20130819_ehk-thesis_final-it_driven_business_service_innovation.

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IT Driven Business Service Innovation IT organizational contributions in large digitized companies to effective business service innovation Master thesis August 12, 2013 Ernstjan H. Kleiberg (1157930) 2 IT Driven Business Service Innovation IT organizational contributions in large digitized companies to effective business service innovation Master thesis August 12, 2013 Ernstjan H. Kleiberg (1157930, [email protected]) Delft University of Technology MSc. Management of Technology Faculty of Technology, Policy and Management Section of Technology, Strategy and Entrepreneurship MOT2910 - MSc Thesis Project The Netherlands Graduation Committee Chairman: First Supervisor: Second Supervisor: External Supervisor: Prof.dr. P.C. (Cees) van Beers Dr. E. (Erik) den Hartigh Dr.ir. G.A. (Mark) de Reuver Marcel Kramer MSc. 4 “Doing this type of study is a marathon, not a sprint.” Acknowledgments This document represents the final report of the Master Thesis Project which concludes my MSc. education in Management of Technology (MoT) at Delft University of Technology. The project has been conducted for the Technology, Strategy and Entrepreneurship (TSE) department in the faculty of Technology, Policy and Management in collaboration with the IT strategy practice of Accenture Netherlands. I am extremely grateful for all the support I have received during the process, without which this thesis project would not have been possible. This is the place where I take some space to express my gratitude to everybody that has made this thesis research possible. I wish to express my sincere gratitude to the members of the graduation committee. First and foremost, to my first supervisor, Erik den Hartigh, for his patience, confidence in my abilities and guidance in carrying out the thesis project. I would also like to express my gratitude to my external supervisor Marcel Kramer, for his enthusiasm, for challenging and enriching my ideas and always taking the time despite demanding schedules. At last, I would like to express my gratitude to Mark de Reuver and Cees van Beers, for their constructive and insightful feedback that greatly improved the scientific quality of this thesis. I would like to thank Paul van der Waay for providing me the opportunity to conduct my research at the Accenture Amsterdam office. Furthermore, I would like to thank Eric Helsloot, Ralph Post and all my colleagues at Accenture. Your business experience and critical feedback have allowed me to develop and focus on the practical relevance of the study. Further, your enthusiasm and coffee breaks have made this internship a great experience. I would like to express my gratitude to those IT organizations that participated in the survey and/or allowed me to use their organization as a case example. Thank you for your time and inspiring stories. They have formed the foundation for my research and the pleasure of conducting this study. Last but not least, I am grateful for all the support I received from my family and friends. I want to thank my parents Cocky and Ad Kleiberg for the unconditional support and encouragement you have always given me. “Pap en mam, ik had me geen betere ouders kunnen wensen.” Jo Hoogslag, who has taken this journey with me, who has been a tremendous support and was always being there to mirror my thoughts. Daniel Liesveld for the brainstorm sessions, thesis survival kits and enjoying the little things in life (outside my thesis). Finally, I would also like to thank my sisters Liesbeth, Marjolein and my brother Tom. Ernstjan Kleiberg Rotterdam, August 2012 i Acknowledgments ii Executive Summary Services play a key role in today’s leading global economies. Companies are facing fierce competition, shortening development cycles of new technologies, and more demanding customer expectations. Innovation is a key driver for economic growth and competitive advantage. New technology is one of the largest sources for innovation, but IT is identified as the largest barrier to effective service development. Studies indicate that IT organizations are is ranked last as the source of new ideas and the CIOs are least involved in the screening decisions of ideas. The growing importance of service innovation and IT has created opportunities for IT organizations to contribute to more effective service introductions. IT organizations can provide their technical knowledge and contribute to selection of ideas on both technical feasibility and compliance with existing capabilities. Nonetheless, IT organizations are often pressured to remain facilitators or technology enablers as conceptual understanding and appropriate innovation mechanisms are missing. The objective of this research is to further develop the understanding of the mechanisms for IT organizational contributions to effective generation, selection and commercial evaluation of business service innovation projects. Understanding is supported with two conceptual frameworks on IT innovation capabilities and by comparing them to large Dutch companies in financial, communication, media and high-technology industries in an electronic survey and two case study examples. The main research question formulated to find an answer to this objective is: How can IT organizations in large digitized companies drive value trough effective business service innovation? Desk research, an electronic survey study and a case study are all geared towards providing comprehensive, valid and reliable answers to the sub-questions following from the main question. The Delft University of Technology joined forces with Accenture to conduct the survey. It provided a select number of CIOs the opportunity to benchmark their IT innovation capabilities with industry peers. From the 93 CIOs that were personally invited, 15 (16%) completed the online questionnaire. Data is analyzed using visual representations, crosstables and chi-square tests. For the case studies initial interviews were conducted with five IT organizations including two banks, two high-tech companies and a telecommunications company. Both a bank and a hightechnology company were selected for further examination based on the maturity of their business service innovation processes. Using the developed case study protocol, a total of five interviews of one hour were conducted for these two cases. The other three initial interviews proved valuable for deeper understanding and illustrative purposes. The evolution of service and information technologies changed the role of the IT organizations. Automation and commoditization of technologies stimulated companies to move towards selling experiences. Experiences are difficult to copy and are becoming the only competitive differentiator. Although digitized companies focus on different technological trends, they all heavily rely on IT to deliver experiences to customers. Therefore, IT has become central part in business value creation. Accordingly, the majority of study findings point out that IT organizations can play a central role in the innovation process. They have moved beyond their traditional role of facilitator or enabler. These IT organizations have become a strategical partner of the business and actively contribute to iii Executive Summary business value creation. In order to drive business value trough effective business service innovation, IT organizations in large digitized companies should consider the following four mechanisms. First, they should understand the difference with technological innovation. All chosen definitions, taxonomies and perspectives in this study are service centered and can support IT organizations to refine their service innovation approach. Taking proper perspective is crucial as it has implications for the way service innovation is organized. It determines the structure of the service innovation process, the focus of service innovation output and what literature or theories are used. Second, the conceptual service innovation IT capability (SIIC) framework is process oriented and offers a systematic approach to effective business service innovation. The framework recognizes the importance of the pre-development process and the influential factors that allow IT organizations to improve their approach to service innovation. Third, the contributions to effective business service innovation depends on the role IT organizations play and the way they can influence effective business service innovation. The IT organization can be facilitating, enabling and driving in creating business value. Companies should recognize which role their IT organization is currently playing and determine which role they should play. Fourth and final, driving IT organizations should develop appropriate capabilities to contribute to effective business service innovation. Therefore, seven IT innovation capabilities are distinguished, linked to the majority and most important success factor and barrier types. Preliminary insights tend to indicate that IT organizations should focus on IT-business strategy alignment, IT culture and IT resources. They seem to correlate with both the quality and quantity of IT organizational contributions in the pre-development phase. IT tools were very basic and did not show significant correlations with either quality of quantity. In order to improve the quality of their contribution, IT organizations can consider focusing on maturing their IT staff, IT resource and the IT process capability. Further, to improve the quantity of their contribution, IT organizations can involve external parties to attain knowledge and skills that are lacking within the organization. The most important limitations of this study are categorized into data restrictions and biases of the study. IT executives operate in time demanding positions and their insights are extremely valuable. Still, findings of the survey cannot be generalized to IT organizations within digitized and innovative industries resulting from the limited response. Implications of the study includes first advances towards instruments for measuring and describing the IT organizational innovative capability for effective business service innovation. Then, a three layer framework suggesting that IT organizations can contribute to company value acting as facilitators, enablers or drivers. Further, two conceptual frameworks are created to improve the understanding of organizing the service innovation process. They point out the importance of the pre-development phase, influential factors, IT innovation capabilities and both the quality and quantity of IT organizational contributions. iv Contents Acknowledgments i Executive Summary iii 1 Research introduction 1.1 Moving to a digital era of service . . . . . . . . . . . . . . . 1.2 Problem statement: IT organizations and service innovation 1.3 Theoretical and managerial gap identification . . . . . . . . 1.4 Objective of the study . . . . . . . . . . . . . . . . . . . . . 1.5 Scope of the study . . . . . . . . . . . . . . . . . . . . . . . 1.6 Research questions . . . . . . . . . . . . . . . . . . . . . . . 1.7 About this thesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 2 3 4 5 6 7 2 Domain: Towards a service science 2.1 Defining service . . . . . . . . . . . . . . . 2.1.1 Goods dominant logic . . . . . . . 2.1.2 Service dominant logic . . . . . . . 2.2 Perspectives on service innovation studies 2.3 Defining service innovation output . . . . 2.3.1 Service nature . . . . . . . . . . . 2.3.2 Degree of service novelty . . . . . . 2.3.3 Service innovation dimensions . . . 2.4 Defining service innovation process . . . . 2.4.1 Activity stage models . . . . . . . 2.4.2 Service centered models . . . . . . 2.4.3 Two phases of innovation . . . . . 2.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9 10 11 12 14 15 15 17 18 19 20 21 22 3 Organizing effective business service innovation 3.1 Conceptual SIIC framework . . . . . . . . . . . . . . . . . . . . . . 3.1.1 A systematical perspective to innovation management . . . . 3.1.2 Innovation pre-development focus . . . . . . . . . . . . . . . . 3.1.3 Performance metrics for business service innovation . . . . . 3.1.4 Contextual factors . . . . . . . . . . . . . . . . . . . . . . . . 3.1.5 Factors influencing business service pre-development . . . . . 3.1.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Conceptual theoretical framework . . . . . . . . . . . . . . . . . . . 3.2.1 Modes of IT-organizational involvement in pre-development . 3.2.2 IT capabilities for effective business service pre-development . 3.2.3 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 25 26 27 29 31 33 36 37 37 41 45 46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v CONTENTS 4 Research Design 4.1 Research approach . . . . . . . . . . . 4.2 Desk research justification . . . . . . . 4.2.1 Research types . . . . . . . . . 4.2.2 Search strategy . . . . . . . . . 4.3 Survey justification . . . . . . . . . . . 4.3.1 Survey sampling . . . . . . . . 4.3.2 Data collection procedure . . . 4.3.3 Validation and Reliability . . . 4.4 Case study justification . . . . . . . . 4.4.1 Case study design . . . . . . . 4.4.2 Data collection procedure . . . 4.4.3 Quality design: Data validity & . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 47 48 48 49 50 50 53 58 59 59 61 62 5 Survey results 5.1 The relation with effective IT innovation capabilities . . . 5.1.1 Quantity of IT organizational contribution . . . . 5.1.2 Quality of IT organizational contribution . . . . . 5.2 The moderating effect of the company innovation focus . 5.3 The relation with business service innovation performance 5.3.1 Quantity of IT organizational contribution . . . . 5.3.2 Quality of IT organizational contribution . . . . . 5.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 64 65 65 66 67 67 68 68 6 Case results 6.1 Background . . . . . . . . . . . . . . . . . . . . . . . 6.2 Findings on internal and external contextual factors 6.2.1 High-technology company . . . . . . . . . . . 6.2.2 Bank . . . . . . . . . . . . . . . . . . . . . . . 6.2.3 Cross case . . . . . . . . . . . . . . . . . . . . 6.3 Findings on the pre-development phase . . . . . . . . 6.3.1 High-technology company . . . . . . . . . . . 6.3.2 Bank . . . . . . . . . . . . . . . . . . . . . . . 6.3.3 Cross case . . . . . . . . . . . . . . . . . . . . 6.4 Findings on IT innovation capabilities . . . . . . . . 6.4.1 High-technology company . . . . . . . . . . . 6.4.2 Bank . . . . . . . . . . . . . . . . . . . . . . . 6.4.3 Cross case . . . . . . . . . . . . . . . . . . . . 6.5 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 70 72 72 73 74 74 74 75 76 76 76 78 80 82 7 Discussion and conclusion 7.1 Answering the main research question 7.2 Implications . . . . . . . . . . . . . . . 7.2.1 Academic implications . . . . . 7.2.2 Managerial implications . . . . 7.3 Limitations and further research . . . 7.4 Reflection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 85 89 89 90 91 92 References vi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . reliability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 A Literature background 103 B Studies on influential factors 109 CONTENTS C Electronic survey using Confirmit 121 D English invitation letters 141 E Survey results E.1 Hypotheses . . . . . . . . . . . . . . . . . . . . . E.2 Statistical tests on indicators of the hypotheses . E.3 Visual interpretations of the hypotheses . . . . . E.4 Triangulation between the survey and case study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 145 146 149 155 F Case study results 157 F.1 Case study protocol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 F.2 Aggregated case study findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 vii CONTENTS viii List of Figures 1.1 GDP composition of OECD countries (The World Bank, 2012) . . . . . . . . . . . . 1 2.1 2.2 2.3 Reverse innovation cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Service innovation novelty spectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . Service innovation process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 16 22 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 House of innovation . . . . . . . . . . . . . . . . . . . . . . . . Resource-Process Framework . . . . . . . . . . . . . . . . . . . Relations between factors within the service innovation process Balancing cost and uncertainty during the project life cycle . . Objectives used in studies on barriers . . . . . . . . . . . . . . Overview of barriers in innovation studies . . . . . . . . . . . . Objectives used in studies on success factors . . . . . . . . . . . Overview of success factors in innovation studies . . . . . . . . Conceptual service innovation IT capability framework . . . . . Three levels of business value creation . . . . . . . . . . . . . . Conceptual theoretical framework . . . . . . . . . . . . . . . . . Updated conceptual service innovation IT capability framework . . . . . . . . . . . . 26 27 27 28 33 34 35 35 36 40 46 46 4.1 4.2 Landingpages electronic survey (see appendix C) . . . . . . . . . . . . . . . . . . . . Numbered conceptual theoretical framework . . . . . . . . . . . . . . . . . . . . . . . 50 53 5.1 5.2 5.3 5.4 5.5 Conceptual theoretical framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conceptual theoretical framework: results . . . . . . . . . . . . . . . . . . . . . . . . Example: IT capability on quality of IT organizational contribution . . . . . . . . . Correlation between IT culture and quantity of IT organizational contribution . . . Correlation between quantity IT organizational contribution and firm innovativeness 64 64 66 67 67 6.1 6.2 Conceptual service innovation IT capability framework . . . . . . . . . . . . . . . . . Adjusted conceptual service innovation IT capability framework . . . . . . . . . . . . 70 83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E.1 Numbered conceptual theoretical framework . . . . . . . . . . . . . . . . . . . . . . . 145 ix LIST OF FIGURES x List of Tables 1.1 1.2 Scope of the study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overview of examined sub-questions (SQ) per chapter . . . . . . . . . . . . . . . . . 2.1 2.2 2.4 2.5 2.7 2.8 2.9 Differences between goods, e-services and services . . . . . Differences between G-D and S-D logic, adapted from Vargo Segmentation modes of service innovations studies . . . . . Definitions of service innovation outputs . . . . . . . . . . Degree of novelty typologies . . . . . . . . . . . . . . . . . Service innovation dimensions . . . . . . . . . . . . . . . . Definitions service innovation process . . . . . . . . . . . . 3.1 3.2 3.3 3.5 3.6 3.7 Innovation project objectives . . . . . . . . . . . . . . . . . . . . Idividual innovation performace measure (Storey & Kelly, 2001) Measures of innovation process performance . . . . . . . . . . . Four generations of R&D innovation types . . . . . . . . . . . . Overview of mentioned influential factors in the literature . . . . IT service innovation capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 4.2 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.13 4.14 Overview of research methods used in this study. . . . . . . . . . . Search engines and search terms used for this study. . . . . . . . . . Filtering for selected population . . . . . . . . . . . . . . . . . . . . . Used search engines and search terms to identifying survey contacts. Generic hypotheses and example . . . . . . . . . . . . . . . . . . . . Mapping indicators and sub-capabilities on IT culture (A2 ) . . . . . Iterations survey formation . . . . . . . . . . . . . . . . . . . . . . . Concepts, number of idicators and measurement levels . . . . . . . . Distribution of gathered responses. . . . . . . . . . . . . . . . . . . . Data operations to clean and analyze survey data . . . . . . . . . . Used search engines and search terms to select case studies. . . . . . Overview of data analysis technique selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 . . . . . . . . . . . and Lusch (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7 . . . . . . . . . . . . . . . . . . . . . 10 11 13 14 16 17 19 . . . . . . . . . . . . . . . . . . . . . . . . 29 30 30 39 42 43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 49 52 53 54 55 56 56 57 57 60 61 Analysis of the case study protocols . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 . . . . . . B.1 Studies on succes factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 B.3 Studies on barriers to service innovation . . . . . . . . . . . . . . . . . . . . . . . . . 117 C.1 Question mapping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 E.1 E.3 E.5 E.7 Overview of hypothesis . . . . . . . . . . . . . . . . . Statistical tests on indicators of the hypotheses . . . . Visual interpretations on indicators of the hypotheses Triangulation between the survey and case study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 146 149 155 F.1 Case study protocol used for this study . . . . . . . . . . . . . . . . . . . . . . . . . 157 xi LIST OF TABLES F.3 Analysis of the case study findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 xii 1 Research introduction This chapter introduces the significance of business service innovation and recognizes that IT organizations should be involved early on in the innovation process. The subsequent sections elaborate on the problem, gap, objective, scope and research questions of this study. 1.1 Moving to a digital era of service Value added as % of GDP Service plays a key role in today’s leading economies of the world’s most advanced countries. The macroeconomic output through service within Organization for Economic Cooperation and Development (OECD) countries grew from 58% in 1970 to 75% in 2011 (see figure 1.1). The 34 OECD countries are increasingly becoming service economies with dominant service sectors that surpassed the economic contributions from agriculture and industry sectors (United Nations Statistics Division, 2012; CIA, 2012). This has lead academics to claim that society is moving to a post manufacturing world (Chesbrough, 2011) and that manufacturers should move towards service to remain competitive (Jacob & Ulaga, 2008). 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1970 1974 1978 1982 1986 Services (ISIC divisions 50-99) Agriculture (ISIC divisions 1-5) 1990 1994 1998 2002 2006 2010 Industry (ISIC divisions 10-45) Figure 1.1: GDP composition of OECD countries (The World Bank, 2012) Innovation is a key driver for economic growth and competitive advantage (Sheehan, 2006; 1 Research introduction D’Alvano & Hidalgo, 2012; Chesbrough, 2011). Companies can grow through expansion in current markets, purchasing growth through mergers and acquisitions or gaining market share from technological and service innovation Lee, Kim, and Park (2010). Companies that strive for competitive edge and want to remain a significant player in globalizing markets must continuously implement business innovations (Yodokawa, 2007). Innovation has become a fundamental means for companies to develop better-value propositions and deliver superior customer value (D’Alvano & Hidalgo, 2012). Consequently, the pursuit of innovation results in economic growth (Nelson & Phelps, 1966). Companies need to keep up-to-date with technological developments and learning from each other yields positive externalities. Service innovation has become an important competitive differentiator in many industries (Menor, Tatikonda, & Sampson, 2002). Service allows higher profit margins, is a more stable revenue source and less vulnerable to economic cycles (Oliva & Kallenberg, 2003). Both manufacturing companies (Jacob & Ulaga, 2008; Despi & Luca, 2012) and financial industries (Cooper & de Brentani, 1991) should move towards service in order to remain competitive and secure long-term growth. Consequentially, service innovation has become a strategical necessity for most firms (Alam, 2006a). It is more important than ever for service companies to start innovating in order to become competitive and to sustain growth (Panesar & Markeset, 2008). Sheehan (2006) takes the claim one step further and argues that service innovation has become the main driver of productivity and economic growth. Service sectors include industries with high innovative intensity such as consultancy and low innovative intensity like wholesale, construction and hospitality. Knowledge intensive business service (KIBS) and network intensive service companies are most innovative and for a large part rely on Information Technology (IT) (De Jong, Vermeulen, Van de Graaff, & Price, 2003; Vence & Trigo, 2009). In addition, KIBS are knowledge intensive activities developed in close contact with clients that allow companies to compete and economies to grow. Information technology (IT) is revolutionizing goods and service and is the most important driver of innovation and competitiveness (European Commission, 2013). Daimler’s Car2go for example, enabled the company to enter new markets in 2008 and can potentially redefine its industry. Car2go enables customers to rent an electrical car within their proximity through their smartphones. The service relies heavily on IT and the IT organization played an essential role in shaping the innovation. After four years, Car2Go is available in 16 cities, with over 6.000 cars and 120.000 users. Companies are increasingly spending financial resources on IT (K. C. Laudon & J. P. Laudon, 2012). In service companies, IT capital has become the dominant source of investment (Van Ark, Broersma, & den Hertog, 2003). Together with the growing number of service offerings, the share of IT enabled service has grown significantly (Sheehan, 2006). High-technology service is mainly IT enabled and increasingly contributing to the global economical growth (Riel, Lemmink, & Ouwersloot, 2004; Riel, Semeijn, Hammedi, & Henseler, 2011). 1.2 Problem statement: IT organizations and service innovation This section, points out that it is difficult for IT organizations to contribute to service innovation as a systematic and integrated approach is missing. The growth of the service sector has resulted in part from specialization, expertise in-sourcing and the outsourcing of manufacturing activities to lower-cost regions (Sheehan, 2006; Spohrer & Maglio, 2008; Panesar & Markeset, 2008). Companies are facing shortening development cycles of new technologies, fierce competition, and more demanding customer expectations (Chesbrough, 2011). Vargo and Lusch (2004) stress that in order to succeed in the current highly competitive markets, companies have to adopt new ways of thinking in their value creation and relationships 2 1.3 Theoretical and managerial gap identification with customers. In addition, the companies are in constant need of new approaches to service design and delivery (Smith, Fischbacher, & Wilson, 2007). The innovation and management literature indicates that service development differs from tangible products (Kelly & Storey, 2000). Barras (1986) is one of the earliest academics describing service innovation and claims that service follows technology innovation activities in a reverse order. Gallouj (1998) adds that even though the model is suitable for technology orientated service it neglects non-technological forms of innovation outside technological trajectories. Further, service innovation relies less on in-house R&D than in technological innovation and much more on other factors (Sheehan, 2006). For instance, Cross-functional teams strategically integrating market needs and core technical competence are crucial to sustained new venture creation (Ettlie & Rosenthal, 2012). Large companies often have more difficulties with innovation than smaller, flexible, entrepreneurial organizations (Vermeulen, 2004). Although, large companies can apply economies of scale, they have the great difficulty coming up with new service solutions. Though product-centric firms may recognize the need for transition, in practice they struggle to visualize how these processes can be managed (Kindstrom, Kowalkowski, & Sandberg, 2012). A coherent and integrated approach towards service innovation is missing (Chesbrough, 2011). This can potentially limit future growth of advanced economies that increasingly relying on service. The importance of service innovation and IT for a company’s market competitiveness has grown (K. C. Laudon & J. P. Laudon, 2012). Companies are digitizing and are increasingly spending financial resources on IT (K. C. Laudon & J. P. Laudon, 2012). New technology has been considered as the second largest source of service innovation ideas (Panesar & Markeset, 2008). However, IT is identified as the largest barrier to effective service innovation (Kelly & Storey, 2000). In addition, IT experience is an important dimension for a company’s ability to achieve desired new service outcomes (Menor & Roth, 2007). Thus, shaping an IT organization that is able to contribute to company value through effective business service innovation will influence its competitive advantage. Nonetheless, even when IT organizations aspire to develop service experiences, economic downcycles and stakeholder expectations often push companies to maximize profits. At one side these IT organizations are pressured to run their IT applications and reduce costs and at the other side they have to invest in innovation and enhance business performance. Although IT is key for innovation, few firms systematically involve operational staff in the service innovation process (Kelly & Storey, 2000). IT organizations are often facilitators or enablers (Saunders & Brynjolfsson, 2007) and do no proactively capture and integrate creative ideas for new service. The IT organization is ranked last as the source of new ideas (Kelly & Storey, 2000) and the CIO is least involved in the screening decisions of ideas (Riel, Semeijn, et al., 2011). Interestingly, although the CIO is only involved in one-fifth of the selection decisions, his participation has a direct and unmediated effect on the success of innovations (Riel, Semeijn, et al., 2011). Problem statement - The growing importance of service innovation and IT has created opportunities for IT organizations to contribute to more effective service introductions. IT organizations can provide their technical knowledge and contribute to selection of ideas on both technical feasibility and compliance with existing capabilities. Yet, IT organizations are often pressured to remain a facilitator or technology enabler as understanding and appropriate innovation mechanisms are missing. 1.3 Theoretical and managerial gap identification This section highlights an existing gap in the body of knowledge central to this study. Service innovation has raised the interest of researchers in the fields of innovation management, marketing management and operations management (de Brentani, 1989; Cooper, Easingwood, Edgett, Kleinschmidt, & Storey, 1994; Johne & Storey, 1997; Storey & Kelly, 2001; Menor & Roth, 2007). 3 Research introduction Service innovation is a relatively young field of research without proven models and consolidated ways of working. Although, the service sector accounts for most of the world’s economic activity, it is least studied (Spohrer, Maglio, Bailey, & Gruhl, 2007). Johne and Storey (1997) found that the body of knowledge on service innovation is growing. Insufficient research is carried out and limited empirical evidence exists in the area of service innovation (Edvardsson, Haglund, & Mattsson, 1995; Alam & Perry, 2002; Jaw, Lo, & Lin, 2010). As the value of service to our economy and society is growing, systematic service innovation approaches and new ways of innovation thinking are becoming crucial (Riedl, Leimeister, & Krcmar, 2009; Chesbrough, 2011). Although, the number of service studies has rapidly grown, a general literature overview is missing (De Jong & Vermeulen, 2003) and new ways of thinking have not been adopted in our universities (Chesbrough, 2011). Scientific knowledge on the innovation process is missing and current understanding of strategies and tactics is sparse (Droege, Hildebrand, & Forcada, 2009). Little is understood about how new service should be developed (S. J. Edgett, 1994) and what service companies should do to achieve innovation success (Jin, Chai, & Tan, 2010). Only a small number of studies have presented the drivers needed for successful innovation (Droege et al., 2009). The literature detailing the challenges during transitions to service is surprisingly meager (Oliva & Kallenberg, 2003) and the understanding of product transformations is still at an early stage (Jacob & Ulaga, 2008) Similarly to the effect of service, researchers have found that IT investements are positively correlated with productivity and economic growth (Saunders & Brynjolfsson, 2007). As a result of IT tools like ERP and CRM supported by cheap networks, competition in the American economy has accelerated to unprecedented levels (McAfee & Brynjolfsson, 2008). An analogy can be drawn with the“Solow (1957) residual” for technological innovation. The scholar viewed the economy as a black box and observed that the increases in capital and labor going into the box could not account for half of the observed economic growth that came out. In similar vein, Brynjolfsson and Hitt (2000) argue that the impact of IT investments on economic growth is disproportionately large compared to their share of capital stock or investment. As an explanation they point to organizational complements such as new business processes, new skills and new organizational structures as major drivers. Information systems can support collaboration, knowledge sharing, competitive intelligence, and stimulate idea generation in many other ways (Gordon, Tarafdar, Cook, Maksimoski, & Rogowitz, 2008). As companies increasingly outsource support and maintenance of IT-systems, the roles of IT organizations are changing. Instead of sole facilitators, IT organizations are becoming brokers that enable innovation (Erbes, Motahari-Nezhad, & Graupner, 2012; Kelly & Storey, 2000). The role of the Chief Information Officer (CIO) is ambiguous as some IT organization have a supporting role and others directly contribute to business value creation and competitive advantage (Peppard, Edwards, & Lambert, 2011; Kettinger, Zhang, & Marchand, 2011). Especially within business literature much is currently written on the role of the CIO. According to an annual survey, the business strategies of CIOs focus on revenue growth, new connections with customers, reducing costs and innovation (McDonald & Aron, 2012). Some “revenue-generator” or “business-level CIO” are able to integrate technology-driven trends to cultivate direct customers relationships (Levin, 2013). Finally, BMW tries to integrate business and IT, indicating that the CIO has become a part of the business (Raskino & Pezzini, 2013). Nonetheless, there is little research on how IT organizations can combine these findings to create business value through business service innovation. 1.4 Objective of the study This section elaborates on the objective of this study to support IT organizations in understanding and influencing business service innovation. Service innovation is a relatively young field of research without proven models and consolidated ways of working. This study investigates the inside of the black box (Solow, 1957) to identify which mechanisms such as skills or processes (Brynjolfsson & Hitt, 2000) complement to the productivity and economic growth. Allowing especially IT organization to increase or secure their role within large digitized corporations. 4 1.5 Scope of the study There is little research on how IT organizations can contribute to business value creation through business service innovation. Especially, IT organizations in large companies have the opportunity to move from facilitating to enabling or driving business value. They should be involved early on in the innovation process, before actual development. IT organizations can provide their technical knowledge and contribute to evaluation and selection of ideas on technical feasibility and compliance with existing capabilities. Based on this preliminary problem analysis the following research objective is formulated: The objective of this research is to further develop understanding of the mechanisms for IT organizational contributions to effective generation, selection and commercial evaluation of business service innovation projects by developing conceptual frameworks on IT innovation capabilities and comparing them to large Dutch companies in financial, communication, media and high-technology industries in a electronic survey and two case study examples. 1.5 Scope of the study This section describes the scope of this study which is based on the objective, sets the boundaries for the study and defines the research space. Developing theoretical understanding and a framework explaining IT organizational contribution to business service innovation are part of the objective. A framework explains possible outcomes and describes the relations between these useful parts and outcomes (Ostrom, 2010). Table 1.1: Scope of the study Within scope Out of scope Service, service innovation Goods, technological innovation, manufacturing innovation or business model innovation Internal innovation Open innovation, spin-offs, mergers, licensing, platforms, ecosystems Large corporations Small and medium enterprises (SMEs), entrepreneurs, non-profit organizations and governmental institutions Banking, insurance, telecommunication, media and high-technology industries All Other IT organizations Other functions such as marketing or business Pre-developement, fuzzy front-end or search stage Development, operational back-end or implementation stage Identify and select significantly transformed of fully new service Development cost reduction, development time reduction and service quality improvement Increasing the effectiveness of business service innovation Increasing the efficiency and number of business service innovation(s) IT capabilities, barriers, success factors and company performance IT investments, economic productivity and economic growth, IT capability transformation, technology adoption and technology diffusion Central to the study are service and service innovation, as such goods, technological and manufacturing innovation, and business model innovation are out of scope. For an overview of business models consider (Fielt, 2011; Osterwalder et al., 2004). To remain competitive companies have to build internal service innovation capabilities. Large and mature organizations lack these capabilities and have difficulty developing them (Vermeulen, 2004). External innovation such as open innovation, spin-offs, mergers, licensing, platforms and ecosystems are therefore not included. For open service innovation consider Chesbrough (2011). 5 Research introduction Under examination are large corporations in banking, insurance, telecommunication, media and high-technology industries because these industries are most innovative and rely heavily on IT. Further, the number of small and medium enterprises (SMEs) in the financial industry is particularly limited (De Jong, Vermeulen, et al., 2003). This leaves economies, SMEs, entrepreneurs, non-profit organizations and governmental institutions out of scope. In answering how IT organizations can contribute to business service innovation their application of IT innovation capabilities is analyzed. Especially as there is consensus between the literature and practice that IT organizations are least involved in the process and IT-experience is crucial (Kelly & Storey, 2000). Other parts of the company such as marketing, the business and their innovation activities as customer involvement or customer co-creations are left out. IT-functions traditionally develop and facilitate innovation, but do not identify innovation opportunities. Because of the growing importance of IT, IT organizations should be involved early on in the innovation process. Literature argues that innovation activities before development are crucial. To analyze opportunities, the pre-development, ‘fuzzy front-end’ or search stage are examined. Consequently, the development, operational back-end or implementation stage lie out of scope. The activities in the pre-development phase emphasize the effective innovation of significantly transformed or fully new service. The development process is another field of research that concentrates on cost and time reductions or service quality improvement for more efficient development. IT organizations should not increase the number of business service innovations, but identify and develop the right business service innovation capabilities. Especially capabilities that impact barriers and success factors. This focus excludes from examination the relation between IT investment and economic productivity or economic growth (Brynjolfsson & Hitt, 2000; van Ark & de Jong, 2004). Also how capabilities should be transformed (Susman, Warren, & Ding, 2006), how technologies are adopted or how technologies diffuse, will not be studied. 1.6 Research questions This section describes the research questions that illustrates how this study will achieve its objective. Main question - The main questions is divided into sub-questions to obtain distinct knowledge for solving parts of the main question. Based on the defined problem and research objective the following core research question (RQ) is identified: RQ How can IT organizations in large digitized companies drive value trough effective business service innovation? The main research question is descriptive in nature. Companies are digitized when nearly all of the organizations significant business relationships with customers, suppliers, and employees are digitally enabled and mediated (K. C. Laudon & J. P. Laudon, 2012). The large companies have more than 250 employees, annual revenue above 100 million euro, substantial IT organizations and would benefit from internally organized service innovation. A business service is the application of company competences (knowledge and skills) through deeds, processes and performances for the benefit of a customer. Organization pursuing effective rather then efficient innovation focus on front-end portfolio management and selecting the right projects instead of develop projects better, faster and cheaper (Cooper, 2000). The main question seeks ways for IT organizations to contribute to business service innovation and examines how these mechanisms are applied in practice. Sub-questions - The main questions embodies both theoretical and practical aspects that are split into individual sub-questions (SQ). The theoretical oriented part of the study comprehensively and thoroughly analyses the current body of knowledge. A conceptual model and theoretical framework are constructed that are tested in practice. 6 1.7 About this thesis SQ1 What are core concepts relevant for service innovation and how are they different from goods innovation? SQ2 What factors influence the performance of effective business service innovation? SQ3 What role can IT organizations in large digitized companies play within effective business service innovation? The practical oriented part of the study identifies which and how capabilities significantly influence the activities before actual development of business service. SQ4 Which capabilities do IT organizations in large digitized companies require for effective business service innovation? SQ5 How do IT organizations in large digitized companies apply their capabilities to contribute to effective business service innovation? 1.7 About this thesis The thesis is further divided into six parts that are used to answer the described research questions (see table 1.2). Chapter 2 analyses the existing body of knowledge on service and service innovation. Prevalent theories and definitions are compared and consolidated into those selected for this study. The results are used to answer the first sub-question and illustrates the taken perspective in this study. Chapter 3 analyzes the literature on influential factors, identifies IT innovation capabilities and develops two conceptual frameworks for the service innovation process and IT organizational involvement. The findings are used to answer the second and third sub-questions, and to develop hypotheses and questions to examine them. Chapter 4 justifies the selection and design of methodologies used to study the research questions. These includes desk research, a survey and case studies. Desk research is performed to examine the available body of knowledge. The survey details in which manner the survey is formed on the constructs of the conceptual theoretical framework. It compares the maturity of IT capabilities within large digitized Dutch companies. The case studies describes how elements a framework elements of two driving IT organizations are examined in practice. Chapter 5 elaborates on the results from a survey and case study performed for the study. The results of the survey are analyzed through a correlational study. The findings are used to answer the fourth sub-question. Chapter six analyzes the results from the case study using pattern matching based on a within-case analysis and a cross-case search for patterns between the cases. The findings are used to answer the fifth sub-question. Chapter 7 uses the findings of the previous chapters to answer the main question. Further the chapter describes the study implications, study limitation and areas for further research. Table 1.2: Overview of examined sub-questions (SQ) per chapter Chapter 1 2 3 4 5 6 7 Title Research introduction Domain: Towards a service science Organizing effective business service innovation Research Design Survey results Case results Discussion and conclusion Research question SQ1 SQ2,SQ3 SQ4 SQ5 RQ 7 Research introduction 8 “Service provisioning rather then goods is fundamental to economic exchange” (Vargo & Lusch, 2004) 2 Domain: Towards a service science As companies and academia became aware of the existence and the importance of services, more research was carried out on the matter. Service engineering, also called service science, studies the systematic development and design of services using suitable models, methods and tools (Lee et al., 2010). Although the growing body of knowledge contributes to the understanding of service, service science remains a young research field when compared to goods. It is only recently, that available literature on service innovation has exponentially grown. Droege et al. (2009) found that little scientific knowledge had been acquired on the service innovation process and that prevalent understanding and theories of service development strategies was inadequate. The scholars note that some studies are starting to show the drivers for innovation success but further research on the similarities and differences with new product innovation is needed. This chapter analyses the existing body of knowledge to consolidate prevalent theories and definitions. The results will be used to create a perspective for the study and answer the first sub-question: SQ1 What are core concepts relevant for service innovation and how are they different from goods innovation? The first section of this chapter analyzes prevalent perspectives on service. The second section examines segmentations of service innovation studies. It is important to note, that service innovation has been used interchangeably in the literature to refer to both the service innovation process and the service innovation output. The next sections will examine this duality in order to identify innovation, measure innovation and develop uniform terminology throughout the study. The third section explores the taxonomies and characteristics of service innovation output that follow from the process. The fourth section delineates between theories of service innovation processes which refers to the range of activities needed to create service output. The fifth section uses the findings to answer the first sub-question. 2.1 Defining service Each study that examines service should state a clear definition of service for its results to be relevant (Menor, Tatikonda, & Sampson, 2002). Generally, service science considers two dominant views of service (Vargo & Lusch, 2004, 2008; Vargo & Akaka, 2009). These views are the goods-dominant logic and the service-dominant logic. 9 Domain: Towards a service science • The goods-dominant (G-D) logic advocates the traditional view on economic exchange that economic value is primarily created through goods (tangible products). Within this logic there is no common definition for service. Services are conceptualized relative to goods, either as add-ons (e.g. after-sale service) or a special type of (intangible) product. • The service-dominant (S-D) logic asserts that people do not buy objects, but performances (Vargo & Lusch, 2008). Within this logic, a service is not relative to a good. Service is central to economic exchange and value creation, while goods play a central role in service provision. The subsequent section elaborate on the choice for an S-D logic perspective. In this perspective service is defined as a central concept using goods, rather than an inferior output next to goods. The logic emphasizes the performance of these specialized activities in contrast to the output performance of specialized activities. 2.1.1 Goods dominant logic Goods dominant (G-D) logic originated largely within economics in the 1800s and was the predominant paradigm until approximately 1980 (Lusch & Vargo, 2006). G-D logic views economic exchange in terms of production, in which design and manufacturing processes add value to distributed units of output (Quinn, 1988; Vargo & Lusch, 2004). Services are considered supplements to goods and an inferior output (Vargo & Lusch, 2004) that can easily be copied by competitors (Hefley, Murphy, Schneider, & Bowen, 2010). In addition to goods and services, scholars recognize electronic services (e-services). E-services are regarded as a new product category in which service production (software) and service outcome (customer benefit) can be separated. The emergence of information and communication technologies (ICT) like telecommunications, data networks and the internet, have enabled increasing possibilities for services (Bouwman, De Vos, & Haaker, 2008). Hofacker, Goldsmith, Bridges, and Swilley (2007) argue that the spread of ICT led to the appearance of e-services and continues to transform business, marketing and consumer behavior. A comparison of the categories is presented in table 2.1 further discussion of the idiosyncrasies are added in the Literature background (see appendix A). Table 2.1: Differences between goods, e-services and services Goods E-services Services Tangible Intangible, but need tangible media Intangible Can be inventoried Can be inventoried Cannot be inventoried Separable consumption Separable consumption Inseparable consumption Can be patented Can be copyrighted, patented Cannot be patented Homogeneous Homogeneous Heterogeneous Easy to price Hard to price Hard to price Cannot be copied Can be copied Cannot be copied Can be shared Can be shared Cannot be shared Use equals consumption Use does not equal consumption Use equals consumption Based on atoms Based on bits Based on atoms It has been argued that a clear strategic analysis of all service categories is unfeasible due to the broad range of service types within an economy (Ottenbacher, Gnoth, & Jones, 2006). From a G-D logic services are often defined with manufacturing-oriented concepts that do not always fit their nature. Although it is difficult to combine service characteristics into one definition (Hipp & Grupp, 2005), Spohrer and Maglio (2008) combine several definitions: 10 2.1 Defining service A service is a time-perishable, intangible experience performed for a client who is acting as a co-producer to transform a state of the client. The definition reveals that the client plays an essential role in co-production activities and the co-creation of value (Spohrer & Maglio, 2008). 