Existing theoretical and empirical researchers associated innovation with technological transformations and introduced radical/disruptive products and processes. However, considering the approaches and theories would be limited to manufacturing industries, innovation in service industries with non-technological aspects needs to be noticed. This study emphasises the need for a synthesis approach that could play a major role in building/enhancing service business models/frameworks. These frameworks need a stronger focus on using organizational, strategic, and marketing innovation typologies in formulating service business models resulting in low customer engagement and customer experience management. This chapter discusses various new business models that have evolved their features and benefits. Finally, this study concludes by emphasising the need for incorporating non-technical components when innovating in services and services-based firms.
Top1. Introduction To Service Innovation
Innovation is the initial use in production or the market, whereas an invention is a discovery or new existence, typically at the bench or lab (Roberts, 1988). Before Barras' (1986) study, researchers tended to use the term innovation concerning products, whereas service was viewed as a supporting component of the delivery process. Notably, innovation in services was approached similarly to innovation in a product where some exclusive characteristics of services made it difficult during implementation, which paved the way for the evolution of the concept of “Service Innovation”. Service innovation has been gaining attention among researchers over the last three decades. Authors who previously thought of service innovation as akin to product innovation have had their ideas challenged by empirically based theories of service innovation. Studying and developing new approaches, strategies, theories, and measurements would help service firms develop exclusive service business models that could satisfy customer needs (Peixoto et al., 2023). However, it is not easy to analyze all the aspects of service innovation since it is a more comprehensive topic; thus, many researchers have attempted to study different branches of service innovation.
1.1. Service vs. Product innovation: A thorough analysis of research studies on innovation highlights three key distinctions between service and product innovation. They are (a) When it comes to service innovation, not only are services generated, but also the prerequisites for services (Mahavarpour et al., 2023), meaning that when customers want a service, both the production and delivery processes are involved. Since service innovation primarily relates to innovation in the delivery process, the company must integrate it with its current service industry-related business operations. This must be done when manufacturing items because R&D and production adhere to separate processes (Tatikonda & Zeithaml, 2001; Kampani & Jhamb, 2021). The front and back offices must integrate to address the disparity in goals and deadlines (An & Mikhaylov, 2024). In contrast, the front office is set up to meet customer requests, while the back office is organized to maximize productivity in the manufacturing industry (Menor et al., 2002). The third and most significant difference is in the investment and spending. Prior studies on innovation (Barras, 1986; Djellal & Gallouj, 2001) indicated that investment and spending are higher in manufacturing enterprises than in service sectors. The manufacturing firm spends more on R&D and manufacturing than developing new services. The benefits of products to consumers are also less than those of services, according to Atuahene-Gima (1996), and the rate of innovation in the service sector is far higher than that in production firms. DeBrentani and Cooper (1992) assert that when it comes to the generation of innovation, technology plays a lower role in service innovation than it does in product innovation.
Similarly, the differences can be experienced in the barriers to innovation, where the human recourse factor as a barrier is most prominent in services compared to products (Sirilli & Evangelista, 1998). Additional researchers, including Atuahene-Gima (1996) and Janz et al. (2001), contrasted the studies about product industries and service businesses. They found that certain characteristics of services, such as perishability, inseparability, and heterogeneity, completely differentiated them from products. This creates a need for business models/strategies that address the unique features of services for service industries by giving equal importance to technological and non-technological components. Further, contextual differentiation should be addressed (a) based on the industry and (b) based on the innovative concepts developed by the firm. Nevertheless, how is it measured? Drawbacks in existing business models: How can they be transformed/improved as per changing customer requirements? Can it be generalized to all service industries or subject to the individual industry? There remains a gap to be addressed.