An Integrated View of Service Innovation in Service Networks

  • Renu Agarwal
  • Willem Selen
Part of the Service Science: Research and Innovations in the Service Economy book series (SSRI)


This chapter provides an insight into how service innovation may be enabled in service systems. In particular, we look at the ability of the organizational networks to collaboratively generate the capacity to adapt to changing circumstances rather than as individual firms on their own, using the RARE (Resources, Activities and Routines configured and reconfigured through Entrepreneurial actions) strategic framework. This leads into unraveling the complexity of strategic decision making in service networks through co-evolutionary adaptation, or the learning of organizations over time and the resulting virtuous process of experience, learning, and dynamic capabilities enabling them to respond to and launch a variety of competitive actions. Finally, we report on how service networks can address the duality of dynamic control capacity and responsiveness, known as the Paradox of Flexibility, through linking strategic and operational capabilities, as well as customer-supplier duality capabilities, in real time. This in the end results in innovation in services or our notion of “elevated” service offerings.


Service systems service network elevated service offering dynamic capabilities service innovation co-evolutionary adaptation paradox of flexibility 


  1. Agarwal, R. and Selen, W. (2009) Dynamic capability building in service value networks for achieving service innovation. Decision Sciences, August 2009, 40, 3, 431–475.CrossRefGoogle Scholar
  2. Agarwal, R. and Selen, W. (2005) Services Value Network Consortia: recent literature and operational definition. ANZAM Symposium (Australia and New-Zealand Academy of Operations Management), June 13–14, 2005, Capricorn Coast, Queensland, Australia.Google Scholar
  3. Amit, R. and Schoemaker, P. J. (1993) Strategic assets and organizational rent. Strategic Management Journal, 14, 33–46.CrossRefGoogle Scholar
  4. Amit, R. and Zott, C. (2001) Value Creation in e-businesses. Strategic Management Journal, 22, 493–521.CrossRefGoogle Scholar
  5. Barney, J. (1991a) The resource-based model of the firm: origins, implications and prospect. Journal of Management, 17.Google Scholar
  6. Barney, J. B. (1986) Strategic factor markets, expectations, luck and business strategy. Management Science, 32, 1231–1241.CrossRefGoogle Scholar
  7. Barney, J. B. (1991b) Firms resources and sustained competitive advantage. Journal of Management, 17, 99–120.CrossRefGoogle Scholar
  8. Bitner, M. J. and Brown, S. W. (2008) The service imperative. Business Horizons, 50th Anniversary Issue.Google Scholar
  9. Carbone, L. P. and Haeckel, S. H. (1994) Engineering customer experiences. Marketing Management, 3, 8–19.Google Scholar
  10. Cepeda, G. and Vera, D. (2007) Dynamic capabilities and operational capabilities: a knowledge management perspective. Journal of Business Research, 60, 426–437.CrossRefGoogle Scholar
  11. Chase, R. B. (1978) Where does the customer fit in a service operation. Harvard Business Review, 56, 137–142.Google Scholar
  12. Chase, R. B., Aquilano, N. J., and Jacobs, F. (1998) Service innovation in Hong Kong: attitudes and practice. Operations Management for Competitive Advantage. McGraw-Hill, Boston, MA.Google Scholar
  13. Cheah, H. B. (1992) Revolution and evolution in the entrepreneurial process. World Conference on Entrepreneurship. Singapore.Google Scholar
  14. Cook, D. P., Goh, C. H., and Chung, C. H. (1999) Service typologies: a state-of-the-art survey. Production and Operations Management, 3(1), 35–44.Google Scholar
