New services evolution processes

Abstract

Services sector is emerging as a significant sector the world over. In the year 1980, share of services in the total GDP of Developed Economies was 57 per cent, and between 34 to 40 per cent in different sub-groups of Developing Economies. In India, services sector accounted for 39 per cent of the GDP in 1984-85 and has been projected to contribute 44 per cent of the GDP of the country in the year 2000.

Services are distinct from tangible products in that they are essentially intangible and entail simultaneous production and consumption. Both these characteristics associated with the services have implication in that services cannot be stocked prior to delivery and the outcome of service production could be of heterogeneous quality.

Introduction of a new product/service is a decision of large overall significance to a firm. Business history bears testimony to growth industries having been built on new products/services. In this context, firms need to learn the evolution process of a new offering. Schumpeter (1928) notes that economic progress is achieved by innovatively “putting productive resources to uses hitherto untried in practice and withdrawing them from the uses they have served so far.” A seemingly innocuous product or service innovation could diffuse on a massive scale over time and thereby could transform its operating context. Bearing in mind the emerging significance of services sector the world over, the future advancement of any economy would depend on the extent to which new innovations are introduced in services sector. In a developing country like India similarly, the future growth of the economy would depend on the extent of service innovations introduced those prove successful. Thus, the future challenge before the service managers lies in engineering and introducing successful service innovations suggests that evolution of an innovation is fraught with uncertainties. Inability to cope with this uncertainty could be a major block in the pursuit of innovative behavior. Therefore, it is imperative that a body of knowledge is developed that could prescribe managerial actions conductive to the pursuit of innovations. Though considerable research effort has been spent in studying the managerial processes associated with the birth of innovative manufactured products, precious little seems to exist in the services sector.

The existing new product introduction models treat the decision process as a rational, linear problem solving process. Increasing evidence from marketing, strategic management and organizational behavior literature suggests that a new product/service introduction concomitantly consists of political processes those would need to be successfully managed in order for the proposed offering to take birth.

The research objectives of this study were: (a) to examine empirically a large number of new service introduction decisions; provide an accurate description of the process by which these decisions were made with the aid of existing process models of strategic decision/new product introductions by extending, revising, or reformulating these conceptual models to capture the complexity of the processes, (b) To establish linkages between the activities of the various stages/phases of the new service introduction process, (c) To identify, refine, elaborate and/or propose hypotheses about the processes that one of low innovativeness one; and a high performance one.

The scope of the study was limited to financial services sector focusing primarily on new services introduced by catalytic financial services organizations of the sector. The research methodology consisted of a case study approach supplemented by questionnaire approach. Five new services introduction decisions were studied using the case study approach. Following that, data was obtained on twenty four new services introduction decisions using the questionnaire approach.

Based on the study, an emergent model of new service introduction process has been presented and linkages posited between the activities of various stages/phases of the process on the one hand and between the process activities and the process outcome (level of innovativeness/performances) on the other. The following major propositions emerged from the study:

Linking the activities of the various stages/phases

1. If the top management of an organization sponsors the proposal for a new service offering through the various stages of the introduction process, it is less likely that there would be strong internal resistance toward it. 2. In the case of a new service idea/concept that is not sponsored by the top management, the more deviant the new service idea/concept from the existing service market scope of the introducing organization, the more likely it would meet with high internal resistance in the subsequent stages of the introduction process. 3. If the new service idea falls within the existing service market scope of the organization then it is more likely that it would meet with low internal resistance. 4. The greater the delegation of production and delivery functions are sought to be introduced, the more likely that its production cum delivery system would act as a significant influencer during the stages preceding the setting up of production/delivery system. 5. The higher the delegation of production and delivery functions are sought to be down the line for a new services proposed to be introduced, the more likely that the initial market coverage for the service would be selective and the introduction a phased rollout. 6. If the shaping unit during a new service introduction process has been a collective unit, then it is more likely that there is a high cohesion among the members of the shaping unit. 7. Externally driven new service ideas tend to culminate in the birth of a new service faster than internally driven new service ideas, irrespective of the top management being a sponsor or not. 8. Those internally driven new service ideas that are sponsored by the top management tend to culminate in birth faster than those that are not. 9. The new service introduction processes with a high organic orientation, high degree of brainstorming by a highly decentralized internal team during the ideation phase tend to be associated with greater reliance on in-house personnel for evaluation during the convergence phase, and a low centralized technocratic orientation, and a low degree of assistance from experts during the operationalization phase. In addition, if the convergence phase involves a comprehensive evaluation, then there is greater external dependence during operationalization.

Linking the activities of the various stages/phases and the outcome of the decision process Innovativeness

1. In the case of the introduction of an innovative new service, there exists a high top management support; the collectively shaping the process tends to be highly autonomous and cohesive; the options generating phase tends to be highly exploratory and organic; there is greater reliance on in-house personnel for exhaustive evaluation of the emergent options; and greater effort is spent during the process in convincing significant stakeholders (especially the control environment). Performance 1. Given a new service introduction task, the lesser the support of top management, the more externally concerned, mechanistic, centralized and/or technocratic the process of evaluating alternatives and operationalizing the selected option; the less successful tends to be the final offering. 2. The more extensive the market coverage is sought to be at the launch stage for a new service introduction, the greater must the familiarity with market be for high performance.