2. 222/04/2013
Topics of the presentation
- the old dispute between technology push and market pull
- users to the fore
- users, customers (clients), consumers, citizens
- early studies on user-based (product) innovation
- newer developments: managerial approaches
- collaboration with users in innovation
- different user groups
- implications to practice
3. 322/04/2013
The old dispute between technology push
and market pull
• Lively discussion in 1970s and 1980s, whether the main source of innovation is
technology push or market pull. Typical was macro-economic orientation – also the
pull factor was analyzed at the level of markets.
• This antagonism has been rejected long ago – nowadays the importance of both
factors is generally recognized, and the pull factor is increasingly analyzed in terms
of user- or customer-based innovation.
• As regards technology, information technology has drastically changed the delivery
of services and facilitated their internationalization. Many service firms are central
actors in the markets of information – mediators between generic knowledge
available in the economy and tacit knowledge buried in the organizations.
4. 422/04/2013
Users to the fore
• Research into service innovation is today carried out both on basis of general
innovation theories (e.g. Gallouj et al.) and on the basis of service marketing theories
which apply the concept of New Service Development (e.g. Edvardsson et al.).
• During recent years, a third approach – service design – has gained ground. This
approach is not rooted in innovation theories or service theories in the first place, but
in the practice of industrial designers, who nowadays aim to extend their expertise
from the traditional design of material products into services (Hollins et al., 2003).
• Service design is one of those approaches that have promoted the idea of user-based
development of services. However, emphasizing users as central drivers of
innovation is today spreading to other approaches as well.
5. 522/04/2013
Multiple roles of service users
• Due to the late development of innovation theories in services, also the concept
of user-based innovation and the views about the significance of user-orientation
were first introduced in the context of material products.
• In services, the development of corresponding views started within the school of
service marketing (applying the NSD framework). Here, the focus is on the
relationship between the provider and the customer (or ‘client).
• Recently, the multiple roles of users have been raised to the discussion. It has been
realized that a specific service relationship provides quite a narrow perspective to the
human world, where people are consumers, citizens and members of various
communities that form their reference groups.
7. 722/04/2013
Defining ’user’ in more detail
• An explicit definition of ‘user’ is difficult to find in literature. The concept refers
to a person/an organization who or which actually or potentially benefits of a service
via receiving it or via participating more or less in its production and development.
• It is important to note that the end result of an innovation process may not benefit the
immediate user only (or even primarily), but there may be a shorter or longer chain or
network of actors. Often the focus is on the last link in the chain – on the end user.
• The concept of end user is linked to business-to-business context. Thus, the concept
of user is applicable not only in consumer services, but also in business-to-business
services. In addition to active users, the concept also involves potential users.
8. 822/04/2013
’User’ of goods and services
• The concept of user cannot be transferred as such from the material world to the
service context. In the material world, using something implies the idea of a tool:
innovation process provides users with new, better tools (Hasu, 2001).
• This holds true in some service cases, too, but not generally. A categorization based
on ‘what is being handled’ or ‘what is being changed’ is helpful here. Goods,
information, and persons are the basic groups (Illeris, 1989; Miles et al., 1995).
1) tangible objects are processed in some way, i.e. transported, transformed,
maintained, repaired etc.
2) information is produced, captured, diffused, stored or revealed.
3) a change takes place in the physical or mental condition (health, skills,
emotions etc.) of a person. This case requires a broader interpretation of use-
related concepts – the idea of a new tool is odd here.
9. 922/04/2013
’User’ of goods and services (cont.)
• Another important difference between material products and services is the nature
of services as entities in which production and consumption coincide. The user of a
service benefits not only from the end result but also from the process (Edvardsson,
1997; Grönroos, 1990).
• In the service process, the user is a more or less active party – the co-production
relationship has been highlighted as a fundament of services (Gallouj and Weinstein,
1997; Sundbo and Gallouj, 2000). Thus, in the service context a ‘user’ actually means
a ‘user-producer’.
• Service-Dominant-Logic (SDL) has supplemented this view from the value creation
perspective: it highlights the value in use and its co-creation. The service provider
cannot create value on behalf of the user, because the value manifests itself only
when the service is consumed. (Vargo and Lusch, 2004)
10. 1022/04/2013
The concept of customer (client)
• The concept of customer (client) is common in service marketing literature. When
the focus is only on the consuming of a service, the customer can be defined as the
buyer of a service, whose role is restricted to the purchasing decision and acting as
the receiver of a service.
• The co-production relationship implies, however, that customers are important actors
in production as well (Lengnick-Hall, 1996): they act as a resource (providing
information) and as a co-producer (performing work). In addition, customers are
increasingly involved in innovation and development activities.