  15. Cravens, D. W., Piercy, N. F., and Shipp, S. H. (1994) New organization forms for competing in highly dynamic environments: the network paradigm. Proceedings of the Second Research Conference on Relationship Marketing, Atlanta, GA.Google Scholar
  16. D’aveni, R. A. (1994) Hypercompetition: Managing the dynamics of strategic maneuvering. The Free Press, New York.Google Scholar
  17. Day, G. S. (1994) The capabilities of market-driven organisations. Journal of Marketing, 58, 37–52.CrossRefGoogle Scholar
  18. Day, G. S. and Schoemaker, P. J. H. (2000) Managing emerging technologies. Wiley, New York.Google Scholar
  19. De Bano, E. (1977) Lateral Thinking. Middlesex, Penguin.Google Scholar
  20. Duncan, R. B. (1976) The ambidextrous organization: Designing dual structures for innovation. In R. H. Kilmann, L. R. Pondy and D. Slevin (eds.). The management of organization design: Strategies and implementation. North Holland, New York: 167–188.Google Scholar
  21. Edwardsson, B., Gustafsson, A., Kristensson, P., Magnusson, P. and Matthing, J. (2006) Involving customers in new service development. Imperial College Press, London, UK.CrossRefGoogle Scholar
  22. Eisenhardt, K. and Martin, J. (2000) Dynamic capabilities – What are they? Strategic Management Journal, 21, 1105–1121.CrossRefGoogle Scholar
  23. Froehle, C. M. and Roth, A. V. (2004) New measurement scales for evaluating perceptions of the technology-mediated customer service experience. Journal of Operations Management, 22, 1–21.CrossRefGoogle Scholar
  24. Froehle, C. M. and Roth, A. V. (2007) A resource-process framework of new service development. Production and Operations Management Society, 16, 169–188.CrossRefGoogle Scholar
  25. Fernandez, E., Montes, J. M. and Vazquez, C. J. (2000) Typology and strategic analysis of intangible resources: a resource-based approach. Technovation, 20, 81–92.CrossRefGoogle Scholar
  26. Fitzsimmons, J. and Fitzsimmons, M. (2004) Service Management: Operations, Strategy and Information technology, 4th ed. McGraw-Hill, London.Google Scholar
  27. Gadrey, J., Gallouj, F. and Weinstein, O. (1995a) Innovation in services. Research Policy, 26, 537–556.Google Scholar
  28. Gadrey, J., Gallouj, F. and Weinstein, O. (1995b) New modes of innovation: How services benefit industry. International Journal of Service Industry Management, 6(3), 4–16.CrossRefGoogle Scholar
  29. Galbreath, J. (2005) Which resources matter the most to firm success? An exploratory study of resource-based theory. Technovation, 25, 979–987.CrossRefGoogle Scholar
  30. Gattorna, J. (Ed.) (2003) Introduction and frameworks. Gower Publishing Company, Hants, England.Google Scholar
  31. Goffin, K. and Pfeiffer, R. (1999) Innovation Management in UK and German Manufacturing Companies. Anglo-German Foundation, London.Google Scholar
  32. Grant, R. M. (1995) Contemporary Strategy Analysis. Blackwell,Oxford.Google Scholar
  33. Grove, S. J., Fisk, R. P. and John, J. (2000) Services as theatre. In Iacobucci, D., Swartz, T.A. (Ed.) Handbook of Services Marketing and Management. Thousand Oaks, CA, Sage Publications.Google Scholar
  34. Hall, R. (1992) The strategic analysis of intangible resources. Strategic Management Journal, 13, 135–144.CrossRefGoogle Scholar
  35. Harreld, J. B., O’Reilly, C. A. I. and Tushman, M. L. (2007) Dynamic capabilities at IBM: Driving strategy into action. California Management Review, 49, 1–23.Google Scholar
  36. Harris, L. C. and Goode, M. M. H. (2004) The four levels of loyalty and the pivotal role of trust: A study of online dynamics. Journal of Retailing, 80, 139–158.CrossRefGoogle Scholar
  37. Helfat, C.E. (1999) Know-how and asset complemantarity and dynamic capability accumulation: The case of RandD. Strategic Management Journal, 18, 339–360.CrossRefGoogle Scholar
