Service Innovation: The Next Big Thing

IBM, Oracle, and other tech companies have formed a new nonprofit consortium dedicated to the advancement of this hot concept

By Reena Jana

When most consumers and corporations think of innovation, sleek, user-friendly products such as Apple's (AAPL) iPod come to mind. But leading companies, innovation consultants, and academic researchers are shifting their focus from products to services as the next hot area. The Mar. 28 launch of the Service Research & Innovation (SRI) Initiative, an ambitious Silicon Valley nonprofit founded by executives at IBM (IBM) and Oracle (ORCL), is a sign that the concept of service innovation is quickly becoming top-of-mind, at least among executives at high-profile companies in the technology industry.

"People have a good idea of what technological innovation is," says Jim Spohrer, director of service research at IBM's Almaden Research Center. "But service innovation is more hidden."

Though the phrase is not yet widely recognized in the business world, the concept of service innovation isn't new, as Spohrer illustrates with the example of the lightbulb. "The average person knows the story of Thomas Edison, the inventor and innovator who came up with the lightbulb. People don't tend to think of the related service innovations—getting lightbulbs into houses and schools, setting prices for the electricity services to keep them lit. That's all service innovation," he argues.

More recent examples, though most people wouldn't think of them under the phrase, are outsourcing and the shift toward self-service.

Not a "One-Company Thing"

IBM conceived of the consortium as a way to bring tech executives, academics, and government funders together to support curricula and research in the fledgling field. Spohrer and his colleagues had been working on a related project, the Service Science Management Engineering initiative, to encourage service-science education in schools. And about a year and a half ago, IBM contacted two trade groups, the Technology Professional Services Assn. and the Service & Support Professionals Assn., to connect with other companies developing new service models.

"IBM realized that service innovation isn't a one-company thing," says Thomas Pridham, senior vice-president, Advanced Programs of the Service & Support Professionals Assn., and executive director of the SRI Initiative. In other words, IBM realized that, to fully understand how the field of service innovation was evolving, it needed to be part of the broader community. The SRI Initiative, Spohrer points out, has always been conceived as a separate entity from IBM, despite being the brainchild of IBM executives.

Pridham brought in executives from Oracle and other members of the Technology Professional Services Assn., and word of the SRI Initiative began to spread. The fledgling organization now includes representatives from leading tech companies, including Hewlett-Packard (HPQ), Microsoft (MSFT), and Cisco (CSCO). Universities such as Arizona State University and the University of Maryland are also involved, as well as international government bodies, including the European Commission, the executive body of the European Union.

Becoming a Web 2.0 Community

While the initiative's first concrete project is hosting a symposium, The Challenges & Opportunities of Services Research & Innovation, on May 30, at the Santa Clara Convention Center, the groups aims to do more than organize talks and gatherings. The initiative hopes to grow to be "an open, Web 2.0 community," in Pridham's words, and a clearinghouse for research reports and other information on models of service innovation. (The initiative lives online at www.thesri.org.)