The book can go the way of a lightning rod to bringing service innovation up in many people’s thinking both in academic research and corporate agendas.

Professor Chesbrough is absolutely right, services are critical to developed countries’ economies and within our organizations. It is time to move service innovation up in our thinking by combining the internal capabilities within organizations and by enlisting the efforts of many others in support of their business.

The challenge is to combine the customer and the supplier on the same platform for Open Services Innovation to work. It is thinking through platforms more that catches my interest and what this means in generating new, innovative business models.

Taking services into a more open approach is not so easy.
Service innovation is distinctly different. Just take the opportunity to read “Service Innovation” by Lance A Bettencourt, published by McGraw Hill to get a really detailed understanding of this or read my book review I provided to InnovationManagement.se (http://bit.ly/9mCXmO).

Chesbrough’s book has four foundation steps. You can see these in my last blog “Taking the Open Services Innovation Road (http://bit.ly/h5mbAV). The two aspects that I felt were worth focusing upon here are 1) transforming and redesigning your business model and 2) the suggestion of an open innovation business model platform to work from.

Transforming your Business model
The chapter that deals with these two aspects (chapter 5) open with “while openness can be quite helpful to improve service innovation, it becomes far more powerful when joined to the task of designing or redesigning a business model.” This is a pivotal chapter for me.

For me, business model generation is very much something we all have to build into our thinking. I’ve blogged on different occasions about this in many of my September & October 2010 posts on this site- I encourage you to take a look back to refresh on these if needed.

Opening up organizations thinking to focus more on service innovation will certainly challenge existing business model design. Distribution channels, and interactions with customers will dramatically alter; extracting more out of the value chain, and deepening after-sale service will all need to be reviewed. Professor Chesbrough does suggest many current business models are full of inertia by their very logic as one choice can constrain other alternatives and cites Dell as a good example of this.

Also, I would recommend Alexander Osterwalder’s excellent book on Business Model Generation, my review (http://bit.ly/i6W3HV) or Mark Johnson’s “Seizing the White space”, review here (http://bit.ly/bwKNkS) for gaining a really good understanding of Business model needs as Professor Chesbrough’s book touches on the Business model as you do need to supplement this chapter significantly.

Open Innovation Business Model Platform
“The ultimate goal for a service business is to become a platform for other businesses to build upon”

According to Professor Chesbrough “the crowning achievement of a platform business model is that it attracts external companies to invest in business activities that enhance the value of your platform. Stated differently, a platform business model leverages other people’s money and resources at it grow”

Now, this gets to the interesting part of the book for me. Professor Chesbrough suggests a two-sided market platform between suppliers and customers both contributing to the ‘hosted’ platform’s numerous choices for customers to choose from and lots of customers looking for items to choose from to form a virtuous cycle.

It is the architecture, the platform developer that connects the internal and external elements to achieve this.

In this open platform business model where key suppliers and customers enter into a ‘relationship’ and become business partners to share technical and business risks with customer needs and experience understanding.

Getting to this sense of spiritual ‘Nevada’ is the really big ‘bite’ from this book.
“This requires opening up your organization’s business model to harness the energy and investment of third parties in the business”

The book does broaden the business model still further and suggests third parties be encouraged to participate in the company’s future business plans with even independent evaluators to rate and review services on this sharing platform. By sharing tools, standards, intellectual property and know-how needed is part of the open equation, the platform not only coordinates business directions it now shapes future direction alongside the customer.

Extending what is presently going on and applying it across industries is the challenge.

This platform approach is nothing new for many business-to-business activities that have technology as central, and or, have long lead times and require industry standardisation where they need to build out on agreed platforms or through a roadmap approach.

Also for selected industries that have achieved this greater connection with suppliers and customers such as Apple (well covered in the book) for its iPod, iTunes, iPhone & iPad where applications are open and customers participate but can this go more broadly across other industries might be more fraught and questionable?

Can the combination of fresh thinking of your business as more a service business, allowing co-creation with customers getting more involved through opening up innovation to a broader ecosystem-based on platform business models be our next big ‘wave’ in innovation?

It will be interesting to participate in the debate and see if it gains a broader acceptance. I feel we might have a long road to travel through, to tackle this conceptual framework suggested by Professor Chesbrough and resolve the many issues and challenges it tends to brush over.

The post The Promise of Open Services innovation first appeared on Building Your Innovation & Ecosystem Intelligence.