  38. Helfat, C. E. and Peteraf, M. A. (2003) The dynamic resource-based view: Capability lifecycles. Strategic Management Journal, 24, 997–1010.CrossRefGoogle Scholar
  39. Henard, D. H. and Szymanski, D. M. (2001) Why some products are more successful than others. Journal of Marketing Research, 38, 362–275.CrossRefGoogle Scholar
  40. Hill, T. (2005) Operations Management. Palgrave Macmillan, Hampshire, New York.Google Scholar
  41. Johne, A. and Storey, C. (1998) New service development: A review of the literature and Annotated Bibliography. European Journal of Marketing, 32, 184–252.CrossRefGoogle Scholar
  42. Joiner, B. and Josephs, S. (2006) Leadership agility. Jossey-Bass, San Francisco, CA.Google Scholar
  43. Kale, P. and Singh, H. (2007) Building firm capabilities through learning: the role of the alliance learning process in alliance capability and firm-level alliance success. Strategic Management Journal, 28, 981–1000.CrossRefGoogle Scholar
  44. Klein, D. B. (1999) Discovery and the deepself. The Review of Austrian Economics, 11, 47–76.CrossRefGoogle Scholar
  45. Lavie, D. (2006) Capability reconfiguration: An analysis of incumbent responses to technological change. Academy of Management Review, 49, 553-570.Google Scholar
  46. Li, F. and Whalley, J. (2002) Deconstruction of the telecommunications industry: from value chains to value networks. Telecommunications Policy, 26, 451–472.CrossRefGoogle Scholar
  47. Li, J., Wilson, L. S., Qiao, R.-Y., Percival, T., Krumm-Heller, A., Stapleton, S. and Cregan, P. (2006) Development of Broadband Telehealth System for critical care – process and lessons learnt. Journal of Telemedicine and e-Health Oct 2006, 12(5), 552–560.CrossRefGoogle Scholar
  48. Makadok, R. (2001) Toward a synthesis of the resource-based and dynamic-capability views of rent creation. Strategic Management Journal, 22, 387–402.CrossRefGoogle Scholar
  49. March, J. G. (1991) Exploration and exploitation in organizational learning. Organization Science, 2, 71–87.CrossRefGoogle Scholar
  50. Mathews, J. A. (2006) Strategizing, disequilibrium and profit. Stanford University Press, Stanford, CA.Google Scholar
  51. Oke, A. (2007) Innovation types and innovation management practices in service companies. International Journal of Production and Operations Management, 27, 564–587.CrossRefGoogle Scholar
  52. Oke, A. and Goffin, K. (2001) Innovation management in the service sector. Management Focus, 16, 8–10.Google Scholar
  53. O’Reilly, C. A. and Tushman, M. L. (2008) Ambidextrity as a dynamic capability: Resolving the innovator’s dilemma. Research in Organizational Behaviour, 28, 185–206.CrossRefGoogle Scholar
  54. Parasuraman, A. and Grewal, D. (2000) The impact of technology on the quality-value-loyalty chain: A research agenda. Journal of the Academy of Marketing Science, 28, 167–174.Google Scholar
  55. Pine, J. B. and Gilmore, J. H. (1998) Welcome to the experience economy. Harvard Business Review, 76, 97–105.Google Scholar
  56. Porter, M. E. (1980) Competitive strategy: techniques for analysing industries and competitors. The Free Press, New York.Google Scholar
  57. Porter, M. E. (1996) What is strategy. Harvard Business Review, 74, 61–78.Google Scholar
  58. Porter, M. E. (2001) Strategy and the Internet. Harvard Business Review, March 2001, 62–78.Google Scholar
  59. Pullman, M. E. and Gross, M. A. (2004) Ability of experience design elements to elicit emotions and loyalty behaviors. Decision Sciences, 35, 551–578.CrossRefGoogle Scholar
  60. Roberts, P. W. and Dowling, G. R. (2002) Corporate reputation and sustained superior financial performance. Strategic Management Journal, 23, 1077–1093.CrossRefGoogle Scholar
  61. Roth, A. V. and Menor, L. J. (2003) Insights into service operations management: A research agenda. Production and Operations Management, 12, 145–164.CrossRefGoogle Scholar