2.1.2 Service dominant logic Around 1980, S-D logic emerged and service science thinking began to decouple from a G-D driven logic (Vargo & Lusch, 2004). S-D logic is a fundamentally different world view and proposes an alternative perspective to the traditional goods paradigm. S-D logic should not be considered as a recreated perspective but rather a reorientation (Vargo & Lusch, 2004) that differs with G-D logic on six aspects (see table 2.2). Table 2.2: Differences between G-D and S-D logic, adapted from Vargo and Lusch (2004) Traditional G-D Logic Emerging S-D Logic People exchange operand resources like goods. People exchange operant resources or competences like knowledge and skills. Goods are operand resources and end products in themselves. Goods are transmitters of operant resources, they are intermediate products embedded in competences. The customer is solely the recipient of goods. The customer is a co-producer of service. The producer determines value, which is embedded in operand resources and defined in terms of exchange-value. The producer makes value propositions, but the consumer perceives and determines value on the basis of value in use. Firms interact with customers for the transaction of resources. Firms interact with customers as active participants in relational exchanges and co-production. Economic growth is obtained from created surplus of tangible resources and goods. Economic growth is obtained through the application and exchange of specialized knowledge and skills. Vargo and Lusch (2004) argue that fundamental economic exchange results from the application of competences, such as knowledge and skills. In S-D logic, goods and services are not separate product categories, instead goods are a mechanism for service provisioning. Service is the basis of all exchange, and tangibles are intermediary products and transmitters of embedded knowledge and skills. To support their reasoning for this paradigm shift towards S-D logic, Vargo and Lusch (2004) draw an analogy with operand resources. These resources, like raw materials and people, were traditionally viewed as tangible. Over the last 50 years people realized that they can also be viewed as intangible, for example knowledge and skills. Similarly, G-D logic is traditionally centered around tangibles for value exchange and the emerging S-D logic emphasizes that intangibles are the units of value exchange. Most of the current work on societal and ethical issues is based on G-D logic. For example, the accounting systems that companies use to capture and monitor changes in economic activity (Ireland Central Statistics Office, 2012), is based on a goods context. However, both service companies and manufacturers follow the trend to servitization. They move their focus from pure goods to systems that bundle goods and service, with service in the lead role (Vandermerwe & Rada, 1988). It is argued that the inadequacy of classification is becoming increasingly apparent and that G-D logic is not particularly accommodating (Vargo & Lusch, 2008). G-D logic does not report key measures (i.e. renewal rates, employee turnover, customer satisfaction and on-time delivery) which are typical for service performance (Spohrer & Maglio, 2010). Further, Edvardsson, Gustafsson, and Roos (2005) 11 Domain: Towards a service science argue that G-D logic definitions are fuzzy and a clearer point of departure might be required as service research is maturing. As the service share in goods grew, and services made more use of tangibles for their delivery, the distinction between goods and service became less strict. A car is regarded as a pure good and a taxi as a pure service. However, variations of rental models have appeared that are no pure service nor a pure good. They make of new business models such as car leasing, car rental or flexible pay-per-use models (e.g. BMW’s DriveNow, Daimler’s car2go and Zippcar). Instead of viewing the distinction between goods and services as a dichotomy, scholars started to see a goods-service continuum (Oliva & Kallenberg, 2003; Vargo & Lusch, 2004; Bouwman et al., 2008). On one end of the spectrum pure goods are delivered, while on the other end solely services are being produced. For example, along that continuum a car could be sold (good), leased, rented or used to offer a cab ride (service). However, most market offerings lie between both extremes. The inability to name the market offerings (Evanschitzky, Wangenheim, & Woisetschl¨ager, 2011) points out the inadequacy of the classification. So long as markets cannot solely be classified on the extremes of the product-service spectrum, it is interesting to look at a new structural service definition. Vargo and Lusch (2004) define service on the underlying service concept that one economic unit performs some activity for the benefit of another (Hill, 1977): A service is the application of specialized competences (knowledge and skills) through deeds, processes and performances for the benefit of another. Looking through a customer lens with a focus on value-in-use, this definition could offer possibilities for a clear point of departure (Edvardsson, Gustafsson, & Roos, 2005). Vargo and Lusch (2004) anticipate that the emerging S-D logic will have a substantial role in marketing and the potential to replace the traditional G-D paradigm. S-D logic takes a holistic approach to value creation by considering the value exchange through information, skills, knowledge, specialized activities and relations (Vargo & Lusch, 2004). Instead of viewing creation of service value in terms of market offerings, S-D logic emphasizes value-in-use that defines and is determined through customers experiences. To conclude, an S-D logic service definition is considered for this study for five reasons. Firstly, the service definition from G-D logic is too limited and the definition from S-D logic is more inclusive. Secondly, a growing number of people recognize service as being the focal point our economy. Therefore, service should not be deemed residual or additional. Thirdly, putting service at the core of a firm’s value exchange, captures the fundamental function of all business enterprises. Fourthly, considering service from this perspective makes it possible to develop new methods of measuring service performance. It enables new opportunities to classify service and to consider service beyond the traditional industries such as education, health care, consulting, banking and insurance. Fifth and lastly, the application of knowledge and skills explains why the customer has an important role in service value creation. This notion is in line with Spohrer and Maglio (2008) who state that in service systems, value is co-created through interaction and exchange. 2.2 Perspectives on service innovation studies Although service innovation is still a young literature stream, multiple schools of thought have emerged. It is important to develop awareness of different perspectives adopted in current literature. Considering the diversity in service innovation views is important to understand the relation 12 2.2 Perspectives on service innovation studies between goods and service innovation theory. This section motivates the selection of the perspective in this study. Discontinuing technology and applying new technology Generating wholly transformed or new services (product) Increase delivery efficiency of existing services (process) Improving the quality of services (process) Figure 2.1: Reverse innovation cycle The reverse innovation cycle (Barras, 1986, 1990) is marked as the first economic study that devised an innovation theory for service (Gallouj, 1998; Droege et al., 2009). Barras proposes that service also starts with technological discontinuity, but that service follows the goods life cycle (Abernathy & Utterback, 1978) in a reverse order (see fig. 2.1). After Barras pointed out the differences with manufacturing oriented innovation theories, subsequent research started to focus on recognizing the distinctive characteristics of service innovation. Scholars argue that these studies take different approaches on which innovation studies in service science can be segmented.Gallouj and Weinstein (1997) segment studies on what drives innovation while Coombs and I. Miles (2000) segment research on the relation between service and technological innovation (see description in table 2.4). Table 2.4: Segmentation modes of service innovations studies Drivers for innovation (Gallouj & Weinstein, 1997) • Technologist studies like Barras, focus on technological drivers for innovation. • Service orientated studies focus on non-technological forms of innovation outside technological trajectories. Relation between service and technological innovation (Coombs & I. Miles, 2000) • Assimilation studies propose that service innovation is so fundamentally similar to technological innovation that theories and concepts can easily be transferred. For instance, the second European Innovation Survey (CIS-2) of 1997 examined service innovation while using definitions and concepts for products. (Tether et al., 2002; Droege et al., 2009). • Demarcation studies argue that service and technological innovation differ. Service innovation has distinctive features and dynamics that require novel theories and measurement instruments. • Synthesis studies argue that a part of technological innovation theories also applies to service innovation. These studies recognize the uniqueness of service and focus on revealing neglected elements in manufacturing innovation research. For instance, technological innovation relies heavily on R&D size (Nijssen, Hillebrand, Vermeulen, & Kemp, 2006) while service innovation emphasizes customer involvement (Magnusson, 2003). Both segmentations have been used and reviewed in multiple studies (Drejer, 2004; Nijssen, Hillebrand, Vermeulen, & Kemp, 2006). de Vries (2006) combined the technologist with the assimilation approach and the service-oriented with the demarcation approach. Droege et al. (2009) combines both segmentations and highlights four schools of thought that view literature from an evolutionary perspective. The schools evolved from a technologist, assimilation and demarcation to a synthesis approach. However, the segmentations cannot be combined, they have a different focus and are considered separately in this study. For example, Barras can be categorized as both technologist and as demarcation since he takes technological discontinuity as a starting point for 13 Domain: Towards a service science innovation and identifies that service dynamics are different from goods. This study takes both a service oriented and a synthesis approach. The study examines nontechnological drivers for service innovation and recognizes the applicability of technological innovation theories. Many similar issues arise for service, yet innovation theories require changes and additions to account for the unique service characteristics. In addition, the share of new service literature taking a synthesis approach (Coombs & I. Miles, 2000; Droege et al., 2009) is growing, which increases the impact and relevance of this study. 2.3 Defining service innovation output Hipp and Grupp (2005) argue it is ill-advised to converge to one service definition that accounts for the diversity of general service characteristics. As a consequence of the various standpoints on service, multiple definitions for service innovation output can be found in the literature (see table 2.5). This diversity in interpretation makes it difficult to grasp, measure and improve service. Storey and Kelly (2001) state that it is more challenging for service firms than traditional manufacturing firms to evaluate performance. Nonetheless, almost all these definitions contain three elements underlining the service definition, the degree of novelty and the dimensions of innovation: 1. The nature of a service is expressed in words like product, process, experience, offering or solution. 2. The degree of novelty is embedded in words as new, previously unavailable, radical changes or significant improvements. The degree of novelty relates to the firm, to the supplier, to the customer or to their market. 3. The dimensions of innovation indicate on which part of the service the innovation occurs. They are described by organizational changes, service concept additions or changes, improvements in methods, equipment or skills or changes in one of the six dimension Den Hertog, Van der Aa, and de Jong (2010) define. Al three elements will be explored subsequently. Table 2.5: Definitions of service innovation outputs 14 Source Definition Gadrey et al. (1995) Innovations in processes and innovations in organization for existing service products. Gallouj and Weinstein (1997) Any change affecting one or more terms of one or more vectors of characteristics (of whatever kind; technical, service or competence). Johne and Storey (1997) The development of service products which are new to the supplier. Johnson et al. (2000) An offering not previously available to customers that results from the addition of offerings, radical changes in the service delivery process, or incremental improvements to existing service packages or delivery processes that customers perceive as being new. Menor, Tatikonda, and Sampson (2002) An offering not previously available to a firm’s customers resulting from additions to or changes in the service concept. Organisation for Economic Co-operation and Development (2005) Significant improvements in the characteristics of the service offered or in the methods, equipment and/or skills used to perform the service, or a combination of both. 2.3 Defining service innovation output Source Definition Oke (2007) New developments in the core offering of service companies that tend to create new revenue streams. Ireland Central Statistics Office (2012) The introduction of a new service product or a significantly improved service with respect to its capabilities. Or the introduction of a new or significantly improved production process, distribution method, or support activity for services. The innovation could either be new to the market or new to the firm. Toivonen and Tuominen (2009) A new service or a renewal of an existing service that is put into practice and which provides benefit to the organization that has developed it; the benefit usually derives from the added value that the renewal provides to customers. Den Hertog et al. (2010) A new service experience or service solution that consists of one or several of the following dimensions: new service concept, new customer interaction, new value system/business partners, new revenue model and new organizational or technological service delivery system. 2.3.1 Service nature The service definition and delineation between process and product depend on whether one reasons from a goods or a service centered logic. From a goods dominant logic, services are time-perishable and intangible experiences. Within technological innovation, innovations can be classified into product or process innovation (Tidd, 2001). Additionally, a clear distinction can be made between products and processes (Organisation for Economic Co-operation and Development, 2005). Although their distinction is less evident for service, Barras (1986) recognizes both product and process innovation. Product innovations are changes in the offering and process innovations are changes in their creation and delivery. The Service Dominant logic chosen for this study, defines service as the application of specialized competences such as knowledge and skills. As service is produced and consumed the same time, it is difficult to separate the process and the product (Vargo & Lusch, 2004). In addition, the line between products and services is rather vague (De Jong, Bruins, Dolfsma, & Meijaard, 2003). Service innovation is sometimes considered as a separate type, next to product and process innovation (Santamar´ıa, Jes´ us Nieto, & Miles, 2012). Service innovation products often goes together with new processes like patterns of distribution, client interaction or quality control and assurance (De Jong, Bruins, et al., 2003). For example, a new online music service can be considered as a process innovation and as a product innovation. Additionally, embedded in the service definition is the emphasis on delivery and process rather than the product or outcome. 2.3.2 Degree of service novelty The second element focuses on the notion that service innovation involves the creation and introduction of a new service. The degree of novelty of a service innovation characteristic is a measure for the impact or performance of that service. Comparably, the amount of profit is a measure for financial performance and the satisfaction level predicts the impact on customer retention. Within the literature many scholars have devised innovation categories (see table 2.7) that can be placed on a spectrum to identify the degree of novelty. De Jong, Bruins, et al. (2003) place incremental/evolutionary innovations and radical/revolutionary innovations on opposite ends of the novelty spectrum. According to the authors, incremental/evolutionary innovation makes marginal changes or additions to the service and thus the nature of the service remains unchanged. A radical/revolutionary innovation is the introduction of new service that completely replaces a service or total transformation of its characteristics. It is important to understand that although used interchangeably, radical innovation differs from disruptive innovation. Disruptive or discontinuous innovation has a high degree of technological 15 Domain: Towards a service science newness and a high degree of newness to the market (de Brentani, 2001). Radical innovations focus on increased performance rather than technological discontinuity (Barras, 1986). The latter usually has an initial negative effect on performance. Consider for example the introduction of the computer, the internet or the mobile phone. These technologies primarily enabled large performance increases and did not directly discontinue dominant technologies. Table 2.7: Degree of novelty typologies Source Low Moderate High Booz, Allen, and Hamilton (1982) • Cost reductions • Repositionings • Product improvement • Product line extensions • New product lines • New-to-the-world products (new to market and supplier) Heany (1983) • Style changes • Service improvements • Service line extensions • New services for the market presently served • Start-up business • Major innovation Barras (1986) • Increase the efficiency of delivery of existing services • Improving the quality of services • Generating wholly transformed or new services S. Edgett, Shipley, and Forbes (1992) • Use company resources more fully • Broaden or improve the company image • Complement existing products • Diversify, or to grow into new markets Kelly and Storey (2000) • Core products that are improvements over existing products • Supplementary and value-added services • Core products that are new-to-the-world or new to the company The typology by Booz, Allen, and Hamilton (1982) is most often used and includes six categories ranging from cost reductions to new-to-the-world products. It recognizes the innovation novelty to both the developing firm (internal) and the outside world (external). Some scholars adapted the typology and devised their own means to measure innovativeness. Cooper and Kleinschmidt (1993), for example, defined seven categories of new product types ranging from minor changes to true innovation products. Several scholars have analyzed existing typologies attempting to converge to one set of categories (Johne & Storey, 1997; Avlonitis, Papastathopoulou, & Gounaris, 2001; Alam, 2006b). Avlonitis et al. (2001) analyzed data of 132 new financial services and identified six distinct service innovativeness types. They are placed on a continuum ranging from repositionings (1) as least innovative type, to new-to-the-market (6) services as most innovative (see figure 2.2). The authors recognized that the discrepancy among researchers causes confusion. They argue that variations in conceptualization and novelty measurement lead to different and incomparable conclusions. high novelty low novelty Repositionings Service line Service New delivery extensions modifications processes New to the company services New to the market services Figure 2.2: Service innovation novelty spectrum This typology will be considered in this study for three reasons. The spectrum captures the levels of innovativeness of other scholars and is specifically focusing on service. Also, the spectrum is an ordinal scale, although the distinction between the types is not absolute. For example, an 16 2.3 Defining service innovation output Table 2.8: Service innovation dimensions Den Hertog (2000) Voss and Hsuan (2009) Four dimension model 1. New service concept 2. New client interface 3. New service delivery system 4. New Technological options Five Service Modules 1. Interfaces 2. Degree of coupling (interdependence) 3. Components or (physical) systems 4. Commonality sharing 5. Platform innovation that is is modified can also have a new delivery system. For further discussion of key typologies and the reasoning for the constructed typology of new service innovativeness (Avlonitis et al., 2001). 2.3.3 Service innovation dimensions The third element concentrates on the dimensions of new or renewed service. Innovations are most often combinations of small and large changes in existing products. Yet, service innovation resulting from the incorporation of new technologies may vary considerably from one that uses a new distribution channel. This study considers the 4-dimension model (Den Hertog, 2000) as a taxonomy for service innovation dimensions. The taxonomy illustrates that service innovations can follow non-technological trajectories (see table 2.8). With theses so called service-professional trajectories, technology is only one of the considered dimensions (Sundbo, 1997). In addition, it is the most often considered taxonomy (Bouwman et al., 2008; I. Miles, 2008; De Jong, Bruins, et al., 2003) which makes it comparable to other research. The model points out four dimensions; a new service concept, a new client interface, a new service delivery system and new technological options. Other taxonomies by Gallouj and Weinstein (1997) state that service innovation follows from changes in technical-, service- and competence characteristics or service modules representing the functional elements of a service architecture (Voss & Hsuan, 2009). 1. A new service concept can be a new idea or concept to solve a client problem. A condition for it to be a true applies to the novelty of the concept. The application of the concept should be novel in its own market but may already be common in other markets. An example is a self-service bike rental system. Bikes can be taken and returned at public locations throughout cities and the service is available 24 hours a day. 2. Producers are finding innovative client interfaces to interact with their clients and to integrate with other service channels. The boundary between the activities of the producers and the users is becoming less and less evident. A new client interface is for example a mobile banking application. Instead of interacting with an individual, users are steered through selfexplanatory graphic interfaces. This allows self-service in which users perform large shares of the services themselves. 3. Delivery system innovation is strongly related to client interface innovation. The dimension refers to the internal organizational arrangements (logistics and IT systems) that have to be managed to make service delivery possible. An online music service is a new delivery system. The new service channel changes the way in which the service provider and client interact and requires changes in logistics, IT systems and skills. 4. Service can take place without technological innovation, but in practice the majority of service innovations are facilitated or enabled by technological innovation. The technological dimension 17 Domain: Towards a service science always arises in combination with one of the other dimensions. Most of the technological indicators for service innovation are Information Technology (IT) related (De Jong, Vermeulen, et al., 2003). Technological innovation includes tracking and tracing systems. This service enables transport service providers to monitor progress of transport and makes is possible to manage delivery more accurate. In conclusion, this study views service innovation output from an S-D logic and integrative perspective. Definitions in the literature contain three elements that underline the service nature, the degree of novelty and the dimensions of innovation. The service innovation interpretation of Toivonen and Tuominen (2009) is used to define service innovation output. Service innovation output is the new or renewal of existing specialized competences (knowledge and skills) that are put into practice on specific dimensions and provide benefit to the delivering organization. First, the service nature centralizes around the application of specialized competences like knowledge and skills. Second, the degree of novelty is based on the typology of Avlonitis et al. (2001) that captures the levels of innovativeness of other scholars. The spectrum features an ordinal scale, but the distinction between types is not absolute. Third, the 4-dimension model (Den Hertog, 2000) is used as a taxonomy for service innovation dimensions. The model considers non-technological trajectories and is the most often used taxonomy. Thus, the dimension of an innovation depends on where new competences are applied. 2.4 Defining service innovation process Johnson et al. (2000) differentiate between service design and new service development. The authors define service design as the specification of the content, configuration and operations of a service concept. They view new service development as the overall development process of new service offerings. Both terms, service innovation and new service development (NSD) are used interchangeably to refer to the process of creating innovative service. This study uses the former, service innovation, to refer to the whole process from initiation to commercialization. The later could be interpreted to only refer the actual development of the service and to neglect activities like idea generation, implementation or commercialization. This notion is too limited. Many processes can be found in the literature are used to describe the various steps service innovation development (see table 2.9). The changes in the service are the result of a range of basic mechanisms that can be intended or appear natural. Characteristics can evolve or vary, disappear, appear and be associated or dissociated with other characteristics (Gallouj & Weinstein, 1997). De Jong, Bruins, et al. (2003) recognize that most studies use models (Booz et al., 1982; Cooper, 1990; Goffin & Mitchell, 2005) that are developed for pure tangible products. The authors agree that using manufacturing concepts can be useful as it is likely that many similar issues will arise. In their study, the authors identify different perspectives on processes lead to several process types. These are the departmental-stage models, the conversion models, and the activity-stage models. The models are now briefly explained and analyzed so the most appropriate model type for this study can be chosen. Explaining them detail is beyond the scope of this study, for a further elaboration consider De Jong, Bruins, et al. (2003). The departmental models state that the development of an idea into a service will go through a general set of steps. Each step is connected to a department which, depending on their skills and competences, is required to perform a task related to the innovation. The conversion models take a resource view and look at innovation as the transformation of inputs, like natural resources and knowledge, into output, such as service products. This has led to the 18 2.4 Defining service innovation process development of theories like the black box theory to explain the residual effect of economic growth. The advantage of the model is that it recognizes the unstructured nature of service innovation and cannot be divided in separate steps. The activity stage models break the innovation process down into a number of required activities. The models allow examination of the application of knowledge and skills which defines service. Also, they are the most widely accepted type of models (De Jong, Bruins, et al., 2003) (see figure 2.9). Both the other models do not fully apply to service or service innovation. Departmental models are not particularly suitable as service innovation is a interdepartmental and multidisciplinary undertaking. Similarly, conversion models are too simplified for companies to act on. Even more critical, is that it is difficult to measure service value or the value of input and output. 2.4.1 Activity stage models Activity stage models are traditionally focused on new product development in which development activities are performed sequentially. Because of their unique characteristics, the Booz Allen Hamilton (BAH), stage-gate, funnel and pentathlon model will all four be examined in more detail. Table 2.9: Definitions service innovation process Source/model Activities Booz, Allen and Hamilton (1982) (BAH) model • • • • Stage-gate model (Cooper, 1990) • Idea • Preliminary assessment • Detailed business case preparation • Development • Testing & validation • Full production & market launch Edvardsson, Haglund, and Mattsson (1995) • The idea phase • The project formation phase • The design phase • The implementation phase Service innovation process (Sundbo, 1997) • Idea generation • Transformation into service project • Development • Implementation New service development cycle (Johnson et al., 2000; Froehle & Roth, 2007) • Design • Analysis • Development • Full launch Innovation funnel (Tidd & Bessant, 2011) • Outline concept • Detailed design • Testing • Launch The Pentathlon framework (Goffin & Mitchell, 2005; Oke, 2007) • Innovation stategy • Human resource management (people & organization) • Creativity/idea management • Selection • Implementation (new product development, etc.) New product strategy Idea generation Screening and Evaluation Business analysis • Development • Testing • Commercialization The BAH model (Booz et al., 1982) is the most famous and widely applied activity stage model. It has been the basis for many other versions (Johne & Storey, 1997; De Jong, Bruins, et al., 2003). The BAH model requires that companies define a new product strategy before they start any innovation activities. The strategy identifies which strategic business requirements the new product should satisfy. Next, the innovation process is divided into six stages: 1. During idea generation, ideas that meet the strategic objectives are generated. 19 Domain: Towards a service science 2. In the screening and evaluation phase, ideas are analyzed and compared using criteria that follow form the strategic objectives. 3. Business analysis activities will develop a business case through a detailed analysis that will determine the attractiveness of the idea. 4. The development phase transforms an idea into a product that can be introduced in the market. 5. During the testing phase trials, pilots and early experiments are developed to test the commercial viability of the product. 6. The commercialization phase determines when, how and in which market the product will be introduced. The stage-gate model from Cooper (1990) divides the process in phases like the BAH model. In addition, gates are added between the activities to separate progression from one phase to the next. At each gate a manager or steering committee takes a go/no-go decision using rigorous metrics. These metrics can be both qualitative measures like market attractiveness, sustainability, product advantage and risk or quantitative such as time, money and market share. Cooper (1994) distinguishes between three model generations with changes to increase the efficiency and flexibility and emphasize cross-functionality. The innovation funnel framework (Tidd & Bessant, 2011) visually represents the discontinuity of projects. The framework addresses a critique of the stage-gate model, namely that the model is too often used as a tunnel rather than a funnel (Cooper, 2000). Commonly, once a project begins there is little chance it will be discontinued. Many insignificant projects are approved and permitted resources. For the funnel, ideas enter at the left and exit as new products at the right side of the scheme. Numerous ideas enter the funnel for further analysis, but only a fraction will be introduced into the market. This scheme has several advantages. For example, it creates the possibility to apply limited resources to projects with the highest expected payoff. Such a project portfolio enhances the strategic ability to carry out future projects and can be tailored to meet the objectives of the company. The Pentathlon framework addresses (Goffin & Mitchell, 2005; Oke, 2007) several soft organizational factors in addition to process factors. It addresses another major critique on the stage-gate model which is negligence of other factors (Oke, 2007). The phases with gates only focus on process factors and neglect organizational factors that impact innovation performance. The framework is developed based on an extensive comparative study of innovation management practices for manufacturing companies in the UK and Germany. In order to achieve successful innovation, management should follow an integrative approach with two soft organizational factors and three process factors. The soft organizational factors are innovation strategy and human resource management. The process factors are creativity and ideas management, selection and portfolio management and implementation management. 2.4.2 Service centered models A large number of scholars that reason from traditional G-D logic believe that innovation for service is different. They believe that service specific characteristics influence the innovation activities and practices of many service companies (Sundbo & Gallouj, 2000; De Jong, Bruins, et al., 2003; Alam, 2006a). These scholars stress the need for new concepts and theories about service innovation activities (Alam & Perry, 2002). Gadrey et al. (1995) follow a synthesis approach and argue that modified manufacturing innovation theories can be valuable for understanding service. Accordingly, many service innovation studies are based on activity stage models designed for new product development (Menor, Tatikonda, & Sampson, 2002). Johne and Storey (1997) agree that service innovation can follow the same generic process as goods. Yet, according to the authors, the unique characteristics of service will change the relative importance of each stage and the way it is carried out. Specific service characteristics, customer participation and the iterative nature of service innovation have led to service oriented innovation 20 2.4 Defining service innovation process models. These studies make extensions to the models to enrich the understanding of facilitating conditions, activities and outcomes of service innovation (Johnson et al., 2000). Extensions that are often made, address the importance of customer involvement. The service will benefit from including customers in the innovation process as co-producers of that service (Alam & Perry, 2002; Smith et al., 2007). Their input is essential as customers often cannot specify their exact service desires upfront (Chesbrough, 2011). Often, is it difficult to measure the performance of service. In addition, customers might experience the same service differently. Service innovation processes are typically highly iterative and non-linear processes (Menor, Tatikonda, & Sampson, 2002). This differs from the typical milestone (Cooper, 1990) processes for pure tangible products. Activities are not formally separated, but projects continuously move through the phases. Edvardsson, Haglund, and Mattsson (1995) state that the stages in the innovation process overlap and cannot be clearly separated. They argue that this makes planning and controlling service innovation extremely complex. The new service development process cycle of Johnson et al. (2000) is an example of such service oriented innovation model. Innovation activities are centered on designing and on configuring service concept elements. The model integrates many conditions to facilitate service innovation activities and outcomes (Menor, Tatikonda, & Sampson, 2002). The authors state that resources like development teams, tools and organizational context play an enabling function in the innovation process. Another model by Sundbo (1997) divides the service innovation process into four phases. These phases are idea generation, transformation (into a service project), development and implementation. Sundbo (1997) identified that service innovation is often complex and rather chaotic which makes it difficult to plan the service outcome. The author argues that proper organization and management will increase the odds of meeting the goals set for the outcome. 2.4.3 Two phases of innovation The preceding models indicate that the majority of scholars seek to define the process steps for innovation. De Jong, Bruins, et al. (2003) state that all innovation models address the same activities in which some activities are further detailed. The authors reason that since service sectors are diverse, a general service innovation model is inevitably very simplified. Analyzing the objectives of innovation activities De Jong, Bruins, et al. (2003) group all activities in a two-stage model. They propose to divide the activities in a search stage and an implementation phase. Accordingly, Cooper (2000) reasons that half of the activities are focused on doing the right things, while the other half is centered around doing the things right. In the search stage, the organization generates ideas and determines the objectives for further development. In the implementation stage, activities are directed towards transforming the most promising ideas into concrete results. Variations in terminology exist for the same split such as the pre-development and development phases (Cooper & de Brentani, 1991) or the fuzzy front-end and execution-oriented back-end (Khurana & Rosenthal, 1997; Cooper, 1990; Zhang & Doll, 2001; Menor, Tatikonda, & Sampson, 2002; Reid & De Brentani, 2004; Lee et al., 2010). A service innovation process structure is created for this study that combines all described insights (see figure 2.3). The process structure integrates parts of examined models, to cover service particularities pointed out in earlier studies. The structure is based on innovation processes for manufacturing, but accounts for service specific characteristics and process factors. First, the activity stage model from Booz et al. (1982) is chosen because it proved its validity in many other studies and is the most widely accepted model (Johne & Storey, 1997; De Jong, Bruins, et al., 2003). Second, the activities are grouped in a 2-stage-structure (Cooper, 2000; De 21 Domain: Towards a service science Innovative climate Screening New service strategy Idea generation Commercial evaluation Pre-development Testing Developing Commercia -lization Service innovation output Development Figure 2.3: Service innovation process Jong, Bruins, et al., 2003) to account for the different nature of these activities. The first stage focuses on developing the right projects. The second stage emphasizes the development, market introduction and support of service. Third, the structure has the shape of a funnel (Tidd & Bessant, 2011) to illustrate that the number of service projects decreases. Although iterations between ideas and project are possible, insignificant projects will be discontinued. Fourth, as in the Pentathlon framework (Goffin & Mitchell, 2005; Oke, 2007), the structure addresses soft organizational factors such as strategy and culture that create an innovative climate. In addition, service innovation activities are allowed to overlap. The process is iterative rather than sequential and visualized to be circular instead of linear. 2.5 Conclusion This chapter analyses the current body of knowledge on service science. Bearing the perspectives, theories and taxonomies of this chapter in mind, makes it possible to answer the first sub-question: SQ1 What are core concepts relevant for service innovation and how are they different from goods? innovation? Four core concepts are identified on which service innovation differs from goods. These concepts concentrate on defining a service, the perspectives on service innovation, service innovation output and the service innovation process. First, the definition of a service depends on the chosen paradigm: a goods dominant (G-D) or a service dominant (S-D) logic. This study works with S-D logic in which goods and service are not separate product categories. Rather than ends, goods are mechanisms for service provisioning. Value creation results from service which is the application of competences, such as knowledge and skills. The S-D logic definition of service: The application of specialized competence(s) (knowledge and skills) through deeds, processes, and performances for the benefit of another, is more inclusive. Placing service at the core of the firms value exchange captures the fundamental function of all business enterprises. Second, the perspectives on service innovation present in the literature can be segmented into three schools of thought. These schools are assimilation, demarcation and synthesis approaches. These schools differ in the way they consider the relation between service innovation and technological innovation. This study takes both a service oriented and a synthesis approach. The study examines non-technological drivers for service innovation and recognizes the applicability of technological innovation theories. Innovation literature is traditionally focused on goods and should be extended to also account for service. Service has unique characteristics that will require changes or additions to innovation concepts neglected in technological innovation research. For instance, while technological innovation relies more heavily on R&D size, service innovation will benefit greatly from 22 2.5 Conclusion customer involvement. In addition, the share of new service literature taking a synthesis approach is growing, which increases the impact and relevance of this study. Third, service innovation output is a new or renewal of existing specialized competences (knowledge and skills) that are put into practice on specific dimensions and which provide benefit to the organization that delivers them. The service innovation output definition contains three elements that underline the service definition. These are the nature of service, the degree of novelty and the dimensions of innovation. The service nature is centered on the application of specialized competences like knowledge and skills. The degree of novelty captures the levels of innovativeness of goods taxonomies but is adapted to service. The output dimensions are service oriented and can be both technological and non-technological. Consequently the definition for innovation output is geared towards service and different from goods on all three elements. Fourth, many studies are available in the literature to describe the various activities for developing an innovative service. Most of these service studies use models that are developed for pure tangible products. In accordance with the chosen synthesis approach, manufacturing concepts can be useful as many similar issues will likely arise. Against the theoretical background analyzed in this chapter, a service innovation process structure is created. The structure is based on innovation processes for manufacturing and accounts for service specific characteristics and process factors. For example, service innovation activities should be allowed to overlap. The process is iterative rather than sequential and visualized to be circular instead of linear. To summarize, all chosen definitions, taxonomies and perspectives are service centered and differ from goods. The differences have implications for the way service innovation is organized and what literature or theories should be used. The approach companies take includes a definition of service. Consequently, the definition determines the structure of the service innovation process and the focus for service innovation output. 23 Domain: Towards a service science 24 “Genius is one percent inspiration and 99 percent perspiration” Thomas Edison 3 Organizing effective business service innovation The study determines how IT organizations can drive business value through business service innovation. The literature analyzed in this chapter is used to answer the second and third sub-question: SQ2 What factors influence the performance of effective business service innovation? The question focuses on the service innovation process, determination of which activities contribute to effective business service innovation and what factors influence the performance of these activities. SQ3 What role can IT organizations in large digitized companies play within effective business service innovation? This question concentrates on IT organizational involvement and the role they play in contributing to effective business service innovation. This chapter is structured as follows to answer both sub-questions. The first section focuses on a systematical approach to effective business service innovation. The section analyzes which activities are essential for effective business service innovation and what success factors and barriers influence the performance of business service innovation output. These factors form the building blocks for the SIIC framework that integrates the theoretical insights into a process oriented conceptual framework. The second section focuses on the IT organizational involvement and contribution to effective business service innovation. It examines which roles IT organizations can play, which capabilities they require to influence the influential factors identified earlier and develops a theoretical conceptual framework for involvement and hypothesis testing. In the third section and conclusion, the theoretical insights from both models are combined. 3.1 Conceptual SIIC framework Many of the companies that want to develop new service solutions, struggle to envision how to best manage the process in practice (Kindstrom et al., 2012). A substantial amount of literature is available on influential service innovation factors. Yet, publications are fragmented and a comprehensive overview of factors is missing (see section 3.1.5). This section develops a process framework 25 Organizing effective business service innovation by examining systematical approaches to innovation management, highlighting important parts of the process and determining which factors influence these parts. 3.1.1 A systematical perspective to innovation management The goal for developing a framework in this study is to determine in which ways IT organizations can contribute to business service innovation. Therefore a systematical approach is based on three studies elaborating on a comprehensive framework describing innovation in service companies. De Jong, Bruins, et al. (2003) describe an approach to service innovation that addresses four subjects. These are the antecedents of innovation success, the service innovation process, the service innovation output and the service innovation performance. The service innovation process and the service innovation output were discussed in the previous chapter. Service innovation performance refers to the innovation goals and how they are measured. Finally, the antecedents of innovation success are divided in internal and external contextual factors influencing the innovation process. These antecedents are in line with earlier studies describing factors affecting innovation performance. These studies (de Brentani & Cooper, 1992; de Brentani, 2001) depict factors related to the market, company, process and product. Similarly, a subsequent study clusters critical factors into market, organizational, process and product factors (Ottenbacher et al., 2006). A comparable approach to innovation management is the A.T. Kearney House of Innovation (Diedrichs, Engel, & Wagner, 2006). The model covers five building blocks to innovation management required for sustainable growth from innovation (see figure 3.1). These blocks are innovation strategy, innovation organization and culture, innovation life-cycle management, enabling factors and innovation results. Innovation life-cycle management contains innovation activities such as idea management, service development and service improvement. Enabling factors are influential factors Management in High-Growth SMEs from management, the Knowledge-intensive (KIS): management Setting the Paceand for likeInnovation human resource management, knowledge project Services or program Growth in Europe information technologies (IT). Innovation Strategy Business Impact Innovation Organization and Culture Innovation Life Cycle Management Idea Management Product/Service /Process/Busines Model Development Launch/ Cont. Improvement Enabler, e.g. Human Resource Management, Knowledge Management, Project and Program Management, Controlling and IT A.T. Kearney House of Innovation Figure 3.1:A.T. House of House innovation Figure 26: “The Kearney of Innovation” Froehle and Roth (2007) present the Resource-Process Framework for service innovation. The The IMP³rove Assessment reports show KIS companies, what the Growthperspectives Champions in theoretical framework integrates both processand resource-oriented oftheir newindustry service do differently. They immediately can learn from current “good practice”. The IMP³rove Assessment development. The process oriented part of the framework highlights four activities performed for report guides the KIS SME to address those often hidden areas that cause the loss of money. service innovation. These activities are design, analysis, development and launch, and the same four steps Johnson et al. (2000). The–resource part400 of the framework turns to cultivating, Theastrained IMP³rove consultants there areoriented more than across Europe (https://www.improvemotivating, and developing resources. These resources can be intellectual (knowledge skills), innovation.eu/improve/UserList/UserList.do?type=DIRECTORY_CONSULTANTS) – are and at the dis26 posal of KIS companies, their financial investors, intermediaries, innovation agencies and policy makers to effectively assist the SMEs in the development of their Innovation Management capabilities. The IMP³rove consultants are trained to focus the improvement measures on tangible impact. Differentiating the levels of proficiency in Innovation Management increases the transparency in the Innovation Management consulting market. IMP³rove Guide, IMP³rove Expert level I, IMP³rove Expert level II and IMP³rove Auditor are the defined categories. Courses to receive the respective level of proficiency are offered on an international basis by the IMP³rove – European Innovation Management Academy (www.improve-innovation.eu) throughout Europe. 3.1 Conceptual SIIC framework organizational (reporting, planning and controlling structure) and physical (facilities and tangible technologies) resources that support the service innovation capability of the company. Figure 3.2: Resource-Process Framework To conclude, the presented frameworks illustrate the inter-relatedness between important building blocks of innovation management. The three frameworks take a similar overall approach with slight individual variations. Accordingly, a framework is developed for this study that considers the common building blocks in these frameworks. A basic representation of the framework integrating the major elements will be used to structure the remainder of this section (see figure 3.3). Contextual factors (internal/external) IT (business) service Innovation process Pre-development Development Business service innovation goals IT service innovation capabilities Figure 3.3: Relations between factors within the service innovation process Elements that can be distinguished and that are deducted from the other models are process factors, contextual factors, the IT service innovation capabilities and the service innovation output. First, innovation process factors are embodied in the activities of for instance the innovation lifecycle management. Second, the contextual factors are factors in the internal or external environment that are related to business service innovation such as the company’s innovation strategy or culture. Third, the activities of some divisions such as information technology, human resource management or knowledge management, enable or impact the performance of the innovation process. This study focuses on the capabilities and contributions of the IT organization. Fourth, the process will deliver service innovations that allow companies to achieve desired objectives. The building blocks visualize the relation between the topic for the remainder of the section and will be analyzed and detailed further to determine how IT organizations can contribute. 3.1.2 Innovation pre-development focus Most development process studies consider the BAH-model (Booz et al., 1982) describe activities for new product development (Johne & Storey, 1997; De Jong, Bruins, et al., 2003). For this study, 27 Organizing effective business service innovation a service innovation process model is created (see ??) against theoretical background. The model is based on the BAH-model and accounts for characteristics and process factors specific for service. While service innovation and manufacturing innovation follow the same generic process, unique service characteristics influence the relative importance of each stage and way they are executed (De Jong, Bruins, et al., 2003). Financial service companies omitted large parts of the process or poorly carried out stages of the process (Bowers, 1989; S. J. Edgett, 1996). Examined companies for example made little use of product screening, concept testing, product testing and market testing techniques but recognized that the impact on the outcome was high. Based on their nature, service innovation activities can be split in two phases. During the first phase companies identify new service innovation project and in the second phase these projects are developed and introduced in the market. Variations in terminology exist in the literature, such as the search and implementation stage, (De Jong, Bruins, et al., 2003), pre-development and development and front-end and back-end (Menor, Tatikonda, & Sampson, 2002; Panesar & Markeset, 2008). The front-end is traditionally centered on marketing and can be isolated from the back-end which is traditionally centered on operations. Service innovation and manufacturing innovation both suffer from over-the-wall transfer of information and other dysfunctional organizational behavior (Menor, Tatikonda, & Sampson, 2002). Particularly, the performance of pre-development activities in the front-end are key to service innovation (Lievens, Moenaert, & Jegers, 1999; Zhang & Doll, 2001). Based on the two phases model, there are two approaches to innovation that companies can choose to outperform competitors (Cooper, 2000). One is to do the right projects and the other is to do the projects right. When focusing on doing the right projects, companies focus on winning by means of selecting the right projects and front-end portfolio management. In case of doing the projects right, companies reengineer their back-end development processes to be able to develop projects better, faster and cheaper. Nonetheless, most innovation projects fail at the beginning rather than at the end (Khurana & Rosenthal, 1997). The stages of idea generation and idea screening are found to be more important for service innovation than other stages (Alam & Perry, 2002; Alam, 2006a; Lee et al., 2010). The pre-development part remains a knowledge-intensive black art that increasingly consumes a large part of the total concept to market introduction time (Kelly & Storey, 2000). Being able to balance uncertainty and cost to make the right choices early on in the project will greatly impact innovation performance (PMBOK, 2009). Early on in the process the cost of changes are low but dramatically increase when the project progresses. At the same time stakeholder influence, risk and uncertainty start off high and reduce over time (see figure 3.4). High Degree Stakeholder influence, risk and uncertainty Cost of change Low Project time Figure 3.4: Balancing cost and uncertainty during the project life cycle Thus, the benefits companies gain from improving pre-development activities will likely exceed the result from the improving development processes (Zhang & Doll, 2001). From the predevelopment phase, concept generation is an important and the most frequently included step for service development processes (Oke, 2007). Yet, concept selection activities that follow are the most crucial steps for performance since they influence the direction or remaining activities (Lee et al., 2010). 