• The concept of customer has its roots in private business. Customers are suggested
to be sovereign and rational, being able to decide whether or not they want to do
business with a specific firm and having the option to choose between different
services. (Alford, 2002)
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The concept of consumer
• The literature based on the concept of consumer points out that even though value is
essentially created in cooperation of the provider and the customer, the value network
external to the dyad is important to take into account.
• The so-called cultural consumption theory highlights value drivers beyond financial
aspects: social, cultural, moral and political values that influence both individual
consumers and consumer groups. The latest discussions in relationship marketing
come close to this view (Kaijanen, 2010).
• However, in business sciences the starting point is still that there is enough rationality
to secure manageability of consumer behaviour. Consumer researchers argue that
unpredictability and inconsistency characterise today’s consumption; the notion of
average consumer is a fiction (Gabriel and Lang, 2008).
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The concept of citizen
• The concept of customer has been transferred to the public sector. New management
models highlight that the recipients of public services have the right and obligation to
be active participants in planning and producing these services.
• Also ideas linked to consuming have been applied - freedom to decide between public
services like a consumer in a market (Newman and Clarke, 2009).
• The concept of citizen is, however, linked with public services, and complicates
the situation. Citizens are not only individuals but members of a collective; they are
not always sovereign actors but restrained by power structures (Rosenthal and Peccei,
2007). Thus, the rights and responsibilities of citizens, and the relationship between
citizens and the state, are very different from those of customers and consumers.
14. 1422/04/2013
Early studies on user-based (product) innovation
• There are two main ways in which user-based innovation has been understood in
literature: taking user needs as the starting point and relating to users as innovators.
Both viewpoints are old and still extensively applied.
• The former can be traced back to the emergence of interest in ‘user feedback’ in the
1970s and early 1980s (Nelson and Winter, 1977). Empirical studies indicated that the
most important factor in the success of innovations is the understanding of user needs.
• The early findings also formed the basis for von Hippel’s studies (e.g. 1978, 1986,
1988), which focused on the analysis of the role users as innovators. According to von
Hippel, users may supply an innovating firm with the identification of a problem or
need, product-related specifications, or even a complete product design. Lead users
are particularly important.
15. 1522/04/2013
Customer-orientation – the view of service marketing
• Service marketing scholars have developed managerially oriented research based
on the importance of user feedback. Relationship marketing has pointed out that using
customers as informants secures the success of services and the loyalty of customers.
• Methods of acquiring and structuring customer information have been developed
within this framework. The versatility of information has been emphasized: both facts
about the profile of customers (demographic data and business figures), and
behavioural and relationship information should be included (Xu and Walton, 2005).
• Information should be gathered not only of the customers, but also from the customers
(Rowley, 2002) – customer information often includes weak signals about the future,
enabling the analysis of potential customers. Client interface as an arena for the
acquisition of versatile customer understanding has been emphasized besides surveys.
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User experience and shared understanding
• In the newer studies, two additional perspectives have come to the fore: 1) the role
of user experience, and 2) the importance of elaborating information on user needs
into shared understanding within the provider organisation.
• The first perspective focuses on the phenomenological side of the service and on
social networks as the framework for experiences (Payne et al., 2008). It highlights
that novelties are not perceived in the similar way - there are novelties that providers
define as innovations, but which users do not consider useful from their viewpoint.
• The second new perspective highlights that information gathering does not guarantee
its purposeful application, but customer information has to be elaborated and
interpreted within the organisation. The formation of shared understanding is often
much more demanding than the gathering process. (Nordlund, 2009)
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Collaboration in innovation: stage-gate models
• In addition to the ‘sources of innovation’approach, the interaction between producers
and users during the innovation process is gaining foothold increasingly.
• Several empirical studies have confirmed that users can and should come into the
picture earlier than at the point where a new service is brought to the markets. The
linear model of innovation has been modernized into more flexible stages models
where the input from users can be taken in at every stage (Alam and Perry, 2002).
• Often the innovation process is divided into two main parts: the so-called fuzzy front
end that emphasises creative problem-solving, and the more systematic development
that highlights rational planning (Koen et al. 2001). In this context, user input has
been considered to be valuable first and foremost in the front-end.
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A customer-oriented stage-gate model
1. Strategic planning
2. Idea generation
3. Idea screening
4. Business analysis
5. Formation of a
cross-functional
team
6. Service design
and process system
design
7. Personnel training
8. Service testing
and pilot run
9. Test marketing
10.
Commercilization
Feedback on financial data
State needs, problems and solutions. Criticize, identify gaps in the market, wish
lists etc.
Suggest sales guide and market size, suggest features, benefits, attributes, show
reaction and preference
Limited feedback on financial data and profitability.
Join top management in selecting team members.
Review and jointly develop the blueprints, suggest improvements by identifying
fail points.
Observe and participate in mock service delivery process, suggest improvements.
