The service sector plays an increasingly important role in the economy. Innovation has long been recognized as a key to economic growth but its role in the service sector is still very low compared to other sectors like manufacturing. There is an opportunity to look into demand-oriented innovation in service sector like regulatory change, cost savings, consumers demand and pressure from competitors.

Innovation needs to be a high priority agenda item for organizations in the IT service industry for their long-term survival and success. Many organizations have a central team taking responsibility for innovation initiatives. Organizations need to be innovative in their day-to-day execution e.g. a practice team building solutions/offerings, or a delivery team executing a project or a sales team selling offerings to the customer, or the leadership team deciding the strategy.

How to measure innovation?

When it comes to measuring innovation, there is no one definitive answer. Innovation literally means, ‘introducing something new.’ Innovation is the successful exploitation of new ideas – this definition applies to all firms in the economy and is equally relevant to services innovation.

Approach taken by IT service companies

The service sector as a whole is a rather heterogeneous conglomerate of industries so therefore, it is therefore often difficult to make generalizing statements or to come to clear conclusions. Technology is the key to drive the innovation in the service sectors. Technologies enabled ‘NEW’ business models as follows (source: Seizing the White space Harvard Business Press by Mark W Johnson) –

  • Pay-as-you-go ( : Replace a CapEx product with an OpEx Service
  • Subscription Club (NetFlix) : Subscription fee creates a tied in customer base
  • Freemium (Skype) : Basic service is free and ubiquitous with premium is chargeable
  • LowTouch (SouthWest) : Low cost, self service in place of high cost with high service
  • Disintermediation (WebMD): Using technology to deliver direct not through limited local source
  • Brokerage (Century 21st): Match buyers and sellers for a fee on successful transactions
  • Smart Devices (Vodafone): Package combinations of product and services to maximize market
  • Crowd Sourcing(Wikipedia): Outsource content construction in exchange of broader view