28 3.1 Conceptual SIIC framework Table 3.1: Innovation project objectives Ottenbacher et al. (2006) • • • • • • • • • • • • Total sales Market share Profitability Improved loyalty Improved image Enhanced profitability and sales of other services Opened up new markets Attracted new customers Cost efficiency Customer satisfaction Positive employee feedback Competencies of employees Storey and Kelly (2001) • • • • • • • • • • • • • • • • Profit Sales Revenue Satisfy customers needs Market development New customers Market gap Strategic position Develop distribution Product improvement Product range Respond to regulation Customer satisfaction Image Reduce costs Market share IT organizations should focus on their contributions to the pre-development phase and in particular to the concept generation and selection activities. IT organizations hold technical knowledge and are often responsible for further development of the projects. Early involvement allows them to contribute to the selection activities and set the direction for subsequent development activities. Consequently, IT organizations will likely be more dedicated to the development projects and have the opportunity to assure greater alignment projects between projects and current capabilities. 3.1.3 Performance metrics for business service innovation It has long been recognized that the evaluation of performance in service firms is more challenging than in traditional goods firms (Storey & Kelly, 2001). The intangible nature of service makes it more difficult to measure them in contrast to goods following from technological innovation. For a good, its performance can be measured at its point of sale using tangible characteristics such as color, size, speed or stiffness during movement. The value and performance of service depends on the customers perception and the performance is a moving target along its life-cycle. Innovation literature traditionally focuses on manufacturing. Consequently, conventional innovation surveys aim to measure service on tangible output such as the introduction of new services (De Jong, Vermeulen, et al., 2003). Two comprehensive studies (see table 3.1) identified multiple objectives for innovation projects. The performance of these projects depends on the extent to which new service introductions meet the objectives of the company. At the company level, these service innovation objectives seem to match those of manufacturing innovation (Storey & Kelly, 2001; Tidd & Bessant, 2011). However, measuring the service itself is much more difficult and the growing share of service innovation studies use various means for measuring service performance. These studies differentiate between measuring the performance of the innovation process and the performance of innovation output (Oldenboom & Abratt, 2000; Menor, Tatikonda, & Sampson, 2002). Performance of the innovation process, measures the facilitating mechanisms of a company for producing service innovations. Performance measures of innovation output are related to the objectives of individual service projects. 29 Organizing effective business service innovation Performance of the service innovation output The performance of an individual service can be measured on project level aspects such as duration, cost, sales and market factors. The used measures are linked to the objectives or motivations companies have for new service introductions. Some studies developed specific scales to measure an explicit aspect of performance such as service quality (Parasuraman, Zeithaml, & Berry, 1985; Carrillat, Jaramillo, & Mulki, 2007). However, though service quality impacts service adoption, service management costs, profit and performance are multi-faceted (Hefley et al., 2010). Table 3.2: Idividual innovation performace measure (Storey & Kelly, 2001) Financial measures Customer measures Internal measures • • • • • • • • • • • • • • Sales Profit Return on Investment (ROI) Market share Costs Customer satisfaction Market feedback New customers Competitiveness Customer retention Future potential Efficiency Success rate Strategic fit Development process Many studies have taken a multidimensional construct to be able to measure service performance across projects (de Brentani, 1989, 1991; Avlonitis et al., 2001; Tidd & Bessant, 2011). According to de Brentani (1989) overall performance can be measured through four performance categories named sales and market share performance, competitive performance, other boosters and cost performance. The authors argue that the first category, sales and market share performance, is the most important dimension and accounts for 70% of the explained variation. Avlonitis et al. (2001) draws heavily on earlier research and developed a construct containing eleven items to measure overall performance. Storey and Kelly (2001) recognized that the measures companies employ, depend on the service innovation objectives and strategies they choose. They examined the wide range of employed performance measures and categorized them according to a balanced scorecard (Kaplan & Norton, 1992). Three of the four scorecard types are chosen namely; financial measures, customer measures, and internal measures, used as measures of individual projects (see table 3.2). For further elaboration on the measurement types, consider the balanced scorecard of Kaplan and Norton (1992). Performance of the service innovation process Innovation process measures largely mirror the measurements of individual service innovation projects (Storey & Kelly, 2001). They are more subjective to be able to measure performance across companies and projects. Performance of the innovation process, measures the ability of companies to produce service innovations. These measures consider performance on a program level (see table 3.3). Storey and Kelly (2001) ties the fourth measure type of the balanced scorecard (learning and growth) to performance measurement on the program level. Equally, Menor, Tatikonda, and Sampson (2002) describes three efficiency categories for service innovation process performance. These categories concentrate on the cost, effectiveness and speed of development. Oke (2007) evaluates the innovativeness of companies using perceptual and non-financial measures. Finally, the Community Innovation Survey (CIS) is a survey designed to provide information on the innovativeness of companies in different sectors and regions. The survey considers a company’s ability to effectively innovate new services. The IT innovation capability depends on the ability of own employees to introduce services new to the company or even new to the market. Table 3.3: Measures of innovation process performance 30 3.1 Conceptual SIIC framework Source Measures of service innovation process performance Storey and Kelly (2001) Learning and growth • Successful new product launches • Sales or profit from recent new service • Average development cost per service • The number of new service launches • The number of killed projects prior to launch • the number of design awards Menor, Tatikonda, and Sampson (2002) Criterion cost • Average development cost per service product • Development cost of individual service product • Percentage of turnover spent on developing new services, products and processes Effectiveness • How many new services developed annually • Percentage new services that are successful Speed • Concept to service launch time • Concept to prototype time • Prototype to launch time • Time to adopt new concept from outside the firm Oke (2007) Non-financial performance measures (Likert scale) • One of the first to market with innovative new product or service • More effective than competitors at taking existing ideas and making them into something better • Better than competitors at developing products and services that meet customer needs • Perceived by customers to be more innovative than competitors • At the leading edge of innovation Ireland Central Statistics Office (2012) Company innovativeness • Service innovations new to the company, but not new to the market • Service innovations new to the market To conclude, this study will focus on measures that evaluate the performance and innovativeness of companies on a process level. These are methods that evaluate the innovativeness of companies using perceptual and non-financial measures (Ireland Central Statistics Office, 2012; Oke, 2007). Companies primarily introduce new service to gain financial benefit by satisfying customers. Profitability is considered the most important criterion for evaluating innovation performance in manufacturing innovation studies (Storey & Kelly, 2001). Also, customer satisfaction is frequently mentioned as an important objective for new service. Nonetheless, using financial measures to measure performance of a single service requires analysis during fixed time intervals after introduction. In practice, employing these measures to determine innovation performance uniformly is unfeasible. Service projects are measured at a specific moment but their moment of market introduction greatly varies. Additionally, the variety of objectives for service innovation projects illustrate that it is unfeasible to appoint one uniform measure for individual innovation performance. One single measure does not objectively compare innovation performance as companies have multiple goals and different business cases. In addition, meeting the objectives of a single project is not an indication that the firm is good at service innovation (Storey & Kelly, 2001). 3.1.4 Contextual factors Contextual factors can potentially influence performance of business service innovation. These factors can be divided into both externally and internally oriented factors (de Brentani & Ragot, 31 Organizing effective business service innovation 1996). Externally oriented factors apply to the market environment outside the company. Internally oriented factors concern the environment of the IT organization inside the company. External contextual factors External factors in the market environment influence business service introductions of companies. These factors can create positive conditions for business service innovation or inhibit their performance or introduction. Examples are government policies, technology trends (Daugherty, Biltz, & Kurth, 2013; Cearley & Claunch, 2012), changes in customer needs, the economic state, maturity of the market or intensity of competitive rivalry. A means to examine the market environment of companies follows from the marketing literature. PEST-analysis stands for Political, Economic, Social and Technology analysis and describes the macro-economical factors that characterize the environment of a company. Other analysis methods add components as ethics, demographics or ecology (i.e. the STEER analysis that considers Sociocultural, Technological, Economic, Ecological, and Regulatory factors) to extend the analysis. Yet, in essence they all contain the PEST factors. Although companies can exert limited influence on their external environment they can be externally focused (De Jong, Bruins, et al., 2003; Jaw et al., 2010). These companies continuously obtain knowledge of their external environment and are receptive to change. Service companies that actively seek information about their company’s business environment are associated with new service development effectiveness and competitiveness (Menor & Roth, 2007). Although the PEST analysis considers political factors, the NSD literature on performance only emphasizes law and regulation in relation copy protection of services (De Jong, Bruins, et al., 2003). PEST factors competitive companies do consider, are changes in customer needs, technology trends, market changes and competitor actions (S. J. Edgett, 1994; Menor & Roth, 2007; Melton & Hartline, 2012). Internal contextual factors Internal factors in the corporate environment can influence the business service innovation outcome of IT organizations. Examples of these factors are the culture of the company, its innovation strategy and the way the company intends to deliver value to its customers. R. E. Miles, Snow, Meyer, and Coleman (1978) describe four approaches companies can take towards innovation strategy. 1. Prospectors value being first with new products, markets and technologies. 2. Analyzers are seldom first to market. They are frequently fast followers with a more costefficient or innovative product. 3. Defenders locate, maintain a secure a niche. They protecting their position in a relatively stable product or service area. 4. Reactors respond to product and market changes only when forced by environmental pressures. (Treacy & Wiersema, 1993) does not consider the approach to innovation, but considers three ways a company intends to deliver value to its customers. The author argues that the value delivery systems of companies can focus on operational excellence, customer intimacy or product leadership. 1. Operational excellence focuses on optimizing the production and delivery of products or services. These companies seek ways to minimize overhead costs, to eliminate intermediate production steps, to reduce transaction and other friction costs, and to optimize business processes. 2. Customer intimacy focuses on tailoring and shaping products and services to fit the increasingly fine demands of customers. These companies do not to look at the value of any single transaction, but at the customers lifetime value to the company and to build long term customer loyalty. 3. Product leadership focuses on offering leading-edge products and services to customers. These products and services consistently enhance the customers use or application, thereby making 32 3.1 Conceptual SIIC framework competing goods obsolete. These companies aim to be creative, open to new to new ideas and commercialize ideas quickly. 3.1.5 Factors influencing business service pre-development Although research on service innovation is scattered over many topics, substantial research has been done on barriers and success factors for new service development (Cooper & de Brentani, 1991; Drew, 1995; de Brentani, 2001; Menor & Roth, 2007; Oke, 2007; Johnston, 2008; Frei, 2008; Maleyeff, 2011). These are factors companies should mitigate or stimulate to contribute to service innovation. Barriers are potential impediments for service innovation. The degree to which these factors are present negatively influences the probability of an innovation achieving its goals. In contrast, success factors will improve the success of a service. For these factors, their presence positively influences the probability of an innovation achieving its goals. Many of barriers and success factors are each others opposites. For instance, a slow development speed could prevent a new service from being introduced in the market in time and within budget. On the other hand, fast development decreases introduction in the market and increases the probability of achieving market goals. Barriers Barriers are influential factors that can pose potential issues for service innovation. The degree to which these factors are present negatively influences the probability of an innovation achieving its goals. The barriers for business-to-business (B2B) companies are the same as for business-toconsumer (B2C) organizations (Johnston, 2008). Barriers can be both external and internal to the company (Johnston, 2008). The literature search resulted in 35 studies on influential factors from which 26 are considered for further analysis. Five studies consider the impact of barriers on particular service innovation objectives (see table B.3). The overviews show which objectives (see figure 3.6) and barriers (see figure 3.6) are present and the number of times they are mentioned in these studies. New service development success 2 New service performance 1 New service development initiation 1 Innovation success 1 0 Innovation radicalness 0   0.5   1   1.5   2   2.5   Number of times mentioned Figure 3.5: Objectives used in studies on barriers These studies most frequently use new service development to examine the effect of barriers. New service development includes all activities applied to develop a new service from idea generation to market introduction. This study groups these activities into the pre-development and the development phase. Using new service development can refer to only the second part of the innovation process. This study uses service innovation instead to prevent confusions over the choice of words. Most of the studies on barriers group the individual factors in specific constructs. The overview examines the variety of factors and included these constructs rather than each individual barrier. Process factors are most often recognized to prevent companies from meeting service innovation objectives. When processes pose a barrier, methods or techniques for service innovation are missing or partially implemented. Innovation is non-systematical and ad-hoc and competitors are a major source for innovation ideas. However, when planning or management systems become too detailed 33 Organizing effective business service innovation Number of times mentioned Pr oc e Kn ss ow es le dg e an d 7   6   5   4   3   2   5 tu 5 3 3 2 2 1 1 0 0 0 Re so re 5 In 6 no ur va ce tio s M n an st ag ra te em Kn gy en ow ts le up dg In po e fo m rt rm an at ag io e m n te en M ch t ar n ke ol t/ og cu ie s/ st La om un e rf ch oc an us d M ar ke tin g M ar Se k rv et ice fit su pe rio rit Co y m pa ny fit Ca p ab ilit ie s( 0   Cu l 1   Figure 3.6: Overview of barriers in innovation studies or formalized, they can restrain the creativity needed to develop radical of successful service innovation (Edvardsson, Haglund, & Mattsson, 1995; Maleyeff, 2011). Capabilities, Resources and Culture closely follow process barriers. Barriers around Capabilities include lacking the experience or skills needed for innovation. The companies lack creativity to generate the right ideas or are unable to identify customer needs and select the right projects. Resources includes the lack of time, money and headcount. The IT organization lacks the necessary resources to systematically search and develop new opportunities. Culture barriers exist when reward systems do not recognize service innovation or the attitude towards risk discourages innovation. Examining sub-aspects of these barriers in further detail is out of the scope of this study. For further analysis of these factors consider (Kelly & Storey, 2000; Johnston, 2008).External service quality is largely determined through the organization of internal factors (Johnston, 2008). In determination how IT organizations can contribute to business service innovation, this study will emphasize mitigation of internal barriers (Johnston, 2008). Success factors External and internal factors affect the ability of a firm to generate, develop and commercialize new service. In the literature it is often unclear if success factors are limited to specific innovation activities or parts of the innovation process. This study agrees with other scholars (De Jong, Bruins, et al., 2003) that the uncertainty forms no hurdle as most factors will affect multiple activities and across stages. The literature search resulted in 35 studies on influential factors from which 26 are considered for further analysis. A total of 21 studies consider the impact of success factors on particular service innovation objectives B.1. The overviews show which objectives (see figure 3.6) and success factors (see figure 3.6) are present and the number of times they are mentioned in these studies. Studies on success factors most often consider their effect on new service development success. The dominant choice for this objective matches the findings from the selected studies on barriers. Further, new service development is chosen twice as much as the second objective, new service performance. Studies on new service performance do not only consider the factors that are associated with success during service innovation activities. The objective also includes factors that influences success during and after introduction. Factors such as the quality of marketing activities (de Brentani, 1989), product superiority (Cooper & de Brentani, 1991) and launch effectiveness (S. J. Edgett, 1994). Most of the studies on success factors group the individual factors in specific constructs. The overview examines the variety of factors and included these constructs rather than each individual 34 3.1 Conceptual SIIC framework New service development success 11 New service performance 6 Innovation success 4 Innovation radicalness 1 New service development initiation 0 0 2 4 6 8 10 12 Number of times mentioned Figure 3.7: Objectives used in studies on success factors Number of times mentioned 18 15 12 9 6 3 15 14 9 9 8 8 7 5 4 4 3 2 2 Ca p cu s ar M ab ilit ie ke s( t/ Kn ow le dg e an to d m er fo cu La s un Pr oc ch e an ss es d M ar ke tin g M Se a rk rv et ice fit su pe rio rit y Cu Kn ltu ow re Re le dg so ur e m ce an s In ag no em va en tio t n st ra te gy Co M an m pa ag In ny em fo rm fit en at ts io up n te po ch rt no lo gi es / 0 Figure 3.8: Overview of success factors in innovation studies success factor. Capability factors are mentioned most often as a success factor for meeting service innovation objectives. These factors include the availability of employees with the desired skills and expertise or availability of training to provide these skills. Many studies point out the value of highly specialized and trained personnel at the frontline. They will influence how customers perceive service quality and are an important source of ideas (de Brentani, 2001). For decision making activities subject experts or innovation professionals should be involved (de Brentani, 1991; de Brentani & Ragot, 1996). Further, single champions or chief executive sponsorship will improve development and launch of significant service innovation Ettlie and Rosenthal, 2012. Companies should consider these skills in their hiring process and (Drew, 1995) and train all employees on general and interpersonal skills (Ottenbacher et al., 2006). Market and customer focus closely follow and are mentioned second most often as success factors for meeting service innovation objectives. Proficient market focus and deep customer understanding play an important role in innovation success. The effectiveness of service innovation depends on knowing the rules for attracting and retaining the right customers in both B2C and B2B markets Hefley et al., 2010. Understanding the requirements makes it possible to provide service with anticipated effects (Riel, Lemmink, & Ouwersloot, 2004) that meet the needs of the customers (de Brentani, 2001). Success increases through the amount and quality of conducted market research (Riel, Lemmink, & Ouwersloot, 2004) and involving customers in the innovation process. For novel projects, customers and suppliers were twice as likely to be involved in the development and commercialization (Tidd & Bessant, 2011). Both the innovation process and the launch and marketing follow market and customer focus. The quality of the process and used methods have a positive effect on meeting service innovation objectives. Leading innovation organizations have a higher use of innovation management tools, tech35 Organizing effective business service innovation niques and methodologies intended to support the process of innovation.(Yodokawa, 2007; D’Alvano & Hidalgo, 2012). Most successful firms in providing new service prevent their innovation process from being ad-hoc (de Brentani, 2001; Kelly & Storey, 2000). Companies should take a pro-active approach towards service innovation and develop strategic innovation plans (Drew, 1995). Having a process for capturing and managing ideas substantially influences pursuit of radical service innovation (Oke, 2007). To improve success, companies should implement selection and portfolio management practices (Oke, 2007). Ideas should be formally tested before they are fully developed and introduced into the market (de Brentani, 2001). Companies that form cross functional teams are more effective in introducing innovative service projects (Avlonitis et al., 2001; Tidd & Bessant, 2011; Melton & Hartline, 2012). Launch and marketing success factors relate to the extent to which activities during the commercialization phase, near the end of the development process, are performed. These activities include training front-line employees, internal service marketing to service employees, planning the launch strategy and planning promotion strategy (de Brentani, 2001). Because the study centers on the activities before development, these factors are out of scope and will not be considered. Service innovation has inherent disadvantages due to the difficulty of appropriation, standardization and scalability complexity. These three disadvantages can be solved by understanding and leveraging the corporate culture context of the innovation process (Ettlie & Rosenthal, 2012). Other success factors that contribute substantially to innovation success are development speed, technological advantage (Riel, Lemmink, & Ouwersloot, 2004) and degree of service modularity (Voss & Hsuan, 2009). The possession of unique service modules or the ability to exploit these modules through replication contribute to service success. Further, projects that are carried out by teams with at least a few full-time team members are finished much quicker (Vermeulen, 2004). The chosen studies illustrate that innovation failure and success is multi-factored (Johne & Storey, 1997). Project success is rarely the result of managing one or two supporting activities brilliantly. 3.1.6 Conclusion The findings from the previous sections are used to answer the second sub-question: SQ2 What factors influence the performance of effective business service innovation? The updated service innovation IT capability (SIIC) framework is process oriented and offers a systematical approach to effective business service innovation. The framework illustrates what factors influence effective business service innovation and how they relate to each other (see figure 6.1). Internal and external contextual factors •  Innovative company focus IT (business) service Innovation process Screening Idea generation Commercial evaluation Pre-development (Doing the right things) Testing Developing Commercialization Development (Doing things right) Service Innovation output Business service innovation objectives Novelty •  New to market •  New to company Performance •  Meet objectives •  Exceed objectives IT service innovation capabilities Figure 3.9: Conceptual service innovation IT capability framework 36 3.2 Conceptual theoretical framework The relations between the contextual factors, the innovation process, the IT innovation capabilities, service innovation output and business service innovation objectives form the answer for the second sub-question. First, the contextual factors can be both internal and external and can form both success factors or barriers. In order of decreasing relevance, the critical barriers to business service innovation are: processes, capabilities (knowledge and skills), culture, resources, innovation strategy, management support, knowledge management, information technologies/tools, market/customer focus and launch/marketing activities. In order of decreasing relevance, the critical success factors for business service innovation are: capabilities (knowledge and skills), market/customer focus, processes, launch/marketing activities, market fit, service superiority, culture, resources, knowledge management, innovation strategy, company fit, management support and information technologies/tools. Second, the innovation process model of this framework is centered around doing the right projects. The framework offers a means for IT organizations to contribute to pre-development activities such as idea generation, evaluation and selection and commercial evaluation. The process is iterative, circular and allows activities to overlap. Third, the study differentiates between measuring the performance of the innovation process and the performance of innovation output. This study will focus on measures that evaluate the performance and innovativeness of companies on a process level. These are methods that evaluate the innovativeness of companies using perceptual and non-financial measures. Using financial measures to measure performance of a single service is too limited to measure long term performance and requires uniform analysis during similar time intervals after introduction. Fourth, IT capabilities enable IT organizations to systematically influence innovation activities in the pre-development phase. The capabilities are based on predominant factors that underlie service innovation activities and should mediate barries or take advantage of success factors. To conclude, recognizing the importance of the pre-development process and the influential factors allows IT organizations to improve their approach to service innovation. 3.2 Conceptual theoretical framework After developing a systematical approach to effective business service innovation, this section determines which innovation capabilities IT organizations require. Therefore, first the roles IT organizations play are determined, then the capabilities are developed to influence the success factors and barriers identified earlier. Finallt, the involvement and capabilities are combined into a conceptual theoretical framework to illustrate the relations and enable hypothesis development for testing. 3.2.1 Modes of IT-organizational involvement in pre-development The role IT organizations play depends on their involvement in the process and the influence they have. An organization or department is a division of a large company, dealing with a specific area of activity (Oxford University Press, 2012). IT organizations deal with the area and activities related to information technologies (IT). Companies are digitizing and are increasingly spending financial resources on IT (K. C. Laudon & J. P. Laudon, 2012). In these firms nearly all of the organization’s significant business relationships with customers, suppliers, and employees are digitally enabled and mediated. Companies appoint vast amounts of money to information systems to achieve six strategic business objectives: operational excellence, new products or services or business models, customer and supplier intimacy, improved decision making, competitive advantage and survival (K. C. Laudon & J. P. Laudon, 2012). Business aiming for operational excellence continuously seek efficiency improvements of their operations in order to increase the profitability of the company. Information systems and technologies are a major enabling tool for firms to create new products and services, or completely new business 37 Organizing effective business service innovation models. Customer and supplier intimacy can be realized when a company knows its customers and is able to satisfy their needs, which will stimulate spending. Companies can resort to IT to have right information at the right time to make an informed decision and not have to operate in an information fog bank. IT can be applied to gain competitive advantage through achieving specific business objectives such as cost reduction, superior products or minimized response time. Sometimes companies are required to invest in information systems and technologies for survival and to be able to do business. The role of the Chief Information Officer (CIO) that manages the IT organization is rather ambiguous (Peppard et al., 2011). The IT organization can have a supporting role in the company focused on deploying and managing IT. These organizations automate tasks that are previously manually executed. Other IT organizations embrace a business-driven approach. They seek to exploit information and IT that drives competitive advantage, strategic change, and innovation. Much is expected from the CIO as the promoter of business innovation (Yodokawa, 2007). Earlier studies found that CIO involvement in innovation has a positive effect on indirect innovation success such as employee satisfaction or opportunity creation (Riel, Semeijn, et al., 2011). Peppard et al. (2011) found that the CIO position has within a company depends on two criteria. One, the importance of IT to the company for differentiation in the market. Two, the maturity level of the capability to take advantage of information. The scholar identified five distinct CIO types. 1. The IT director is an executive focused on technology and operations who primarily provides IT infrastructure, systems, data and telecommunications capability. 2. The evangelist CIO aims to raise awareness within the company of the potential for information for driving business value. 3. The innovation CIO typically identifies new opportunities that IT enables and introduces newly developed processes and services. Information is used as an integral part of strategic growth and innovation and a key source of competitive advantage. 4. The facilitator CIO makes sure that information skills and capabilities are spread out through every part of the organization. The CIO makes sure that every part of the organization can define, integrate, and exploit information. 5. The agility IT director or CIO acts at the cutting edge of technology and should have access to networks of technology suppliers to support the business with the technologies and systems they require. At one extreme is the utility IT director and the belief that IT is an inevitable expense that should be minimized. At the other extreme is the agility IT director or CIO and the belief that IT offers significant strategic opportunities. To analyze how IT organizations collaborate with the business an analogy can be drawn with the collaboration research and development (R&D) and marketing organizations. Many studies provide a historic overview of manufacturing innovation management generations that are centered around R&D organizations. In the literature scholars have identified three (Cooper, 1994), four (Niosi, 1999), and even five (Rothwell, 1994) types of R&D innovation generations (see table 3.5). Some scholar proclaim that three generations do not cover all process types of innovation management. Others argue that five R&D generations of R&D is in fact too many. Ortt and Duin (2008) for example argue that the fifth generation is rather an enhanced version of the fourth, therefore this study recognizes four generations. Additionally, the scholars found that dominant best practices of innovation management are no longer related to a specific time period or industry. Companies are adopting a more contextual innovation approaches. The most innovative companies carefully select an innovation approach or generation that best suits their context. 38 3.2 Conceptual theoretical framework Table 3.5: Four generations of R&D innovation types Gen. Period Characteristics Disadvantages 1st Mid 1950s Mid 1960s Sequential innovation process, technology push, scientific breakthroughs and basic research Link to the market place is missing 2nd Mid 1960s Late 1970s Sequential innovation process, market pull, intensified competition and applied research Leads to incremental innovations rather then to radical innovation 3rd Late 1970s Early 1990s Sequential innovation process with feedback loops, technology push, market pull and tightly coupled Marketing and R&D Focus on product and process innovations rather than market and organizational innovations 4th 1990 - Early 2000 Parallel innovation process, innovation in alliances, open innovation Highly complex, not suitable for every industry A similar course of action can be identified for IT organizations. They are increasingly gaining R&D characteristics such as managing innovation activities and keeping up with technology developments. With the invention of IT, companies in the first generation type could easily introduce new technologies in the market. Computers, information infrastructure and the internet had a large technological advantage and resulted in wide spread adoption. IT organizations in the second generation had to operate in a more competitive market place. These companies submit to a market pull, the business rather than IT is controlling budgets and they are making innovation decisions. Some companies have adopted a third generation in which IT and the business partner on innovation. Others have even adopted a fourth generation type. These are for example companies that have a parallel iterative innovation process and use innovation alliances to obtain missing innovation capabilities. This generation is especially interesting for smaller firms that are tied to resources. Kettinger et al. (2011) constructed a strategic leadership-positioning framework on the way CIO and business executives drive the information orientation (IO) of a company. The IO is management’s perspective on how effective use and management of information supports the company’s strategy. Further included is the perspective on how IT investments and information management facilitate the information capabilities of the company. The scholars recognized four combinations of leadership situations in which the IO initiative is an equal partnership, led by the CIO, led by a business executive or an IO leadership void. First, the CIO forms an equal-value partnership with information-savvy business executives to lead IO efforts. On the one hand, the IT organization provides strategic insights to develop information business strategies. On the other hand they support the business with IT resources and services that are effective, reliable and cost-effective. Second, the CIO leads the IO Initiative and recognizes the value of IO but business executives do not. The CIO supports IO initiatives, is a transformational leader, envisions how IO contributes to business strategies and outlines the road-map for IO development. Third, the business executives lead the IO initiative and recognize the value of IO but the CIO acts as a servant and does not do not. The executives build an IO to support the business strategy without involvement of the IT organization. The CIO prefers to run IT as a utility and does not want to be involved in information business strategies or road-map development. Fouth, in case of an IO leadership void the value of IO is not recognized by either the CIO or business executives. Neither of the parties takes a leadership position that drives IO development. Given companies are digitalizing, an IO leadership void will likely result failure. These situations illustrate combinations in which CIOs and business executives take part in IO initiatives to support the business strategy. Depending on the position of the IT organization, CIOs can prevent their position from being marginalized. Some IT organizations are more than 39 Organizing effective business service innovation just a reliable IT utility and have transformed to lead information related efforts. To do so, the IT organization has to move from managing IT utilities efficiently to contributing to business value creation. A three level view of IT organizational contribution to business value is created for this study. The analyzed literature in this section describes: the reasons for IT investments, the role IT organizations can play, the generations of innovation management and the collaboration between IT and the business. Based on the purpose of the IT organization and the collaboration with other parts of the company, a three level view can be created. The view recognizes that IT organizations can create business value within their own environment, the company environment or the market environment. Depending on the ambition of the IT organization, they can act as a facilitator, enabler or driver of business value (see figure 3.10). Market environment (Driver) Business value creation Company environment (Enabler) IT organization (Facilitator) Figure 3.10: Three levels of business value creation First, the facilitating IT organization explores new technologies to support the performance of their own environment. The CIO plays the role of a utility IT director and approaches IO in voiding or servant situations with the business. The enabling IT organization, analyzes and implements new technologies to enable other organizations within the company to create more business value. The CIO is an evangelist, capabilities facilitator or an agility IT Director and at most considers IT innovation. Technology can for example support collaboration, manage knowledge within the organization or stimulate idea generation. The driving IT organization systematically scans new technologies that can be used to satisfy customer needs and create value outside company boundaries. These CIOs play the role of the innovator and approach IO in partnering or leading situations with the business. Traditionally, IT organizations are mainly cost driven and have a facilitating role within the company. Some IT organizations manage to enable business value and only a few are able to drive business value. Although least common, IT organizations that play the third role will be able to deliver the largest contribution to company value and growth. Recent studies examine the IT organization as an enabler of service innovation (Ordanini & Rubera, 2010) and this study will center around the third role. This study identifies ways in which IT organizations can contribute to business value creation by means of business service innovation. Central are the activities before development that determine which innovation projects should eventually be developed. Next are development activities that aim to introduce service projects faster and cheaper in the market. The activities before development emphasize effectiveness rather than efficiency. On doing the right things rather than on doing things right (Cooper, 2000). IT organizations have the opportunity to take on a more significant role for business value creation. They should extent their role as facilitator towards an enabler or driver of business value. Before actual development, these IT organizations should apply their technical knowledge. They can contribute to evaluation and selection of ideas on technical feasibility and 40 3.2 Conceptual theoretical framework compliance with existing capabilities. These IT organizations should be involved early on in the innovation process and collaborate with the business on new innovation projects. 3.2.2 IT capabilities for effective business service pre-development Companies centered around goods are confronted with rapidly changing markets as a result of new customer demand, new forms of competition and the commercialization of technologies (Kindstrom et al., 2012). Competing in rapidly changing markets often requires the ability to quickly develop and deploy new offerings (de Brentani, 1989; Gallouj & Weinstein, 1997; Froehle & Roth, 2007). To increase performance, companies can use innovation to gain competitive advantage in three ways (Organisation for Economic Co-operation and Development, 2005). First, companies can increase the efficiency of service production, purchasing or distribution and in turn reduce costs. Second, they can focus on improving existing products, make them more attractive to draw new customers and shift demand. Third, innovation creates and develops new knowledge that improves the ability of companies to generate and develop service. The latter aligns with Vargo and Lusch (2004) who argue that value creation is centered on the application of competences rather than around goods. Service provisioning results from a combination of competences embodied in tangible systems and of competences that do not use technological mediation (Gallouj & Weinstein, 1997; Vargo & Lusch, 2004). Parallel with the shift to servicedominant logic, manufacturers are increasingly adopting solution oriented innovation approaches (Evanschitzky et al., 2011). These approaches need a different organizational mindset, capabilities and processes from the way value is created and delivered through products (Evanschitzky et al., 2011; Hefley et al., 2010). Service organization, tools, measurement, skills and competencies are enablers for service innovation (Menor, Tatikonda, & Sampson, 2002). These service innovation competencies positively correlate with new service innovation performance (Menor & Roth, 2007). Companies should identify and develop the core competences, such as the fundamental knowledge and skills, that have potential for competitive advantage (Vargo & Lusch, 2004). As technologies, customer demand and markets change, so do the capabilities needed for service innovation. Considering the shift to service-logic and rapidly changing markets, scholars have focused on identifying the required dynamic capabilities for competitive advantage. Dynamic capabilities Dynamic capabilities are a set of specific and identifiable processes that evolve through organizational learning mechanisms (Eisenhardt & Martin, 2000). There are processes such as product development, strategic decision making and formation of alliances. Teece and Shuen (1997) defines dynamic capabilities broader than processes, they are firm-specific sources of advantage that address changing environments. The study explain how combinations of competences and resources can be developed, deployed and protected. Dimensions of dynamic capabilities are distinct skills, processes, procedures, organizational structures, decision rules and disciplines. (Kindstrom et al., 2012) state that the development of these dimensions allows companies to successfully realign their dynamic capabilities with service innovation activities. The scholars separate the purpose of dynamic capabilities into three distinct activities. These activities are sensing opportunities and threats, seizing those opportunities and re-configuring resources to maintain competitive. The evolution of service innovation within a company is the result of a continuous learning process (Sundbo, 1997). To gain competitive advantage through innovation, companies should develop their dynamic capabilities. They should create distinct skills, processes, procedures, organizational structures, decision rules and disciplines that facilitate innovation. To be able to drive and contribute to innovation, IT organizations should develop their dynamic innovation capability. A model developed and used in business is the IT capability and Maturity Model (ITCMM) from (Accenture, 2009). The ITCMM model provides an overview of the IT capabilities an IT department can 41 Organizing effective business service innovation develop and the levels of their maturity. The ITCMM includes 7 capabilities and is based on industry standards as Prince 2, ScampiSM, CMMI, IIBA, Cobit, Togaf v9 and IT infrastructure library v3. First, strategic IT alignment describes how business vision and strategies are translated into multi-year IT investment and operating plans. Second, IT governance describes how IT decisions are made, sponsored, enforced and evaluated, both within and across the organization structure. Third, architecture and information management describes how information is managed and how the IT architecture framework is strategically executed and followed. Fourth, solutions delivery describes how projects are developed and turned into live services. Fifth, service management and operations describes how day-to-day operational service is planned, delivered and measured. Sixth, information and technology security describes how information and technology security is governed, managed, protected and controlled within the enterprise. Seventh, workforce and resource management describes how human resource, financial assets, IT assets and knowledge resources are managed and support delivered services. Service innovation performance is mainly determined by the quality of the pre-development activities (Zhang & Doll, 2001). Accordingly, the barriers and success factors identified earlier largely influence the performance of these activities. IT organizations should focus dynamic capability development on these internally and externally oriented factors (de Brentani, 1991). Adequate dynamic capabilities will increase the extent to which service innovation objectives are met. Such capabilities allow IT organization to take advantage of success factors or mitigate the barriers for service innovation activities. In uncovering the predominant factors, this study groups and analyzes the influential factors for the pre-development phase. Table 3.6: Overview of mentioned influential factors in the literature Success factors (times mentioned) Barriers (times mentioned) • • • • • • • • • • • • • • • • • • • • • • • Capabilities (Knowledge and skills) (15) Market / customer focus (14) Processes (9) Launch and Marketing activities (9) Market fit (8) Service superiority (8) Culture (7 ) Resources (5) Knowledge management ( 4) Innovation strategy (4) Company fit (3) Management support (2) Information technologies/tools (2) Processes (6) Capabilities (Knowledge and skills) (5) Culture (5) Resources (5) Innovation strategy (3) Management support (3) Knowledge management (2) Information technologies/tools (2) Market / customer focus (1) Launch and Marketing activities (1) Seven IT capabilities are distinguished that include most success factors and barriers types (see table 3.6). The capabilities exclude both launch and marketing activities as they are not linked to the pre-development phase, and service superiority as it is a characteristic for the innovation output. The capabilities are divided into types that relate to either the innovation climate or the innovation process of the IT organization (De Jong & Vermeulen, 2003; De Jong, Bruins, et al., 2003). Climate related IT capabilities From the influential factors, two capabilities are derived that impact the internal climate (De Jong, Bruins, et al., 2003). The capabilities IT culture and IT-business strategy alignment support innovation but do not directly relate to the innovation process. 42 3.2 Conceptual theoretical framework Table 3.7: IT service innovation capabilities IT innovation climate 1. IT-business strategy alignment 2. IT culture IT innovation process 3. 4. 5. 6. 