Participate in a simulated service delivery processes. Suggest final improvements
and design change.
Comments on marketing plan and satisfaction on marketing mixes. Suggest
desired improvements.
Adopt the service as a trial; feedback about overall performance of the service
along with desired improvements, if any; word of mouth communication to other
potential customers.
Source: Alam and Perry, 2002
19. 1922/04/2013
Collaboration in innovation: rapid application
• Stage-gate models are based on a planning process. Several researchers (e.g. Engvall
et al., 2001) have pointed out that these model systematize the form but do not help in
tackling the unknown content. They suggest an alternative which enables the creation
of shared experience of the object to be developed.
• The creation of shared experience means that planning and implementation are
merged to some extent. It is not self evident that planning always occurs first and is
followed at a later time by implementation.
• These views have led to innovation models which assume a process relying on real-
time experience (the effectual approach and bricolage). They consider that intuition
and flexibility are essential on the uncertain path through shifting markets and
technologies. (e.g. Read et al., 2009)
20. 2022/04/2013
The effectual model
Interact
with people
I know or
meet
What
can I do
New
means
New
goals
Obtain
partner
commit-
ments
Assess
means:
•Who I am
•What I
know
•Who I
know
Converging
cycle of
constraints
Start
Innovations
Expanding
cycle of
resources
Source: Read et al., 2009
21. 2122/04/2013
’After’ innovation
• Newer user-centric views have also discussed the continuance of the innovation
process after the launch.
• Tuomi (2002) has described this phenomenon in the technological context: new
technologies are not unchangeable artefacts, but modified and reinvented in use.
Technological novelties are also actively interpreted by the users; one artefact has
different meanings for different user groups.
• Sundbo (2008) has examined the same phenomenon – after-innovation – in the
context of services: innovation in services is not completed when it is launched
on the market. The reason is that customers cannot say beforehand what they want
and they even have difficulties in assessing prototypes. They react by suggesting
ideas for improvements when they use the service in practice.
23. 2322/04/2013
Making the service user’s (customer’s)
process visible
• The process of the user (the customer) essentially differs from the process of the
provider. Realizing this is the first stage in the building of customer understanding.
• The old method of service blueprinting is nowadays developed further and provides
quite a versatile tool for making the customer’s process visible. It shows, among
others, how much time the customer devotes for the service.
• Blueprinting also reveals the service vs. goods -dominant orientation of the provider:
the extent to which the provider emphasizes the customer experience and the
interaction with the customers (cf. Vargo and Lusch, 2008).
24. 2422/04/2013
Source: Bitner et al. 2008
Service blueprinting as a way to create
user understanding
Physical
evidence&outputs
Customer:
preparatory actions
Customer: face-to-
face actions
Employee:
front-office actions
Employee:
back-office actions
Development needs
in the service process
Steps in the service
delivery process
Customer interface
Concrete outputs of the
service for a customer
Line of visibility
25. 2522/04/2013
Different user groups
• Recent research has also emphasized that there are very different user groups.
In addition to lead users, there are ordinary users, advanced users, critical users,
unresponsive users and non-users (Heiskanen et al., 2007).
• Besides individual users, user communities are increasingly sources of innovations –
both existing communities and new communities that are grown around the service.
• A common feature between different schools is that emphasis is moving away from
the question ‘can the user cope with the service’ to usage motivations and user
attitudes towards the service throughout its lifecycle. Designers are replacing the
concept of ‘usability’ with the broader concept ‘user experience’. Also in marketing
research, the focus is increasingly on customer value and customer experience instead
of customer satisfaction. (Kaasinen et al., 2010)
26. 2622/04/2013
Different roles of customers in service innovation
Efficient acquisition of
customer information
Focus on structuring and
using knowledge, not
only on acquiring it
Knowledge about
customers’ future needs,
not only about the
present situation
Efficient utilisation of
CRM systems
From customer
information to customer
understanding
Building in-house
understanding how the
company links customer
knowledge with its own
business systems
Common understanding
between the company’s
customer service and the
R&D personnel is essential
Co-development of
services together with
customers
Customers can be
involved in services
innovation in three ways:
1) The innovative idea
comes from a customer
2) Customers actually
participate in the
innovation process
2) Customers develop the
innovation further
Source: Nordlund 2009, modified
27. 2722/04/2013
Implications of service-dominant logic
1) Moving the focus of providers from making something (goods or services)
to assisting customers in their value creation process.
2) Seeing value as co-created with customers and partners instead of thinking
it as produced and sold.
3) Relating customers to the context of their networks instead of understanding
them as isolated entities.
4) Considering organizational resources in terms of knowledge and skills,
not primarily as tangibles.
5) Appreciating customers as resources, not handling them as targets. Three
roles of customers: co-creator of value, co-producer and co-innovator.
