Get the balance right! • 1
Service providers need to leverage resources effectively to drive innovation and achieve desired outcomes over time. Smart visualizations of the innovation pipeline and portfolio might help leaders and teams drive fruitful discussions, uncover interconnections, make informed choices, build alignment, and ultimately get the balance right.
Before diving into the intricacies of innovation portfolios, we need to expand the scope of innovation beyond the unimaginative, product-centric definitions of innovation that merely pay lip service to services (see, e.g., Keeley et al., 2013; Viki et al., 2019). Let’s do this by unpacking three tensions in service innovation. The first one is below.
Tension 1: Innovation for core businesses vs. innovation for new businesses
Service providers need to get the balance right between investing in core/legacy businesses (to unlock value) and investing in new, transformational endeavors (to create new sources of value). This is ultimately about determining the overarching purpose and desired outcomes of innovation efforts.
Incremental innovation: Service providers can unlock value in core/legacy businesses by identifying and exploiting opportunities to
drive growth (↑ desirability, ↑ inclusion, ↑ differentiation, ↑ loyalty, ↑↓ price, ↑ revenue streams, ↑ channels, ↑ segments, ↑ geographies), and
improve organizational performance (↑ focus, ↓ waste, ↑ service productivity, ↑ service quality, ↑ employee engagement, ↑ customer experience).
Transformational innovation: Service providers can uncover new sources of value by identifying and exploiting opportunities to
adapt, reinvent, and reposition the core businesses (think Netflix),
create adjacent, ‘close-to-the-core-business’ businesses (think Facebook, Virgin, or Easy),
create ‘new-to-the-core-business’ businesses (think Amazon Web Services), and/or
create uncontested market spaces (think Cirque du Soleil).
This tension rhymes with influential frameworks and mental models such as Product-Market Strategies for Business Growth (Ansoff, 1957), Seven Degrees of Freedom for Growth (Baghai et al., 2000), ‘little i’ and ‘Big I’ Innovations (Day, 2007), Hierarchy of New Service Categories (Wirtz & Lovelock, 2010), Innovation Ambition Matrix (Nagji & Tuff, 2012), and Transformation A and B (Gilbert et al., 2012).
In my next blog post, I will unpack the second tension of service innovation.
References
Ansoff, I. (1957, September–October). Strategies for diversification. Harvard Business Review, 113–124.
Day, G. (2007, December). Is it real? Can we win? Is it worth doing? Managing risk and reward in an innovation portfolio. Harvard Business Review.
Gilbert, C., Eyring, M. & Foster, R. (2012, December). Two routes to resilience. Harvard Business Review.
Keeley, L. et al. (2013). Ten Types of Innovation: The Discipline of Building Breakthroughs. Wiley.
Nagji, B. & Tuff, G. (2012, May). Managing your innovation portfolio. Harvard Business Review.
Viki, T., Toma, D. & Gons, E. (2019). The corporate startup: How successful companies can develop successful innovation ecosystems. Management Impact Publishing.
Wirtz, J. & Lovelock, C. (2010). Services Marketing: People, technology, strategy (8th ed.). World Scientific.
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