7. IT IT IT IT IT resource dedication processes formalization staff tools external collaboration IT culture includes influential factor types such as innovation strategy, management support and culture. Each individual IT innovation capability is further divided in sub-capabilities. For the IT culture in the pre-development they are (see appendix C.1 for a mapping on the other capabilities and used sources): • • • • • Service innovation is communicated as a main priority Senior IT managers encourage innovation Risk-taking efforts and mistakes are tolerated Staff are empowerment to explore own ideas Financial and non-financial reward systems are present for innovation Activities in the pre-development phase will benefit from an open and entrepreneurial IT culture. These sub-capabilities emphasize dominant characteristics mentioned in the literature identified earlier. They were identified to stimulate innovative behavior and can be used as indicators to measure the capability’s maturity level in subsequent research. IT-business strategy alignment addresses market and customer focus, market fit and company fit. The IT organization and the business should jointly define the road-maps for IT investments. Chief level staff should be involved in strategic IT decision making. IT organizations should evaluate and select ideas on their market potential. Ideas should align to the strategy objectives, the technical capabilities and available resources of the company. Process related IT capabilities Five other capabilities are derived from the influential factors that intervene directly with the activities in the innovation process (De Jong, Bruins, et al., 2003). These capabilities are IT resource dedication, IT process formalization, IT staff, IT tools and IT external collaboration. IT resource dedication recognizes that the lack of resources is a potential barrier and needed for systematical service innovation. The IT organization has to dedicate resources specifically to the predevelopment phase. These are financial, staff and time resources. Companies should systematically reserve time for pre-development activities. Examples are Google’s 80/20 rule in which staff can spend 1 day a week on exploring their own ideas. Then, IT organizations should have dedicated teams that are working on pre-development activities and are responsible for innovation. IT process formalization emphasizes the need for a pro-active approach and systematical process to innovation. Most companies innovate ad-hoc with the risk of not recognizing innovation opportunities, they rely on their competitors for innovation ideas (me-too innovation) and terminate projects early and do not allow ideas to grow. Service innovation is a learning process of trial and error and a systematical approach has several advantages. Service firms that organize their innovation process will be better able to recognize opportunities for innovation. Oke (2007) found several studies suggesting that high performing innovation companies usually have a formal 43 Organizing effective business service innovation process for developing new products and services. IT organizations should formalize the ways in which ideas are captured and managed. The IT organization should determine how new business service ideas are evaluated and can be put forward for commercial evaluation. They should define a strategy and a specific set of selection criteria that guide the generation, selection and commercial evaluation of ideas. Key performance indicators (KPIs) should be employed to steer business service innovation. Excessive formalization will kill creativity (Edvardsson, Haglund, & Mattsson, 1995), but the IT organization should have a method the pre-development phase and a formal process for the development phase. Rules and procedures can provide direction for an effective process and potentially improve the development speed to make the process more efficient (De Jong, Bruins, et al., 2003). For these activities, the IT organization should collaborate with other departments. Cross functional teams broaden the points of view and problem-solving ability, enabling the IT organization to generate more ideas (De Jong, Bruins, et al., 2003). IT staff covers all aspects of knowledge management and capabilities such as knowledge and skills. Pre-development activities require capabilities that are specific for innovation, like creativity and interpersonal skills. Therefore, staff involved in pre-development activities of the IT organization should be selected and trained on different skills and experiences than other IT staff. The organization should ensure, staff are up-to-date on technology trends, external business customer needs, changes in market demand and service innovations of competitors (Goffin & Mitchell, 2005). The training of employees determines the difference between successful and less successful service outcome (Ottenbacher et al., 2006). Having highly trained experts with intimate knowledge of the service and customers is important for service delivery success. IT organizations should not view front line staff only in terms of managing end-user relationships but involve them in pre-development activities. A end-user relationship is the way in which somebody from the company is connected to the person who actually uses particular products or services from that company (Oxford University Press, 2012). Early involvement in the innovation process, can be critical for gaining insights about client needs and opportunities (de Brentani, 2001). Ordanini and Parasuraman (2011) found that involvement of front line staff has a moderately strong positive impact on service innovation volume and radicalness. Vice-verse enthusiasm of frontline staff for service is important as it directly effects the customers’ perception of service quality (Ottenbacher et al., 2006). IT tools comprises information technologies or tools that are used for pre-development activities. IT has given service companies a range of possibilities to increase the efficiency of their processes. IT tools facilitate collaboration between internal and external parties, and between virtual teams. Information rich environments are traditionally associated with highly innovative organizations (De Jong, Bruins, et al., 2003). IT enables staff to discover information and data on previous innovations, their market, technologies, customers and competitors. This information helps to generate ideas for new or improved business service. IT provides tools to test and evaluate business service ideas on their technical potential and feasibility. Further, tools can assist in calculating the cost of new business service ideas. A clear business case analysis will allow the company to make an accurate decision before ideas are actually developed. IT external collaboration is concerned with the advantages of a market and customer focus. In the pre-development phase, companies should collaborate with technology vendors, research companies, consulting companies, IT service providers and customers. Each contributor brings in his own knowledge and skills and increases the variety of information (De Jong, Bruins, et al., 2003)). Their involvement provides IT staff with rich information that stimulates idea generation and problemsolving capabilities. Also, collaboration makes the development process of small companies more efficient and lowers the risks of failure. Similarly, Fritsch and Lukas (2001) found that companies that aspired high levels of innovation have a special need for specialized know-how. During pre-development activities they were more likely to have co-operative agreements with external par44 3.2 Conceptual theoretical framework ties. However, for the second phase these companies tend to reduce the number of agreements and collaborate with a relatively small number of partners on further development. To summarize, these capabilities enable IT organizations to systematically influence innovation activities in the pre-development phase. In similar fashion Loewe and Dominiquini (2006) state that a successful serial innovator needs a systematical approach. They should address four underlying interrelated root causes of innovation ineffectiveness namely leadership and organization, processes and tools, people and skills, and culture and values. The extent to which the seven capabilities are developed within IT organizations is an indication of the level of capability maturity. The capabilities are dynamic and can be further developed to become more proficient in service innovation. Linking the influential factors to capabilities makes it possible to build a conceptual framework for service innovation and to devise strategies for its implementation (Kindstrom et al., 2012). 3.2.3 Conclusion Based on the literature, this section forms the answer for the second sub-question: SQ3 What role can IT organizations in large digitized companies play within effective business service innovation? Incorporated in the question are both determination of the role IT organizations play and the way they can influence the effective business service innovation. First, the IT organization can take on three roles. In order of lowest to highest contribution to business value creation these roles are: facilitating, enabling and driving. The facilitating IT organization explores new technologies to support the performance of their own environment. This CIO plays the role of a utility IT director and approaches information orientation (IO) in a voiding or servant situations with the business. The enabling IT organization, analyses and implements new technologies to enable other organizations within the company to create more business value. This CIO is an evangelist, capabilities facilitator or an agility IT Director and at most considers IT innovation. Technology can for example support collaboration, manage knowledge within the organization or stimulate idea generation. The driving IT organization systematically scans new technologies that can be used to satisfy customer needs and create value outside company boundaries. This CIO plays the role of the innovator and approach IO in partnering or leading situations with the business. Second, in order to have a driving role, IT organizations should develop appropriate capabilities to contribute to effective business service innovation. Seven IT capabilities are distinguished linked to the majority and most important success factors and barriers types. The capabilities are divided into types that relate to either the innovation climate or the innovation process of the IT organization. These IT innovation capabilities are IT-business strategy alignment on the maturity of the match between IT and business strategies. IT culture describing an open and entrepreneurial innovation environment. IT resources are resources required to execute innovation such as the financial, staff and time resources reserved for innovation. The maturity of IT processes relates to systematical approaches within companies to guide service innovation. IT external collaboration points out the value of the cooperation with external parties like customers and consulting firms. Then, IT tools concerns the information technologies and tools used for innovation activities. The seventh capability IT staff is based on the success factors and barriers related to capabilities such as knowledge and skills. Both findings are combined in the conceptual theoretical model (see figure 3.11) that looks at both on how often the IT organization is involved in the innovation process and the contribution they deliver to that process. Performance is measured on process factors identified earlier. To examine the influence of the contextual factors, the firm’s innovation focus is considered. It is an internal contextual factor that largely influences the role the IT organization is allowed the play as it relates to the company’s appetite for innovation. 45 Conceptual framework Organizing effective business service innovation Innovative company focus IT-business strategy alignment Quantity of contribution of ITorganization to business service innovation IT culture IT resources Firm innovativeness Meeting business case objectives IT processes Quality of contribution of ITorganization to business service innovation IT external collaboration IT tools Exceeding business case objectives IT staff Figure 3.11: Conceptual theoretical framework 3.3 Conclusion 46 Copyright © 2012 Accenture All rights reserved. The updated service innovation IT capability (SIIC) framework (see figure 6.1) incorporates the identified IT innovation capabilities into the process framework identified earlier. The framework visually represents relevant aspects of business service innovation. The SIIC framework allows an IT organization to take a pro-active and systematical approach to influencing innovation activities in the pre-development phase. IT organizations can potentially diagnose the maturity of their capabilities for effective business service innovation though the conceptual theoretical framework. Service innovation is a learning process of trial and error. The capabilities are dynamic and can be further developed in order to become more proficient in service innovation. Then, the framework illustrates which factors influence effective business service innovation and how they relate to each other. This framework visualizes how IT organizations can recognize and take advantage of innovation opportunities. Internal and external contextual factors •  Innovative company focus IT (business) service Innovation process Screening Idea generation Commercial evaluation Pre-development (Doing the right things) Testing Developing Commercialization Development (Doing things right) IT service innovation capabilities Climate related •  IT-business strategy alignment •  IT culture Process related •  IT resources •  IT processes •  IT staff •  IT tools •  IT external collaboration Service Innovation output Business service innovation objectives Novelty •  New to market •  New to company Performance •  Meet objectives •  Exceed objectives Figure 3.12: Updated conceptual service innovation IT capability framework 46 “Innovation is about creating the maximum decision capability with minimum of investment and time.” Digital accelerator organization 4 Research Design This chapter elaborates on the designs of the three research methods used to answer the main research question of this study. These are the justification of desk research, a survey study and a case study. The three research designs are geared towards providing comprehensive, valid and reliable answers to the research sub-questions. 4.1 Research approach There are two types of research orientation. Theory oriented research unravels a theoretical problem by studying the existing literature while practice-oriented research aims at a problematic situation or new policy initiation within organizations (Verschuren, Doorewaard, Poper, & Mellion, 2010). Additionally, research types can be exploratory, explanatory or descriptive in nature (Yin, 2009; Sekaran & Bougie, 2010). According to the goals of the three research methods, an appropriate orientation and research type is chosen (see table 4.1). Table 4.1: Overview of research methods used in this study. Research method Orientation Type Goals subquestions Desk research Theoretically Exploratory oriented Review existing literature, position study and develop framework Electronic study Practically oriented Explanatory Examine correlations between constructs in the conceptual framework 4 Case study Practically oriented Descriptive Describe framework patterns of best practices 5 1,2,3 Firstly, the nature and objective of the first three questions is exploratory research that identifies key issues or key variables. The desk research comprehensively and thoroughly analyses the current body of knowledge to provide detailed answers to the first three research sub-questions: SQ1 What are core concepts relevant for service innovation and how are they different from goods innovation? 47 Research Design SQ2 What factors influence the performance of effective business service innovation? SQ3 What role can IT organizations in large digitized companies play within effective business service innovation? The findings position the study, identify relevant literature, distinguish options for IT organizational involvement and point out influential factors for effective business service innovation. Desk research collects, presents and combines this knowledge to develop theoretical understanding and descriptive frameworks for effective business service innovation. In addition, two conceptual frameworks are provided as input for the practically oriented research. These frameworks relate to the capabilities and the systematic approach IT organizations require for effective business service innovation. The theoretical capability framework serves as input for the survey analysis while the systematic approach framework provides context for the case studies. Secondly, the nature and objective of the fourth sub-question is explanatory: it seeks to explain the nature of certain relationships: SQ4 Which capabilities do IT organizations in large digitized companies require for effective business service innovation? An electronic survey is conducted to analyze the conceptual theoretical framework through hypothesis testing. The survey takes an interpretivism or inductive perspective that seeks evidence for the general principles of the relations in the conceptual theoretical framework. To answer the sub-question a correlational rather than a causal study is chosen. The correlational study aims to identify important IT capabilities for business service innovation. A causal study intends to delineate one or more factors causing the problem (Sekaran & Bougie, 2010). The answers to the question provide insight into the mechanisms IT organizations can use to contribute to effective business service innovation. Third and lastly, the nature and objective of the fifth sub-question is descriptive to study real world examples of the offered notions and concepts: SQ5 How do IT organizations in large digitized companies apply their capabilities to contribute to effective business service innovation? The case study compares the conceptual framework to IT organizations in practice, in order to identify common patterns. A case study is an empirical inquiry that pays a lot attention to the context to understand contemporary events in more depth (Yin, 2009). The study reasons from a positivist or deductive perspective. It seeks instances of patterns between real examples and the conceptual practical framework. It is well suited to understand the interactions between IT organizational contribution and their organizational contexts. The executed studies examine how the framework applies to both a high-technology company and a bank. A particular focus is placed on the value of IT, innovation processes and IT organizational contributions to business service innovation. 4.2 Desk research justification The desk research justification elaborates on the research types and search strategies done to carry out the literature study. 4.2.1 Research types Extensive desk research has been carried out to identify the literature gap, review the literature and to identify critical barriers and success factors for effective business service innovation. Identifying the problem and literature gap is crucial for setting the study focus and ensuring that comparable research has not been done before. The literature review for the theoretically oriented 48 4.2 Desk research justification part of this study focusses on an in-depth analysis of the perspectives and theories in academic literature. The identified success factors and barriers are used as a foundation for the capabilities and both conceptual models. For each of the desk research activities an individual search strategy was used to collect the necessary information. 4.2.2 Search strategy For each of the research types, primal search engines were used to identify and validate relevant journal articles. A focus was placed on articles that elaborate on relevant topics or provide an overview of the literature and recommend areas for further research. Backward searches were performed on the collected literature using the provided citations. Forward searches were performed using search engines or dedicated tools. For less academic information, common search engines and in-site search engines were used. Additionally, a selection of topic related articles were provided or recommended by others during the process. Multiple data sources like textbooks, journals, theses, conference proceedings, reports, newspapers, business publications, industry expert reviews and the internet were used to collect information. The use and relevance of the search strategy depends on the search type. An overview of the used sources and search term combinations can be found in table 4.2. Table 4.2: Search engines and search terms used for this study. Search engines Search term combinations Identifying the literature gap • Google Scholar and Google search, Emerald, Scopus and ScienceDirect • CIO magazine (NL), ICT Media and Harvard Business Review (HBR) magazine • McKinsley Quarterly, MIT Libraries, HBR online libraries and Wiley online libraries • IT-funtion, CIO,“chief information officer”, IT-department, “IT organisation” or “IT organization” • “service innovation strategy”, “idea generation” or “idea selection” • “Information technology” or ”ICT”, • “new service development”, NSD, “new service solutions”, “service innovation” or innovation process • “literature review”, “research areas”, overview, “research agenda” or “literature analysis” Literature review • Google Scholar and Google search, • Emerald, Scopus, ScienceDirect and citeseer • Gardner, MIT Libraries and HBR Magazine • Wiley Online Libraries, TU Delft Library, Erasmus University Rotterdam and Google books • IT-funtion, CIO,“chief information officer”, IT-department, “IT organisation” or “IT organization” • “service innovation strategy”, “idea generation”or “idea selection” • pre-development or “fuzzy front”, • “Information technology” or ”ICT”, • “new service development”, NSD, “new service solutions”, “service innovation” or innovation process • barriers, “success factors”, “contextual factors”, capabilities Identifying critical barriers and success factors • Google Scholar and Google search, • Emerald, Scopus, ScienceDirect and citeseer • barries, “succes factors” and CSF. • “new service development”, NSD, “service innovation” and “service project” • “fuzzy front”, “front-end”, ideation and “pre-development” • “service idea” , generation, selection, evaluation, “commercial evaluation” and “business analysis”. Collected literature was evaluated on relevance and quality using a selection of indicators. Relevant information sources are recently published or are particularly suitable for the topic. The 49 Research Design quality of the information sources depends on the number of citations, quality of the journal, structure of the article and type of research. Furthermore, an effective file storage system was developed and used in combination with reference management software. Both supported efficient reuse of collected information in subsequent project stages. 4.3 Survey justification The survey study justification elaborates on individual parts of the survey conducted to answer the fourth sub-question. These parts include the survey sampling, data collection procedure and design validation and reliability. The Delft University of Technology joined forces with Accenture to conduct the survey. The survey provided a select number of CIOs the opportunity to benchmark their IT innovation capability with industry peers. Accenture holds close relationships with the IT organizations of identified companies. A large advantage is that the Accenture contacts can personally extent the invitations for the survey which would increase the expected response rate on the survey. Disclaimer: Despite accurate data analysis, the number of survey responses limit the generalizability of the findings. Extreme care was taken to identify the appropriate population, to develop solid measurement instruments and to motivate the sample to participate. The results provide an initial indication of potential relations between the variables of the conceptual theoretical model. The findings cannot be generalized to the target population, and should not be interpreted as such. Figure 4.1: Landingpages electronic survey (see appendix C) 4.3.1 Survey sampling The sample design describes which individuals were invited to participate in the survey. A careful selection of individuals representing the target population ensures that relevant information is retrieved. The population is defined in terms of geographical boundaries, elements and time to reduce the negative influence of both unusable elements and disturbing factors. Population The population considered in this study is the entire group of Dutch IT organizations in large innovative digitized corporations. These are IT organizations that can apply IT capabilities to 50 4.3 Survey justification contribute to effective business service innovation. For effective business service innovation, the survey questions concentrate on the innovation activities before development. This research has both a unit of analysis and unit of observation. The unit of analysis is the unit in the sample under consideration. The unit of observation is the actual manifestation of this unit of analysis in the sample. These units can but do not have to be the same and are subsequently described. To examine the contributions of IT organizations, business to consumer (B2C) service within large companies is selected. For these companies innovation is essential but challenging to organize internally. Small and medium sized enterprises (SMEs) have up to 250 employees. However, as most companies do not register their number of employees, large companies are selected based on their annual sales revenue. In similar fashion, large companies are selected with an annual revenue above 100 million euro. In particular companies in the Netherlands are selected to reduce variation in and influence from legislation, culture or national economies. The survey focuses on knowledge intensive and network intensive service companies. • Knowledge intensive companies (e.g., consultancy, research, architecture, engineering, IT) provide extremely differentiated service in which knowledge is important for long term survival. • Network intensive service companies (e.g., banks, insurance and telecommunication service) rely heavily on IT, and initiate innovation and introduce innovations themselves. These sectors are more aware of the broad character of service innovation , most innovative and for a large part reliant on Information Technology (IT) (De Jong, Vermeulen, et al., 2003; Vence & Trigo, 2009). Especially banking, insurance, telecommunications, media and high-technology industries are chosen in accordance with an earlier study (Kelly & Storey, 2000). The sample frame The sample frame represents all population elements from which the sample is deducted. The survey was sent to large companies within selected industries that are established in the Netherlands. All large companies established in the Netherlands are registered with the Chamber of Commerce. The Chamber is embedded under public law, and targets its service on all businesses in the Netherlands. The listings are publicly accessible and provide information including their name, industry, annual revenue and contact details. Multiple databases were analyzed to make sure that an up-to-date representation of all elements in the population was obtained. The selected van Dijk REACH database contains data of the Dutch Chamber of Commerce and allows extraction of all required sample elements. The sampling design Two major sampling designs are probability and non-probability sampling (Sekaran & Bougie, 2010). For the first, the chance of subject selection is unknown and for the latter subjects are selected with a predetermined chance. Probability sampling is used when the representativeness of the sample is important for the purpose of wider generalizability. Non-probability sampling is used when time, industry or other factors are more important than generalizability. Using the selection tool from the database, the search result was refined to companies operating in the Netherlands with an annual revenue of 100 million euro. The results show that 2951 companies meet these criteria. Further analysis of the sample (see sample size) showed a relatively small sample which narrowed down the options for sampling. Non-probability sampling is chosen to obtain data of all subjects in the final sample. The sample will allow preliminary information gathering on the framework that can be generalized to the entire population only if every subject participates. Three available non-probability designs are convenience sampling, judgmental sampling and quota sampling (Sekaran & Bougie, 2010). Convenience sampling selects the most easily accessible 51 Research Design subjects. Judgmental sampling selects a single number or single type of subjects that have the relevant information. Quota sampling selects a fixed number of subjects from several groups in the population. A judgmental sampling approach is selected. The research sample focused on selecting an individual group of subjects, rather than emphasizing convenience or quotas from multiple groups. The sample size Using seven steps, a total of 93 participants were identified and invited to complete the study (see table 4.4). Step one, a total of 2951 companies were gathered from the database that operate in the Netherlands with an annual revenue of 100 million euro. Step two, to select innovative and digitized companies from these companies, those in banking, insurance, telecommunications, media and high-technology industries were chosen. These 871 companies are most innovative compared to other sectors and to a large extent make use of IT. Step three, after excluding holding companies (NACE 6420), trust funds (NACE 6430), other credit granting (NACE 6492) and pension funding (NACE 6530) companies, 230 companies were left. Table 4.4: Filtering for selected population Step 1 2 3 4-6 7 Operation Companies in the Netherlands Operating revenue (turnover) >100 million euro in 2011 Banking, insurance, telecommunications, media and high-technology industries Financial holding, trust, credit granting and pension fund Subsidiary without own IT organization Innovation situated abroad Outsourced & small IT organizationz Chief information officer (CIO) left the company Discontinued companies Financial; banking and insurance industries Technology; Telecommunications, media and high-technology industries Total population No. Total No. 3,656,864 2,951 871 230 174 117 108 101 93 56 37 93 Step four, individual analysis indicated that 137 companies had no IT organization that concentrated on business service innovation, had a departing CIO or went bankrupt. Step five, survey contacts within IT organizations were identified using a three way approach to send individual invitations. First, the Accenture database was used to identify the employees managing the company relationship. Then company leadership support was acquired to jointly ask the Accenture employees to identify their contacts. Second, 10 companies were members and were contacted through the CIO-platform. Third, the majority of individuals followed from company pages, LinkedIn pages and annual reports. A search for the individuals in control of the IT organizations was performed to identify their name, function and assessment of tasks. For a small portion of the companies this turned out to be unfeasible. Step six, the collection of the email addresses from individuals found through the internet search list was done by telephone. The standard company number was used to verify the name and provide the contact details. During these activities it was established that some IT organizations were too small, outsourced innovation activities abroad or no longer employed the individual. Almost all the names of identified participants proved to be correct and others were corrected for the remaining cases. 52 4.3 Survey justification Table 4.5: Used search engines and search terms to identifying survey contacts. Search engines Search term combinations • Google search, • Linkedin. • “chief information officer”, CIO,“chief technology officer”, CTO,“director”, “directeur”, “manager”, leader or leider. • IT, ICT, or “IT innovatie” Step seven, a population of more than a 90 CIOs, of which 56 work in financial and 37 in technology industries and were personally contacted. 4.3.2 Data collection procedure The data collection procedure can be divided in hypotheses development, the data collection technique, the collection data type (operationalization), and operations to turn data into information (codification). All four topics are subsequently described. Hypothesis development For this study, a survey has been developed based on the hypotheses that follow from the conceptual theoretical framework (introduced in section 3.2). Innovative company focus IT-business strategy alignment A1 IT culture A2 IT resources A3 IT processes A4 B1 IT external collaboration A5 IT tools A6 IT staff A7 + Quantity of IT organizational contribution to business service innovation Quality of IT organizational contribution to business service innovation C1 + C2 Firm innovativeness D1 Meeting business case objectives D2 Exceeding business case objectives D3 Figure 4.2: Numbered conceptual theoretical framework To test if relations between the variables of the conceptual theoretical framework are existent (alternative hypothesis, HXxA ) or non-existent (null hypothesis, HXx0 ), three types of hypothesis are identified (see table 4.6). First, the direct relation between the IT capabilities (AX ) and the IT organizational contribution to effective business service innovation (CX ). Second, the moderating effect of the innovative company focus (B1 ) on these relations. Third, the direct relation between the IT organization contribution (CX ) and business service innovation performance (DX ). For example: each of the variables is selected to illustrate each of the hypotheses types (see appendix E for all hypotheses). These are IT culture (A2 ), the innovative company focus (B1 ), quality of IT organizational contribution to business service innovation (C2 ) and meeting business case objectives (D2 ). An electronic survey is developed to test each of the identified hypotheses. The majority of questions follow from the literature and others were developed together with industry experts. 53 Research Design Table 4.6: Generic hypotheses and example Hypo. Generic Example H1BA < AX > has a positive effect on the < CX > IT culture (A2 ) has a positive effect on the quality of IT organizational contribution to business service innovation (C2 ). H1B0 < AX > has no effect on the < CX > IT culture (A2 ) has no effect on the quality of IT organizational contribution to business service innovation (C2 ). H2BA < AX > has a positive effect on the < CX >, but the strength of the effect depends on the innovative focus (B1). IT culture (A2 ) has a positive effect on the quality of IT organizational contribution to business service innovation (C2 ), but the strength of the effect depends on the innovative focus (B1). H2B0 The strength of < AX > on the < CX >, does not depend on the innovative focus (B1). The strength of IT Culture (A2 ) on the quality of IT organizational contribution to business service innovation (C2 ), does not depend on the innovative focus (B1). H4BA : < CX > has a positive effect on < DX >. Quality of IT organizational contribution to business service innovation (C2 ) has a positive effect on meeting business case objectives (D2 ). H4B0 : < CX > has no effect on < DX >. Quality of IT organizational contribution to business service innovation (C2 ) has no effect on meeting business case objectives (D2 ). To adequately measure each individual variable, all IT capabilities are measured using more than four indicators. Rather than asking identical questions in different wording, the indicators highlight dominant characteristics of the variable. This approach reduces the influence of bias, misunderstanding and increases the reliability of measures. For example: the instrument for IT culture (A2 ) is comprised of five indicators to measure the maturity of the IT capability (see table 4.7). For a mapping of other indicators see appendix C. Through 23 iterations the quality of survey questions was further refined involving three groups in three phases. Colleagues, academic experts and industry were consulted during the process. First, feedback from friends and colleagues emphasized the complexity and clarity of questions. Second, academic experts tested the line of reasoning and survey techniques from a theoretical perspective. Third, a community of practice (CoP) and business experts determined if target respondents would be knowledgeable enough to answer the questions. Additionally, in collaboration, relevant questions from a business perspective were added. The three primal phases refined multiple quality aspects and changed from using a spreadsheet, to a word processor, to finally using an electronic survey (see table 4.8). The spreadsheet focused on formation of mutually exclusive, collectively exhausting questions. The word processor corrected wording, sequence and length of the survey. The electronic survey mainly focused on testing the survey look and feel of participating, and on removing errors. Adding business relevant questions to survey had the largest impact that required retesting of the preceding quality aspects. The electronic survey was programmed using multiple online tools and thoroughly tested before invitations were sent. The online survey contains five major parts: the introduction, overall company details, the IT capabilities, further description and a thank you note. The survey contains 71 main questions from which 56 are in the obligatory second and third part and 15 in the compulsory fourth part. 54 4.3 Survey justification Table 4.7: Mapping indicators and sub-capabilities on IT culture (A2 ) ID Indicator Question Source CULT001 Service innovation is communicated as a main priority Business service innovation is communicated as a main priority to your IT organization. Loewe and Dominiquini (2006), Menor and Roth (2007), Oke (2007) CULT002 Senior IT managers encourage innovation Senior IT managers openly encourages business service innovation. de Brentani (2001), S. J. Edgett (1994), Loewe and Dominiquini (2006), Ettlie and Rosenthal (2012) CULT003 Risk-taking efforts and mistakes are tolerated Your IT organization allows risk-taking efforts and mistakes of staff working on business service innovation. de Brentani (2001), Drew (1995), Menor and Roth (2007), Melton and Hartline (2012) CULT004 Staff are empowerment to explore own ideas Your IT staff are empowered to explore their own new business service ideas. Ottenbacher et al. (2006), Menor and Roth (2007), Johnston (2008) CULT005 Financial and non-financial reward systems are present for innovation Your IT organization employs (financial or non-financial) rewards systems to better recognize new business service ideas that staff contributed. Drew (1995), Oke (2007), Loewe and Dominiquini (2006), Menor and Roth (2007) Data operationalization Data operationalization describes which concepts are analyzed and how they are turned into measurable tangibles. The indicators from the survey are translated into observable and measurable elements through development of a measurement index (Sekaran & Bougie, 2010). The indicators of the conceptual theoretical framework (see figure E.1) are assigned appropriate instruments to measure their maturity level (see table 4.9). These variables are new business service performance, the IT organizational contribution to new business performance, the IT innovation capabilities, and the innovative focus of the company (see figure 3.11). All the questions that are linked to the concepts are subjective and depend on the perception of the respondent. The four indicators for each capability are measured on a specific level using specific corresponding instruments (see figure 4.9). First, new business service performance (D) is divided in both the innovativeness and the extent to which it is able to achieve its business objectives. The innovativeness contains four question categories that are measured on an ordinal scale. Second, the IT organizational contribution to new business performance (C), considers both the quality and quantity. For the quality one question asks to grade the contribution (measured on a ratio scale). The quantity refers to the level of involvement and is measured on a ration scale. Third, for each of the IT capabilities (A) multiple questions are posed using a Likert scale on the underlying sub-capabilities. This study uses a five point Likert scale as an interval. Treating the sum of correct answers on a multiple choice test as an interval scale is perfectly defensible (Norman, 2010). The Likert scale is an ordinal scale that approximates an interval scale. Fourth, the innovative focus of the company (B) affects the contribution that an IT organization is able to make. The concept is measured through one question on a nominal scale that determines how the company intends to deliver value to its customers. 55 Research Design Table 4.8: Iterations survey formation Quality aspect Identifying the extent to which the questions measure the constructs Ensuring mutually exclusiveness of questions Establishing conformity of wording and terminology Removing biased and leading questions Adding business relevant questions Tuning question complexity and length to respondent knowledge Determining survey sequence, flow and time demand of survey Testing survey look / feel and removing errors Total (23) Spreadsheet 4 1 1 1 7 Word proc. Electr. survey 2 2 1 4 2 2 13 1 2 3 Table 4.9: Concepts, number of idicators and measurement levels Variables No. Measuring level indicators Dependent variables - Business service innovation performance D1 - Firm Innovativeness 4 Ordinal - Categories D2 - Meet business case objectives 1 Ratio - Percentage D3 - Exceed business case objectives 1 Ratio - Percentage Mediating variables - IT organizational contribution to effective business service innovation C1 - Quality 1 Ratio - Number C2 - Quantity 3 Ratio - Number Independent variables - IT innovation capabilities A1 IT-Business strategy alignment 6 Ordinal that approximate Interval A2 IT culture 5 Ordinal that approximate Interval A3 IT resources 4 Ordinal that approximate Interval A4 IT processes 4 Ordinal that approximate Interval A5 IT external collaboration 4 Ordinal that approximate Interval A6 IT tools 4 Ordinal that approximate Interval A7 IT staff 6 Ordinal that approximate Interval Moderating variable - Innovative focus 1 Innovative company focus 1 Nominal Data collection technique An electronic questionnaire was selected for a number of reasons (Sekaran & Bougie, 2010). Questionnaires are designed easily, delivered fast, inexpensive and can be answered at the convenience of the respondent irrespective of their schedule or location. Full versions of the survey were made with fluidsurveys.com, surveygizmo.com and confirmit.com. Finally the latter was tested and selected, based on company security policies (see figure 4.1). The participants for the survey were contacted through the three channels in which they were identified. First, the Accenture employees were asked to extend an individual email invitation to their contacts. This approach was chosen as the intimate relationship with their clients should increase the standard response rate of 10 percent for online surveys. Second, the program director of the CIO-platform was asked the same for his contacts. Third, the internet participant list was invited through email to take part in the survey. A total of 15 responses were retrieved, from which 1 from Accenture, 1 from the CIO platform and 13 through direct email (see table 4.10). A total of four emails were sent to the participants: an 56 4.3 Survey justification Table 4.10: Distribution of gathered responses. Channel Companies contacted 24 8 61 93 Accenture CIO-platform Directly Total Response complete 2 2 7 11 Response complete 1 1 13 15 announcement, the invitation, the friendly reminder and the final reminder. This approach varies for Accenture and the CIO-platform depending on priorities or prevalent policies. The letters were written in Dutch and English to address the native language of the participant (see appendix D). Several actions were taken to increase the response rate of participants in this survey. For instance, personally contacting every sampling unit and explaining the urgency of the research increased the motivation and willingness to participate. Further, participation in the online survey was rewarded with a comparison between the individual companies. Codification The electronic survey tool for delivering the survey was used to increase the coding accuracy. Types and restrictions were set on the entry fields which prevented illegal codes or inconsistent responses. Then, primal data answering was required to reduce omission (see table 4.11). Frequencies and scatter plots offer visual representations and tendencies of the responses to get a feel for the data. Tables and graphs were used to look for patterns and relationships through frequencies. Scatter diagrams examined preliminary correlative indications between the elements in the framework. Gathered data was visually analyzed using a trend line and checking for outliers. A Pearson test was employed to show preliminary signs that can potentially point to significant relations. In addition, a Chi-square test was used to address the goodness of fit between the expected and actual results. Table 4.11: Data operations to clean and analyze survey data Cleaning data Approach Resolution Coding accuracy: Illegal codes Open questions with numbers, grades and percentages will have numerical restrictions. These variables are checked on coding errors Follow up with respondent or determine if editing is justified Coding accuracy: Inconsistent responses Evaluate for each block of answers of respondents if they are consistent Follow up with respondent or determine if editing is justified Coding accuracy: Missing data Respondents should be able to answer the questions as will be required to continue. All variables will be checked on missing data Follow up with the respondent or compare the pattern of response to another respondent Coding accuracy: Omission Respondents should be able to answer the questions as will be required to continue. All variables will be checked on missing data Survey is extensively tested in advance to assure questions are interpreted correctly Coding accuracy: Univariate outliers Use frequency distribution or Boxplot to identify mild and extreme outliers Remove outlier records Correlation between items Analyze the directions of measures and answers Reverse direction or remove answers if necessary 57 Research Design Cleaning data Approach Resolution Main technique Data requirements Routine in Excel (1) /SPSS (2) Descriptive analyses to gain an overview of the data Frequencies Coding accuracy 1 - Frequencies Analysis procedure for main and sub hypotheses Relation - scatter plots Coding accuracy 1 - Charts/ scatter Relation - bivariate analysis Coding accuracy 2 - Analyze/ Correlate/ bivariate/ Pearson Goodness of fit chi-square Coding accuracy and median split 2 - Analyze/ descriptive statistics/crosstabs/chisquare 4.3.3 Validation and Reliability The population consists of 93 large companies and a proper sample requires around 74 responses (Krejcie & Morgan, 1970). Surveys are typically a data gathering tool for quantitative research. However, the population in this research is rather small which implies a more qualitative approach. In that case the sample has a confidence level of 95% and a 5% precision which are acceptable for most business research. Precision denotes the proximity of the sample parameter resembling the true population characteristic. Confidence, indicates with what certainty the estimated values are valid for the true population. The validity of the sample is established though industry experts and company rankings. The company rankings are used as sanity checks to validate the uniformity with company rankings of the Amsterdam Exchange index (AEX) and Elsevier. The AEX index, is a stock market index of Dutch companies that trade on Euronext Amsterdam. The index includes the 25 most actively traded securities on the exchange. The “Elsevier ranking of the top 500 companies in the Netherlands” was developed in collaboration with information supplier “Bureau van Dijk”. The ranking is based on the revenue the companies made in 2011 or 2010. The validity of the survey concerns the extent to which concepts, measures and conclusions represent the phenomenon in the real world. The research is of an exploratory nature, thus external validity like generalization is negligible and should be verified in further qualitative research. Three types validity are considered to assure the validity of the measuring instrument itself. These are content validity, criterion-related validity and construct validity. First, content validity ensures that the used measure includes an adequate and representative set of items that describe the concept. This is done with face validity that verifies the construct validity with industry and academic experts. Through multiple rounds with five experts it was made sure that the instruments measured the concepts. Second, criterion-related validity establishes if a measure differentiates individuals on a criterion it is expected to predict. Criterion-related validity is tested through concurrent validity, relating the instrument to another instrument that is assessed in the same survey. For example, for the IT capability resources, multiple instruments measure the maturity of the capability and an instrument is used to measure the importance of resources. All these instruments should correlate to validate criterion related validity. 58 4.4 Case study justification Third, construct validity establishes the extent to which the results from the measures in the survey fit the theories of the framework. The survey foremost examines correlations and considers convergent validity. Convergent validity establishes to what extent instruments that measure the same concept correlate. The maturity of IT capabilities such as the IT culture is measured with three or more instruments and the correlation between these instruments establishes construct validity. The reliability is an indication of the quality of the measures. Measures should be bias free, stable and consistent across time. The survey measures the constructs at one point in time and seeks preliminary insights into the validity of the framework. The survey should subsequently be repeated to examine the reliability over time. Additionally, for large samples internal consistency can be measured. Internal consistency tests whether instruments measuring the same construct will produce similar scores. The test is based on the correlations between instruments measuring a construct. This can be done by splitting the group of respondents in half or using statistical methods to measure the degree instruments are independent measures of the same construct. Moreover, a common measure for internal consistency is Cronbachs Alpha, making sure the correlation coefficient is high (1 being the maximum). 4.4 Case study justification The case study justification elaborates on individual parts of the design to carry out the case study. These parts include the chosen approach, unit of analysis, number and selected cases, data collection procedure and the quality of the method. The following paragraphs elaborate on the choices and justification of the chosen approach. 4.4.1 Case study design The sub-question requires investigation of the ways IT organizations contribute to business service innovation within large, digitized and innovative corporations. The SIIC framework illustrates the relationships between IT capabilities and effective business service innovation, tested via hypotheticdeductive logic and analysis (Par´e, 2004). Answering the sub-question strives for a description of the ways that allow IT organizations to contribute to business service innovation. Examples are modes of involvement, compositions of capabilities and patterns of capability application. A multi-case approach is preferred to a single case approach. A multi-case analysis provides more opportunity to describe cases in depth as suppose to the quantitative survey (Verschuren et al., 2010). Multiple cases are chosen to allow for replication of significant findings to other cases. A single case or experiment is relevant when an unusual, rare critical or revelatory case is considered under a single set of empirical circumstances (Yin, 2009). Single cases have the advantage of detail but the disadvantage of limited generalizability. Findings are only generalizable to other settings when more cases are tested under the same circumstances and confirm the findings. As no samples are used, the goal is theoretical or analytic generalization rather than statistical (Par´e, 2004; Yin, 2009). Unit of analysis The unit of analysis is the IT organization. This IT organization operates within an innovative, digitized company in banking, insurance, telecommunication, media or high-technology industries and drives value through business service innovation. Similar to the survey sample, the chosen industries are most innovative and rely above average on IT. The study will not examine sector specific characteristics because the business service innovation process and the way IT organizations can apply their capabilities will be comparable. Nonetheless, to enlarge generalizability one case 59 Research Design from the banking industry and one from the high-technology industry are chosen. By including both industries, significant findings can be replicated to other cases. Case selection In order to allow for similarities, two cases are carefully selected. Their analysis focusses on literal replication of theory, aiming to predict similar results (Par´e, 2004). In order to select the cases multiple sampling strategies were considered including critical case, theory-based, confirming and disconfirming cases, extreme or deviant case, typical case, intensity, criterion and convenience (Par´e, 2004). Although these categories are not mutually exclusive, theorybased sampling is adopted for this study. It is well suited for describing the framework and the deductive perspective of the study. The sampling strategy is used to find examples of a theoretical construct - thereby elaborating and examining it. Confirming and disconfirming sampling strategies are more suitable for explanatory research that aims to support or challenge understanding of the topic of study. Criterion sampling is worth mentioning as it can be used to identify cases from respondents that participated in the survey for an in-depth follow-up. A search strategy was applied combining companies in the survey sample and European companies pointed out in the literature study (see table 4.13). The search strategy focused on identifying recently introduced business service innovations that point towards a mature IT organization. The main sources of information are innovation service awards, internal Accenture pages, communities of practice, annual company reports, innovation experts and internet pages such as blogs and news sites. Table 4.13: Used search engines and search terms to select case studies. Search engines Search term combinations • Google search, Gardner and Accenture search • HBR magazin, Wired magazine and annual company reports • Innovation experts, communities of practice and multiple innovation awards • “service innovation”, “business service innvotion”, “IT innovation”, disruptive or break-through • award, prize, “top 100”or “top 10”, • financial, bank, insurance, high-tech, media, telecom • industry, sector, investment or budget Eventually 11 companies, that introduced an innovative business service in the last two years and indicated signs of mature IT innovation capabilities, were contacted. Initial interviews were conducted with five IT organizations including two banks, two high-tech companies and a telecommunications company. Both a bank an a high-technology company were selected for further examination on the maturity of their business service innovation processes. Using the developed case study protocol, a total of five interviews of one hour were conducted for these two cases. The other three initial interviews proved valuable for further understanding and illustrative purposes. Respondent selection For the two descriptive cases, viewpoints from several respondents are integrated to make the method more reliable. The level of reliability depends on the quality and number of interviews per case and the use of multiple data sources. The illustrative examples demand less reliability and are based on single interviews. The descriptive cases decrease bias by interviewing multiple levels and selecting respondents and informants. The respondents work within the IT organization and are involved in business service innovation. The informants are from another department or organization and are involved in the same business service innovation. 