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    Competitive Strategies Set the Stage for Successful Innovation


    © International Trade Centre, International Trade Forum - Issue 3/2000

    Service excellence: one pre-requisite for succesful innovation.

    The seeds of innovation need fertile terrain in order to grow. Innovation strategy is most likely to succeed when it complements service excellence, quality assurance, customization and bench-marking strategies.

    Export success depends on several strategic factors, only one of which is innovation. In fact, it is important to think through an optimal level of innovation. With too little innovation, you will lose market share; with too much, you will have trouble assuring consistent quality and may lose customer loyalty.

    Service excellence

    Services marketing and management research revolves around "delighting" the customer - that is, researching techniques which ensure that customers' expectations are exceeded in a manageable fashion. The focus has been on "moments of truth" - those times when a customer has a memorable contact with some aspect of your organization and uses that opportunity to judge the quality of the services you are providing.

    To set the stage for successful innovation, you need to provide excellent ser-vice support before, during and after the service is provided. In order to create satisfied customers, the experience should meet or exceed customer expectations; it should be viewed positively by customers even after it is over; and customer dissatisfaction should be addressed through successful recovery techniques.

    Competitive focus: more value for money.

    Managerial challenges include making sure that you are doing the right things and focusing on ways to add value that matter to the customer. Remember that "excellent" service is always relative and is based on the customer's expectations, which are shaped by marketing communications, previous experience and awareness of the offerings of competitors. A questioning attitude ("How can we better meet customer needs?") underlies the quest for excellence, and is a vital component of the ability to innovate. But a focus on excellence by itself only creates market parity, not leadership.

    Quality assurance

    Customers need to know that they can be sure of always receiving high-quality services. They may appreciate flashes of excellence, but their overriding concern is to obtain consistently good quality, to offset the risk of receiving substandard services.

    Competitive focus: quality control for increased productivity, with an emphasis on doing things right.

    By providing service of a constantly high quality, you can generate positive "word of mouth" and build customer loyalty. Managerial challenges include motivating staff to achieve and sustain a zero-defects level of performance.


    Providing consistent quality (or reliable service) is one way to help reduce the perceived risk of buying your services. But much as customers want consistency, they also want customization to their needs. The tension between controlling for standardization and flexibility for customizing to individual circumstances is one of the biggest challenges for service managers.

    Competitive focus: improve the match between the service provided and the benefit the customer expects.

    Your staff need clear guidelines on how to customize consistently in order to delight your customers with a positive service experience.


    Your services firm operates in the context of many competing firms whose ser-vice offerings also shape customer expectations. Another competitive strategy is to benchmark your services against international best practices. Benchmarking involves identifying practices responsible for the high performance of other firms (in any industry) that you can adapt and adopt in your own company. Web sites such as that of the American Productivity and Quality Center (http://www.apqc.org) can help you do this.

    For example, aircraft have traditionally been regarded as equipment in which people are transported from A to B. Now they have become airborne offices, with fax machines, computer power outlets, and modem telephone connections. Once business travellers become used to these amenities, airlines not providing them will become uncompetitive, especially for longer flights.

    Competitive focus: compete in relation to "best in class".

    Comparisons can be made not only with firms in the same industry, but also with those in other industries which use similar processes. A range of functions can be compared:

    - Financial performance.

    - Response time.

    - Delivery process (convenience, access, use of technology).

    - Staff time allocation.

    - Ability to target customers' needs.

    - Quality controls and recovery techniques.

    - Empowering front-line employees.

    - Services standards and targets.

    Benchmarking can help your firm ensure that, when it enters an export market, it is at least meeting international quality standards.

    Ready for innovation

    Once you control your current service delivery process (quality assurance), are able to meet appropriate customer expectations (customization), and know what your competitors are doing (bench-marking), you are in a position to consider innovation. Service innovation is driven by focusing on solving customer problems while maintaining a loyal customer base. If your firm constantly introduces service innovations, repeat customers will lose the sense of consistency and predictability that is critical to managing their sense of risk. If you fail to innovate in response to market trends, your repeat customers will switch to another, more innovative service provider.

    The focus of innovation is to compete by changing the rules and making competitors irrelevant. Successful innovation results in increased customer satisfaction and strengthened customer loyalty, which translate into increased repeat purchase, cross-selling of related services, and recommendations to others.