Innovation in Services: A comparative study of external learning processes in incremental and radical service innovation

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• Henning Droegeand Juan Ramis, ESADE Business School (visitor to the CSA IfM)
• Tuesday 17 November 2009, 12:00-13:00
• Seminar Room Three, Institute for Manufacturing.

If you have a question about this talk, please contact Peter Wild.

Innovation in Services: A comparative study of external learning processes in incremental and radical service innovation *

In this study we present findings on external learning processes in service innovation projects and show how such processes operate in incremental and radical innovation projects. While research on product innovation has revealed already first valuable insights (e.g. Lane & Lubatkin, 1998; Jansen et al., 2005), in service innovation literature, external learning still belongs to one of least researched topics (Sundbo, 2000; Stevens & Dimitriadis, 2004), although several researchers have called for more research in this domain (e.g. Spohrer, 2008; Lane et al., 2006). This is surprising, as due to differences in the ease with which service firms may identify and exploit external information (Mendonca et al., 2004), patterns of absorbing external information may be shaped differently particularly in services innovation. In order to answer these questions, we conducted case study research in the retail banking sector in Germany and Spain.

Our findings indicate that, different from existing studies, in incremental innovation projects, the firm could readily acquire the novel information to fit the information needs of the innovation project and could exploit it subsequently. In contrast, external learning in radical innovation activities involved external information from more distant or ambiguous sources. This information, could not be readily assimilated and exploited after acquisition, but needed additional intermediary steps. After the acquisition stage, an intense transformation stage was initiated. Only after the external information was transformed by internal experts in order to become understandable and to get closer to the existing knowledge base, the service development staff could integrate this information into the innovation activities in order to exploit it subsequently. In sum, the absorption process for external information related to incremental innovation included the steps (1) recognizing, (2) acquiring, and (3) exploiting. In contrast, the process for radical innovation differed and included the steps (1) recognizing (2) acquiring, (3) transforming, and (4) exploiting. Particularly among the process steps during radical innovation, we observed frequent iterations. For example, due to observed ambiguity and the continuous changing of the external information available, the project development staff needed to acquire, transform, integrate and exploit external information several times again over the course of the radical projects.

Our findings on the differences in learning from external sources depending on whether this takes place in incremental or radical innovation projects, support Todorova & Durisin’s (2007) conceptual argument on the contingency of external learning integration processes with regard to the type of knowledge absorbed. In addition, our findings on the iterative nature of the external learning activities add to current literature a dynamic perspective, as existing process models have to date remained exclusively static in nature (e.g. Zahra & George, 2002). Future research should apply our findings and investigate it in additional service industries. Via quantitative research, our findings could further be extended in order to inquire whether they hold also for larger groups of observed organizations.

As regards practical implications, firms need to put external information absorption processes in place which are adaptable to the different information needs of incremental and radical innovation projects. In addition, firms must be aware, that external learning activities should not be performed only at the beginning of an innovation project. Rather, these absorption processes are highly iterative and need to be repeated on a continuous basis in order to be able to quickly react to environmental changes.

• The authors would like to thank the IBM Global University Relations and Innovation Program as well as the European Union Social Fund for financially supporting this research.

This talk is part of the Cambridge Service Alliance Forum series.

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• All Talks (aka the CURE list)
• Seminar Room Three, Institute for Manufacturing

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