60 4.4 Case study justification 4.4.2 Data collection procedure Careful case planning is important for effective and efficient data collection. Cases have to be examined prior to data collection and effectively categorized for further analysis. The following sections elaborate on the collection techniques, data sources, analysis strategies and design quality for this study. Data collection techniques The selection of a theory-based case sampling strategy and the IT organizations for interviews, guides the selection of interviewees. The study takes a purposeful sampling strategy as IT organizations operate in large companies and innovation team compositions are undisclosed. Not all respondents and informants could be pointed out in advance therefore a lead respondent was selected to be interviewed first. The Chief Information Officer (CIO) from each case was contacted to assess interest and identify the lead respondent from the IT organization. The lead respondent was asked to support further sampling decisions. In consultation, a snowball or chain strategy was employed to identify which other staff to interview. Other sampling strategies target maximum information variation, understanding of homogeneous groups or acting opportunistic and follow new leads as they emerge (Par´e, 2004). They are not taken into account because they are not the goal or necessary for this study. Interviews can vary from fully structured, seeking concise answers like in a survey, to unstructured, addressing topics and formulating questions as they emerge. Semi-structured interviews are conducted to describe patterns between both the IT organizations and the constructs in the conceptual SIIC framework. Semi-structured interviews for gathering required information provides the freedom to respond to and illustrate concepts (Par´e, 2004). Data collection sources Case study research typically uses a selection of collection methods to combine information from multiple data sources (Yin, 2009). Business service innovation is a complex phenomenon and therefore multiple information sources are used. Using different sources widens the scope and may result in a fuller picture of the phenomena under study. (Yin, 2009) identifies six data sources including documentation, archival records, interviews, direct observation, participant observation and physical artifacts. Following from the size of the organization and specificity of the required information, case data is primarily collected through interviews. Case studies have the advantage of a direct focus on the study topics, and provided insight and explanation. Findings from interviews are compared to the survey results. Documentation is used to identify and select te cases. Direct and participant observations or artifacts are either too time consuming or not available. Data analysis strategy and techniques A data analytic strategy is chosen to guide the creation of a case report. Four strategies that can be chosen rely on theoretical propositions, development of a case description, using both qualitative and quantitative data and examining rival explanations (Yin, 2009). Development of a case description strategy is selected following from a positivist perspective and a descriptive study approach. A theoretical propositions strategy is based on theoretical propositions and hypotheses that shape the data collection plan and analytic strategies. A qualitative and quantitative data strategy is used when substantial amounts of quantitative data can be included in the study and statistical analyses can be performed. Examining rival explanations aims to define and test rivalling theories. The selection of a case study description strategy underlies the five data analysis techniques. The techniques are pattern matching, explanation building, time series analysis, logic models and crosscase synthesis (Yin, 2009). These techniques are further divided in types: 61 Research Design Table 4.14: Overview of data analysis technique selection Technique Pattern matching • Nonequivalent dependent variables as a pattern • Rival explanations as patterns • Simple patterns • Precision of pattern matching Explanation building Time series analysis Logic models Cross-case synthesis 4.4.3 Types ... • Simple time series • Complex time series • Chronologies • Individual-level logic model • Firm or organizational-level logic model • Alternative configuration model • Program-level logic model ... Description Used Compares a predicted pattern with an observed one. Related to independent and dependent variables for explanatory studies. Requires predicted patters prior to data collection for descriptive cases. Yes Analyses gathered data to develop an explanation for the case. Validates a number of presumed linkages between events in a series of iterations. Most useful in explanatory case studies. Traces a unit of analysis over several points in time to recognize general patterns, rising or declining trends, causal events or descriptions. No Examines a complex chain of events over an extended period in time. Cause-and-effect patterns that illustrate hot a sequence of actions will lead to goals. No Specifically relevant for multiple cases. Aggregates findings across multiple individual cases. Yes No Quality design: Data validity & reliability To ensure the quality of the case design four tests can be applied (Yin, 2009). These are construct validity, internal validity, external validity and reliability. Three tests have been applied throughout the case study to establish validity and reliability. First, internal validity is not relevant for descriptive or exploratory studies but applies to explanatory studies. It is not considered, as this type of validity seeks to establish casual relationships. Second, construct validity relates to the use of correct operational measures for the studied concepts. To meet the test of construct validity, multiple sources of evidence are used and key informants have reviewed draft versions of the case study report. Third, external validity links to the extent to which findings can be generalized to other cases. To ensure external validity two cases are studied. Fourth, increasing emphreliability and minimizing errors and biases is an important goal in positivist case research (Yin, 2009). Another investigator conducting a comparable research should be able to repeat the procedures and arrive at the same conclusions. To establish reliability a case study protocol and case study database are created. The case study protocol document describes the procedure that could be repeated subsequently. The protocol includes an overview of the case study project, field procedures, instruments for guiding the interviews and an outline for the case study report. The overview elaborates on the companies, the IT organization and introduced a business service. The protocol contain the topics of discussion and questions to be kept in mind during each interview. The interview data is transcribed and structured according to the case study protocol. The transcripts were shared with the respondents for feedback and further refinement. The case study protocols can be found in the appendix (F) with a summary and comparison between both cases. 62 “IT business alignment has a focus of 1-3 years. Innovation has a focus of 3 - 5 years ahead.” Survey respondent 5 Survey results This chapter presents the survey results of the tested hypotheses of the conceptual theoretical framework. The results of the survey are analyzed through a correlational study. Correlations do not examine causality but linear relationships between variables. The findings are used to answer the fourth sub question: SQ4 Which capabilities do IT organizations in large digitized companies require for effective business service innovation? From the 93 CIOs that were personally invited, 15 (16%) completed the online questionnaire. Although they occupy in time demanding positions and their insights are extremely valuable, the limited response places two restrictions on further analysis. First, the use of statistical analyses like t-tests and ANOVA is inappropriate. Data is more qualitative and analyzed using visual representations, crosstables and chi-square tests. Second, the results obtained from manual analysis cannot be generalized to IT organizations within large companies that operate within digitized and innovative industries. Disclaimer - Despite accurate data analysis, the number of survey responses limit the generalizability of the findings. Extreme care was taken to identify the appropriate population, to develop solid measurement instruments and to motivate the sample to participate. The results provide an initial indication of potential relations between the variables of the conceptual theoretical model. The findings cannot be generalized to the target population, and should not be interpreted as such. The conclusions from this chapter provide initial findings and understanding of presumed relations in the theoretical framework (see figure 5.1). The conceptual theoretical model illustrates the relationship between IT capabilities (i.e. culture, tools, resources), the quality and quantity of IT contribution to business service innovation, the innovative company focus and the business service performance (i.e. firm innovativeness, meeting business case objectives). The hypotheses for these relationships are categorized into three correlation types: 1. The direct relation between the IT capabilities (AX ) and the IT organizational contribution to effective business service innovation (CX ). 63 Survey results 2. The moderating effect of the innovative company focus (B1 ) on these relations. 3. The direct relation between the IT organization contribution (CX ) and business service innovation performance (DX ). Innovative company focus IT-business strategy alignment A1 IT culture A2 IT resources A3 IT processes A4 Quantity of IT organizational contribution to business service innovation B1 IT external collaboration A5 IT tools A6 IT staff A7 Quality of IT organizational contribution to business service innovation + C1 + C2 Firm innovativeness D1 Meeting business case objectives D2 Exceeding business case objectives D3 Figure 5.1: Conceptual theoretical framework The survey instruments test these relations and the results for each hypothesis type are subsequently described (see appendix E for a complete overview of visual and statistical results). Significant correlations only apply to the sample of participating IT organizations and are compared to the case study findings. The survey’s validity should be verified in subsequent research. 5.1 The relation with effective IT innovation capabilities This section examines the relations between the individual IT innovation capabilities and both types of IT organizational involvement in effective business service innovation. Survey instruments were used to test the hypothesis (see appendix E.1) of the conceptual theoretical model. Visual and statistical analyses were performed on the results. An interpretation of the findings is presented in figure 5.2 (see appendix E for analyzed data). Innovative company focus IT-business strategy alignment .479* .647** IT culture .492* .531* IT resources Quantity of IT organizational contribution to business service innovation .596** Quality of IT organizational contribution to business service innovation .724** .523* .583* IT processes .573* IT external collaboration .607** .458* IT tools .448* .448* IT staff *. Correlation is significant at the 0.05 level (1-tailed). **. Correlation is significant at the 0.01 level (1-tailed). Figure 5.2: Conceptual theoretical framework: results 64 Firm innovativeness Meeting business case objectives Exceeding business case objectives 5.1 The relation with effective IT innovation capabilities The results presented here are mainly based on statistical tests analyzing bivariate correlations. The visual interpretations (see appendix E.3) fully support these finding. For the chi-square test these findings are less strong, especially for the correlation between the quantity of IT organizational contributions and effective business service innovation. Nonetheless, both techniques show similar patterns and do not contradict the findings. A reason for the difference could be the limited number of respondents that do not allow each quadrant of the 2x2 crosstable to have the minimal required number of four responses. 5.1.1 Quantity of IT organizational contribution For the quantity of IT organizational contributions to effective business service innovation four out of seven IT innovation capabilities show significant correlation. The hypothesis for IT culture (H1b) has the strongest correlation (.647**) and is most significant (p ≤ 0.01, 1-tailed). Then IT-business strategy alignment (H1a), IT resources (H1c) and IT external collaboration (H1g) also correlate (respectively .479*, .492*, .531*) at significant levels (p ≤ 0.05, 1-tailed). For IT culture the significance could be the effect of three indicators that correlate at significant levels with the IT organizational contribution to effective business service innovation. These are IT organizations that communicated business service innovation as a main priority (.589**), in which senior IT managers openly encourage business service innovation (.591**) and that employ (financial or non-financial) rewards systems to better recognize new business service ideas that staff contributed (.499*). For IT-business strategy alignment the significance could be the effect of three indicators that correlate at significant levels with the IT organizational contribution to effective business service innovation. These are IT organizations that evaluated new service ideas based on the company’s strategy objectives (.496*) or the company’s technical capabilities (.457*), and where chief-level business staff are involved in strategic IT decision making (.537*). For IT resource the significance could be the effect of two indicators that correlate at significant levels with the IT organizational contribution to effective business service innovation. These are IT organizations that dedicate financial (.569*) and staff (.573*) resources to the pre-development phase. 5.1.2 Quality of IT organizational contribution For the quality of IT organizational contributions to effective business service innovation five out of seven IT innovation capabilities show significant correlation. The hypothesis for IT culture (H2b) has the strongest correlation (.607**) and is most significant (p ≤ 0.01, 1-tailed). Then IT-business strategy alignment (H2a), IT resources (H2c), IT processes (H2d) and IT staff (H2e) also correlate (respectively .573*, .458*, .448*, .448*) at significant levels (p ≤ 0.05, 1-tailed). For IT culture the significance could be the effect of two indicators that correlate at significant levels with the IT organizational contribution to effective business service innovation. These are IT organizations that communicate business service innovation as a main priority (.535*) and in which senior IT managers openly encourage business service innovation (.562*). For IT-business strategy alignment (H2a) the significance could be the effect of two indicators that correlate at significant levels with the IT organizational contribution to effective business service innovation. These are IT organizations that evaluate new service ideas on the company’s technical capabilities (.540*). For IT resources the significance could be the effect of two indicators that correlate at significant levels with the IT organizational contribution to effective business service innovation. These are IT organizations that systematically reserve time for the pre-development phase (.574*). For IT processes the significance could be the effect of two indicators that correlate at significant levels with the IT organizational contribution to effective business service innovation. These are IT 65 Survey results organizations that collaborate with other departments to generate new business service ideas (.563*) and have a formalized process for capturing and managing new business service ideas (.474*). For IT staff the significance could be the effect of two indicators that correlate at significant levels with the IT organizational contribution to effective business service innovation. These are IT organizations with IT staff involved in the pre-development phase that have a complete understanding of technology trends (.452*) and external business customer needs (.528*). 5.2 The moderating effect of the company innovation focus This section examines the effect of the innovative focus on the relations between the individual IT innovation capabilities and both types of IT organizational involvement in effective business service innovation. Applicable calculations proved unfeasible, therefore visual analyses are performed (see appendix E.3 for analyzed data). Quality of IT contribution to business service innovation Respondents were separated in groups with respect to their service value delivery strategy. Having a product leadership strategy should result in a higher contribution for similar capability averages. Figure 5.3 illustrates the relation that was expected to be found. A service value delivery strategy that focuses on product leadership should increase the correlation (steeper slope) between the IT capability and the quality of IT organization contribution to effective business service innovation. 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 IT service innovation capability opp. excellence cust. intimacy prod. leadership Figure 5.3: Example: IT capability on quality of IT organizational contribution However, the visual representations do not show this relation. To elaborate on the findings IT culture is selected as the capability has the most significant correlation for both IT organizational contributions (see figure 5.4). The data points of the graph are too dispersed to estimating potential effect on the relation. Companies stating they have a product leadership focus do not consistently have higher or lower quantity levels for the same IT culture average (i.e. 3.6). Three reasons are found for this limitation. The categories are not discrete (i.e. companies could focus on both product leadership and operational excellence), they cannot be tested with a single indicator and analysis require more responses. Nonetheless, the findings do indicate that the innovative focus could potentially have a direct effect on the quantity of involvement as data points for operational excellence are positioned on the left and customer intimacy is positioned on the right of the graph. 66 Quantity of IT contribution to business service innovation 5.3 The relation with business service innovation performance 100 90 80 70 60 50 40 30 20 10 0 1 2 3 4 5 IT culture opp. excellence cust. intimacy prod. leadership Figure 5.4: Correlation between IT culture and quantity of IT organizational contribution 5.3 The relation with business service innovation performance This section examines the relations between IT organizational involvement in effective business service innovation and business service innovation performance. Similar to the IT capabilities, visual and statistical analyses were performed and an interpretation of the findings is presented in figure 5.2 (see appendix E for analyzed data). 5.3.1 Quantity of IT organizational contribution The quantity of IT organizational contributions to effective business service innovation correlates significant with two out three business service innovation performance indicators. The hypothesis for firm innovativeness (H5a) has the strongest correlation (.596**) and is most significant (p ≤ 0.01, 1-tailed). Quantity also correlates (.583*) with meeting business case goals (H5b) at a significant level (p ≤ 0.05, 1-tailed). The findings are preliminary and can only be generalized to the companies that have participated in the survey. These companies are more innovative and more able to meet business case objectives when the quantity of IT organizational contribution is higher (see figure 5.5). 5 Firm innovativeness 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 0 20 40 60 80 100 Quantity of IT contribution to business service innovation Figure 5.5: Correlation between quantity IT organizational contribution and firm innovativeness 67 Survey results 5.3.2 Quality of IT organizational contribution The quality of IT organizational contributions to effective business service innovation correlates significant with two out three business service innovation performance indicators. The hypothesis for meeting business case goals (H6b) has the strongest correlation (.724**) and is most significant (p ≤ 0.01, 1-tailed). Quantity also correlates (.523*) with firm innovativeness (H6a) at a significant level (p ≤ 0.05, 1-tailed). Thus, the companies that participated are more innovative and more able to meet business case objectives when the quality of IT organizational contribution is higher. 5.4 Conclusion This chapter analyses the survey results to test the hypotheses of the conceptual theoretical framework. The findings provide an initial indication of potential relations between the variables of the conceptual theoretical framework. Therefore, the conclusions regarding the fourth sub-question cannot be generalized: SQ4 Which capabilities do IT organizations in large digitized companies require for effective business service innovation? Based on the literature seven IT capabilities are identified that are important for contributing to effective business service innovation (see figure 5.1). Six main hypotheses with a total of 34 combinations are analyzed to examine to relations of the theoretical framework in practice. From these combinations 13 have a positive correlation at a significant level (see figure 5.2). The 14 combinations for the effect of the company’s innovation focus cannot properly be examined but their analysis is not required to answer the fourth sub-question. In addition, the preliminary findings show no significant correlation for the remaining 7 combinations. The quantity of IT organizational contributions to effective business service innovation correlate significantly with four of the seven IT innovation capabilities. Those with more mature IT innovation capabilities contributed more often to pre-development activities of effective business service innovation. Consequentially, those companies in which IT organizations contributed more, are considered more innovative and better able to meet business case objectives. The quality of IT organizational contributions to effective business service innovation correlate significantly with five of the seven IT innovation capabilities. Those with more mature IT innovation capabilities received higher grades for their contribution to effective business service innovation. Consequentially, those companies that received a higher grade are considered more innovative and better able to meet business case objectives. All together, three capabilities correlate with both the quality and quantity of IT organizational contributions to effective business service innovation. Potentially, IT organizations with these mature IT innovation capabilities contribute more to effective business service innovation. Further, the companies of these IT organizations are more innovative and more able to meet business case objectives. The findings show that IT organizations in large digitized companies potentially require six out of seven of the capabilities for effective business service innovation. IT-business strategy alignment, IT culture and IT resources seem to have a relation with both of the quality and quantity of the contribution of IT to business service innovation. IT processes, IT external collaboration IT staff have a relation with either the quality or the quantity of the contribution of IT to business service innovation. IT tools correlated with none of the contributions for the participating companies. These findings support the notions found in the literature that development of the significant capabilities will positively influence company value created through business service innovation (see chapter 3). The next chapter examining the case study results provides detailed insight into the innovation processes and capabilities of two carefully selected companies. 68 “The IT activities are moving up the stack towards the most exiting part of IT.” The connected organization 6 Case results This chapter presents the case study results and elaborates on the individual parts examined for this study. A case study is an empirical inquiry. It pays special attention to the context to understand contemporary events in more depth (Yin, 2009). It is well suited to understand the interactions between IT organization contribution and their organizational context. Interviews with five companies were conducted that introduced innovative business services in the last two years and showed initial signs of a mature innovation process. After examining their IT innovation capability maturity, both a bank and a high-technology company were selected for further examination. Using the developed case study protocol, eventually a total of five interviews of one hour were conducted for these two cases. The findings are used to answer the fifth sub question: SQ5 How do IT organizations apply their capabilities to contribute to effective business service innovation? The question examines how the IT organizations of the interviewed high-tech company and bank apply the IT innovation capabilities. The question is descriptive in nature and the conceptual SIIC framework is used to structure the questions. The main constructs are further broken down in the case study protocol (see appendix F.1) but the associated questions are: • Could you describe how the growing importance of IT changed the role of technology for competitive differentiation in your industries? • How do ideas for business innovations get into your development portfolio? • How is the IT organization involved in the activities before development? • How do the IT innovation capabilities of your IT organization contribute to the generation, selection and commercial evaluation of business service ideas? The interview results are compared based on the SIIC framework (see figure 6.1). Both companies have introduced innovative business services in the last two years and exhibit mature IT innovation capabilities. Therefore, service innovation output and meeting business service goals are not analyzed. For the framework elements, pattern matching and cross-case analysis is performed. Pattern matching is based on a within-case analysis that compares the framework and actual patterns in both cases. Cross-case analysis couples the findings and searches for common patters between both cases. 69 Case results Internal and external contextual factors •  Innovative company focus IT (business) service Innovation process Screening Idea generation Commercial evaluation Pre-development (Doing the right things) Testing Developing Commercialization Development (Doing things right) IT service innovation capabilities Climate related •  IT-business strategy alignment •  IT culture Process related •  IT resources •  IT processes •  IT staff •  IT tools •  IT external collaboration Service Innovation output Business service innovation objectives Novelty •  New to market •  New to company Performance •  Meet objectives •  Exceed objectives Figure 6.1: Conceptual service innovation IT capability framework The combination of the framework, with the individual matching of patterns and cross-case search enhanced generalizability (Par´e, 2004). Each of the elements in the SIIC framework is described subsequently and evaluated in the conclusion. The first section provides background on both cases. The second section describes both analyses for internal en external contextual factors. The third section elaborates on the findings on the pre-development phase. The fourth section examines the IT innovation capability. The fifth and last section draws conclusions on the findings. 6.1 Background This section elaborates on the backgrounds and innovation activities of the IT organizations in both companies. First the high-technology company is described followed by the selected bank. The high-technology company provides a broad selection of tangible products, often IT enabled to offer the customer an experience instead of an easily imitable product. The company has three organizations adding to the innovation of experiences. The first is the digital innovation organization that was founded at the end of 2011. It is a catalyst for understanding digital innovation through developing digital strategies and thought leadership. The organization supports ideas during their development and stays involved until their market introduction. The second is the digital accelerator program that was co-founded by the digital innovation organization and the business at the end of 2012. Unlike the digital innovation organization, the accelerator only covers the pre-development phase. The program offers a supporting process which businesses can select to explore their business cases, for example around connected devices. The accelerator aims to support service innovations and accelerate the transformation of the company by helping to validate business propositions that were identified in the strategy track. It does this by: 1. Helping business units to envision how digital is changing their potential role in the way they deliver products. 2. Providing activities such as prototyping, digital innovation planning (DIP), rapid co-creation (RCC) and testing. 70 6.1 Background The third is a division within the IT organization called the connected product platform (CCP). The platform offers a generic service that is independent and not linked to a location, telecom operator or business vertical. The service makes it possible to connect products, enable online presence, interface with the company, link to other systems and deliver additional service. In addition, the platform offers knowledge and expertise to the business. The bank provides a range of financial services. Gradually the bank is transiting to mass customization to deliver differentiating experiences to their customers. The (service) innovations needed to realize this experience delivery through mass customization, is aided by the banks innovation organization. Being part of the banks IT organization, the innovation organization has five main tasks: 1. Trend watching: following market and technology trends that could present opportunities for innovation projects 2. Developing proof of concepts: to test if service is potentially successful 3. Increasing innovative capacity: essential since the innovation organizations success largely depends on the attitude of the organization towards innovation 4. Contributing to company strategy 5. Facilitating knowledge exchange: maintaining internal and external relations related to innovation Service thinking in a high-technology company Goods are commoditizing, they are copied more easily and their quality can be approximated. An example are LED lights that were copied within no time by a Chinese manufacturer. Service such as connected products are more difficult to copy. For example, an ecosystem in which goods communicate with each other is difficult to imitate. In these connected ecosystems a light flickers when you receive a message or a home cooker signals that a dinner has been prepared. The company is moving beyond service, towards shaping a full user experience which is impossible to copy. The unique selling point has extended from solely tangible products to offering user experiences. With the shift to experience design, service thinking is spreading throughout the organization. Design activities were traditionally focused on the design of products. Yet, the design department currently contains a team that focuses on the design of service experiences. Similarly, within research the scope broadened towards service research. To support this transition, new business models are required. A major challenge for the business is the transition of thinking from a business model that sells boxes to a service model. The business needs to adopt new models to be able to make a feasible business case for connected devices. Some divisions are focused on meeting targets and choose to introduce new products that offer short term revenues. When choosing between a connected baby camera and an unconnected baby bottle, these divisions would choose the latter because they are familiar with the market, the price point and predicted sales. Other divisions are more visionary and have a long term focus that includes innovation. Nonetheless, the business thinks, lives and breathes traditional manufacturing thinking which slows down the adoption of service offerings. For example, the LED light is an innovative product that uses an old business model. The business model still focused on selling boxes through physical and digital channels. The manufacturing and service perspectives fully oppose each other. The connected platform employs a subscription based model. The model is based on pay per use in which the costs depend on the level of use. Or when viewed from another perspective, the costs depend on the success of the system. However, old business models are unable to embed recurring costs after the point of sale. These cost are all categorized in the bill of material, and subscriptions become unwanted costs that limit creation of a transparent business case. Thus, from a manufacturing perspective, all costs are categorized as after-sale service costs that should be reduced as much as possible. From a service perspective, a company should strive for the opposite and sell as much service as possible. Even when employers are aware of such models and would like to use them, the business is unable to provide support. Currently, offerings in the web-shop or other digital sales channels are based on one-time transaction models instead of recurring revenue models. A business transformation is necessary in order to develop subscription based models. However, developing a service that makes use of new business models is easier said than done. The desire to take ownership of tangible goods is embedded in all generations of the current society and requires a change in upcoming generations. Developing new business models in practice involves a lot of risk and can put organizations out of business. 71 Case results 6.2 Findings on internal and external contextual factors This section describes the pattern and cross-case analysis of both cases. The collected data is structured according to the data collection protocol (see appendix F.1). The table section for contextual factors (see table 6.2) displays the questions, topics under considered and the answers that were provided (the table for the subsequent section is provided in appendix F). Each section starts with the high-technology company, then describes the bank and eventually compares both cases. Table 6.2: Analysis of the case study protocols Elements Bank High-technology company Could you describe how the growing importance of IT changed the role of technology for competitive differentiation in your industries? the IT component in new business services? The IT component creates a large part of the experience A central part of the new services is the hardware / software proposition that delivers experience strategically leveraging technology for competitive differentiation in industries? IT enabled service and experience are only competitive differentiating factors for banks moved from technologies to hardware-software combination that creates experiences that are hard to imitate focusing on specific trends? Mobile devices Data analytics and connected devices the driver of ideas? (market or technology) Market driven, experience design, customer journeys and business decides Market driven, experience designing, customer validation and business decides how IT changed the role of IT activities before development of new business services? The innovation department started with the arrival of internet banking Digital propositions are more complex and their pre-development is more critical. This lead to the digital innovation and digital accelerator organizations 6.2.1 High-technology company The company delivers experiences comprised of hardware-software combinations. The company rides the wave with technology innovation but will never become a pure service company. The competitive differentiator has moved from technologies towards design and experience. Technologies are hitting physical boundaries and Asian manufacturing capabilities are driving the increasing pace of hardware commoditization. The IT organization is increasingly involved in the early stages of development. IT has become a central part of the proposition and the experience delivered to customers. Three types of IT organizations can be distinguished in the IT organization. Corporate IT is a largely responsible for business administration systems such as enterprise resource planning (ERP) and knowledge management. Product IT offers embedded software and is not related to Corporate IT. Business IT is mostly embedded in the business and offers service specifically within that business. Corporate IT is mainly facilitating and enabling business value. Both Product IT and Business IT are more enabling and drive value. IT is no longer a facilitation organization, it has become more strategic and commercial. Furthermore, IT has been integrated into the innovation team. The IT organization 72 6.2 Findings on internal and external contextual factors partners with the business and provides them with knowledge and expertise of combining hardware with software. They develop prototypes, make essential cost estimations and contribute to the strategy. Together with other divisions, the IT organization is involved in every step of the Rapid CoCreation projects. These RCC projects are initiated by the business as they provide the budget and make the final go-no-go decision at the end of a project. The IT organization watches technologies, market trends and visits exhibitions to develop their point of view on technology. During idea generation the IT organization develops prototypes and gathers knowledge two to three weeks before a hackathon. During the first day of the hackathon they take an active approach and brainstorm on which technologies can contribute to the proposition. When ideas are selected, the IT organization determines which technologies are necessary and what their implications are for the current systems. Next, all the assets the departments prepared are integrated into a prototype en technically evaluated. Finally, the prototypes are commercially evaluated. The prototype is subjected to consumer testing to examine acceptance and give direction for further development. These tests seek validation of the experience rather than validation of the idea and should help to move the proposition forward. The IT organization helps to further develop the proposition with the team. Additionally, the IT organization makes the cost estimations that follow from the complexity and the implications for current systems. External consultancy companies are involved to estimate the revenues for the proposition. At the end, the business has to make a go-no-go decision. At this point the team is broken down, but a part of the IT organization could stay involved. If the business decides to continue to the development phase then digital innovation and the connected platform can still remain involved. The digital accelerator organization will not stay involved as they strictly focus on the pre-development phase. 6.2.2 Bank The IT organization plays a central role in the creation of new business value. Development of information technologies (IT) had an immense impact on the operation of the bank and the role of the IT organization within the bank. Banks have transited from product orientated companies to service oriented companies. Standardization and automation have made banks replaceable and the delivered service is their only differentiating factor. A large part of the service experience is created through IT. All service the bank launches makes use of IT and innovation is always linked to the IT organization. These developments led to initiation of the innovation organization in 2000 to address early innovation activities. Sponsorship for their innovation projects is established on management board level. One of the goals of the organization is creating added value for the customer using online technologies. Broadening the focus from creating value at the back-end to creating customer value, had implications for IT organizational activities. This translates into tasks for the innovation organization such as trend watching, developing and testing proof of concepts and contributing to the company strategy. The IT organization takes a proactive approach in all activities before the development. Further, although not officially defined, the role of the Chief Information Officer (CIO) determining the strategy of the bank is increasingly important. The future role of the CIO is embedded in its name and should be chief officer of information and innovation. With the introduction of the Internet in the 90s and currently mobile banking, the business and IT have become seamlessly interwoven. This integration gave rise to new concepts like crowd funding, which is entirely IT driven and the business is executed directly on the IT platform. This has a large impact on the bank. Further, online activities require less physical space and more automation. Straight through processing for example, requires less employees. In addition to standardized processes, the previously physical products have become virtual. An example are mortgages that a decade ago would require direct involvement of a salesperson. Currently, a major part the mortgage can be settled online and can make use of the personal adviser in that virtual 73 Case results channel when necessary. As a result of IT developments, banks are transiting from a product orientated company to a service oriented company. Standardization and automation have made banks replaceable and the only differentiating factor that they have is the service they deliver and the experience they create. IT creates a large part of the experience. 6.2.3 Cross case The IT organization plays a central role in each of the companies. Development of information technologies (IT) had an immense impact on the operation of the companies. The organizations argue that the companies are moving towards selling experiences. Both the bank and the high-technology company mention that experience is becoming the only competitive differentiator. Experiences are more difficult to copy and allow larger margins. The difference is that automation and standardization have made the bank replaceable. Instead, the high-technology company is facing increasing speed of technology commoditization. Both companies focus on different trends. The bank moved from online technologies to mobile applications. The high-technology company focuses on connected devices. Nonetheless, a large part of the experiences the companies offer contain IT and consequently changed the role of IT organizations. The IT organization is no longer facilitating but plays a central part in business value creation. The IT organizations partner with the business and contribute early on in the innovation process. The IT organization provides the business with knowledge and expertise of integrating technologies. Other common activities between the organizations are trend watching, selecting the adequate technologies, prototype development and cost estimation. 6.3 Findings on the pre-development phase This section describes the pattern and cross-case analysis of the pre-development phase of both cases. The section starts with the high-technology company, then describes the bank and eventually compares both cases. 6.3.1 High-technology company Pre-development activities are essential for digital propositions. IT and has become a central part of the propositions and requires a business transformation to facilitate these propositions. The digital propositions are more complex and require new business models and support for clear decision making. Pre-development activities can be used to analyze the implications of digital technologies. To enable this, the business and the digital innovation organization co-founded the digital accelerator organization that strictly focuses on the early stages of innovation. The organization introduced Rapid Co-Creation (RCC) projects that shape pre-development phase. The goal of the projects is to provide the business with maximum decision capability with minimum of investment and time. The projects take three months and have multidisciplinary teams. Teams have members from design, IT, research, digital innovation and part of the business lines. The projects follow an iterative process in which the following general steps can be identified: 1. Two - three weeks opportunity identification and consequent asset gathering (i.e. market information and prototypes) 2. One week hackathon to bring together the team and assets in a physical space (a) One day brainstorming and ideation (b) Three days asset integration and prototype testing (c) One day finalizing the prototype for consumer testing 3. One - two months proposition iteration and consumer validation 74 6.3 Findings on the pre-development phase 4. Go-no-go decision on the developed proposition by the business The three steps of the hachathon illustrate how the high-technology company organizes predevelopment activities. The steps in the projects follow the activities in the same sequence as the SIIC framework. The company has developed a systematical approach to consider these steps. The RCC projects iterate these steps at least three times, resulting in a set of deliverables. The pre-development process is milestone driven and becomes more structured during the development process. The RCC projects are considered to be a success. The teams provide the business with a reasonable sense of product definition, customer acceptance, business model and business case. The projects fulfill their goals and allow the business to make a decision in confidence. 6.3.2 Bank Pre-development activities have become a structural part of the funnel. The bank emphasizes that an organization should have a process in place and analyze the strengths and weaknesses of that process. For instance, innovation often revolves around generating the right ideas. However, if the selection and evaluation of those ideas is the weak spot, than it will block the funnel and prevent those right ideas from entering the market. The organization uses a funnel approach and divides the process into three phases: 1. Ideation and prototyping phase: ideas are turned into prototypes that expose their value and serve as input for the business case 2. Deployment phase: when a service is selected for deployment standard methods are used for implementations and achieving economies of scale 3. Maintenance phase: when the service is introduced it should be updated and maintained Each phase in the funnel process is equally important. Any activity that is weakly developed will form the bottle neck of the entire process and prohibit successful introduction. However, because the costs and efforts in the deployment phase will increase exponentially, selection of the right ideas early on is crucial. Selecting inadequate ideas will produce unnecessary costs and unwanted service. Customer journeys have become the standard method. They consider activities from the initial orientation of the customer to the after sales maintenance. A new method the bank is considering, is the lean start-up method (rockstart.com and startupbootcamp.org). Until now lean methods are generally used from a cost perspective although they could also be used from an opportunity perspective. The ideation and prototyping phase comprises the activities of the pre-development phase. Idea generation mainly takes place within the innovation organization. They watch technology and market trends, obtaining the majority of this knowledge from external sources. The bank uses financial service websites, congresses and innovation platforms such as Finnovate and Innotribe from Swift. The bank also uses investment funds financing financial start-ups, strategic suppliers, innovation awards (like the Accenture innovation awards) and research labs that investigate technologies/trends that match the bank’s portfolio. Other sources include close communities that enable reflection on operational processes and suggestions of improvements. An example of such a community is “denk mee met je bank”. Using crowd sourcing initiatives for ideas is considered but still at an early stage. All the ideas the innovation organization selects show early signs of value for the business. Evaluation of ideas is done together with the business. Next, the IT organization develops and tests a prototype. The innovation organization is too small to evaluate all the ideas themselves and always collaborates with other parts of the organization. IT and business closely collaborate and subject experts are involved to evaluate ideas for market opportunities. The ideas are evaluates based on a balanced range of objectives originating from both IT and the business. After evaluation, the innovation organization develops and tests a prototype to look for proofs of concept. For the commercial evaluation, the innovation organization determines the development costs and the value of the business case. They provide estimations and a proof of concept to the potential 75 Case results adopting business. The business has to decide if they want to move the service to the development phase. At the end of the pre-development process, projects are selected on their contribution to the business line specific objectives. These can include both financial and non-financial objectives. The financial opportunities are important because the adopter eventually has to exploit the service. On the other hand, banks operate in a mature industry in which it is challenging to get new customers. As a result, business objectives often focus on customer satisfaction and retention. 6.3.3 Cross case The pre-development phase and related activities are recognized by both companies. They both follow the steps of the framework to develop proof of concepts for the business. The largest difference is the used method. The bank primary uses customer journeys and the high-technology company develops RCC projects. The latter method is more structured and makes more iterations the further develop the prototype. Also the goals slightly vary. The bank’s IT organization delivers a proof of concept on which the business has to decide for further development. The goal of the RCC projects is to provide the business with maximum decision capability with minimum of investment and time. Both organizations argue that the pre-development phase is more flexible and becomes more formal in the development phase. Further, they identify a phase after the development phase. For the bank these activities are related to maintenance and changes. The high-technology company will continue innovation after the market introduction. They point out that these propositions are more similar to launching a website. It is not the first version of the site that will make or break it. It the company’s ability to continuously improve the website over time as they learn more from how consumers are using it. 6.4 Findings on IT innovation capabilities This section describes the pattern and cross-case analysis of the pre-development phase of both cases. The analyses examine how the companies organize the seven capabilities of the conceptual SIIC framework. The sections starts with the high-technology company, then describes the bank and eventually compares both cases. 