Service Oriented Innovation
Yes. I took this title from popular software concept of Service Oriented Architecture (SOA). If service is so important that it gets a whole software movement named after it, it surely deserves some innovation.
What triggered this line of thinking was a blog I ran into at Courant’s new hub on innovation: 3 types of innovation in your business (Jeffrey Phillips). The taxonomy represents what I would call Product Oriented Innovation. My Geek side really wanted to call it Object Oriented Innovation. But my Empath subsystem keeps saying “Don’t speak Geek when you are not talking to Geeks.”
The concept of Service Oriented Innovation (SOI) goes back to the middle of the last century. Business consultants then expressed it in the question:
“What business are you in?”
At that time, the industrial revolution was running out of steam (note the old cliché, appropriate for the context). Companies had long focused on the business of making and selling products. They needed to rethink their business model. What some business consultants realized was that the demand for products is usually driven by the demand for the services they provide. And the demand for a specific service lasts longer than the demand for a specific product.
It was sometimes useful for companies to shift the focus from the products they made to the services those products provided. The focus of their innovation shifted:
“How can we make the product better?” (POI) became “What service are we providing and how can we do it better?” (SOI)
You can see what the results would be: Product Oriented Innovation gets you better products. Service Oriented Innovation gets you better services. That can mean different products. Or it can mean a different way of providing the service. Those developments are called disruptive innovation. Especially by those who used to sell the products. I hope some software vendors are listening.
An article in Business Week Online speaks of this concept as Business Model Innovation. But I like to include the service concept because it give you a better idea of where to look.
As a familiar example, take the service of home entertainment. Start in mid-stream. VCRs reach the consumer market. People realize that you can put movies on those video cassettes. They start selling cassettes with movies (product).
The underlying service, however, is a type of home entertainment. Some people, notably Blockbuster, see that they can provide a similar service at lower cost by renting the tapes. This step disrupts the market for movies on tape. Score one for SOI.
Blockbuster easily adapts to the introduction of the DVD. Similar product. You can distribute it the same way. For SOI, turn to Netflix. Part of the service is aggregation and distribution. Blockbuster does that with stores. But you can mail a DVD. And you can aggregate on the web. Netflix comes out of nowhere and threatens to put Blockbuster out of business. Blockbuster probably calls that disruptive innovation. Score another one for SOI.
But the story continues. Nobody wants a DVD. People want the content it supplies. We all know that the content can be distributed over broadband. In fact, content is already being distributed over broadband, much of it in violation of copyright. But companies can license content and distribute it. In this case, the product (content) is already available. The service will lie in the improved distribution. Somebody will get it right. Probably later this year.
Maybe Netflix and Blockbuster with do it. Otherwise, they will know the power of disruptive innovation. Score another one for SOI. I don’t even know the winning player. But I am sure that the winning focus will be service oriented.
What triggered this line of thinking was a blog I ran into at Courant’s new hub on innovation: 3 types of innovation in your business (Jeffrey Phillips). The taxonomy represents what I would call Product Oriented Innovation. My Geek side really wanted to call it Object Oriented Innovation. But my Empath subsystem keeps saying “Don’t speak Geek when you are not talking to Geeks.”
The concept of Service Oriented Innovation (SOI) goes back to the middle of the last century. Business consultants then expressed it in the question:
“What business are you in?”
At that time, the industrial revolution was running out of steam (note the old cliché, appropriate for the context). Companies had long focused on the business of making and selling products. They needed to rethink their business model. What some business consultants realized was that the demand for products is usually driven by the demand for the services they provide. And the demand for a specific service lasts longer than the demand for a specific product.
It was sometimes useful for companies to shift the focus from the products they made to the services those products provided. The focus of their innovation shifted:
“How can we make the product better?” (POI) became “What service are we providing and how can we do it better?” (SOI)
You can see what the results would be: Product Oriented Innovation gets you better products. Service Oriented Innovation gets you better services. That can mean different products. Or it can mean a different way of providing the service. Those developments are called disruptive innovation. Especially by those who used to sell the products. I hope some software vendors are listening.
An article in Business Week Online speaks of this concept as Business Model Innovation. But I like to include the service concept because it give you a better idea of where to look.
As a familiar example, take the service of home entertainment. Start in mid-stream. VCRs reach the consumer market. People realize that you can put movies on those video cassettes. They start selling cassettes with movies (product).
The underlying service, however, is a type of home entertainment. Some people, notably Blockbuster, see that they can provide a similar service at lower cost by renting the tapes. This step disrupts the market for movies on tape. Score one for SOI.
Blockbuster easily adapts to the introduction of the DVD. Similar product. You can distribute it the same way. For SOI, turn to Netflix. Part of the service is aggregation and distribution. Blockbuster does that with stores. But you can mail a DVD. And you can aggregate on the web. Netflix comes out of nowhere and threatens to put Blockbuster out of business. Blockbuster probably calls that disruptive innovation. Score another one for SOI.
But the story continues. Nobody wants a DVD. People want the content it supplies. We all know that the content can be distributed over broadband. In fact, content is already being distributed over broadband, much of it in violation of copyright. But companies can license content and distribute it. In this case, the product (content) is already available. The service will lie in the improved distribution. Somebody will get it right. Probably later this year.
Maybe Netflix and Blockbuster with do it. Otherwise, they will know the power of disruptive innovation. Score another one for SOI. I don’t even know the winning player. But I am sure that the winning focus will be service oriented.
posted by Selby Evans at 9:05 AM
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