Radical Service Innovation

Strategies on the frontiers of service design demand a blend of creativity and discipline. Here are five steps to leverage positive results

By Mark Jones and Fran Samalionis

To compete in the marketplace and maintain relevancy, service companies need to innovate constantly. But while there is a desire to innovate, actually getting new services to market is rare, and what we call radical innovation—new services that dramatically change the marketplace—is even rarer.

When asked about the pathway to radical innovation, service company executives will also tell you that ideas are a dime a dozen. What's more important is the execution: the alignment of the right idea, the right team, the right development process, the right leadership, the right level of risk management, the right target, the right time to market, and so on. Innovation is not just a matter of "Aha" ideas. It is rather a process that requires a disciplined approach to rigorously identify and execute the most promising ideas. Here is a five-step framework for implementing innovation projects successfully.

1. Develop insight about the market

Develop insights about customers, the business, and technology in parallel. Simply observing customers may not be enough to drive the kind of innovation that changes markets. Inspiration can come from many areas, so be as insightful as you can about alternative business models, market landscapes, and operational and technology infrastructure. Innovations will come from the union of these perspectives and will be successful when aligned with customer needs.

Develop frameworks that clearly describe the "pain point" and the opportunity space. What you do with market insights is more important than the insights themselves; too often, companies don't take advantage of their full potential. Excitement over customer insights alone can lead teams to jump the gun and start brainstorming service solutions that solve only specific issues. This tends to result in incremental service improvements rather than the more substantial leaps the team is looking for.

It takes time for a team to immerse itself in the nuances of a problem. But it's critical to take that time to develop meaningful frameworks that can structure ideation. A team knows it is ready to move on to ideation and prototyping when it sees an opportunity for a radically different way to serve customer needs.

2. Create radical value propositions

Radical innovation is about acquiring new customers and tapping underserved markets, as well as retaining those people once they become customers. Giving people a reason to try your service in a crowded marketplace requires going a step above what they experience with their current service. And if what you are offering is a new class of services—think Zipcar, for example—then you'll have to help your customers recognize the value of trying something new. Sometimes, radical services fill an obvious gap in the marketplace—think Google (GOOG) 411 and SMS information services. At other times, they help steer markets in new directions by capitalizing on existing but fragmented behaviors—think Apple's (AAPL) iPod and iTunes.

Prototype extreme service propositions early to stretch the organizational mindset. Quick, low-cost mockups allow emerging ideas to be expressed, explored, modified, and shared with customers, experts, and stakeholders in a very tangible and emotive way. They encourage informed decision-making more than a paper description could ever do, and they encourage the idea to continually evolve. Since they often deal with the intangible, service ideas may also require simulation or even the acting out of a scenario. For example, simulating a customer's experience of interacting with a service can be an invaluable tool.