6.4.1 High-technology company Staff was found to be one of the most important capabilities in all cases. Resources were argued to be a precondition to be able to start innovating. Further mentioned were IT culture and IT-business strategy alignment. The IT-business strategy alignment within the company is mature. The business and IT jointly develop roadmaps and the digital accelerator is a co-ownership between the organizations. The Chief Information Officer and Chief Strategy Officer are involved in the connected organization. Management has regular meetings to share the level of progress and is involved in strategic IT decision making. Additionally, the business strategy is used as input for the Digital Innovation Planning of the digital products and services roadmap. There RCC projects deliver a clear set of deliverables. The evaluation of propositions considered for further development is relatively mature. They are evaluated on market opportunity, technical capabilities, strategy objectives and available resources. Through the iterations with customers the value of the propositions is validated. Benchmark methods of external strategy consultants are used to determine the expected revenue of the proposition. The IT organization estimates the implications of the proposition on current service delivery systems. Based on the complexity, they make crucial cost estimations that can make or break a proposition. If the estimate is high then the proposition might not be considered, if too low 76 6.4 Findings on IT innovation capabilities then the proposition might fail after introduction. The IT culture is becoming more open and entrepreneurial. Entrepreneurship is encouraged both within the IT organization and on the company level. Entrepreneurship has become part of the values, and the attitude towards risk-taking and failure is changing. The current Chief Information Officer has been a successful entrepreneur and understands well which role IT should play. People are encouraged to take a proactive approach, to take accountability and execute the great ideas they come up with. This requires a culture that understands and does not stigmatize failure, but accepts it as a means to improve. People are allowed to fail as long as they can learn from it and become better. Ultimately those failures will help them improve and more effectively reach individual targets. Monetary and non-monetary rewards are not directly linked to service innovation. People are rewarded for hitting their targets and an entrepreneurial mindset will contribute to that. The IT resource dedication focuses more on dedicated staff and teams than on dedicated financial budgets. The business is co-owner of the digital accelerator and initiates and funds the RCC projects. The number of projects that are initiated depends on the appetite for innovation. Within the IT organization, no financial budgets or systematic time reservation programs are available for innovation. The connected platform, for example, funds all their innovation with obtained revenue. The organization has also obtained European innovation funding for further development of the platform. Despite, the IT organization dedicates both staff and teams to the pre-development process. The staff of the digital innovation and the digital accelerator organizations are fully dedicated to business service innovation. Further, teams are formed for the RCC projects that are fully dedicated to pre-development activities. The IT process is not formalized. Instead it uses a systematic method to organize the activities before development. The RCC projects are a joint effort with other divisions. For each project the IT organization collaborates with design, research, digital innovation and part of the businesses. Each division adds their skills and expertise to the process. As a result, knowledge of digital innovation is combined with forty years of business expertise, for example in shaving. The RCC projects enable the company to explore digital propositions. A business case is provided as input for the process and the team is asked to prepare prototypes. During the first day of the hackathon the ideas of the team are captured and managed. These ideas are then evaluated and integrated into a prototype. The experience and value of the proposition is valuated through at least three rounds of customer tests in a three month period. Selection criteria are set for each phase. The RCC team evaluates the ideas on technical implications and contribution to the business case. Customer feedback is used to set the goals and direction of the next iteration. At the end of the process, strategy consulting companies determine the expected revenues of the service and the business is able to make a clear decision based on the estimated costs and revenues. The performance of the process is determined on the deliverables at the end of the process. The process is driven by milestones instead of key performance indicators (KPIs). Ideas are vulnerable and should have opportunity to grow stronger, too many KPIs could kill the idea. The IT Staff involved in business service innovation are integrated in innovation teams of RCC projects. The innovation IT staff require different skills and experience than corporate IT staff. For pre-development activities multifaceted people are necessary that have both a hands-on capability and a business interface. The staff should have an open, entrepreneurial mind-set and have subject matter expertise. The IT organization recognizes two types of staff called thought leaders and hands-on-gurus. The thought leaders are people who have an overview of the overall domain. These leaders understand the effect of trends and are able to extract and leverage the opportunities and ideas for changing the company. The hands-on-guru, is somebody who can implement and build a prototype. Additionally, they should be able to have a discussion with business representatives during, for instance, the 77 Case results hackathons. The RCC projects are short, intense and tweaking should be done on the fly. Therefore, interpersonal skills are essential to collaborate with business people that might not have technical knowledge. The connected platform has a space where new possibilities are showcased. The space illustrates what opportunities and new value propositions the platform can create for the business. It points out that the IT organizations is looking beyond their traditional role of facilitators. The organization has understanding of both technology and market trends, and displays how their knowledge and skills can add value to the business. Although no specific training programs are available that focus on service innovation, the required skill set is part of the hiring policy. Having front line employees is a critical success factor for service innovation. The connected organization continues innovating its service after market introduction. The data returned from the connected is used to learn and further develop the service. Consequently, the staff managing the end-user relationship are included in the innovation process. The innovation tools for the pre-development activities are still rudimentary. Tools are mainly used for knowledge sharing and communication between teams. The company uses crowdsourcing initiatives such as “simply innovate”, but these ideas have not yet been used in the RCC projects. The tool has a more mature scope and looks for ideas that are further developed into proof of concepts of submitted intellectual property. The connected organization has a tool to apply real time changes and speed up development. The Digital Accelerator intends to develop a Rapid Co-Creation platform which would make it easier to build a prototype. Currently prototypes are built from off the shelf products. A RCC platform will speed up prototyping and discharges the need for mock-ups or shortcuts. The IT external collaboration is important for the RCC projects. The Digital Innovation organization was initiated at the end of 2001 and the Digital Accelerator co-founded with the business at the end of 2012. As not all knowledge and skill are currently present, many highly skilled staff are actually external. Strategy consultant companies are involved to estimate the expected revenues from the propositions. Technology and software vendors are suppliers of the generic IT innovations. Then, as the activities of the IT organization moves up the stack, IT service providers are used as outsourced foundations like datacentres and infrastructure maintenance. Customers are a crucial part of the RCC projects, they provide feedback on the experience and validate the value of the proposition. The company has an internal research division, and does not directly collaborate with other research institutes. 6.4.2 Bank Culture was found to be the most critical capability. Both culture and staff are deemed capabilities for the long term and therefore cannot be developed instantaneously. On the short term, creation of an innovation capability would start with getting support from a champion in management board, preferably the Chief Executive Officer (CEO). Next it is important to have an innovation process in place and to analyzes the strengths and weaknesses of the activities in that process. Getting the financial resources and building an external sourcing capability to watch technology trend and market trends for opportunities is also relevant. The bank’s IT-business strategy alignment is mature. Executive business staff are involved in strategic IT decision making and secure sponsorship for innovation projects. One of the tasks of the innovation organization is their contribution to the formation of the bank’s strategy. Although not officially defined, the role of the CIO in defining the strategy of the bank is increasing impor78 6.4 Findings on IT innovation capabilities tant. The innovation organization and business jointly develop roadmaps. The adopting business is involved early on in the selection process to evaluate new ideas for market opportunities. The innovation organization selects the innovation projects and develops a proof of concept. The innovation organization evaluates the ideas on a balanced range of both IT and business objectives. These are factors such as the customer experience, the financial benefit, the development costs fit with the strategy and fit with delivery systems. A service has to fit into the strategy of a business line and it should be possible to incorporate the service in the current systems. The IT culture of the innovation organization is open and entrepreneurial. Sponsorship for innovation projects is established on management board level and the CIO encourages entrepreneurial behaviour. An open and entrepreneurial culture make the organization more receptive to innovation. Organizations embedded in such a culture are more willing to consider new ideas and adopt innovations. The bank promotes an entrepreneurial mind-set and stimulates employees to explore new ideas. As a result, an amount of risk taking efforts is accepted and mistakes are tolerated up to a certain extent. The innovation course available to employees that emphasizes entrepreneurship, points out that the bank values an open culture. Additionally, non-monetary rewards recognize the innovative initiatives of individuals. A prime example of the open, innovation stimulating culture is the annual internal innovation award that is handed out by the CIO. The IT resources dedicated to pre-development activities are mainly the staff and budgets from the innovation organization. The organization is comprised of six staff members and operates within the IT organization. The staff are fully dedicated to innovation activities. They form teams with adopters from the business and subject experts to turn ideas into proof of concepts that can be evaluated. No programs such as Google’s 80/20 program are mentioned for the overall IT organization. The innovation organization has dedicated financial resources to test ideas that show early signs value for the business. Thus, the organization structurally dedicates staff, teams and financial to shape the pre-development phase. The IT process for service innovation heavily relies on internal collaboration without formalized processes. Activities before development are always executed in collaboration with other stakeholders. For each project is determined which stakeholders should be involved. This includes subject experts, the adopter and other parts of the business. Especially early involvement of potential business adopters intending to exploit the service is important. At the end of the pre-development phase, these adopters have to decide if they wish to continue further development. Early involvement of business adopters will stimulate support and increases adoption of innovation projects. The innovation organization has no formalized process for capturing and managing ideas, but is looking into crowdsourcing initiatives. Nonetheless, watching technology and market trends is an identified task of the innovation organization. Most of the ideas emerge outside the bank or within the innovation organization. The bank makes use of multiple external sources to attain ideas for new opportunities. The innovation organization initiates innovation projects to turn these opportunities into proof of concepts. The final evaluation of the prototype is more formal and should meet the needs of the business. The business has to decide if they wish continue development and move the project to the development phase. During idea generation, prototype development, testing and evaluation, no key performance indicators are used. Instead, specific selection criteria are set for each phase. As ideas are vulnerable at the start, the selection criteria are flexible and determined along the way. These criteria consider the innovativeness of the idea, the new technology involved and uncertainties for deployment. The selection criteria make ensure that the process is of a funnelling rather than a pipe nature. When a project moves to development, these criteria become more solid and clearly defined. This warrants against the unnecessary high costs associated with the development of inadequate ideas. The IT staff within the innovation team require different skills and expertise than other IT 79 Case results staff. Staff for innovation projects are hired on their background in and ability to look across silos of individual disciplines. Innovation staff is selected based on their entrepreneurial mind-set and affinity with estimating the impact of technologies. Especially interpersonal skills are essential: staff should possess the communicative capability to convey their ideas to others. They have to be result oriented and persistent. A special innovation course is developed to educate new employees about entrepreneurship within the organization. In addition, innovation employees are trained to finalize projects. It is in the nature of innovative people to start projects but not to finish them. Some project managers are exceptionally competent in finalizing projects, but have large difficulties coping with insecurities. Other project managers can more easily deal with ambiguity and resistance (be persistent). The IT tools for the early stages of innovation are mainly focused on communication and knowledge sharing. For the generation, technical and commercial evaluation of ideas, no spefic tools are used. The team is examining the possibilities for online crowd-sourcing but proceedings are still at a very premature stage. Instead, the team relies more on Lean and Agile methodologies to deal with their relative small size. The IT external collaboration is primary used for social innovations and to acquire knowledge and expertise. Projects are preferably developed and implemented internally. The bank collaborates with research companies to look for a match between the research agendas and the bank’s portfolio. A match can result in a joint effort to examine particular market trends or technologies. Additionally, knowledge and expertise on new subjects that is lacking in-house, are attracted from vendors or service providers outside the company. In that case the bank’s line organization is closely involved to secure knowledge flows and prevent the “not-invented-here” syndrome. The collaboration with investment funds that are financing financial start-ups is also a potential source of new ideas. Further, the bank engages in social innovation around important societal themes. This does not create direct value for the bank but for society. The social innovation refers to topics such as stimulating the housing market for newcomers. Social innovation has to be a joint effort and is only possible by organizing collaborations with other organizations and stakeholders that will take their piece of the pie. 6.4.3 Cross case All the IT organization of the companies find IT staff essential for business service innovation. Further, culture is often mentioned. The cross-case analyses is performed on these IT capabilities to look for patterns between the cases. The IT-business strategy alignment is mature in each organization. The IT organizations jointly develop roadmaps with the business. The chief information officer (CIO) of the bank is increasingly involved in strategic decision of the bank. The Digital Accelerator of the high-technology company uses the company’s strategy as input for their roadmaps. Executive business staff are involved in strategic IT decision making. The bank’s innovation organization has attained sponsorship for innovation projects on management board level. Within the high-technology company, regular meetings take place during RCC projects to share the level of progress. All the IT organizations involve the business early on in the pre-development process. The patterns for initiating innovation projects differ between the IT organizations. Within the bank projects are initiated by the IT organization, and within the high-technology company they are initiated by the business. The reason for this is that the former has its own innovation budgets and innovation for the latter needs funding from the business. At the end of the pre-development phase, the business in both of the cases decides if the innovation project continue to the development phase. For this decision both IT organizations support the business with a set of deliverables. Ideas for each company are evaluated on their fit with the strategy, fit with current delivery systems and the financial benefit. The difference is that the 80 6.4 Findings on IT innovation capabilities bank operates in a mature market and therefore often focuses on customer retention. Further, their innovation organization supplies estimations for costs and the expected earnings. The overall strategy of the high-technology company more often relates to driving market share, gross margin and EBITDA (Earnings before interest depreciation and appreciation) targets. Their IT organization estimates the complexity and the cost of the innovation, but not the earnings. Benchmark methods of external strategy consultants are used to determine the expected revenue of the proposition. The IT culture within both organizations encourages entrepreneurship and allows risk taking efforts and mistakes. Senior managers such as the Chief Information Officer (CIO) encourage entrepreneurship and own initiatives. This required a culture that understands failure and does not stigmatize failure, but accepts failure as a means to improve. The cultures of the organizations tolerate risk taking and mistakes up to a certain extent. People are encouraged to take a proactive approach and explore own ideas. The staff of the bank can execute innovation projects. The high-technology organization organizes competitions in the IT community. The bank is the only organization that directly rewards innovative behavior. The annual internal innovation award handed out by the CIO is a prime example of the bank’s non-monetary rewards. Within the high-technology company, an innovative attitude is indirectly rewarded with monetary rewards. People are rewarded for hitting their targets and an innovative attitude can contribute to that goal. The IT resources dedicated to early innovation activities in both cases comprise staff and teams. The bank and the high-technology company have a division within the IT organization that fully focuses on pre-development activities. The latter even co-founded the digital accelerator organization with the business that solely focuses on the early stages of innovation. All the organization have dedicated innovation staff and dedicated teams to pre-development activities. Only the bank had innovation budgets are available to test ideas that show early signs value for the business. Within the high-technology company divisions have to fund their innovation. Consequently, budgets for innovation project and prototypes were created by the business. Additionally, the connected organization from the high-technology company applied for European innovation funds. The IT process for the pre-development phase the organizations is flexible and become more formal during further development. Each of the organizations collaborate with other divisions on pre-development activities. The team of the high-technology company is however more diverse and includes a broader set of disciplines. Similarly, the organizations have a process to evaluate ideas. Nonetheless, the bank’s IT organization involves company experts and the business adopter for the selection. The high-technology company, relies on customers for the evaluation of the proposition. Additionally, their process is more structured and iterates on customer feed three times during a rapid co-creation project. The projects are also used to capture and manage the ideas in contrast to the bank that has no formalized process. The organizations agree that no key performance indicators should be used during the pre-development phase. Ideas are vulnerable at the beginning and are easily killed. The bank uses selection criteria for each stage such as innovativeness, the novelty technology involved and uncertainties for deployment. The high-technology company uses no criteria and depends on the customer the evaluate the experience and determine the direction for further development. The IT staff was mentioned as one of the most important factors for the generation, selection and commercial evaluation of new business service ideas. The organizations argue that having the right skills, experience and talent is essential for the contribution of the IT organization. The organizations point out that different skills are required for IT staff that are involved in innovation activities. Similarities in the mentioned skills are an entrepreneurial mindset, interpersonal skills and multifaceted people that are able to look across silos. They should be able to estimate the impact of technologies and trends. The bank strongly emphasizes that staff needs to be result oriented and persistent. Instead, the high-technology company added subject matter expertise and the abil81 Case results ity to extract and leverage the opportunities of ideas. Alike, both organizations apply hiring policies to match these skills. In addition, only the bank offers an innovation course on entrepreneurship and trains staff to finalize projects. Both of the organization have a physical space that exhibit their innovations. The difference is that the bank uses the User Experience lab for testing, and the high-technology company for illustrating the possibilities. The IT tools both companies used focus primarily on knowledge sharing and communication. Tools that specifically focus on pre-development activities such as crowd sourcing or rapid prototyping tools were still very basic or in an early stage. IT external collaboration was important for both cases. External parties such as technology and software vendors or IT service providers were used for their expertise. Further, research organization are involved in both cases for their analytical skills. The bank collaborates with reserach and knowledge institutes that investigate technologies and trends that match the bank’s portfolio. The connected organization of the high-technology company collaborates with the research organization of the company to jointly develop propositions. Customers were involved in the commercial evaluation phase to value the experience and set the direction for further development. Their involvement is optional for the bank and structural for the high-technology company. The high-technology company does at least three iterations during RCC projects in which each iteration ends with a customer test. Consulting companies were involved, but for different reasons. For the high-technology company they were involved for external estimation of the expected revenue. The bank collaborates with investment funds that finance financial start-ups as a source of ideas. 6.5 Conclusions This section presents the case study results. The three sections following the background performed pattern matching and a cross analysis on a bank and a high-technology company. The patterns of from the case studies are compared to the SIIC framework in order to formulate an answer to the fifth sub-question: SQ5 How do IT organizations apply their capabilities to contribute to effective business service innovation? The patterns on how these IT organizations apply their IT innovation capabilities are combined in three topics. The topics highlight the changing role of the IT organization, emphasize that a method is used rather than a formal process and arguing IT staff staff is essential for long term performance. Changing role of the IT organization - The evolution of information technologies changed the role of the IT organizations in both companies. Automation and commoditization of technologies stimulated these companies to move towards selling experiences. Experiences are difficult to copy and are becoming the only competitive differentiator. Although, both companies focus on different technological trends they heavily rely on IT to deliver experiences to customers. IT has become central part of in business value creation. In both companies, the IT organization plays a central role in the innovation process. They have moved beyond their traditional role of facilitator and actively contribute to business value creation within the company. These IT organizations have become a strategical partner of the business. The IT-business strategy alignment is more mature and capable to both shape and support the business strategy. Their maturity is established in five ways. First, the IT organizations are watching technology trends and market trends and identify opportunities for the business. Second, the IT organizations jointly develop roadmaps with the business. Third, they provide the business with knowledge and expertise of integrating technologies. Fourth, the chief information officer is increasingly involved in strategic decision of the bank. Fifth, the organizations 82 6.5 Conclusions not only develop proof of concepts but are able to estimate the complexity, technological implications and costs of the proposition. A method rather than a formal process - Both companies have a method rather than a formalized process for the pre-development phase. Ideas are vulnerable in the beginning, therefore pre-development activities are fluid, flexible and become more structured during the development phase (see adjustments in figure 6.2). The companies follow each of the steps of the conceptual SIIC framework and the IT organization is involved in each activity. Especially, selecting the right ideas is essential. Innovation is about creating the maximum decision capability with minimum of investment and time. The methods in the cases display five patterns. First, the IT organizations take a proactive approach towards each pre-development activity. Second, digital propositions are more complex. Therefore, the pre-development is a joint effort in which each discipline contributes the necessary knowledge and skills. Third, iterations with subject experts and customers are essential to validate the experience. Fourth, the process is milestone driven as key performance indicators could kill the ideas. Fifth, service innovation continues after the market introduction and allows for further changes and improvements. Internal and external contextual factors •  Innovative company focus •  IT component in new business service IT (business) service Innovation process Screening Idea generation Commercial evaluation Pre-development (Doing the right things) Developing Testing Development (Doing things right) IT service innovation capabilities Climate related •  IT-business strategy alignment •  IT culture Commercialization Process related •  IT resources •  IT processes •  IT staff •  IT tools •  IT external collaboration Service Innovation output Business service innovation objectives Novelty •  New to market •  New to company Performance •  Meet objectives •  Exceed objectives Figure 6.2: Adjusted conceptual service innovation IT capability framework Staff is essential for long term performance - Staff was mentioned every time and culture very often as an essential capability for IT organizational contributions to effective business service innovation. The availability of resources is a necessity and in both cases implies dedicated IT staff and a dedicated innovation team. Financial resources can come from both the innovation organization or the business. Both of the organizations have a physical space that exhibit innovation for testing or illustrating of possibilities. The organizations point out that different skills are required for IT staff that are involved in innovation activities. The organizations agree the staff should be hired on the following five skills. First, an entrepreneurial mindset. Second, interpersonal skills. Third, multifaceted staff that are able to look across silos. Fourth, able to estimate the impact of technologies and trends. Fifth, have a result oriented and hands-on approach. The skills of the staff are reflected in the culture of the IT organization. Both cultures encourage entrepreneurship and allow risk taking efforts and mistakes to a 83 Case results certain extent, as a means to improve. Senior managers such as the Chief Information Officer (CIO) encourage entrepreneurship and own initiatives. Staff are encouraged to take a proactive approach and explore own ideas. The organizations both offer staff opportunities to further explore their ideas. The IT tools both companies used were rather basic and primarily focused on knowledge sharing and communication. External collaboration was especially important to attain knowledge and skills that are lacking within the organization. These are parties such as consulting companies, research companies, IT service providers, software vendors and customers. They are used as a source of ideas, the development and evaluation of concepts, the validation of the experience and estimation of the revenues. 84 “Good tooling is helpful, but not essential. People are still dominant in the success or failure of service innovations.” Survey respondent 7 Discussion and conclusion This chapter examines the findings from the literature, the survey and the cases in the light of the previous state of the subject as outlined in the background. The first section summarizes primary findings to answers the main research question. The second section elaborates on the academic and managerial implications of the study. The third section describes the limitations of the study and area for further research. The fourth and final section reflects on my personal vision and experience. 7.1 Answering the main research question The objective of this study is to further develop understanding of the mechanisms for IT organizational contributions to effective generation, selection and commercial evaluation of business service innovation projects. The main research question that guided this research is: RQ How can IT organizations in large digitized companies drive value trough effective business service innovation? The findings from the five sub-questions perfectly illustrate how the the main research question of this study can be answered. SQ1 What are core concepts relevant for service innovation and how are they different from goods innovation? Four core concepts are identified on which service innovation differs from goods. These concepts concentrate on defining a service, the perspectives on service innovation, service innovation output and the service innovation process. First, This study works with S-D logic in which goods are mechanisms for service provisioning, rather than ends. The S-D logic definition of service: The application of specialized competences (knowledge and skills) through deeds, processes, and performances for the benefit of another, is more inclusive and defines how value is created. Placing service at the core of the firm’s value exchange captures the fundamental function of all business enterprises. Second, this study takes both a service oriented and a synthesis approach. The study examines non-technological drivers for service innovation and recognizes the applicability of technological innovation theories. Innovation literature is traditionally focused on goods and should be extended to also account for service. 85 Discussion and conclusion Service has unique characteristics that will require changes or additions to innovation concepts neglected in technological innovation research. Third, service innovation output is a new or renewal of existing specialized competence(s) (knowledge and skills) that are put into practice on specific dimensions and which provide benefit to the organization that delivers them. The service innovation output definition contains three elements that underline the service definition. These are the nature of service, the degree of novelty and the dimensions of innovation. The definition for innovation output is geared towards service and different from goods on all three elements. Fourth, many studies are available in the literature to describe the various activities for developing an innovative service. Most of these service studies use models that are developed for pure tangible products. In accordance with the chosen synthesis approach, a service innovation process structure is created against the analyzed theoretical background. The structure is based on innovation processes for manufacturing and accounts for service specific characteristics and process factors. To summarize, in order be able to drive business value, IT organizations have to understand the difference with technological innovation. All chosen definitions, taxonomies and perspectives in this study are service centered and can support IT organizations to refine their approach to organizing service innovation. Taking proper perspective is crucial as it has implications for the way service innovation is organized. It determines the structure of the service innovation process, the focus of service innovation output and what literature or theories are used. SQ2 What factors influence the performance of effective business service innovation? The innovation IT capability (SIIC) framework is process oriented and offers a systematic approach to effective business service innovation. The framework illustrates that contextual factors, the innovation process and the IT innovation capabilities influence service innovation output and business service innovation objectives. First, the contextual factors can be both internal or external and can form both success factors or barriers. The three most often mentioned critical barriers to business service innovation are processes, capabilities (knowledge and skills) and culture. The three most often mentioned critical success factors for business service innovation are capabilities (knowledge and skills), market/customer focus and processes. Second, the innovation process model of this framework is centered on doing the right projects. The framework offers a means for IT organizations to contribute to pre-development activities such as idea generation, idea evaluation and selection and commercial evaluation. The process is iterative, circular and allows activities to overlap. Third, this study will focus on measures that evaluate the performance and innovativeness of companies on a process level rather than an individual service level. These are methods that evaluate the innovativeness of companies using perceptual and non-financial measures. Fourth, IT capabilities enable IT organizations to systematically influence innovation activities in the pre-development phase. The capabilities are based on predominant influential factors that underlie service innovation activities and should mediate barriers or take advantage of success factors. To conclude, recognizing the importance of the pre-development process, the influential factors and looking for ways to influence these factors, allows IT organizations to improve their approach to service innovation. SQ3 What role can IT organizations in large digitized companies play within effective business service innovation? Incorporated in the question are both determination of the role IT organizations play and the way they can influence the effective business service innovation. First, the IT organization can take on three roles. In order of lowest to highest contribution to business value creation these roles are: facilitating, enabling and driving. This study focuses on the third role of IT organizations that allows them to contribute to effective business service innovation. The driving IT organization systematically scans new technologies that can be used to satisfy customer needs and create value outside company boundaries. These CIOs play the role 86 7.1 Answering the main research question of the innovator and are leading innovation or are partnering with the business. Second, in order to play a driving role, IT organizations should develop appropriate capabilities to contribute to effective business service innovation. Seven IT capabilities are distinguished linked to the majority and most important success factors and barriers types. The capabilities are divided into types that relate to either the innovation climate such as IT-business strategy alignment and IT culture, or the innovation process such as IT staff, IT resources, IT processes,IT tools and IT external collaboration. Both findings are combined in the conceptual theoretical model that looks both at how often the IT organization is involved in the innovation process and at the contribution they deliver to that process. Nonetheless, the maturity or IT capabilities and role IT organizations are allowed to play depends on the company’s appetite for innovation. The research findings from both fourth and fifth sub-questions are compared as they illustrate which capabilities show preliminary indications of a correlation with the IT organizational contribution and the patterns of how these capabilities are applied in practice. SQ4 Which capabilities do IT organizations in large digitized companies require for effective business service innovation? SQ5 How do IT organizations in large digitized companies apply their capabilities to contribute to effective business service innovation? A triangulation between the findings is performed (see appendix E.4 for an overview of the comparison between the IT innovation capabilities). Following from the capability ranking in the survey IT-business strategy alignment was found most important followed by IT external collaboration and IT culture. In agreement with the preliminary survey findings these capabilities correlate with the IT organizational contributions at significant levels. Interestingly, the findings differ from the cases that pointed out IT staff as most important. Further, IT tools were considered least important in both the survey and the cases. The survey findings solely apply to the sample of respondents and cannot be generalized to the identified population. Triangulation between each of the seven capabilities is as follows. IT-business strategy alignment correlates significantly with both the quality and quantity of IT organizational contributions. Accordingly, the IT-business strategy alignment in both cases is mature and capable to both shape and support the business strategy. Chief Information Officers (CIOs) are increasingly involved in strategic decision. The IT organizations watch trends and identify opportunities for the business. Further, they jointly develop roadmaps with the business and provide knowledge and expertise on integrating technologies, estimating complexity and estimating cost. IT culture correlates significantly with both the quality and quantity of IT organizational contributions. Similarly, the IT culture in both cases is mature and encourages entrepreneurship. They allow risk taking efforts and mistakes to a certain extent, as a means to improve. Senior managers such as the CIOs encourage entrepreneurship and own initiatives. People are encouraged to take a proactive approach and explore own ideas. The organizations both offer staff opportunities to further explore their ideas. IT resources correlates significantly with both the quality and quantity of IT organizational contributions. These findings stem with the arguments from cases that the availability of resources is a precondition for innovation. Both cases dedicate financial resources, IT staff and a dedicated innovation team to innovation. Financial resources that can come from both the innovation organization or the business. IT process formalization correlates significantly with only the quality of IT organizational contributions. Accordingly, both companies have a method rather than a formalized process for the pre-development phase. They follow each step of the pre-development process, they are involved in each activity and point out that selecting the right ideas is essential. Pre-development is a joint 87 Discussion and conclusion effort in which each discipline contributes the necessary knowledge and skills. Ideas are vulnerable in the beginning, therefore pre-development activities are fluid, flexible and become more structured during the development phase. The process is milestone driven as key performance indicators (KPIs) could kill the ideas. Service innovation continues after the market introduction and allows for further changes and improvements. Innovation is about creating the maximum decision capability with minimum of investment and time. IT staff in both cases require specific skills and experience that are embedded in hiring policy. One of the companies supports staff with an innovation course and training to finalize projects. Both organizations have a physical space that exhibit innovation for testing or illustration of possibilities. For the survey, IT staff was only significant for the quality of IT organizational contributions. For the case studies IT staff was mentioned every time and IT culture very often as an essential capability for IT organizational contributions to effective business service innovation. The difference can be contributed to the fact that more capable staff will allow IT organizations to increase the quality of their contribution to business service innovation but does not automatically make them more involved. Additionally, the mix of various maturity levels in the sample could be a possible explanation. The importance of IT capabilities could vary with maturity levels and IT staff can become more important as the the IT innovation capabilities mature. IT external collaboration in both cases includes parties such as consulting companies, research companies, IT service providers, software vendors and customers. They are used as a source of ideas, the development and evaluation of the concept, the validation of the experience and estimation of the revenues. For the survey, the capability was only significant for the quantity of IT organizational contributions. A reason is found in the cases where IT external collaboration was especially important to attain knowledge and skills that are lacking within the organization. Involvement of external parties to innovation correlates with IT organizations number of contributions IT organizational can make. However, preliminary findings seem to indicate that the involvement does not influence the quality of IT organizational contributions. IT tools were not significant for IT organizational contributions. Similarly, the IT tools for generation and selection of ideas in both companies used were rather basic. Tools primarily focused on collaboration such as communication and knowledge sharing. Summarizing, the evolution of service and information technologies changed the role of the IT organizations. Automation and commoditization of technologies stimulated companies to move towards selling experiences. Experiences are difficult to copy and are becoming the only competitive differentiator. Although digitized companies focus on different technological trends, they all heavily rely on IT to deliver experiences to customers. Therefore, IT has become central part in business value creation. Accordingly, the majority of study findings point out that IT organizations can play a central role in the innovation process. They have moved beyond their traditional role of facilitator or enabler. These IT organizations have become a strategical partner of the business and actively contribute to business value creation. In order to drive business value trough effective business service innovation, IT organizations in large digitized companies should consider the following four mechanisms. First, they should understand the difference with technological innovation. All chosen definitions, taxonomies and perspectives in this study are service centered and can support IT organizations to refine their service innovation approach. Taking proper perspective is crucial as it has implications for the way service innovation is organized. It determines the structure of the service innovation process, the focus of service innovation output and what literature or theories are used. Second, the conceptual service innovation IT capability (SIIC) framework is process oriented and offers a systematic approach to effective business service innovation. The framework recognizes the importance of the pre-development process and the influential factors that allow IT organizations to improve their approach to service innovation. Third, the contributions to effective business service innovation depends on the role IT organizations play and the way they can influence effective business service innovation. The IT organization 88 7.2 Implications can be facilitating, enabling and driving in creating business value. Companies should recognize which role their IT organization is currently playing and determine which role they should play. Fourth and final, driving IT organizations should develop appropriate capabilities to contribute to effective business service innovation. Therefore, seven IT innovation capabilities are distinguished, linked to the majority and most important success factor and barrier types. Preliminary insights tend to indicate that IT organizations should focus on IT-business strategy alignment, IT culture and IT resources. They seem to correlate with both the quality and quantity of IT organizational contributions in the pre-development phase. IT tools were very basic and did not show significant correlations with either quality of quantity. In order to improve the quality of their contribution, IT organizations can consider focusing on maturing their IT staff, IT resource and the IT process capability. Further, to improve the quantity of their contribution, IT organizations can involve external parties to attain knowledge and skills that are lacking within the organization. 7.2 Implications This section elaborates on the academic and managerial contributions of this thesis. The literature gap identified in the introduction identifies limited understanding of how service innovation output can successfully be developed. This study contributes to the little number of studies that have started to present drivers, strategies and challenges for successful innovation. 7.2.1 Academic implications The academic contributions of the study are related to the findings from desk research, the survey and the case studies. All findings are used to address the identified gap. For desk research and the analysis of the existing body of knowledge, both a service dominant logic and a synergistic perspective were taken. Service dominant logic is a relatively young paradigm and its use in this study explores new opportunities this perspective provides. The study converged the current body of knowledge to definitions for service and service innovation output that go with these perspectives. The definitions focus on applying specialized competences (knowledge and skills) through deeds, processes and performances. Using this focus contributes to the understanding of developing business service innovations. An overview of success factors and barriers is created on which IT innovation capabilities are developed. The IT innovation capabilities illustrate how IT organizations can take advantage or mitigate these factors. The conceptual framework extents traditional innovation theories with service specific adjustments. The conceptual framework provides a focused and systematic approach to influencing the performance of effective business service innovation. Although not scientifically proven, the development of the survey is the first advance towards an instrument for measuring the IT organizational innovation capabilities for the pre-development phase. The survey is constructed on solid literature and extensively validated by academic experts and business experts in the field of IT strategy. With further extensions the framework has potential for a general maturity measuring tool for pre-development effectiveness. An extension can be business specific service innovation capabilities that deal with customer involvement. The result indicate preliminary suggestions to the correlation between IT innovation capabilities and the IT organizational contributions. Other implications follow from executing the survey and point out that the joint business-academic undertaking is unfeasible for the selected sample. The population Dutch CIOs in digitized innovative sectors is constrained and approaching them is labor intensive. The IT organizational executives were not receptive to personal business contacts, which did not exhibit a positive effect on the survey participation. The case study technique proved to deliver valuable insights. The in-depth interviews, using the developed case study protocol, constitute an effective case study method. The case study protocol adequately touched the topics under examination. The results produced valuable insights, much of which could be directly related to effective business service innovation. Consequently, the employed 89 Discussion and conclusion methodology can also be deemed suitable for subsequent research. The case study delivers initial confirmations of patterns between the framework’s IT innovation capabilities and those in practice. The case descriptions can be used in subsequent research to compare the patterns to other cases. Those results can be used to possibly refine the framework or increase its generalizability. 7.2.2 Managerial implications The results from this study have multiple practical or managerial implications. The desk research on the body of knowledge allows those interested in the topic to quickly update their understanding and points of view on effective business service innovation. The literature describes a three layer framework suggesting that IT organizations can contribute to company value on three levels. Accordingly, IT organizations can act as a facilitator, enabler or driver of business value. IT organizations traditionally act as facilitators and the layer framework illustrated two options for extending their role. The study focuses on the third role in which IT organization drive value and contribute to effective business service innovation. The literature details which factors IT organizations most certainly face in the course of service innovation within digitized and innovative companies. Awareness of these factors can support innovation management of companies transitioning towards service oriented offerings and IT organizations involved in effective business service innovation. The IT organizations can develop the IT innovation capabilities based on these factors to take advantage of success factors or mitigate barriers. The conceptual service innovation IT capability (SIIC) framework visualizes the relations between the capabilities, contextual factors, innovation process and innovation performance. It provides a focused and systematic approach to influencing the performance of effective business service innovation. When striving for effective business service innovation, IT organizations can use the conceptual SIIC framework as a reference for the following reasons. First, the conceptual framework extents traditional innovation theories with service specific adjustments. The framework provides a blueprint of high level constructs and the underlying items. In addition, the results of the survey provide preliminary insight into which innovation capabilities can potentially be significant. Further, the case studies describe patterns of how driving IT organizations apply the framework in practice. Accordingly, an IT organization that contemplates cultivating an innovative culture could start multiple initiatives. They can begin communicating innovation as a priority, openly encourage and reward innovative behavior, empower staff to explore own ideas or accept risk-taking behavior. Second, the framework motivates IT organizations to consider the importance of both the predevelopment and development phase. IT organizations traditionally have a facilitating role and create business value through efficient service development. This includes reducing development cost and development time, while maintaining quality to create competitive advantage. In addition, the framework points out the importance of the pre-development activities for effective business service development. These activities allow IT organizations to contribute company value though adequate generation, selection and evaluation of business service innovations. The framework is a starting point for establishment of a formal method to establish these pre-development activities. Such method can potentially offer IT organizations a systematical approach and structural involvement into the business service innovation process. The developed survey can offer IT executives such as CIOs, IT directors or IT mangers initial insights into their organizational capabilities for effective business service innovation. The survey may used as a starting point for preliminary understanding of their strengths and weaknesses. The results can indicate which capabilities should be exploited or improved. The survey can be used as a starting point for further development by measuring the IT innovation capabilities at a certain point in time. Additionally, the survey permits IT organizations to monitor the maturity trajectories of IT innovation capabilities within the company. Between companies, the survey can potentially be 90 7.3 Limitations and further research used to compare the IT innovation capabilities as a potential benchmark technique. Both case studies describe the impact of information technologies on the roles of the IT organizations. The cases illustrate how the growing importance of information technologies has placed the IT organizations at the center of propositions. They illustrate in which manner the growing importance stimulated IT organizations to move beyond their role of facilitator towards an enabler or driver. On top of that, the case descriptions demonstrate to businesses how IT organizations can contribute to company value. The results can motivate businesses to look for ways to involve IT organizations into the service innovation process. Further, the case studies provide practical examples of the framework. The matching of patterns within the cases and between cases describe how both organizations structure their IT innovation capabilities. 