Customers and service innovation

A new working paper looks at customers’ role in innovation in a service industry: banking.

Eric von Hippel of the MIT Sloan School has long argued that users play a larger role in product development than is commonly believed. Now, in a new working paper, Pedro Oliveira and von Hippel take a look at customers’ role in innovation in a service industry: banking.

Oliveira and von Hippel studied the history of 47 commercial and retail banking services that were introduced between 1975 and 2008. Their conclusion: In 85% of the cases, the service was something some customers had previously been doing on their own, before the bank provided the function as a commercial service. For example, before commercial “sweep” accounts existed to transfer money not immediately needed to accounts that earn more, many customers transferred money from one account to another on their own to achieve that effect.

For managers, Oliveira and von Hippel suggest, the study’s findings indicate that one good way for a service provider to innovate is to look at what customers do on their own before and after using the provider’s existing commercial services.  Studying customers’ activities in areas adjacent to current commercial service offerings, they observe, may reveal new business opportunities for service providers.

1 Comment On: Customers and service innovation

  • josé manuel carvalho vieira | February 1, 2010

    Interesting findings.

    It seems like expectations conditioning the service experience or

    The primordial social nature of the majority service economic encounters

    Finally, where is the knowledge?

    With Cooper, Edgett, Easingwood & Story studies, Carvalho Vieira, JM., Serra, E, & Gonzalez, A.V., 2004. “New Services Marginal/High Success Discriminators”. Service Industries Journal, Vol. 24, Nº 5, Nov.2004, pp.91-101, empirical results showed:

    1. New service innovativeness to market is a strong discriminator between NS success (high/marginal) and failure;

    2. New service innovativeness to service provider has no global impact on the NS future performance (financial/no-financial) with exception 0f unless on time-to-break even (strong negative impact).

    congratulations

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