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    Managing Change in Your Organization


    © International Trade Centre, International Trade Forum - Issue 1/2001 

    Success of failure of a service innovation is linked to two primary factors:

    • A correct reading of the market and what matters to customers.

    • Appropriate management of the innovation process.

    Principles behind successful innovation 

    While firms usually give explicit attention to market factors, they are much less likely to attend to the management of the innovation process. Few firms have explicit success measures for innovations. Even fewer have an innovation policy to guide the innovation process. Here are principles essential for managing the innovation process successfully:

    • Innovative activities should meet customer needs, please shareholders and motivate staff. Innovation delights customers while meeting needs of stake-holders and allowing the company to remain financially viable.

    • Innovation requires vision to drive the change process. Top management needs to be able to inspire staff towards a single vision or a sense of purpose within which to innovate.

    • Innovation requires a risk-tolerant environment where you are not expected always to succeed. When developing new service initiatives, not all ideas will be viable and occasional failure is inevitable. Managers need to provide support for risk-taking and reassurance that creative efforts are recognized whether or not they are successful.

    • Innovation requires a lifelong learning orientation that involves all members of the organization. Employees need support in seeing their own learning as ongoing, rather than completed at the end of formal schooling.

    • Innovation requires creative thinking in a diverse, information-rich environment. The creative process requires a great deal of input to stimulate new concepts.

    • Innovation requires a cross-functional systems perspective for analysing the impact of change and overseeing implementation.

    Key issues to address 

    Managers of services firms need to be able to address seven issues: reducing the sense of risk; managing the customer interface; training customers; managing staff performance; engaging front-line staff; linking innovation options to the type of ser-vice; and using information technology.

    Reduce the sense of risk 

    A major barrier to innovation adoption is the customers' fear of the risk involved. For services firms, risk is always present: customers never know ahead of time how well the service will be provided. While a service provider may usually perform well, there are always those days when staff are preoccupied with personal issues or simultaneous customer demands outstrip delivery capacity. While customers may find a service innovation intriguing, they may also be concerned that the service firm is less likely to be able to control quality in providing a ser-vice with which they are less experienced.

    To help reduce the customers' sense of risk in new export markets, try strategies like the following:

    • Provide a free sample of the service, such as a brief presentation or assessment.

    • Provide a guarantee that the service is free if the customer is not satisfied.

    • Target a government department as your first customer (to get its blessing) before approaching the private sector.

    Manage the customer interface 

    Manufacturers produce their goods away from the customer and so can separate the operational and marketing functions. Not so for services firms. In most instances, customers have some direct interaction with the service production process, whether virtually or in person. The customer's experience of the service process is shaped in large part by the front-line contact staff who perform both as administrative and 'marketing' staff.

    To improve the customers' experience of your service firm, try strategies like the following:

    • Call your firm from outside your office to see how welcoming initial contact is.

    • Ensure that telephones can be answered within three rings and customers are not routed through seemingly endless voice message responses.

    • Transform front-end receptionists into 'marketing assistants' who can add real value to interactions with the customer.

    If your service has a physical place where customers interact with staff, observe that area as though you were a customer. Problems to look for and resolve include:

    • Staff who are visible to customers but are not available to help them. These staff need to be kept out of the sight of customers so that customers do not feel that they are being ignored by staff who could be helping them.

    • Interruptions from backstage staff talking to on-stage staff in front of the customer. All staff need to be trained to support a customer's sense of uninterrupted service and importance to the firm.

    Consider also interactions between those responsible for services to customers and those who provide the support functions within the firm (e.g. accounting, computer network administration) which affect how well the service can be delivered to the customer. This is the place within a service firm where organizational innovations are most promising but most often overlooked. The ease with which this interaction is handled is often referred to as 'internal service quality'.

    Train customers to participate appropriately 

    Often customers must themselves play a role as 'co-producers' or 'unpaid staff' for the service to be delivered. This requires them to learn their role and execute it properly. Interestingly, the United States Technical Assistance Research Program has found that 30% of customer dissatisfaction results unwittingly from their own inadequate performance.

