It is harder for a Services business to innovate. Product innovations are easier, at least in perceptions, because they are more tangible to the senses of the general mass. Beyond value-added new services, incremental upgrades and additions to the existing services are rarely considered as innovations. For example, people seldom feel the traditional Services business, like the utility companies, can innovate. There is a lot of truth to it simply because in general these businesses are very risk-averse. Because of the high requirements of ensuring “the continuity of the services”, they dare not to make quick changes and they are also subject to too many government regulations for the same reasons. Gradually it is the mindset of the people inside and the speed of change mark their business more like a days-in-days-out slow-moving train. Consulting Services companies talk more about “to adapt” than “to innovate”. Smaller and less regulated service sectors, on the other hand, innovate quite often and faster, but by the means of frequently launching embedded new and creative “products” (e.g. knowledge-based products, consumer products, etc)as they are called, not services. We can vaguely sense that a technology services business may fall somewhere in the middle.
Big Services companies tend to stay the course, maintain their on-going services to the “satisfaction of the customers”, but customers rarely can point you to the right innovations. That’s why Steve Jobs intuitively pointed out that “A lot of times, people don’t know what they want until you show it to them.” Unless a Services company truly owns a unique and long-standing high-entry point apart from competitions, hardly the case most of the time, any new service, once turns into an existing offering, can lose the innovative edge immediately or be copied quickly by competitors. A Services companies can keep adding incremental changes to their services and putting a lot of resources into the upgrades and maintenance cycles, but these routine actions in fact divert resources and may only keep them further away from being truly innovative. A lot of times the routine mindset set in and makes it harder for a Services organization to change. Startups, however, usually have limited resources. They have to focus their people’s mindset and tight resources onto creating something new, unique, either a product or service, to hit the market quickly and stand apart from the herd. That’s why startups are in general more innovative than big companies.
An innovative company needs an innovative mindset throughout. Great innovations need out-of-the-box thinking, out-of-the-beaten-path risk-taking, maybe new skills and often a large degree of abandonment of the old routines in order to strike onto something new, exciting, creative and different. How a Services company can maintain its innovative edge? Besides the new services every once a while or adding new product mix, it has to focus more on the behind-the-scene: people innovation, process innovation and value innovation. Its goals should be the market-leading efficiency, the exceptional customer experience, the unique value proposition and/or the superior cost structure. To achieve these, it needs a deeply rooted innovative culture and it needs mindful leaders and talents. It is not easy.
Leaders need to take a long and hard look into an organization’s core strengths, the competitive edge, the culture needed to decide on its best line-ups and directions if they want to stay innovative. Today any big company needs to be willing to transform itself to stay relevant. A company can transform successfully for the money-making sense, but it may not guarantee its long-term innovative edge if the urgency and drive for innovations are not conscientiously put into its core visions, its leadership’s mindset and its daily practices. IBM is a great example. They can transform from a mainframe and PC business into a good Services business, but it didn’t make them an innovative market leader. Today they are still facing the same challenges and threats from the competitors who can innovate a lot faster. Profitability and stability are double-edged swords for a long-term business.
Steve Jobs once said (Apple is mainly a product company though), “Innovation distinguishes between a leader and a follower.” It applies to both a leader and a business or organization itself.