7.3 Limitations and further research This section elaborates on the limitations of the study and provides recommendations for further research. The most important limitations of this study can be categorized into data restrictions and biases of the study. From the 93 CIOs that were personally invited, 15 (16%) completed the online questionnaire. They occupy in time demanding positions and their insights are extremely valuable, but the limited response limits the generelizability of the findings and validation of the conceptual theoretical capability framework. Further, analyses methods such as factor analysis and linear regressions are not applied. Exploratory and confirmatory factor analysis require more than 100 respondents and were not tested to analyze the validity of the construct in the survey. Then, linear regressions that test on linearity, coding accuracy, homoscedasticity and normality were not used. Also, the innovation focus of the company is omitted from the analysis as the electronic survey did not yield adequate data for analysis. Additionally, conducting the study from an academic institutions proved to yield the largest response. The limitations caused by the low response rate can be prevented in further research. One could even consider this study to be a motivation for a successive study. Biases were inherently caused by the design and execution of the project, or were introduced by external factors that are found in both the survey and the case studies. Extreme care was taken to identify the appropriate population, to develop solid measurement instruments and to motivate the sample in participating. Yet, survey respondents were self-selected, creating a subjective sample. Motivations for taking part in the diagnostic varied, but were not objective. For example, some respondents might have declined or inclined to complete the questionnaire, due to their perception of the involved institutions. In addition, the survey asks respondents to subjectively assess their company’s performance. This can lead to biased answers, indicating a more mature IT innovation capability as respondents may answer questions strategically. Nonetheless, the grades of the IT organizations that participated in the survey were evenly distributed suggesting that the influence of these biases are minimal. The cases selected for interviews also led to a biased sample. Furthermore, the interviewees, although selected from different departments, could present a one sided story tending towards socially favorable answers. The interviewer also introduced bias by his means of conducting the interview: favoring particular information and consequently asking specific questions. A similar bias is introduced by the interviewer during the interpretation of the collected data. Although a minimal number of two cases were selected for pattern-matching and cross-case analysis, triangulation between both the survey and cases increases the generalizability findings. Findings cannot be generalized to the target population, but only to those IT organizations that operate under the same conditions. Nonetheless, the limitations and biases are should be taken into account when evaluating the results of this research. 91 Discussion and conclusion Areas for further research can be deducted from the described limitations. Executing the survey on a larger scale will make it possible to test and validate the framework. An option is to carry out the survey internationally or specifically with IT staff involved in innovation instead of the chief information officers (CIOs). Each factors is tested with three to five factors. Collecting more then a hundred responses, using a logical sample design, will allow confirmatory factor analysis. Confirmatory analysis allows testing whether the survey questions measure the constructs in the conceptual theoretical framework. Additionally, when using other sampling designs, a greater response will increase the generalizability of the findings. Subsequently, the relation between each individual IT capability and the contribution to effective business service innovation can be examined to identify important IT capability sub-factors. The used measures for effective business service innovation performance should be further developed and validated. In contrast, efficient business service innovation performance can be measured through the development time, cost and quality. A uniform measure for the effective business service innovation of the innovation portfolio is still missing. This measure should use indicators for the innovativeness and the extent to which business objectives are met. For example, measuring the relation between systematical organization of pre-development activities and the novelty level of the innovation. A rigor set of measures makes it possible to compare innovation performance on company level rather then on individual service level. Future research could further look into combinations of departments or the relation to contextual factors and their effect on effective business service innovation. It is interesting to determine what the effect is of IT-business partnership variations on business service innovation performance. Former studies found that IT organizations can play different roles within companies. Determining the effect of these variations could help determining which roles IT organizations should acquire. Then, it is interesting to study the effects of contextual factors. First, to study the effect of different firm sizes and industries on the variations of IT-business partnership combinations. This will support companies in determining how to organize business service innovation. Second, to examine the influence of the company’s innovative focus on the IT organizational contributions to effective business service innovation. Third, to explore the relation between the extent to which service offers rely on IT and the IT organizational contributions. Research could focus on the organization of R&D capabilities and IT organizational capabilities within different company structures. For example, banks might prefer placing the responsibility for developing IT innovation capabilities within the IT organization. Opposed to high-technology firms that might place the responsibility for service innovation capabilities within R&D departments. It is interesting to explore future development of these structures and their effect on business service innovation performance. Similarly, it will be interesting to study the effects of developing IT innovation capabilities internally or obtaining them externally. Especially, the effect of outsourcing effective business service innovation on the performance of both the long term and the short term business objectives. Another avenue for further research is the identification of roadmaps for developing business service innovation capabilities. This implies developing measures to determine the maturity of service innovation capabilities. Exploring sequences and patterns in which innovation capabilities are developed in practice. Examining the dynamics and best practices to build these innovation capabilities. Finally, create a model for a dynamic capability that continuously adjusts and updates the service innovation capability to the company’s environment. 7.4 Reflection This chapter reflects on the topic, the process, methods used, and my personal vision. 92 7.4 Reflection First, business service innovation is complex and a challenging topic. Service innovation is a young field of study without consolidated theories and perspectives. New ways of service thinking are not embedded in many university curricula. Consequentially, literature is fragmented and required a comprehensive literature scan to gain adequate understanding. Second, the ambition of the project has turned the study into a labor intensive exercise. The large number of involved stakeholders made it difficult to narrow down or uphold the scope. Eventually, two empirical research types were conducted that doubled the required effort and research. Third, executing the study from an academic perspective proved to yield the largest response. Judging from the gathered responses, companies are more susceptible to a neutral or academic study. Despite the intimate relations that are present, IT executives seem hesitant to share the requested information with advising companies. The added value of partnerships between academic institutions and companies main stems from the contribution of knowledge and industry insights that have been essential for this study. Fourth, the study has challenged me in many ways and the study has greatly contributed to the capabilities of a future manager of technology. The actuality and relevance of the topic, for future survival of every company, has made this endeavor extremely valuable. On a daily basis I encounter companies struggling how to deal with service innovation and business service that revolutionize industries. After banking, insurance, telecommunications, movie, music and hightechnology companies, energy providers will soon digitize their portfolio. It will be interesting to see observe the consequences for their offerings, business models and competitive differentiation. To close, many companies consider service innovation as complex, intangible and the result of pure serendipity. I believe however that service innovation requires both the right perspective and for companies to do their homework. As Thomas Edison has put it “Genius is 1% inspiration and 99% perspiration. 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European Journal of Innovation Management, 4 (2), 95–112. 102 A Literature background Goods dominant logic Goods dominant (G-D) logic originated largely with economics in the 1800s and was the predominant paradigm until approximately 1980 (Lusch & Vargo, 2006). G-D logic views economic exchange in terms of production, in which design and manufacturing processes add value to distributed units of output (Vargo & Lusch, 2004). In G-D logic, this output is preferably defined to enable maximum efficiency in operations. Ideally, output is tangible, produced without interference of customers, standardizable and storable until sold. Services are considered supplements to goods and an inferior output (Vargo & Lusch, 2004) that can easily be copied by competitors Hefley et al. (2010). The characteristics of services differ fundamentally from goods according to scholars reasoning from G-D logic contend (Hill, 1977). Zeithaml, Parasuraman, and Berry (1985) conducted a literature review on service characteristics and examined 46 publications by 33 authors from 1963 to 1983. They found that the four distinct characteristics are most commonly cited namely; intangibility, inseparability, heterogeneity and perishability. A subsequent study (S. J. Edgett & Parkinson, 1993), expanding the period from 1963 to 1990, analyzed 106 publications and came to a comparable conclusion. Edvardsson, Gustafsson, and Roos (2005) argue that Sasser, Olsen, and Wyckoff (1978) were the first to mention these characteristics in a textbook. Intangibility is recognized as the most important characteristic (Alam, 2006a) as it empathizes the essence of most services. A service is non-physical and in essence a series of interactions between customers and service providers during service delivery (Menor, Tatikonda, & Sampson, 2002). Inseparability underlines that the production and consumption of a good can be separated and that a service is produced and consumed simultaneously. Heterogeneity means that the variability in quality of delivered goods is relatively constant compared to the delivered quality services which is much more volatile. Perishability concerns the fact that services, unlike goods, cannot be stored. Consequently, the lack of inventory can lead to problems in demand and supply. These four characteristics have been used in many studies (Lovelock, 1983; Atuahene-Gima, 1996; Alam, 2006a) and multiple other characteristics were added since. For example, Johne and Storey (1997) captures the characteristics under three main headings named intangibility, heterogeneity and simultaneity (as an alternative to inseparability). However, from all the other suggested characteristics, none have been widely accepted (Edvardsson, Gustafsson, & Roos, 2005). 103 Literature background Scholars describe electronic services (e-services) as category in addition to goods and services. E-services are regarded as a new product category in which service production (software) and service outcome (customer benefit) can be separated. The emergence of information and communication technologies (ICT) like telecommunications, data networks and the Internet, has enabled increasing possibilities for services (Bouwman et al., 2008). Hofacker et al. (2007) argue that the spread of ICT led to the appearance of e-services and continues to transform business, marketing, and consumer behavior. The authors evaluate how the properties of services might apply to eservices. The distinct characteristics of e-services require a customized development process that is different from traditional new service development (Riedl et al., 2009). Although this study recognizes the value of information technologies (IT), they will not be further elaborated upon. For a more thorough discussion of e-services literature consider Hofacker et al. (2007). Further, just like goods before them, services are increasingly becoming a commodity. An example is the subscriptions of mobile telephone operators that sell subscriptions solely based on the price of operation costs. After service Pine and Gilmore (1998) consider experiences as the next step in economic value creation. This new category allows further differentiation and the ability to charge a premium price. Services are often defined in the context of goods, with manufacturing-oriented concepts that do not always fit their nature. Within G-D logic, scholars view services as byproducts of goods and see the service sector to include all economic activities whose output is not a product or construction (Quinn, 1988). Hill (1977) defined a good as a physical object which is appropriable and, therefore, transferable between economic units. He defined a service as a change in the condition of a person, or of a good belonging to some economic unit. As the service component in goods started to grow, and services increasingly made use of tangibles for their delivery, the distinction between goods and service became less strict. For example, a car is regarded as a pure good and a taxi as a pure service. However, variations of rental models have appeared that make use of new business models such as car leasing, car rental or flexible payper-use models (BMW’s DriveNow, Daimler’s car2go and Zippcar). These examples are no pure service nor a pure good. It has been argued that a clear strategic analysis of all service categories is unfeasible due to the broad range of service types within an economy (Ottenbacher et al., 2006). Instead of viewing the distinction between goods and services as a dichotomy, scholars started to see a goods-service continuum. (Oliva & Kallenberg, 2003; Vargo & Lusch, 2004; Bouwman et al., 2008). On one end of the spectrum pure goods are delivered, while on the other end solely services are being produced. For example, along that continuum a car could be sold (good), leased, rented or used to offer a cab ride (service). However, most market offerings lie between both extremes. The inability to categorize the market offerings (Evanschitzky et al., 2011) points out the inadequacy of the classification. Attempts to delineate between goods, services and other categories, resulted in a wide range of service definitions (De Jong, Bruins, et al., 2003; Spohrer & Maglio, 2008). Edvardsson, Gustafsson, and Roos (2005) conducted a literature review and selected 34 studies to analyze service definitions. The researchers found that most scholars consider services to be activities, deeds or processes, and interactions that deliver a value, an experience or a solution to customer problems. For example, Gr¨ onroos (2001) emphasizes that a service is essentially a process consisting of a series of activities that leads to an outcome different from a physical product. De Jong, Bruins, et al. (2003) argue that a service is only a service when it is being delivered. Hipp and Grupp (2005) argue that it is difficult to combine the various service characteristics identified in the literature into one definition. Given the difficulty, Spohrer and Maglio (2008) review a selection of definitions available in the literature. The authors choose to combine service definitions of Fitzsimmons and Fitzsimmons, and Hill to describe services as; A service is a time-perishable, intangible experience performed for a client who is acting as a co-producer to transform a state of the client. 104 When reasoning from G-D logic, this definition is considered in this study. The definition integrates the findings from Edvardsson, Gustafsson, and Roos (2005), and reveals that the client plays an essential role in co-production activities and the co-creation of value (Spohrer & Maglio, 2008). Service dominant logic Reasoning from a G-D logic paradigm has lead to misconceptions of several fundamental principles of S-D logic. Using three of these dominant misconceptions, the scholars Lusch and Vargo (2006), Vargo and Lusch (2008) summarize their position on service: 1. Treating services as what goods are not, is a goods-dominant (G-D) logic term and inconsistent with S-D logic. There is no plural services, indicating intangible units of output. There is only singular service, indicating a process of doing something for someone. 2. Economies have always been service economies in which service is the basis of exchange. Manufacturing is just a special type of service provision. Claims for a growing or revolutionary service economy are false and result from treating services as alternative forms of products, and the associated classification system. 3. Value is always co-created with customers in which the benefit of the unique experience is determined by them (value-in-use). If tangibles are used as vehicles of service they might be co-produced but their value is always co-created. Value-in-exchange through of goods and services that is determined on the point of exchange originates from G-D logic perspective (Vargo & Lusch, 2008). Other taxonomies of service innovation processes Besides studies that show that service innovation processes can be classified on their activities, other studies focus on technical trajectories or forces that drive innovation patterns. Three common taxonomies will be discussed, for further elaboration on innovation process taxonomies see Gallouj (2002). Most popular, is the taxonomy and theory of Pavitt (1984) that focuses on the diffusion of (information) technologies. The author analyses sources of technology and company types. The taxonomy considers both different groups that are present in industrial sectors and the knowledge flows between these groups. The primary activities of these groups lead to different trajectories of technological change. The author groups the trajectories into the following four firm categories: 1. Supplier-dominated firms are mostly agricultural firms and traditional manufacturing firms such as textiles and footwear. These firms rely on sources of innovation external to the firm. Most innovations come from suppliers and sometimes large customers and governmentfinanced research. 2. Scale-intensive firms includes large firms producing basic materials like glass and metal and mass-production firms such as automotive and consumer durables. These firms produce the majority of their own process technology, but also rely on sources external to the firm. 3. Specialized suppliers includes smaller specialized firms that produce specialized machinery and high-tech instruments. These firms produce a relatively high proportion of their own process technology which they sell to other firms. 4. Science-based firms are high-tech firms developing products and processes mainly in the pharmaceutical and electronic industry. The source of innovation for these firms are mainly R&D activities taking place both internally and at universities. 105 Literature background Critics argue that this taxonomy is disproportionate as supplier-dominated firms create 70 percent of economic wealth (Gallouj, 2002). Also, service activities are heterogeneous in nature and a bank, for example, will behave different than a logistics company. The taxonomy does not account for the variety of innovation trajectories in service and presupposes that it is straightforward to distinguish between products and processes. Further, the taxonomy does not account for other types of innovation such as incremental or organizational innovation. As a reaction to some of the limitation and objections, Pavitt, Robson, and Townsend (1989) add a fifth, an information or knowledge intensive trajectory. These are companies that use information and computing technologies to create opportunities for software-based technical change in processing information. Nonetheless, service companies in this new trajectory are still dominated by suppliers of information technologies. Miozzo and Soete (2001) make an advancement to Pavitt’s taxonomy that accounts for the heterogeneity of service. The scholars identify 3 main types of firms that are divided in subgroups. 1. Supplier dominated firms is divided in both personal service companies and public/social companies. Personal services companies are hotel, catering and retailing companies. Public and social companies is made up of education and health service companies. 2. Network companies can be both physical and informational. Physical network or scaleintensive service companies use tangible mediums for delivery such as in transport of wholesale trade. Information network companies use codified information as a medium for service delivery, examples are finance, insurance and communication companies. 3. Specialized suppliers and science-based services include small companies that have particular relationships to R&D, information technologies (IT) and telecommunications. Another mode looks at the forces that dive innovation processes. (Sundbo & Gallouj, 2000) identify the following six innovation modes in services firms: 1. The classic R&D pattern rarely occurs in service firms and follows linear technological innovation trajectories. Service companies that do follow this pattern ordinarily innovate by interacting with sources or actors following complex non-linear patterns. 2. The service professional pattern happens within medium size firms like consultancy and engineering firms devoted to knowledge intensive business services. These companies follow non-formalized structures in which companies sell competencies and problem-solving abilities rather then service products. 3. The organized strategic innovation pattern is most typical within the service sector. Companies with this pattern own no permanent R&D innovation department. Strategy or innovation organization guide idea development which considered to be the responsibility of every employee. 4. The entrepreneurial pattern occurs within small companies without R&D departments. They are commonly start-ups that mainly sell initial radical innovation. 5. The artisanal pattern is prevalent within small operational service companies. The companies such as cleaning services, hotels and restaurants do not have an innovation strategy or R&D department. These companies are conservative, less innovative and depend little on technologies. 6. The network pattern occurs when multiple service firms jointly create a network firm. The network firm innovates on behalf of its member firms and, in principle, could have an R&D department. Examples are found in tourism, insurance and banking industries. Finally, another mode is to classify innovation processes, is based on way they are initiated. Gallouj (1998) envisions three innovation types named ad-hoc, anticipatory and formalized innovation. 106 Additionally, Oke (2007) adds me-too innovation to this list. Often, these categories are used to characterize innovation products in similar manner as innovation novelty or innovation dimensions discussed earlier. However, the taxonomy is more suitable for processes as they apply to causes that set the innovation process in motion. • Ad-hoc innovation is a spontaneous process, the resulting service products are sometimes only considered an innovation afterwards. • Anticipatory innovation results from monitoring and listening to new needs of client and technological, economic, social or institutional change. Relevant knowledge and expertise is collected and accumulated in order to solve an anticipated problem. • Formalized innovations result from creating order in service characteristics and functions. Service functions which are often vague and unformatted, are given form, specified and made concrete. • Me-too innovations arise within companies that choose a fast follower strategy. These companies quickly copy innovation products from competitors in an attempt to create a slightly better version with less development costs. Design methods for service innovation processes Service innovation processes can be complex, costly, time consuming and can fail easily, but are essential for the growth and survival of organizations. A number of models and approaches have been developed to support the innovation processes of companies. Five service design tools, techniques and frameworks available in the service literature are: • Quality Function Deployment (QFD) is a method that translates customer needs into service characteristics. QFD focusses on product development and quality management. The method allows prioritization of service characteristics and simultaneously sets service development targets and warrants design quality (Smith et al., 2007). • Service Blueprinting focuses on consumer experiences. It deliberately designs the customer journey and points of interaction. This method makes is possible to identify potential points of failure and poor service delivery (Smith et al., 2007). • Service Concept Definition (Goldstein, Johnston, Duffy, & Rao, 2002) is a means to make a service concept more explicit. The definition describes what the innovation concept comprises, how that is achieved and ensures integration between the two. The service concept assist in determining the balance between customer needs and the strategic intent of the organization. • Augmented Service Offering (ASO) analyses the complete service offering from the customers perspective (Storey & Easingwood, 1998). A service purchase is not only influenced by the service itself but also by other factors such a company reputation and the quality of the interaction between the company’s system of staff with customers. • A job-centric approach (Bettencourt, Brown, & Sirianni, 2013) to service innovation does not focus on the customer evaluations of current offerings. The approach analyzes the customer job instead of the service itself. After identifying the job that customers are trying to get done, service innovation efforts will become more structured and predictable. For further discussion on service design methods and tools please see Stickdorn and Schneider (2010). The authors describe an approach to thinking about innovation and provide an overview of the process, methods and tools that can be used. 107 Literature background Three generation of stage-gate schemes Cooper (1994) distinguishes between three generations of new product development schemes highlighting the advancement of the model. 1. The first-generation scheme was NASA’s Phased review planning process, developed in the 1960s. The scheme broke development down in discrete phases with review points at the end of each phase. Funding for the next phase depended if certain conditions had been met. The first scheme tended to exclude marketing and manufacturing and tended to be only an engineering or technical scheme. Further, the scheme was used as a control mechanism to ensure the project was executed as planned. The review points were rarely used to determine if the product would be a potential business success and should be continued. These limitations led to the next generation of schemes. 2. This second-generation scheme emphasizes that product development is a cross-functional activity. Also, the scheme has tougher decision gates with clear go/no-go metrics or selection requirements. These additions caused several new problems. Projects would slow down, because they could not overlap multiple stages. Then, before projects could move to the next stage all tasks had to be completed. Another problem was that general selection criteria did not allow project prioritization. The scheme does not include mechanisms for delay, tying scarce resources to top-priority projects and possibilities to skip stages. 3. The third-generation scheme focuses on increasing the efficiency and flexibility of the former stage-gate model. This generation allows activities to cover more stages in order to speed up the process. Also, the decision criteria for the gates are flexible, as each project is unique and has its own routing through the project. 108 B Studies on influential factors 109 110 Research description The study examined the role of product innovativeness in different new service development patterns and performance outcomes. 11 factors are significantly linked to service performance-success or failure-most in a convincing way. What factors separates very successful new service products from ordinary within financial services considering three performance dimensions: financial performance, relationship enhancement, and market development. Source Avlonitis et al. (2001) Cooper and de Brentani (1991) Cooper, Easingwood, et al. (1994) (Continued on next page) Data was collected through a mail survey among 491 firms in the financial services sector. Data on 173 new financial services was obtained from the responses that were all considered to be commercial successes. A 10-page self-administered questionnaire examined the new service development and launching practices in the financial industry of Greece. new service development project leaders in 84 financial companies responded providing data on 80 successful and 52 unsuccessful financial services developed within the last three years. Initially, exploratory interviews were conducted with senior managers in 25 commercial financial services companies, then data on 56 successes and 50 failures was obtained through self-administered questionnaires mailed to different managers in 37 firms. Research Method Table B.1: Studies on succes factors 1. Innovative technology 2. A market-driven new product process 3. Effective marketing communication • Synergy • Product / market fit • Quality of execution of the launch • Unique/superior Product • Quality of execution of marketing activities • New service development process formality • Cross-functional involvement Factors New service development success (Market Development) New service performance New service development success Objectives Studies on influential factors 111 Research description How do firms measure success and failure in new services? What project variables characterize new service success? How do the characteristics that distinguish services from physical products impact on new service performance? Investigation of new services success and failure in the business service sector This article reports on five new service development scenarios that characterize a large sample of industrial service ventures. The five scenarios, three of which are associated with success and two with failure, can shed light on the types of new industrial service development situations. Source de Brentani (1989) de Brentani (1991) de Brentani (1995) (Continued on next page) A survey among 148 managers from 115 Canadian companies in a broad range of business service industries gathered data on 150 successes and 126 failed projects. A survey among 148 managers from 115 Canadian companies in a broad range of business service industries gathered data on 150 successes and 126 failed projects. A survey among 148 managers from 115 Canadian companies in a broad range of business service industries gathered data on 150 successes and 126 failed projects. Research Method • Detailed-formal new service development process • Effectiveness of new service development management • Detailed and formal new service development process • Effective new service development management were significant • Overall product synergy • Market attractiveness • Expert-/people-based service • Marketing orientation, understanding customer needs • Marketing and service delivery system • InternaI marketing program to frontline personnel • Marketing synergy • Choosing projects that fit with the firms core line of services Factors New service development New service performance (Sales) New service performance (Sales and Market Share) Objectives 112 Research description Determine what factors lead to success and failure in development of new professional services in the business-tobusiness sector Compared highly innovative to incremental new business services in order to discover significant factors for discontinuous innovation (ranked). Source de Brentani and Ragot (1996) de Brentani (2001) (Continued on next page) A survey among 115 companies yielded 276 usable rated projects of which 150 were successes and 126 were failed new services ventures. A survey among 148 managers from 115 Canadian companies in a broad range of business service industries gathered data on 150 successes and 126 failed projects. Research Method 1. Innovation culture and management 2. Client/need fit 3. Front line expertise 4. Formal testing and launch 5. Service quality evidence 6. Market potential 7. Strategy and resource fit 1. Product/market fit 2. Quality of execution of launch/marketing activities 3. Synergy: product/company fit 4. Service expertise 5. Product advantage Factors New service development success (disruptive) New service development success (financial products) Objectives Studies on influential factors 113 Research description The speed of new (financial) product development is influenced primarily by the organization and management of the new product development process itself. 53 variables present the aggregate mean responses for the success and failure cases and have been grouped under 11 different constructs developed using factor analysis. Source Drew (1995) S. J. Edgett (1994) (Continued on next page) 88 financial institutions took part in the survey and provided 78 successes and 70 failures of new service development projects 10 personal interviews were held with executives and senior managers of new product development teams in financial institutions. 44 completed questionnaires examined strategic and project management practices for innovation. Research Method Organizational Resource allocation Formalization Preliminary assessment Design testing Market research Market potential Business/financial analysis • Project update • Market synergy • Launch effectiveness • • • • • • • • • Organizational climate (above average innovation commitment) • Hiring new skills • Proactive product development approach • Development of strategic innovation plans • Marketing orientation: Employee and customer suggestions; • Linking rewards to innovation • Separate unit department for R&D and innovation • Setting targets/goals for revenues from new products Factors New service performance New service development success (time) Objectives 114 The paper identifies two primary strategies pursued by these firms development and launch of significant new service innovations representing important diversification moves for the firm. This study aims to understand how service characteristics, market orientation, and efforts in innovation together drive new service development (new service development) performance Cross funtional teams,front line employees involvement and individual learning orientation must have a positive effect on service marketability and launch effectiveness in order to significantly influence performance outcomes such as sales performance and project cost efficiency. How innovation types and degree of innovation relate to innovation performance and innovation management practices employed to implement innovation. Ettlie and Rosenthal (2012) Melton and Hartline (2012) Oke (2007) Jaw et al. (2010) Research description Source (Continued on next page) The empirical phase of the study was conducted using a two-stage process initiated by interviews and completed with mail surveys. Interviews were held with six senior executives of leading service companies in the UK. 214 senior managers of UK service companies were surveyed. First, in-depth interviews from six service managers are taken to support the conceptual framework and investigative measures. Then, a survey research from Top 500 service firms and Top 100 financial firms in Taiwan is used to examine the research hypotheses. An integrated model is empirically analysed through 160 new service development (new service development) projects with responses from single key respondents within service providers A total of nine cases of new service offerings (43% of the companies contacted) participated in this case study approach. Research Method • Innovation strategy • Creativity and ideas management • Human resource management • implementation • selection and portfolio management practices • Cross-functional teams • Frontline personnel • Learning orientation • Service characteristics of heterogeneity and perishability • Market-orientated culture • Innovation champion Factors Radical product (offerings) service innovation Sales performance and process efficiency new service development success (a firms resources and reward in innovation) Service innovation success Objectives Studies on influential factors 115 Research description Discovery of significant success and failure factors in the development process of financial services within banks and insurers in South Africa. Propose a conceptual framework for investigating the antecedents and consequences of service innovation. Gain insight into factors that contribute to the success in high contact new service development (new service development) projects in the hospitality industry Source Oldenboom and Abratt (2000) Ordanini and Parasuraman (2011) Ottenbacher et al., 2006 (Continued on next page) A conceptual model was developed using extensive review of the NPD and new service development literature and extensive personal interviews with eight hotel managers. Then, 183 completed questionnaires on new hospitality services were received from hospitality managers knowledgeable about new service development in their organization. A multiphase research approach was used in this study. First, a pilot study finalised and adapted questionnaires to the South African market. Second, 45 Banks and 81 Insurers responded to the two questionnaires, one for successful and another for an unsuccessful service. The results were presented to six new product development managers during a post-questionnaire interview Collected data during 2007 on through self-reported survey 193 five-star luxury hotels in Italy, 91 (46%) hotels participated in the 10 minute interviews of the study. Research Method 1. Market attractiveness; 2. Strategic human resource management; 3. Market responsiveness; 4. Empowerment; 5. Training of employees; 6. Employee commitment and 7. Marketing synergy • Customer orientation of a compagny • Collaborating with contact employees and • Knowledge integration mechanisms • Adequate skills and resources for development • A product advantage • The degree of service newness • Efficiently gaining consumer insight Factors New service development success innovation radicalness mediating the effect on firm performance (revenue growth and profit growth) New service development success Objectives 116 Research description Investigating the screening decision process from an information processing perspective, this article aims to identify antecedents of effective TBS screening decision-making, and could thus help companies to enhance their decisionmaking and reduce innovation project failure rates. In the past, the primary purpose of the use of IT was to reduce costs by improving business efficiency. Recently, how- ever, we see a stronger tendency to clearly focus on the effects of improved efficiency. IT-driven business innovation should be promoted by the trinity configura- tion involving these three parties, i.e., CEO, CIO and the person responsible for each business unit. Source Riel, Lemmink, and Ouwersloot, 2004 (Yodokawa, 2007) Reviewing literature regarding service innovation, new product screening and decision-making under uncertainty, identified antecedents of decisionmaking effectiveness in the technologybased service (TBS) screening stage. Hypotheses are developed and tested with data from 251 TBS innovation projects. Nomura Research Institute, Ltd. (NRI) has been conducting the annual Survey on IT Utilization by User Companies for leading companies in all industries in Japan. In 2006, the survey was conducted in November and 519 companies responded. Research Method Success factors • ensuring high strategic alignment • developing human resources • Team composition decision makers • Information sources • Decision making perspective Factors sustaiable service innovation Innovation success Objectives Studies on influential factors 117 Research description Planning processes will be described and analysed from different perspectives. Internal organizational forces as well as market influences will be studied. The focus of the study is both descriptive and normative. 72 internal issues summarised under six barrier types identified from the literature that make it difficult for organisations to bring about improvements to internal and therefore external service Source Edvardsson, Haglund, and Mattsson (1995) Johnston (2008) (Continued on next page) A qualitative study was conducted involving structured interviews in two European countries with 20 staffs and managers from a large international express package delivery firm. Two different studies used an exploratory case approach. The first study focused on the development of seven new services from which five persons per project were interviewed. The second study selected two large development projects in which 60 interviews were conducted. Research Methods Ranking according to number of citations: 1. Management issues 2. Poor processes 3. Lack of customer focus 4. People issues 5. Lack of resources 6. Inappropriate culture • General lack of information about specifications and goals • Uncertainty about who the sponsor was • Difficulties in dividing responsibilities • Allocating resources for the projects • A lack of systematic reporting, documentation and feedback Factors Table B.3: Studies on barriers to service innovation Improvements to internal and therefore external service Problems in the organization of the development project Objectives 118 Research description investigate whether service firms use systematic procedures to generate and screen ideas for new services To become a successful serial innovator, you need a systemic approach that addresses all four underlying interrelated root causes of innovation ineffectiveness leadership and organization; processes and tools; people and skills; and culture and values Source Kelly and Storey (2000) Loewe and Dominiquini (2006) (Continued on next page) In-dept innovation survey of innovation practices of more than 550 large companies in every industry 154 surveys of executives in leading UK service firms, across five different sectors. 43 executives of which 57 per cent were either marketing/product development directors followed up for an interview. Research Methods 1. Short-term focus 2. Lack of time, resources or staff 3. Leadership expects payoff sooner than is realistic 4. Management incentives are not structured to reward innovation 5. Lack of a systematic innovation process 6. Belief that innovation is inherently risky Ranking according to number of times mentioned: 1. Information technology 2. Resources 3. Knowledge, skills, capabilities and processes 4. Culture 5. Financial 6. Other (Relationships, Strategy and direction or Structure) Factors General innovation New service development project initiation Objectives Studies on influential factors 119 Research description Description of organization of innovative processes in financial companies, identified barriers to innovation and two main reasons for the persistence of these barriers are outlined. Source Vermeulen (2004) 5 Panel sessions with 610 people, 39 exploratory interviews, 10 interviews with IT experts and 75 interviews, for case studies. Research Methods • Functionally departmentalized structures • Limited use of New Product Development (NPD) tools • Conservative organizational culture • Constraining information technology Factors Service product innovation Objectives Studies on influential factors 120 C Electronic survey using Confirmit 121 122 IT-Business strategy alignment D3 Exceeding busienss objectives Quantity of IT organizational contribution to business service innovation Quality of IT organizational contribution to business service innovation A1 B2 B1 D2 D1 Firm innovativeness Meeting business objectives ID Variable Please indicate, for what % of these new business service introductions did your IT organization generate the idea? Please indicate, for what % of these new business service introductions did your IT organization test and evaluate the idea? Please indicate, for what % of these new business service introductions did your IT organization calculate the development costs? Grade the quality of your IT organizations contribution to the pre-development phase of these new business services introductions involvement idea generation Involvement screening New service ideas are evaluated by your IT organization based on your companys strategy objectives. Select ideas on strategy objectives (Continued on next page) New service ideas are evaluated by your IT organization based on their market potential. Select ideas on market potential Involvement commercial evaluation What % of new business services exceed the goals of their business case? What % of new business services meet the goals of their business case? - - Were the introduced new business services new to your company, but not new to your market? Were the introduced new business services new to your market? New to market New to company, not new to market Question Indicator Table C.1: Question mapping Cooper and de Brentani (1991), Menor and Roth (2007), Oke (2007) S. J. Edgett (1994), de Brentani (2001), Cooper and de Brentani (1991), Menor and Roth (2007) Melton and Hartline (2012) Industry and academic experts Melton and Hartline (2012) Industry and academic experts Melton and Hartline (2012) Industry and academic experts Industry and academic experts Avlonitis et al. (2001), Storey and Kelly (2001), Melton and Hartline (2012) Avlonitis et al. (2001), Storey and Kelly (2001), Melton and Hartline (2012) Cooper and de Brentani (1991), Avlonitis et al. (2001), Ireland Central Statistics Office (2012) Avlonitis et al. (2001), Ireland Central Statistics Office (2012) Source Electronic survey using Confirmit 123 ID A2 A3 Variable IT culture IT resources New service ideas are evaluated by your IT organization based on your resource availability. Chief-level business staff are involved in strategic IT decision making. Industry experts Your IT organization and the business have jointly defined roadmaps for IT investments. Industry experts Business service innovation is communicated as a main priority to your IT organization. Senior IT managers openly encourages business service innovation. Your IT organization allows risk-taking efforts and mistakes of staff working on business service innovation. Your IT staff are empowered to explore their own new business service ideas. Your IT organization employs (financial or non-financial) rewards systems to better recognize new business service ideas that staff contributed. Your IT organization dedicates financial resources to the pre-development phase. Your IT organization dedicates staff resources to the pre-development phase. Select ideas on resource availability Joint strategic IT decisions Joint defined roadmaps Senior IT managers encourage innovation Risk-taking efforts and mistakes are tolerated Staff are empowerment to explore own ideas Financial and non-financial reward systems are present for innovation Dedicated financial resources Dedicated staff resources (Continued on next page) New service ideas are evaluated by your IT organization based on your companys technical capabilities. Select ideas on technical capabilities Service innovation is communicated as a main priority Question Indicator Loewe and Dominiquini (2006), De Jong, Bruins, et al. (2003) S. J. Edgett (1994), Loewe and Dominiquini (2006), Johnston (2008) Drew (1995), Oke (2007), Loewe and Dominiquini (2006), Menor and Roth (2007) Ottenbacher et al. (2006), Menor and Roth (2007), Johnston (2008) de Brentani (2001), Drew (1995), Menor and Roth (2007), Melton and Hartline (2012) de Brentani (2001), S. J. Edgett (1994), Loewe and Dominiquini (2006), Ettlie and Rosenthal (2012) Loewe and Dominiquini (2006), Menor and Roth (2007), Oke (2007) Cooper and de Brentani (1991), S. J. Edgett (1994) Cooper and de Brentani (1991), de Brentani (2001), Menor and Roth (2007) Source 124 ID A4 A5 A6 Variable IT processes IT external collaboration IT tools Your IT staff systematically reserves time for the pre-development phase. Industry and academic experts Systematic time reservation arrangement (such as Google’s 80/20 program) Dedicated teams Your IT organization has a formalized process for evaluating new business service ideas to be put forward for commercial evaluation Your IT organization defined a specific set of selection criteria for each stage in the pre-development phase Did your company engage technology / software vendors in business service innovation activities from 2010 to 2012? Industry experts Did your company engage research companies in business service innovation activities from 2010 to 2012? Industry experts Did your company engage consulting companies in business service innovation activities from 2010 to 2012? Industry experts Did your company engage IT service providers in business service innovation activities from 2010 to 2012? Industry experts IT tools in your IT organization support activities related to the generation of new business service ideas. IT tools in your IT organization support activities related to the testing and evaluation of new business service ideas. IT tools in your IT organization support activities related to the cost calculation of new business service ideas. Process for screening Selection criteria for each stage Technology / Software vendors Research companies Cost calculation tools Idea testing and evaluation tools Idea generation tools IT service providers (Continued on next page) Your IT organization has a formalized process for capturing and managing new business service ideas Process for capturing and managing ideas Consulting companies Your IT organization collaborates with other departments to generate new business service ideas Collaboration with other departments Your IT organization has a dedicated team working on pre-development activities. Question Indicator Loewe and Dominiquini (2006) Ottenbacher 2006; Loewe and Dominiquini (2006) Loewe and Dominiquini (2006), Menor and Roth (2007) Loewe and Dominiquini (2006), Menor and Roth (2007) Cooper and de Brentani (1991), S. J. Edgett (1994), Kelly and Storey (2000), Menor and Roth (2007), Ottenbacher et al. (2006) S. J. Edgett (1994), Kelly and Storey (2000), Oke (2007) S. J. Edgett (1994), Loewe and Dominiquini (2006), Ordanini and Parasuraman (2011), Melton and Hartline (2012) Menor and Roth (2007), Melton and Hartline (2012) Source Electronic survey using Confirmit 125 ID A7 B1 Variable IT staff Innovative company focus - What best describes the service value delivery strategy to customers of your company? IT staff responsible for managing end-user relationship are actively engaged in generating business service ideas. Staff management of end-user relationships IT staff involved in the pre-development phase have a complete understanding of changes in market demand. ,, IT staff involved in the pre-development phase are selected on different skills or experience than other IT staff. IT staff involved in the pre-development phase have a complete understanding of external business customer needs. ,, Training and hiring guidelines IT staff involved in the pre-development phase have a complete understanding of technology trends. Different skills or experience needed for innovation IT staff involved in the pre-development phase have a complete understanding of service innovations of competitors. IT tools in your IT organization support activities related to the collaboration with internal or external partie. Collaboration tools ,, Question Indicator Treacy and Wiersema (1993) de