    Firms often overlook the customer's role. An increasing number of services firms solicit customer input on what would make a new service or service delivery process most attractive to them. Once the service is being delivered, both customer and staff roles may vary. If the design is for self-service, then customers will be taking the lead 'production' role.

    When services firms introduce an innovation, the customer's role may need to change. This raises issues about whether or not customers want to take on the effort of learning a new role. Ser-vices firms also need to think through how they will communicate those changed role expectations and what additional benefits customers could expect to receive if they are willing to adopt a new role.

    Manage staff performance 

    When customers assess service quality, what they typically assess is staff performance (how the ser-vice was delivered) rather than the service offering per se. The challenge for managers is that, while customer satisfaction increases with consistent task execution, staff motivation may decrease if they feel that their work has become routine. Generally, staff are motivated by increased task complexity and increased discretion in task execution.

    To improve staff performance, try strategies like the following:

    • Create innovation circles (similar to quality circles).

    • Give staff responsibility and authority for problem-solving in areas of customer dissatisfaction.

    • Vary the degree of customer contact that each staff member has, to alternate routine (back-office) tasks with challenging (front-office) interactions.

    Engage front-line staff in innovation research 

    It is usually counterproductive for ser-vices firms to segregate research and development into a separate department, because research for innovation begins with assessing customer needs. In fact, the most knowledgeable staff are often those who interact directly with customers.

    Traditionally, 'research' has been viewed as a technical skill that is not part of front-line responsibilities. Services firms that overlook the potential for input from front-line staff are severely limiting their chances of success.

    To encourage front-line staff to think about customers' needs, try strategies like the following:

    • Ask staff to report at staff meetings on what they have observed about customers' behaviour (what appears to frustrate or please customers).

    • Ask staff to track frequently asked questions, and then analyse those questions periodically in order to to make suggestions for improvements to the service.

    • Share letters from customers with staff and discuss why the customer has been pleased or unhappy.

    Link innovation options to the type of service 

    How customers perceive risk is important. Customers select some services primarily on the basis of convenience of location (e.g. corner grocery store, nearest branch of a favourite fast-food chain) and are unlikely to travel to a distant location no matter how innovative the service offerings are. Of course, this in itself offers innovation possibilities. For example, dry-cleaners can opt to pick up and deliver dry-cleaning to customers at their offices. More risky services purchases (e.g. medical care, security services) usually result in customers researching options carefully and selecting a service provider largely because of its ability to deliver rather than for reasons of convenience.

    Use information technology to innovate 

    Both domestic and export service operations have been revolutionized by the links between information technology and telecommunications. The Internet is being utilized for marketing, partner search, ser-vice delivery, inter-staff coordination, and interactive customer research, among other uses. Medical specialists provide real-time consultations to remote communities that they may never visit in person. Customer service telephone numbers may be answered from anywhere in the world. Other companies use advances in digital imagery to produce high-quality flyers and promotional brochures overnight for local and international clients incorporating images e-mailed to these companies.


    How does your organization rate? 

    Answer the questions below to test how you and your staff rate as innovators.

    Is innovation stated as part of your corporate objectives and business plan?

    Do you have at least two experiments or pilots of new service concepts being conducted at any one time?

    Do you regularly review your portfolio of service offerings to make sure that they are balanced in terms of novelty/innovation and risk?

    Is your objective to be the market leader by exceeding the value added of your main competitors?

    Does your financial reporting system reflect innovation as an investment rather than a cost?

    Are you attracted by new technologies and considering how to apply them in your business?

    Do you provide support to staff who try out new ideas even if the ideas fail?

    Do you have a procedure for having staff "mystery shop" the competition and report back?

    Do you provide training for staff in innovation-related skills?

    Do you expect to get at least 5% of export revenues from innovative services?


    9-10 Check marks = Great job!

    7-8 Check marks = Strong foundation for innovation.

    5-6 Check marks = Some support, but could be better.

    1-4 Check marks = Need to develop a more proactive role.