes it cumbersome or inconvenient? product usage or consumption done

 What makes [this step] problematic or challeng- In addition to discovering service innovation oppor-
ing? What causes it to be inconsistent or to go off tunities related to the focal job for which customers
track? hire a product, a company can discover opportuni-
ties by focusing on the difficulties customers have
 What makes [this step] ineffective or the output with the ownership activities they must get done in
of poor quality? What would the ideal result look order to receive full and continuing value from the
like? product (MacMillan & McGrath, 1997)what we call
consumption chain jobs.
In one case, we studied the job of an anesthesiologist, For most durable goods, customers must execute
with the goal of revealing innovation possibilities for the following consumption chain jobs: they must
BUSHOR-1030; No. of Pages 7

EXECUTIVE DIGEST 5

select a product, purchase it, install and/or deploy maintenance managers, facility managers, and
it, learn how to use it, actually use it, move and/or plant managers. These interviews generated 70 de-
store it, maintain it, upgrade it, and eventually sired outcomes, encompassing eight job map steps
dispose of it. There are opportunities for innovation related to performing preventative maintenance.
at any point at which customers are not satisfied Next, Ingersoll-Rand asked more than 200 individuals
with their ability to get these jobs done. tasked with maintaining a compressed-air system in a
Hewlett-Packard (HP) is one company that has number of different industries to rate these value
taken advantage of the opportunities that consump- criteria for importance and satisfaction.
tion chain jobs present, offering services throughout The survey results revealed many important but
the ownership life cycle of its products. At the start not well-satisfied outcomes. Ingersoll-Rands Pack-
of the cycle, HP offers financing services to help with ageCare service addresses more than a dozen of
making a purchase. It also offers installation and these unmet needs, including the following:
deployment services for its servers, storage devices,
networking hubs, PCs, and printers. To keep things  Keeping a breakdown from occurring because
running, HP offers support and repair services. It preventative maintenance was not performed.
also offers classroom training by accredited instruc-
tors to help professionals learn how to get the most  Reducing the cost of performing each preventa-
from the technology they are purchasing. And, at tive maintenance task.
the end of the ownership life cycle, HP offers asset
recovery services to help with disposing of equip-  Avoiding unnecessary expenses because a preven-
ment that is no longer wanted. tative maintenance task is performed sooner than
To reveal opportunities to help customers get needed.
consumption chain jobs done better, the company
must uncover the struggles that customers have as By helping customers avoid problems with maintain-
they try to get these jobs done. The company must ing compressed-air systems, Ingersoll-Rand has
first map the steps in getting a particular consump- benefited as much as its customers.
tion chain job done and uncover the criteria cus-
tomers use to assess value in that task. Value criteria
that are important to customers but not well satis- 3. How to create sustainable service
fied are targets for innovation. innovation
Ingersoll-Rand, a manufacturer which now de-
fines itself as a global supplier of products and For product-dominant companies, systematically
services to transportation, manufacturing, commer- discovering service innovation opportunities repre-
cial and residential buildings, and agricultural in- sents more than simply creating a new strategy to do
dustries, has found success with an innovative so. For most organizations, strategies succeed or
service that addresses many unmet needs related flounder based upon their congruence with company
to maintaining a compressed-air system. Ingersoll- culture. And, the present culture of most product
Rand introduced its PackageCare service in March companies is not conducive to service innovation.
2007, and since then, its customer base has grown Thus, a culture change must first occurone that
quickly. Under the PackageCare fixed-cost service moves the firm away from an infatuation with
contract, Ingersoll-Rand replaces a systems parts engineering marvels toward a priority focus on the
before they fail. The service contract provides 100% jobs customers are trying to get done (Neu & Brown,
coverage of machine upkeep, repair, and parts 2005).
replacement. Other benefits, such as coverage of VWR International, for example, is a $4 billion
overtime costs when the system is down, are avail- global distributor of products and supplies for labo-
able as options. Via regular maintenance visits by ratories. Company leaders in recent years have
expert technicians, predictive diagnostic tools, and recognized that its product preoccupation too often
speedy 24-hour repair service, PackageCare re- results in a competitive playing field dominated by
moves the inconvenience of maintaining a com- price. By adjusting its mindset to focus on helping
pressed-air system, reduces customer costs, and researchers in labs be more productivethat is, to
improves the compressed-air systems operational do their jobs betterVWR has spawned a host of
efficiency. site services including inventory management,
To uncover innovation opportunities, Ingersoll- equipment repair, and glass washing. This is very
Rand conducted interviews with individuals respon- similar to the way in which Ingersoll-Rands culture
sible for the consumption chain job of maintaining a shift from an engineering mindset to a customer
compressed-air system, including business owners, job mindset has enabled the company to look
BUSHOR-1030; No. of Pages 7