Brentani (2001), Ordanini and Parasuraman (2011), Melton and Hartline (2012) de Brentani (2001), Loewe and Dominiquini (2006), Ottenbacher et al. (2006), Menor and Roth (2007) Menor and Roth (2007), Melton and Hartline (2012), Goffin and Mitchell (2005) Menor and Roth (2007), Drew (1995), Oldenboom and Abratt (2000), Goffin and Mitchell (2005) Menor and Roth (2007), Jaw et al. (2010), Ordanini and Parasuraman (2011), Goffin and Mitchell (2005) Menor and Roth (2007), Drew (1995), Oldenboom and Abratt (2000), Goffin and Mitchell (2005) Loewe and Dominiquini (2006), Menor and Roth (2007) Source This research project will identify how an IT organization can become a driving force in the innovation of new business services. This survey is part of a research project conducted by Accenture in close collaboration with Delft University of Technology. The questions take approximately 20 minutes to complete. Upon completion we will provide you with feedback on how your innovation activities benchmark against your peers. Next Powered by Confirmit All survey questions relate to the years 2010, 2011 and 2012. This research focuses on business services and service innovation. A business service is the application of company competences to solve a customer's problem, it is intangible and created and used at the same time. A service innovation is a new service or a significant renewal of an existing service that is put into practice. Business service innovation combines both definitions and refers to the innovation of business services. This survey refers to six activities in a typical service innovation process and groups them into two phases. The survey focuses on the activities before development, the pre-development phase of the service innovation process. The aggregated, and anonymized results of this research will be distributed to you upon completion of the analysis. If you wish to receive the results, please provide your contact details below. Company details: Company name Job title Contact details (optional): Name Email Phone Back Next Survey progress: 10% Powered by Confirmit All questions relate to the years 2010, 2011 and 2012. What best describes the service value delivery strategy to customers of your company? Operational excellence Customer intimacy Product leadership No Yes Is a share of the IT budget spent on innovation? Back Next Survey progress: 15% Powered by Confirmit Contribution of your IT organization The following questions relate to the pre-development of new business service within your IT organization in 2010, 2011 and 2012 On average, what number of new business services did your company introduce annually? Please indicate, for what % of these new business service introductions ... ...did your IT organization generate the idea? ...did your IT organization test and evaluate the idea? ...did your IT organization calculate the development costs? Grade the quality of your IT organization's contribution to the pre-development phase of these new business services introductions Please select your answer Back Next Survey progress: 22% Powered by Confirmit IT-Business strategy alignment The following questions relate to the pre-development of new business service within your IT organization in 2010, 2011 and 2012. IT-Business alignment refers to the link between business strategy and IT strategy. This link's maturity is determined by the capability of IT organizations to both shape and support business strategy. New service ideas are evaluated by your IT organization based on ... Strongly Strongly Disagree Disagree Neutral Agree Agree ... their market potential ... your company's strategy objectives ... your company's technical capabilities ... your resource availability Chief-level business staff are involved in strategic IT decision making Your IT organization and the business have jointly defined roadmaps for IT investments Your IT-Business alignment strategy is essential for meeting the business case goals of business service innovations Why is IT-Business strategy alignment (not) essential to your organization? Back Next Survey progress: 39% Powered by Confirmit IT culture The following questions relate to the pre-development of new business service within your IT organization in 2010, 2011 and 2012. Strongly Strongly Disagree Disagree Neutral Agree Agree Business service innovation is communicated as a main priority to your IT organization Senior IT managers openly encourages business service innovation Your IT organization allows risk-taking efforts and mistakes of staff working on business service innovation Your IT staff are empowered to explore their own new business service ideas Your IT organization employs (financial or non-financial) rewards systems to better recognize new business service ideas that staff contributed Your IT culture is essential for meeting the business case goals of business service innovations Why is your IT culture (not) essential to your organization? Back Next Survey progress: 46% Powered by Confirmit IT resource dedication The following questions relate to the pre-development of new business service within your IT organization in 2010, 2011 and 2012. Strongly Strongly Disagree Disagree Neutral Agree Agree Your IT organization dedicates financial resources to the pre-development phase Your IT organization dedicates staff resources to the pre-development phase Your IT staff systematically reserves time for the pre-development phase Your IT organization has a dedicated team working on pre-development activities IT resources dedicated to pre-development are essential for meeting the business case goals of business service innovations Why are IT resources dedicated to pre-development (not) essential to your organization? Back Next Survey progress: 53% Powered by Confirmit IT process formalization The following questions relate to the pre-development of new business service within your IT organization in 2010, 2011 and 2012. Strongly Strongly Disagree Disagree Neutral Agree Agree Your IT organization collaborates with other departments to generate new business service ideas Your IT organization has a formalized process for capturing and managing new business service ideas Your IT organization has a formalized process for evaluating new business service ideas to be put forward for commercial evaluation Your IT organization defined a specific set of selection criteria for each stage in the pre-development phase Which 3 key performance indicators (KPIs) does your IT organization employ to steer business service innovation? KPI 1: KPI 1: KPI 3: Strongly Strongly Disagree Disagree Neutral Agree Agree Formalized IT processes are essential for meeting the business case goals of business service innovations Why are formalized IT processes (not) essential to your organization? Back Next Survey progress: 61% Powered by Confirmit IT staff The following questions relate to the pre-development of new business service within your IT organization in 2010, 2011 and 2012. IT staff involved in the pre-development phase have a complete understanding of .... Strongly Strongly Disagree Disagree Neutral Agree Agree ... technology trends ... external business customer needs ... changes in market demand ... service innovations of competitors IT staff involved in the pre-development phase are selected on different skills or experience than other IT staff IT staff responsible for managing end-user relationship are actively engaged in generating business service ideas IT staff are essential for meeting the business case goals of business service innovations Why are IT staff (not) essential to your organization? Back Next Survey progress: 70% Powered by Confirmit IT tools The following questions relate to the pre-development of new business service within your IT organization in 2010, 2011 and 2012. IT tools in your IT organization support activities related to the .... Strongly Disagree Disagree Strongly Neutral Agree Agree Please indicate which tools you employ ... generation of new business service ideas ... testing and evaluation of new business service ideas ... cost calculation of new business service ideas ... collaboration with internal or external parties Strongly Strongly Disagree Disagree Neutral Agree Agree IT tools are essential for meeting the business case goals of business service innovations Why are IT tools (not) essential to your organization? Back Next Survey progress: 77% Powered by Confirmit IT external collaboration The following questions relate to the pre-development of new business service within your IT organization in 2010, 2011 and 2012. Did your company engage the following parties in business service innovation activities from 2010 to 2012? Strongly Strongly Disagree Disagree Neutral Agree Agree Technology / Software vendors Research companies Consulting companies IT services providers Other (Please specify) IT external collaboration is essential for meeting the business case goals of business service innovations Why is IT external collaboration (not) essential to your organization? Back Next Survey progress: 84% Powered by Confirmit Overall contribution of IT capabilities Please select the 3 most important IT innovation factors for meeting the business case goals of business service innovations. ( starting with 1 for your most important factor ) IT-Business strategy alignment IT culture IT resource dedication IT processes formalization IT staff IT tools IT external collaboration What other IT factors not yet discussed strongly contribute to the performance of the pre-development phase of business service innovations from 2010 to 2012? What would you change to further improve your IT organization's ability to drive business service innovations? Back Next Survey progress: 91% Powered by Confirmit Overall contribution of IT capabilities Please indicate how often the following technologies lead to new business services Every Never 1 Time 2 3 4 5 Location-based services Online behavior targeting Social platforms Software as a service Platform as a service Infrastructure as a service Mobile platforms Unstructured data architectures Analytics Other (Please specify) Please elaborate on the involvement and contribution of your IT organization for at least one new business service introduced from 2010 to 2012 New business service introduced Evidence of innovation goals Evidence of IT Involvement Evidence of IT contribution 1. 2. 3. Do you have closing comments or remarks that you would like to share? Back Next Survey progress: 98% Powered by Confirmit Thank you for participating in this diagnostic! The study will run until the end of July. As a participating organization you will be the first to receive the result of the study. In an interactive session we will elaborate on the insights from this study that will be complemented with experiences from practice. Only the participating organizations are able to attend this session. After the study has been completed you will receive a report comparing the innovative approach of your IT organization with the industry average. Also, the results help you determine how your IT organization can (even) more effectively contribute to the creation of value and new services for the market. Please invite IT staff involved in new business service innovation to participate in this survey and receive more results Contact name Email Back Next Survey progress: 100% Powered by Confirmit Thank you! This is the end of the diagnostic, you may now close this window. Ok Powered by Confirmit D English invitation letters SUBJECT: Your invitation: Accenture IT-Driven Service Innovation study Dear CIO Name, Accenture and Delft University of Technology have joined forces to conduct a study on how IT organizations can become a driving force in the innovation of business services. Were providing a select number of CIOs the opportunity to benchmark their IT innovation capability with industry peers through this study. The anatomized results of this study provide insight into the strengths and weaknesses of your innovation capacity. Via this email I want to extend an invitation to you to be part of this study. After the study has been completed you will receive a report comparing your answers to the industry average and those identified as high performers. The full report will be shared during an interactive session aimed at gaining insight in best practices in driving business service innovation through IT. Only those that have participated in the study will be eligible to attend. Your participation would entail completing an online diagnostic that will be sent to you in the week of 13 may. Completing the diagnostic will take approximately 20 minutes. Kind regards, {Your Name} 141 English invitation letters SUBJECT: Participation requested: Accenture IT Driven Business Service Innovation study Dear {CIO Name}, This week youve received an invitation to participate in a study on IT-driven service innovation by Accenture and the Delft University of Technology. The study is conducted to identify how IT organizations can become a driving force in the innovation of business services. Through this mail we would like to invite you to complete the survey for this study. Completing the survey will take approximately 20 minutes. Please visit the following link to complete the survey: http://survey.confirmit.com/wix1/p2537860551.aspx We kindly ask you to complete the survey before May 29, 2013. For further information on this study, please contact my colleague Marcel Kramer via (telephone) or (email). If you require support in answering this survey, please feel free to contact me via (telephone) or (email). The study will run until the end of July. As a participating organization you will be the first to receive the results of the study. In an interactive session we will elaborate on the insights gained from this study, complemented by best practices. Only the participating organizations are able to attend this session. In addition, the results will be used to further develop the theoretical knowledge on this topic. After the study has been completed you will receive a report comparing the innovative approach of your IT organization with the industry average. The results help you to determine how your IT organization can (even) more effectively contribute to the creation of value and new services for the market. Best Regards, {Your Name} 142 SUBJECT: Friendly reminder: Accenture IT Driven Business Service Innovation study Dear {CIO Name}, You have received an invitation to participate in a study on IT-driven service innovation by Accenture and the Delft University of Technology. The study is conducted to identify how IT organizations can become a driving force in the innovation of business services. Through this mail we kindly ask you to complete the survey before June 6, 2013. Completing the survey will take approximately 20 minutes. Please visit the following link to complete the survey: http://survey.confirmit.com/wix1/p2537860551.aspx The study will run until the end of July. As a participating organization you will be the first to receive the results of the study. The results will be used to further develop the theoretical knowledge on this topic. After the study has been completed you will receive a report comparing the innovative approach of your IT organization with the industry average. The results help you to determine how your IT organization can (even) more effectively contribute to the creation of value and new services for the market. Thank you for participating! Best Regards, {Your Name} 143 English invitation letters SUBJECT: Completion requested: Accenture IT Driven Business Service Innovation study Dear {CIO Name}, You were carefully selected to participate in this study and in return you will receive insights in your innovation capability. We invite only 100 CIOs of leading Dutch companies that operate in innovative industries and increasingly rely on IT. Most CIOs have innovation as a top priority. 80% of companies copy competitors in order to innovate. However, most innovation projects fail even before they are introduced in the market. This study is conducted by Delft University of Technology and Accenture to identify how IT organizations can become a driving force in the innovation of business services. Completing the survey will take approximately 20 minutes. Participation is possible until next Friday, the 15th of June. Please visit the following link to complete the survey: http://survey.confirmit.com/wix1/p2537860551.aspx If you do not have the opportunity, could you ask a colleague in your IT organization to participate? This study combines the insights from an online survey with case analysis of successful service innovations. The anonymous results will be compared with grounded theory and expert experiences to determine a best practice model for IT-driven business service innovation. The results will be used to further develop the theoretical knowledge on this topic. After the study has been completed you will receive a report comparing the innovative approach of your IT organization with the industry average. The results help you to determine how your IT organization can (even) more effectively contribute to the creation of value and new services for the market. This study will allow me graduate for my Master Management of Technology. You can imagine that your support is greatly appreciated! Best Regards, {Your Name} 144 E Survey results This chapter contains an overview of the conceptual theoretical framework, the formed hypothesis and their individual results from the survey. The scatter plots illustrate the correlation between constructs in the conceptual theoretical framework. The relation table describes the results from the tests performed. E.1 Hypotheses Innovative company focus IT-business strategy alignment A1 IT culture A2 IT resources A3 IT processes A4 B1 IT external collaboration A5 IT tools A6 IT staff A7 + Quantity of IT organizational contribution to business service innovation Quality of IT organizational contribution to business service innovation C1 + C2 Firm innovativeness D1 Meeting business case objectives D2 Exceeding business case objectives D3 Figure E.1: Numbered conceptual theoretical framework Table E.1: Overview of hypothesis Hypothesis Relation Independent variable Dependent variable HXXA : < AX > has a positive effect on the < CX > HXX0 : < AX > has no effect on the < CX > 145 Survey results Hypothesis Relation Independent variable Dependent variable H1a A1 on C1 IT business strategy alignment Quantity IT involvement H1b A2 on C1 IT culture Quantity IT involvement H1c A3 on C1 IT staff Quantity IT involvement H1d A4 on C1 IT external collaboration Quantity IT involvement H1e A5 on C1 IT resources Quantity IT involvement H1f A6 on C1 IT tools Quantity IT involvement H1g A7 on C1 IT processes Quantity IT involvement H2a A1 on C2 IT business strategy alignment Quality IT involvement H2b A2 on C2 IT culture Quality IT involvement H2c A3 on C2 IT staff Quality IT involvement H2d A4 on C2 IT external collaboration Quality IT involvement H2e A5 on C2 IT resources Quality IT involvement H2f A6 on C2 IT tools Quality IT involvement H2g A7 on C2 IT processes Quality IT involvement HXXA : < AX > has a positive effect on the < CX >, but the strength of the effect depends on the innovative focus (B1). HXX0 : the strength of < AX > on the < CX >, does not depend on the innovative focus (B1). H3a A1\B1 on C1 IT business strategy alignment H3b A2\B1 on C1 IT culture Quantity IT involvement Quantity IT involvement H3c A3\B1 on C1 IT staff Quantity IT involvement H3d A4\B1 on C1 IT external collaboration Quantity IT involvement H3e A5\B1 on C1 IT resources Quantity IT involvement H3f A6\B1 on C1 IT tools Quantity IT involvement H3g A7\B1 on C1 IT processes Quantity IT involvement H4a A1\B1 on C2 IT business strategy alignment Quality IT involvement H4b A2\B1 on C2 IT culture Quality IT involvement H4c A3\B1 on C2 IT staff Quality IT involvement H4d A4\B1 on C2 IT external collaboration Quality IT involvement H4e A5\B1 on C2 IT resources Quality IT involvement H4f A6\B1 on C2 IT tools Quality IT involvement H4g A7\B1 on C2 IT processes Quality IT involvement HXXA :: < CX > has a positive effect on < DX >. HXX0 :: < CX > has no effect on < DX >. E.2 H5a C1 on D1 Quantity IT involvement Firm innovativeness H5b C1 on D2 Quantity IT involvement Meeting business case objectives H5c C1 on D3 Quantity IT involvement Quality IT involvement Exceeding business case objectives Firm innovativeness H6a C2 on D1 H6b C2 on D2 Quality IT involvement Meeting business case objectives H6c C2 on D3 Quality IT involvement Exceeding business case objectives Statistical tests on indicators of the hypotheses Table E.3: Statistical tests on indicators of the hypotheses Pearson chi-Square (goodness of fit) (Continued on next page) 146 E.2 Statistical tests on indicators of the hypotheses Quantity IT involvement (median split) median split Value Quality IT involvement (median split) IT-Business strategy alignment IT culture H1a 0.254 Asymp. Sig. (2sided) 0.614294665 H1b 2.286 0.130570018 16 H2b 8.905** 0.003 16 IT resources H1c 0.254 0.614294665 16 H2c 0.907 0.341 16 IT process H1d 1.727 0.188830078 15 H2d 3.616 0.057 15 IT staff H1e 0.579 0.44679769 15 H2e 1.607 0.205 15 N Value 16 H2a 3.874* Asymp. Sig. (2sided) 0.049 N 16 IT tools H1f 0.077 0.782055267 15 H2f 0.045 0.833 15 IT external collaboration H1g 0.714 0.39802472 15 H2g 2.269 0.132 15 Correlations Quantity IT involvement average Quality IT involvement IT-Business strategy alignment IT culture H1a Pearson Correlation .479* H1b .647** 0.00339574 16 H2b .607** 0.006281265 16 IT resources H1c .492* 0.0265282 16 H2c .458* 0.037219459 16 IT process H1d 0.356453001 0.096097681 15 H2d .448* 0.04692402 15 IT staff H1e 0.233588281 0.201048432 15 H2e .448* 0.046952026 15 IT tools H1f 0.299494967 15 H2f 0.069289744 0.403084689 15 IT external collaboration BUSI001 H1g 0.147851433 .531* 0.020879898 15 H2g 0.437953307 15 H1a-check 0.083090481 0.379828728 16 H2a-check 0.044129578 0.097 0.360 16 BUSI002 H1a-check .496* 0.025401518 16 H2a-check 0.330 0.106 16 BUSI003 H1a-check .457* 0.037581838 16 H2a-check .540* 0.015 16 BUSI004 H1a-check 0.072846924 0.394308628 16 H2a-check 0.413 0.056 16 BUSI005 H1a-check .537* 0.015934055 16 H2a-check 0.365 0.082 16 Sig. (1tailed) N 0.030191065 16 H2a Pearson Correlation .573* Sig. (1tailed) N 0.010195734 16 BUSI006 H1a-check 0.332476485 0.104160187 16 H2a-check 0.367 0.081 16 CULT001 H1b-check .589** 0.008188393 16 H2b-check .535* 0.016 16 CULT002 H1b-check .591** 0.007975941 16 H2b-check .562* 0.012 16 CULT003 H1b-check 0.083173863 0.379711447 16 H2b-check 0.385 0.071 16 CULT004 H1b-check 0.357379666 0.087081204 16 H2b-check 0.250 0.175 16 CULT005 H1b-check .499* 0.024663416 16 H2b-check 0.276 0.150 16 RESO001 H1c-check .569* 0.010690204 16 H2c-check 0.389 0.068 16 RESO002 H1c-check .573* 0.010210928 16 H2c-check 0.301 0.128 16 RESO003 H1c-check 0.399459326 0.062654149 16 H2c-check .574* 0.010 16 RESO004 H1c-check 0.236904449 0.188504184 16 H2c-check 0.273 0.153 16 PROC001 H1d-check 0.391340697 0.07458767 15 H2d-check .563* 0.015 15 PROC002 H1d-check 0.313070504 0.127940031 15 H2d-check .474* 0.037 15 PROC003 H1d-check 0.247684944 0.186721474 15 H2d-check 0.045 0.436 15 PROC004 H1d-check 0.197385076 0.240363529 15 H2d-check 0.374 0.085 15 STAF001 H1e-check 0.260521042 0.174174926 15 H2e-check .452* 0.045 15 STAF002 H1e-check 0.36186322 0.092526023 15 H2e-check .528* 0.021 15 STAF003 H1e-check 0.311172646 0.129463991 15 H2e-check 0.387 0.077 15 (Continued on next page) 147 Survey results STAF004 H1e-check 0.419031686 15 H2e-check 0.121 0.333 15 H1e-check 0.057733385 0.154088981 STAF005 STAF006 0.291741886 15 H2e-check 0.317 0.125 15 H1e-check 0.101456742 0.359505267 15 H2e-check 0.294 0.144 15 TOOL001 H1f-check 0.08193794 15 H2f-check -0.039 0.446 15 TOOL002 H1f-check 0.370216286 15 H2f-check 0.015 0.479 15 TOOL003 H1f-check 0.378749846 0.093456567 0.116172073 0.340059825 15 H2f-check 0.028 0.461 15 TOOL004 H1f-check 0.377186648 15 H2f-check 0.201 0.236 15 EXTE001 H1g-check 0.088286117 0.397390017 0.071218829 15 H2g-check 0.153 0.294 15 EXTE002 H1g-check 0.292961512 0.144645915 15 H2g-check -0.152 0.295 15 EXTE003 H1g-check 0.231790126 0.20291654 15 H2g-check -0.308 0.132 15 EXTE004 H1g-check 0.258517933 0.176101094 15 H2g-check 0.311 0.130 15 Quantity IT involvement (correlation) average Quality IT involvement (correlation) 1 Operational Excellence IT-Business strategy alignment IT culture H3a .835* 0.019342208 6 H4a H3b .861* 0.013904305 6 H4b 0.678095942 0.069377564 6 IT resources H3c 0.36093761 0.241052166 6 H4c 0.488071101 0.163012943 6 IT process H3d 0.437173768 0.230825099 5 H4d 0.76486616 0.065967893 5 IT staff H3e 0.657233314 0.114052346 5 H4e 0.746121859 0.073785238 5 IT tools H3f 0.258827548 0.337083966 5 H4f 0.461121324 0.217204414 5 IT external collaboration average H3g 0.394545627 0.255502371 5 H4g 0.181369063 0.385173051 5 IT-Business strategy alignment IT culture H3a 0.366266569 0.272151145 5 H4a -0.356 0.27852642 5 H3b .851* 0.033697938 5 H4b -0.076 0.451753488 5 IT resources H3c 0.436945048 5 H4c 0.271163072 0.329511732 5 IT process H3d 0.475203562 5 H4d -0.7054762 0.091579921 5 IT staff H3e 0.374240362 5 H4e 5 H3f 0.238412243 5 H4f 0.124169306 5 IT external collaboration average H3g 0.359046236 5 H4g 0.797185174 0.636394685 0.684247217 0.053122555 IT tools 0.099209474 0.038960012 0.198861354 0.423969068 0.223278988 0.101298311 5 IT-Business strategy alignment IT culture H3a 0.774300815 0.062132686 5 H4a .996** 0.00015356 5 H3b 0.456311957 0.219925016 5 H4b 0.618718434 0.132930294 5 IT resources H3c 0.787397917 0.056924099 5 H4c 0.40824829 0.247512673 5 IT process H3d .887* 0.022320312 5 H4d 0.671094365 0.107455643 5 IT staff H3e 0.423390618 0.238745811 5 H4e 0.621034428 0.131773328 5 IT tools H3f 0.461237875 5 H4f 5 H3g 0.018909419 5 H4g 0.013638618 0.700913026 0.491317655 IT external collaboration 0.060925116 .899* 0.093645367 5 0.609849579 6 2 Customer intimacy 3 Product leasdership Pearson chi-Square (goodness of fit) (Continued on next page) 148 0.099316098 E.3 Visual interpretations of the hypotheses average Value Innovativeness H5a 1.000a Asymp. Sig. (2sided) 0.317 16 H6a 6.112* Asymp. Sig. (2sided) 0.013 Meet busienss case goals Exceed business case goals H5b 3.086a 0.078982579 12 H6b 6* 0.014305878 12 H5c .343a 0.558184649 12 H6c 0 1 12 Sig. (1tailed) N N H5a 0.007417493 16 H6a Pearson Correlation .523* Sig. (1tailed) Innovativeness Pearson Correlation .596** 0.018896672 16 Meet busienss case goals Exceed business case goals H5b .583* 0.023208985 12 H6b .724** 0.003852441 12 H5c 0.34565234 0.135558012 12 H6c 0.02599956 0.46803717 12 N Value N 16 Correlations average E.3 Visual interpretations of the hypotheses Table E.5: Visual interpretations on indicators of the hypotheses Visual analysis Quantity IT involvement H1a Linear relation Possible medium Quality IT involvement Dispersion IT-busienss strategy alignment IT culture H1b Possible low IT resource H1c Possible medium IT process H1d Possible IT staff H1e Possible Slope medium positive H2a Linear relation Possible Dispersion Slope low medium positive high positive H2b Possible medium medium positive medium positive H2c Possible medium low positive high low positive H2d Possible medium low positive high low positive H2e Possible medium low positive IT tools H1f Uncertain high low negative H2f Uncertain high flat IT external collaboration H1g Possible medium high positive H2g Uncertain high flat Innovativeness H5a Possible low low positive H6a Possible low low positive Meet busienss case goals Exceed business case goals H5b Possible medium high positive H6b Possible low high positive H5c Uncertain high low negative H6c Uncertain high flat 149 Quality of IT contribution to business service innovation 10 9 8 7 6 5 4 3 2 1 Quantity of IT contribution to business service innovation Quality of IT contribution to business service innovation 10 9 8 7 6 5 4 3 2 1 Quantity of IT contribution to business service innovation Quality of IT contribution to business service innovation 10 9 8 7 6 5 4 3 2 1 Quantity of IT contribution to business service innovation Quality of IT contribution to business service innovation 9 8 7 6 5 4 3 2 1 Quantity of IT contribution to business service innovation 10 1 1 1 1 2 2 2 3 4 IT external collaboration 3 IT process 3 IT staff 4 2 3 4 IT-Business strategy alignment 4 5 5 100 90 80 70 60 50 40 30 20 10 0 100 90 80 70 60 50 40 30 20 10 5 0 5 1 2 1 2 1 1 3 4 IT external collaboration 2 3 IT process 3 IT staff 4 2 3 4 IT-Business strategy alignment 4 5 5 100 90 80 70 60 50 40 30 20 10 0 5 100 90 80 70 60 50 40 30 20 10 0 5 Quality of IT contribution to business service innovation 10 9 8 7 6 5 4 3 2 1 Quantity of IT contribution to business service innovation Quality of IT contribution to business service innovation 8 7 6 5 4 3 2 1 Quantity of IT contribution to business service innovation 9 1 1 1 2 2 2 3 IT tools 3 IT culture 3 IT resources 4 4 10 9 8 7 6 5 4 3 2 1 4 5 Quantity of IT contribution to business service innovation Quality of IT contribution to business service innovation 10 5 100 90 80 70 60 50 40 30 20 10 0 100 90 80 70 60 50 40 30 20 10 5 0 100 90 80 70 60 50 40 30 20 10 0 1 2 3 IT tools 4 5 1 2 3 IT culture 4 5 1 2 3 IT resources 4 5 Quantity of IT contribution to business service innovation Quality of IT contribution to business service innovation 9 8 7 6 5 4 3 2 1 0 1 2 1 2 cust. intimacy 1 2 3 prod. leadership opp. excellence 4 5 cust. intimacy 1 prod. leadership 2 opp. excellence Quantity of IT contribution to business service innovation 2 3 cust. intimacy 4 1 3 prod. leadership 2 opp. excellence cust. intimacy 5 prod. leadership 3 4 5 4 5 cust. intimacy prod. leadership 100 90 80 70 60 50 40 30 20 10 0 1 IT culture opp. excellence 4 IT staff Quantity of IT contribution to business service innovation 2 prod. leadership 100 90 80 70 60 50 40 30 20 10 0 5 9 8 7 6 5 4 3 2 1 0 1 3 cust. intimacy IT staff opp. excellence 5 IT tools 9 8 7 6 5 4 3 2 1 0 1 4 100 90 80 70 60 50 40 30 20 10 0 IT tools cust. intimacy 3 IT external collaboration Quantity of IT contribution to business service innovation Quality of IT contribution to business service innovation 5 9 8 7 6 5 4 3 2 1 0 opp. excellence Quality of IT contribution to business service innovation 4 IT external collaboration opp. excellence Quality of IT contribution to business service innovation 3 100 90 80 70 60 50 40 30 20 10 0 2 3 4 IT culture prod. leadership opp. excellence cust. intimacy prod. leadership 5 Quantity of IT contribution to business service innovation Quality of IT contribution to business service innovation 9 8 7 6 5 4 3 2 1 0 1 2 5 1 cust. intimacy prod. leadership opp. excellence 9 8 7 6 5 4 3 2 1 0 1 2 3 4 2 cust. intimacy cust. intimacy 5 1 prod. leadership 2 opp. excellence Quantity of IT contribution to business service innovation 2 3 cust. intimacy prod. leadership 3 4 5 4 5 cust. intimacy prod. leadership 100 90 80 70 60 50 40 30 20 10 0 1 IT resources opp. excellence 5 IT process 9 8 7 6 5 4 3 2 1 0 1 4 100 90 80 70 60 50 40 30 20 10 0 IT process opp. excellence 3 IT-Business strategy alignment Quantity of IT contribution to business service innovation Quality of IT contribution to business service innovation 4 IT-Business strategy alignment opp. excellence Quality of IT contribution to business service innovation 3 100 90 80 70 60 50 40 30 20 10 0 2 3 4 IT resources prod. leadership opp. excellence cust. intimacy prod. leadership 5 5 4.5 4 Firm innovativeness Firm innovativeness 5 4.5 3.5 3 2.5 2 1.5 4 3.5 3 2.5 2 1.5 1 1 0.5 0.5 0 0 1 3 5 7 9 0 100 90 80 70 60 50 40 30 20 10 0 1 3 5 7 40 30 20 10 0 1 3 5 7 9 Quality of IT contribution to business service innovation 80 100 80 70 60 50 40 30 20 10 0 0 20 40 60 80 100 Quantity of IT contribution to business service innovation Exceeding business case objectives [%] Exceeding business case objectives [%] 50 60 90 Quality of IT contribution to business service innovation 60 40 100 9 70 20 Quantity of IT contribution to business service innovation Meeting business case objectives [%] Meeting business case objectives [%] Quality of IT contribution to business service innovation 70 60 50 40 30 20 10 0 0 20 40 60 80 100 Quantity of IT contribution to business service innovation E.4 Triangulation between the survey and case study E.4 Triangulation between the survey and case study Table E.7: Triangulation between the survey and case study Survey correlations Top 3 capabilities IT-Business alignment, external collaboration, culture Quantity Quality Cases Culture, staff, IT-Business alignment Bank Staff, process, culture High technology company Pearson Pearson ITbusienss strategy alignment .479* .573* Ideas are selected on a balanced range of both IT and business objectives, fit with delivery systems, financial benefit. Sponsorship for the projects on management board level is established and roadmap development relies increasingly on contribution CIO. IT culture .647** .607** IT resource .492* .458* Chief Information Officer rewards entrepreneurial behavior. An entrepreneurial culture, in which mistakes are tolerated up to certain extent. Employees are encouraged to explore own ideas. Non-monetary rewards such as the Internal innovation award are present. Innovation budgets are available to test ideas that show early signs value for the business. The innovation organization are staff resources and the team dedicated to pre-development. IT process 0.36 .448* For each project the IT collaborates with experts, the adopter and particular business parts. Processes for capturing and managing ideas are not formalized. The business evalueated ideas on a go-no-go decision. No key performance indicators are used for performance. Selection criteria is present for each innovation but flexible to create a funnel rather than a pipe. IT staff 0.23 .448* User experience labs are used to to test ideas with users, which involves staff managing end-user relationships into the process. IT innovation staff require specific skills and experience that are embedded in hiring policy. An innovation course on entrepreneurship, training to finalize projects is available to support innovation. ”Ideas are selected on earnings estimates, fit with strategy, technical implications, cost and complexity. The chief Information officer and Chief strategy officer are involved in decision IT making and level of progress is shared through Regular management meetings. Digital innovation planning uses business strategy as input.” Chief information officer encourages entrepreneurship and own initiatives. Changing to entrepreneurial culture, accept failure as a means to learn and improve. Innovation competitions in IT community and reward systems doe not specifically focus on innovation. The business has to create budgets to build prototypes for the RCC projects and European innovation funds for innovation. Staff resources from the digital Accelerator organization dedicated to pre-development. The Rapid-co-creation teams are dedicated to pre-development. During RCC projects IT collaborates with design, research, digital innovation and part of the businesses. Ideas are capture an managed in the first week of the RCC, evaluated at least three times with consumers and finally evaluated by the business. The projects are milestone driven, KPIs could kill the idea, performance determined on deliverables at end of RCC. The Connected platform lab has a lab to illustrate possibilities and understand trends. Development continues after market introduction which involves staff managing end-user relationships. IT innovation staff require specific skills and experience that are embedded in hiring policy. No training courses to support innovation are prestent as the organization is still too young. (Continued on next page) 155 Survey results IT tools -0.15 0.069 Tools for idea generation, idea testing are still very basic. Instead the IT organization focusses on methodologies such as Lean and Agile. Tools generally focus on collaboration sucha as, communication, knowledge sharing. IT .531* -0.044 The organization prefers internal external development and only involves collaboexternal parties for necessary ration knowledge and expertise. Reseaerch companies are involved for joint efforts to examine technologies and trends that match the bank’s portfolio. Consumers can be involved, but is not common. *. Correlation is significant at the 0.05 level (1-tailed). **. Correlation is significant at the 0.01 level (1-tailed). 156 Tools for ideas generation are very basic, the connected platform is able to apply real time changes on connected platform. Tools generally focus on collaboration sucha as, communication, knowledge sharing. ”Knowledge and expertise from technology vendors and evaluation of customser are used as input during RCC. IT service providers are used for outsourcing. The company has an internal research division. External consultants are involved to determine the benefits of the proposition. F Case study results This appendix details both the used case study protocol and aggregated findings from both cases. Resulting from privacy agreements, full transcripts and comparison tables are only available on request. F.1 Case study protocol Table F.1: Case study protocol used for this study General information Function Personal Department What is the role of the IT organization? What is the impact of IT development on the operations of the company? How does the IT organization contribute to business value creation? What is the impact of service offerings on the company’s completive advantage? Does the company have specialized innovation departments? Could you describe how the growing importance of IT changed the role of technology for competitive differentiation in your industries? Does IT consitute a large component in new business services? Do you strategically leverage technology for competitive differentiation in industries? Do you focus on specific trends? What drives ideas? (market or technology) How has IT changed the role of IT activities before development of new business services? How did ideas of the business innovation get into your development portfolio? What structural method do you use? What is the goal of the innovation process? 157 Case study results General information Function Personal Department Who is the owner of the innovation process? Who do you think should be the owner of that process? How often do you make a new business case? What are common goals of the business cases? How is the IT organization involved in the activities before development? Could you describe how ideas are transformed into development projects? How does your process compare to the SIIC framework? What activity before actual project development do you consider most important? Do you have formal iterations? Idea generation What are sources of ideas? What is the largest source of ideas? How is your IT organization involved in the process of ideation? What other organizations are involved? Idea selection and technical evaluation How is your IT organization involved in the process of selection and evaluation? What other organizations are involved? Who validates the value of the proposition? Commercial evaluation/business case analysis How is your IT organization involved in the process of evaluation and analysis? What other organizations are involved? Who makes the decision for further development? How do the IT innovation capabilities of your IT organization contribute to the generation, selection and commercial evaluation of business service ideas? Which three IT capabilities are most important to the contribution of the IT organization to new business service innovation? How to develop an innovation capability from the beginning? How does the IT-Business strategy alignment of your IT organization contribute to the generation, selection and commercial evaluation of business service ideas? How are ideas evaluated on market opportunity/technical capabilities/strategy objectives/available resources? How are executive business staff involved in strategic IT decision making? How are roadmaps defined with the business? How does the culture of your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? How does senior IT manager encourage innovation? How are risk-taking efforts and mistakes tolerated? How are staff empowered to explore own ideas? How do financial and non-financial reward systems apply? How do the resources of your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? How are financial resources dedicated to pre-development? How are staff resources dedicated to pre-development? 158 F.2 Aggregated case study findings General information Function Personal Department How are systematic time reservation possible for innovation (such as Google’s 80/20 program)? How are IT teams dedicated to pre-development? How do the processes of your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? How does the IT organization collaborate with other departments? What processes are available for capturing and managing ideas? What processes are available for evaluating ideas? How are selection criteria applied to each stage? How are key performance indicators used for performance? How does the skill, experience and talent development of your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? How are TechLabs used to understand technology trends and changes in market demand? How are staff managing end-user relationships involved? What specific skills or experience do IT innovation staff require? How do training courses support innovation? How do hiring guidelines and selection are different for service innovation? How do the tools of your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? What tools are used for idea generation? What tools are used for idea testing and evaluation? What tools are used for cost calculation? What tools are used for collaboration? How does external collaboration with your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? How are technology / software vendors involved? How are research companies involved? How are consulting companies involved? How are IT service providers involved? How are customers involved? F.2 Aggregated case study findings 159 160 Bank High Technology Company IT enabled service and experience are only competitive differentiating factors for banks Mobile devices Market driven, experience design, customer journeys and business decides The innovation department started with the arrival of internet banking Do you strategically leverage technology for competitive differentiation in industries? Do you focus on specific trends? What drives ideas? (market or technology) How has IT changed the role of IT activities before development of new business services? Develop proof of concept Innovation organization CEO with innovation organization Sometimes, not for all innovations Contribution to the strategy objectives, customer retention and satisfaction What is the goal of the innovation process? Who is the owner of the innovation process? Who do you think should be the owner of that process? How often do you make a new business case? What are common goals of the business cases? How is the IT organization involved in the activities before development? Customer journeys What structural method do you use? How did ideas of the business innovation get into your development portfolio? The IT component creates a large part of the experience Does IT consitute a large component in new business services? Contribution to the strategy objectives of business line, gross margin and EBITDA Always, for every innovation Should become a way of working in each business line co-ownership between IT and the business Provide maximum decision capability with minimum of investment and time Rapid co-creation projects Digital propositions are more complex and their pre-development is more critical. This lead to the digital innovation and digital accelerator organizations Market driven, experience designing, customer validation and business decides Data analytics and connected devices moved from technologies to hardware-software combination that creates experiences that are hard to imitate A central part of the new services is the hardware / software proposition that delivers experience Could you describe how the growing importance of IT changed the role of technology for competitive differentiation in your industries? Elements Table F.3: Analysis of the case study findings Case study results ”The innovation process of the service can be divided in three phases within a funnel process: 1) Ideation and prototyping phase: ideas are turned into prototypes that expose their value and serve as input for the business case 2) Deployment phase: when a service is selected for deployment standard methods are used for implementations and achieving economies of scale 3) Maintenance phase: when the service is introduced it should be updated and maintained” Gathering, selecting and technical evaluating ideas, developing proof of concept All early development steps are crucial and if weakly could become a bottleneck. Selection, expert evaluation Can make use of experience center, but not usual Could you describe how ideas are transformed into development projects? How does your process compare to the SIIC framework? What activity before actual project development do you consider most important? Do you have formal iterations? External sourcing Watching technology and market trends, sourcing external ideas Adopter of the service, Research labs that investigate technologies and trends What is the largest source of ideas? How is your IT organization involved in the process of ideation? What other organizations are involved? Selects innovation projects, technically evaluating ideas, develop proof of concepts Service adopter in the business, subject experts How is your IT organization involved in the process of selection and evaluation? What other organizations are involved? Idea selection and technical evaluation Financial service websites, congresses, innovation platforms such as Finnovate and Innotribe, investment funds for financial start-ups, strategic suppliers, innovation awards such as the Accenture innovation awards, crowdsourcing initiatives, close communities What are sources of ideas? Idea generation Bank Elements Design, research, digital innovation and part of the businesses Selects innovation projects, technically evaluating ideas, develop proof of concepts Design, research, digital innovation and part of the businesses Watching technology and market trend Internal during RCC brainstorming in hackathon Supplied by various departments RCC process. For example, digital innovation provide technological options software is ideally suited for an iterative approach, at least three iterations in RCC Selection, testing with customers assumptions, ideation, prototyping , consumer testing and business case of proposition The innovation process of the service can be divided in three phases within a funnel process: 1) Ideation and brainstorming phase prototyping 2) testing with consume , shaping proposition 4) further developments within the business lines 5) market introduction and further continuous innovation High Technology Company F.2 Aggregated case study findings 161 162 Subject experts Who validates the value of the proposition? Service adopter in the business Service adopter in the business What other organizations are involved? Who makes the decision for further development? Business Business, External consultancy companies Determines development costs Customers High Technology Company Go from culture, process, resource to staff How to develop an innovation capability from the beginning? Go from staff, process to culture Staff, process, culture Sponsorship for the projects on management board level is established relies increasingly on contribution CIO How are executive business staff involved in strategic IT decision making? How are roadmaps defined with the business? Digital innovation planning uses business strategy as input Chief Information officer and Chief strategy officer involved with the connected organization. Regular management meetings to share level of progress Cost and complexity, earnings estimate, fit with strategy, technical implications Chief Information Officer rewards entrepreneurial behavior entrepreneurial culture, mistakes tolerated up to certain extent Employees are encouraged to explore own ideas How does senior IT manager encourage innovation? How are risk-taking efforts and mistakes tolerated? How are staff empowered to explore own ideas? Competitions in IT community changing to entrepreneurial culture, accept failure as a means to learn and improve Chief information officer encourages entrepreneurship and own initiatives How does the culture of your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? Balanced range of objectives both IT and business, fit with delivery systems, financial benefit How are ideas evaluated on market opportunity/technical capabilities/strategy objectives/available resources? How does the IT-Business strategy alignment of your IT organization contribute to the generation, selection and commercial evaluation of business service ideas? Culture, staff, IT-Business alignment Which three IT capabilities are most important to the contribution of the IT organization to new business service innovation? How do the IT innovation capabilities of your IT organization contribute to the generation, selection and commercial evaluation of business service ideas? Determines development cost, determines value of the business case How is your IT organization involved in the process of evaluation and analysis? Commercial evaluation/business case analysis Bank Elements Case study results Internal innovation award How do financial and non-financial reward systems apply? Only personal bonus for hitting targets High Technology Company Innovation team not mentioned Innovation team How are staff resources dedicated to pre-development? How are systematic time reservation possible for innovation (such as Google’s 80/20 program)? How are IT teams dedicated to pre-development? RCC teams not mentioned Digital Accelerator The business has to create budgets to build prototypes for the RCC projects, European innovation fund s for the connected platform not formalized go-no-go for development with the business present but flexible to create a funnel rather than a pipe. Innovativeness, new technology involved, uncertainties for deployment Ideas are vulnerable at the start, the selection criteria are flexible What processes are available for capturing and managing ideas? What processes are available for evaluating ideas? How are selection criteria applied to each stage? How are key performance indicators used for performance? Milestone driven, KPIs could kill the idea, performance determined on deliverables at end of RCC Customers determine value and direction 3 Iterations of service experience with customers during RCC Ideas in first week of RCC During RCC with IT, design, research, digital innovation and part of the businesses. User experience labs, to test with users Feedback from close communities How are TechLabs used to understand technology trends and changes in market demand? How are staff managing end-user relationships involved? Development continues after market introduction Connected platform lab, to illustrate possibilities How does the skill, experience and talent development of your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? For each project with experts, the adopter and particular business parts selected How does the IT organization collaborate with other departments? How do the processes of your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? Innovation budgets are available to test ideas that show early signs value for the business. How are financial resources dedicated to pre-development? How do the resources of your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? Bank Elements F.2 Aggregated case study findings 163 164 ”- able to look across silos - entrepreneurial - able to estimate impact - result oriented - persistent communicatively capable (especially important) - able to convey their ideas to others.” innovation course on entrepreneurship, trained to finalize projects Embedded in hiring policy What specific skills or experience do IT innovation staff require? How do training courses support innovation? How do hiring guidelines and selection are different for service innovation? Embedded in hiring policy Organization is too young ”- overview of the overall domain, multifaceted understand the effect of trends - able to extract and leverage the opportunities and idea - open, entrepreneurial mind-set, - open innovation skills, ability to collaborate internally and externally subject matter expertise.” High Technology Company Instead Lean and Agile methodologies Instead Lean and Agile methodologies communication, knowledge sharing What tools are used for idea testing and evaluation? What tools are used for cost calculation? What tools are used for collaboration? communication, knowledge sharing - Applying real time changes on connected platform Tools are very basic Only necessary knowledge and expertise, prefers internal development Joint effort to examine technologies and trends that match the bank’s portfolio Investment funds financing financial start-ups for ideas Only necessary knowledge and expertise, prefers internal development Consumer test is possible, but not common How are technology / software vendors involved? How are research companies involved? How are consulting companies involved? How are IT service providers involved? How are customers involved? 3 rounds prototype valuation during RCC outsourced foundations like datacenters and infrastructure maintenance Strategy consultants determine the benefits of the proposition. Internal research division Knowledge and expertise as input during RCC How does external collaboration with your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? Examining online crowdsourcing What tools are used for idea generation? How do the tools of your IT organization contribute to the generation, selection and commercial evaluation of new business service ideas? Bank Elements Case study results