I’m hopeful that the forthcoming book of Henry Chesbrough: “Open Services Innovation: Rethinking your Business to Grow and Compete in a New Era”, published by Jossey-Bass and being launched officially next week, 18^th January 2011, will go some of the ways to be a lightning rod to bringing this up in many people’s agenda if it is not already!

I felt with his past books on Open Innovation and Open Business Innovation they were the catalysts for deeper thinking. He provided the stimulus to find better answers with his many reflections and case studies through his solid research work and his ‘open’ and questioning thinking to prompt community ‘reactions’. This galvanized significant innovation movements and this time hopefully, it will be to open up and manage service innovation more effectively.

I will be completing a book review on this latest open innovation thinking by Dr.Chesbrough for www.innovationmanagement.se as an early February publication and I’m certainly looking forward to reading the final edition of this book when it arrives.
I’ve glanced through different early teasers, and complimentary pages and seen some advances to raise my expectations on this but understanding service innovation has been poorly understood and documented to date. It is complex and needs some different perspectives and thinking.

Dealing with the service side of innovation seems to have always been tricky. As the more ‘advanced’ economies or the ‘developed’ world extracts knowledge, its future understanding and extraction seem tied to really understanding and delivering service. Increasingly goods being produced is flowing east, and service experience and delivery will not be far behind unless this becomes the critical focus of Western countries to master and own for the next few years.

I’ve read a significant amount about the subject of service innovation, often it is been very fragmented and poorly connected in many different lacking ways; in its empirical evidence, analytical and theoretical frameworks and laying out a cohesive design. Let us hope Dr. Chesbrough’s book gives us a more solid basis to build upon and extend out.

For me we have different focal points within service that need to be thought through some more, these are

1. Centred on People– how we set about consumer services for example, how we enable engagement and develop these connections to build a sustainable business around individual’s needs is critical to understand
2. Centred on Business– again what connects the parties into a service relationship and what ‘transforms’ from this dialogue and set of exchanges into something that gives value to all the participators and builds on the existing to transform it into something of new worth.
3. Centred on Products– where design becomes more critical to gain appeal and attention but then how to build from this ‘sale’ to operate, maintain and grow further services around these products sold
4.  Centred on Information– the creation of knowledge and the being able to adapt it, leverage its utilization and diffuse it in new and valuable ways.

All of the above four require different understanding, a different science of service. All have a very high social-organizational need; all are lending themselves to being opened up.

An urgent ‘call to action’
We do need an urgent’ call to action’, we need a science of services to understand how this needs to evolve, what the different types of service focus requires look, how the service systems should evolve and scale.

The call to action does need to be a concerted effort-
a)      it needs to take increasing Governments attention to remove barriers and promote service,
b)      it needs businesses to give the necessary ‘weight of emphasis’ service deserves as service relevance to the organization is increasing faster than producing products and this call to refocus internal resources needs to be recognised;
c)       academics need to make service an increased priority for studies, for educational productivity and providing the platforms for research understanding and
d)       Societal impact needs a better service understanding.

Also knowing how to measure service is another big challenge.
Then we need to improve our level of measures for service. The growing need for measuring networks, interactions and relationships is extremely relevant to this area of innovation. Also the ability to measure operations and delivery excellence and thirdly the service value chain, the partnerships needed and the service excellence points understood from the client/ final consumer’s point of view.

There are seemingly many challenges and unknowns for service innovation today. We do need to get systematic about service innovation and make it more of dynamic evolution.

Optimism and openness to fresh insight is indeed needed

I hope Dr Henry Chesbrough’s book is the catalyst for this. Like his 2003 book, Open Innovation, it kicked off a whole new way to manage outside those internal organisational borders, let’s hope he ignites the open touch paper again in this book for service innovation.

A further work of his around the importance of the Business model is very much in the present minds of many and some excellent frameworks presently help us in thinking these through like Alex Osterwalder’s Business model generation and its nine exploring blocks, or Mark Johnson’s and his four-box business model framework. Both of these you will find comments within this blog or the book reviews I have previously made for www.innovationmanagement.se.

We really need a better acceleration of service innovation and its greater understanding for regaining growth in the Western economies and if it is throwing services open then let’s go! I think service innovation is going to be very topical, highly critical in the coming months and years to grasp, translate and perform as we need service excellence to thrive and in the West, survive from service’s increased contribution in wealth formation to the economies and its role in necessary job creation.

The post Service innovation- can it become more open? first appeared on Building Your Innovation & Ecosystem Intelligence.