6 EXECUTIVE DIGEST

beyond the hardware it sells and take advantage of and processes that orient the whole firm to its
opportunities for valuable new services that satisfy customers and their jobs. Though such a change
customer needs (Minter, 2010). is a challenging undertaking, the resultant trans-
In addition to major culture adjustment, product- formation will enable the company to produce on-
dominant companies must make several other going service innovations that lead to sustainable
changes if they are to succeed in developing service competitive differentiation.
innovations. A deep appreciation for and under-
standing of the customers jobs can best come from Meet the authors
associates who frequently touch customers: account
managers, field representatives, and customer ser-
vice people. The conversations have to change,
however, from communications about the com- Lance A. Bettencourt, PhD
panys products to discussions about the customers Lance A. Bettencourt is a Partner with Service
(1) focal jobs they want to get done better and 360 Partners, LLC, a service experience man-
(2) new jobs that a service can help them with. agement consultancy, and Distinguished Mar-
Such a radical shift in communications with cus- keting Fellow, Neeley School of Business, Texas
tomers will not come easy to the firms traditionally Christian University. Prior to starting his own
product-preoccupied associates. In business-to- consulting firm, Dr. Bettencourt was a strategy
business product companies, it is even likely to adviser with Strategyn, Inc., the pioneer of
require discussions with some people in the cus- Outcome-Driven InnovationTM. In his consulting,
tomers organization that these associates may not he has worked with many of the worlds leading
have visited before. In the case of account man- companies to uncover product and service in-
agers, for example, learning about customers jobs novation opportunities, including Abbott Medi-
will probably necessitate contact with users rather cal Optics, Microsoft Corporation, Collective
than just buyers of the firms products. The ac- Brands, Hewlett-Packard Company, TD Bank
count managers should be given special compen- Financial Group, Kimberly-Clark, and J&J Medi-
sation consideration, in light of their duties cal. His research on services and innovation is
involving talking with new people about their jobs published in Harvard Business Review, MIT Sloan
and the longer sales cycle often experienced Management Review, California Management
selling new services. Review, Journal of Applied Psychology, Journal
A product-dominant company must also institute of Retailing, Journal of Personal Selling & Sales
the processes and build the capabilities required to Management, and Journal of the Academy of
systematically understand where and when custom- Marketing Science, among others. He is author
ers struggle in doing their jobs. This should be of Service Innovation: How to Go from Customer
handled by a dedicated team of innovation cham- Needs to Breakthrough Services (McGraw-Hill,
pions. It is important that some members of this 2010). Prior to consulting, he was a marketing
team be responsible for finding and implementing professor at Indiana University.
service innovations specifically so that the natural
momentum of the organization and other priorities Stephen W. Brown, PhD
do not get in the way of meaningful service innova- Stephen W. Brown is the Edward M. Carson Chair
tion (Govindarajan & Trimble, 2010). These team of Services Marketing and Professor of Marketing
members will also need a fundamental understand- Emeritus with the W.P. Carey School of Business,
ing of how service solutions are different from Arizona State University. He currently is a Distin-
products and what it takes to successfully develop guished Faculty with the Center for Services
and deliver a new service (Cooper & Edgett, 1999; Leadership. From its founding in 1985 until
Zeithaml, Bitner, & Gremler, 2009). May 2011, he served as the CSLs executive
Service innovations offer another advantage director. He is also a former national president
over product innovations: it is easier to sustain a of the American Marketing Association. Dr. Brown
competitive advantage with a service innovation. has co-authored and co-edited 23 books and over
Although service innovations can also be copied, it 100 articles. Much of his research and writing
is more difficult to do. This is due, in part, to their focuses on the science of service and the topics of
intangible nature and to the human element often strategic services marketing, service excellence
woven into their development and delivery. Fur- and recovering from service failures. He has been
ther, a product-dominant company enhances its identified as one of the ten most frequent
likelihood of success if its emphasis on service contributors to the English-language services
innovation is accompanied by a change in culture
BUSHOR-1030; No. of Pages 7

EXECUTIVE DIGEST 7

marketing literature in the world. Hes been References


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