  62. Safizadeh, M. H., Field, J. M. and Ritzman, L. P. (2003) An empirical analysis of financial ­services processes with a front-office or back-office orientation. Journal of Operations Management, 21, 557–576.CrossRefGoogle Scholar
  63. Sambamurthy, V., Bharadwaj, A. and Grover, V. (2003) Shaping agility through digital options: Reconceptualizing the role of information technology in contemporary firms. MIS Quarterly, 27, 237–263.Google Scholar
  64. Sampson, S. E. (2001) Understanding business services. Wiley, New York.Google Scholar
  65. Sampson, S. E. and Froehle, C. M. (2006) Foundations and Implications of a Proposed Unified Services Theory. Production Operations Management Journal, 15.Google Scholar
  66. Schmenner, R. W. (2004) Service businesses and productivity. Decision Sciences, 35, 333–347.CrossRefGoogle Scholar
  67. Stuart, I. F. and Tax, S. (2004) Toward an integrative approach to designing service experiences lessons learned from the theatre. Journal of Operations Management, 22, 609-627.Google Scholar
  68. Teece, D. J., Pisano, G. and Shuen, A. (1997) Dynamic capabilities and strategic management. Strategic Management Journal, 18, 509–533.CrossRefGoogle Scholar
  69. Tushman, M. L. and O’Reilly, C. A. (1997) Winning through innovation: A practical guide to leading organizational change and renewal. Harvard University Press, Boston, MA.Google Scholar
  70. University of Cambridge, and IBM. (2008) Succeeding through service innovation (a service perspective for education, research, business and government), University of Cambridge Institute for Manufacturing (IfM) and IBM.Google Scholar
  71. Vargo, S. L. and Lusch, R. F. (2004) Evolving to a new dominant logic for marketing. Journal of Marketing, 68, 1–17.CrossRefGoogle Scholar
  72. Volberda, H. W. (1996) Toward the flexible form: How to remain vital in hypercompetitive environments. Organization Science, 7, 359–374.CrossRefGoogle Scholar
  73. Voss, C. and Zomerdijk, L. (2007) Innovation in Experential Services: An Empirical View. In UK Department of Trade and Industry (DTI) Economic Papers (Ed.) Innovation in services. London, UK: DTI, 97–134.Google Scholar
  74. Walters, D. and Lancaster, G. (2000) Implementing value strategy through the value chain. Management Decision, 38, 160–178.CrossRefGoogle Scholar
  75. Walters, D. and Rainbird, M. (2006) Strategic operations management – A value chain approach. Palgrave Macmillan, London.Google Scholar
  76. Winter, S. G. (2003) Understanding dynamic capabilities. Strategic Management Journal 24, 991–995.CrossRefGoogle Scholar
  77. Young, G., Smith, K. G. and Grimm, C. M. (1996) Austrian and industrial organization perspectives on firm-level competitive activity and performance. Organization Science, 7, 243–254.CrossRefGoogle Scholar
  78. Yu, T. F.-L. (2001) Entrepreneurial alertness and discovery. The Review of Austrian Economics, 14, 47–63.CrossRefGoogle Scholar
  79. Zelenovic, D. M. (1982) Flexibility – A condition for effective production systems. International Journal of Production Research, 20(3), 319–337.CrossRefGoogle Scholar
  80. Zollow, M. and Winter, S. G. (2002) Deliberate learning and the evolution of dynamic capabilities. Organization Science, 13, 339–351.CrossRefGoogle Scholar
  81. Zott, C. (2003) Dynamic capabilities and the emergence of intra-industry differential firm performance: Insights from a simulation study. Strategic Management Journal, 24, 97–125.CrossRefGoogle Scholar

Copyright information

© Springer US 2011

Authors and Affiliations

  • Renu Agarwal
    • 1
  • Willem Selen
    • 2
  1. 1.University of TechnologySydneyAustralia
  2. 2.United Arab Emirates UniversitySharjahUAE

Personalised recommendations