A Maturity Matrix for Assessing Service Innovation Capability

Importance and Key Contribution Despite the recent growth and success being experienced by Irish small and medium sized enterprises (SMEs) in the service sector, their future remains uncertain and challenging (Leithold et al.,... [ view full abstract ]

Importance and Key Contribution
Despite the recent growth and success being experienced by Irish small and medium sized enterprises (SMEs) in the service sector, their future remains uncertain and challenging (Leithold et al., 2016). Environmental conditions mean these organisations are vulnerable to changes which necessitates their ability to consistently and continuously innovate and adapt their services to ensure survival (Tsekouras et al., 2011; Gebauer et al., 2012). Service firms frequently face barriers to innovation including uncertainty, high failure rates, wasted investments, and a lack of management expertise, all of which impact upon their success (Bettencourt, 2013; Thakur and Hale, 2013). While it would be erroneous to attribute service innovation success to one factor, there is growing evidence to suggest that these obstacles can be overcome through an organisation’s service innovation capability (SIC), which describes the capacity of a company to deploy resources to repeatedly improve their services and develop new ones in response to changes in their operating environment (Agarwal and Selen, 2009; Giannopoulou et al., 2011; O'Cass and Sok, 2013). Others suggest that service innovation capability is linked to survival (Chen, 2011), enhanced performance (Basterretxea and Martínez, 2012; Alam, 2013), long-term, sustainable innovativeness (Szabó, 2013), and competitive advantage (Rahab et al., 2011; Saunila and Ukko, 2013).

In spite of this enthusiasm, research efforts have not focused on service innovation capability and it remains an embryonic term that has not been clearly defined, conceptualised, or operationalised within the literature (Pöppelbuß et al., 2011; von Vangerow, 2015). Indeed, numerous commentaries have noted that the literature on service innovation capability is characterised by knowledge gaps, conceptual voids, the neglect of SMEs, and a lack of practical measurement or management tools (Adams et al., 2006; den Hertog et al., 2010; Gryszkiewicz et al., 2013; Kohler et al., 2013). This is has resulted in inconsistent and non-comparable conceptualisations and definitions of service innovation capability, which has severely limited the advancement of the concept. Although there is a lack of research attention directed towards service innovation capability, the term has nevertheless been frequently used, with a mix of divergent interpretations. This has serious consequences for practitioners. Without a clearer understanding by academics as to how service innovation capability is conceptualised and measured, normative guidelines will continue to be scarce and the economic benefits of service innovation will be difficult to achieve and never be fully realised within the Irish SME.
In a conscious attempt to eliminate much of the ambiguity and confusion caused by weak conceptualisation, this paper provides a significant academic and practical contribution by disentangling the vagueness within the literature and conceptualising firm-level service innovation capability as a multi-dimensional construct. In doing so, it provides service companies with a tool to diagnose and understand their level of service innovation capability maturity; as well as identifying which dimension their service innovation capability is struggling on in order to improve their innovation capability to deliver enhanced competitiveness.

The maturity model passes through the stages of planning, development, evaluation, and maintenance which are composed of key decision points, requiring the clarification of the model’s audience, its aim, success criteria, maturity levels, and administration system (Maier et al., 2012). This allows a firm’s service innovativeness to be described based on their abilities and transcends existing research which does so dichotomously, portraying firms as innovative or non-innovative (Walsh et al., 2009; Saunila and Ukko, 2012).

Theoretical Base
In essence, SIC is the organisational means with which to generate innovative outputs and is positioned here as a dynamic capability (Esterhuizen et al., 2012). The dynamic capabilities view (DCV) is a robust theoretical perspective with the purpose of assisting organisations to strategically manage, deploy, or modify their resources through repeatable patterns, routines, or processes (Eisenhardt and Martin, 2000; Wang and Ahmed, 2007; Teece, 2009). Many authors already consider SIC as a dynamic capability and stress its value in changing markets (den Hertog et al., 2010; Giannopoulou et al., 2011; Janssen et al., 2012; Gryszkiewicz et al., 2013; Stryja et al., 2013). The DCV lens perfectly complements the study of SIC through its concentration on behaviours embedded in systems of processes and diffused throughout an organisation and its application enables the development of an integrated conceptual model depicting its role in performance and competitive advantage (Mort and Weerawardena, 2006; Janssen et al., 2012).

Research Questions & Method
Presently, there is no generally accepted methodology for assessing an organisation’s maturity in terms of their service innovation capability, or its capability compared to competitors. Service innovation capability is not well understood and the concept is calling for a universal and standardised model. In response, the objective of this paper is to build a unique framework for assessing and improving SIC. The model is theoretically developed through findings from an extensive review, incorporating 1,050 conceptual and empirical studies published in a wide range of inter-disciplinary journals, conference papers, books, dissertations, and working papers, covering the period 1983-2015. Despite the variation in quality of this literature analysis, the primary consideration was whether a contribution is made to the stock of knowledge concerning the service innovation capability concept, the dimensions that shape it, and the measurement of its maturity.

Findings
This research offers a new multi-dimensional conceptualisation of SIC that explores its most salient dimensions in the context of SMEs and coherently constructs a staged maturity model with an explicit focus on design principles and methodologies (Van Steenbergen et al., 2010).
It depicts SIC as a second-order structure, composed of four interdependent process areas, namely user involvement, networking, strategising, and knowledge management, which comprehensively capture service innovation capability (Blommerde and Lynch, 2014). The five distinct maturity levels corresponding to SIC maturity are Initial, Managed, Defined, Measured, and Optimising. These follow an evolutionary pattern describing increasing maturity based on key attributes and can be used to systematically assess existing SME competencies. The paper hypothesises that a higher capability to handle these factors positively associates with a higher overall service innovation capability. The objective of the tool is to diagnose and quantify the present, internal status of service innovation capabilities against criteria, articulate their desired future state, and provide a structured path for their development and continuous improvement (Albu and Panzar, 2010; Jin et al., 2014). It is a representation of reality designed to create an understanding that allows for changes and management to occur across industries and sectors (McLaughlin, 2009; Ojasalo, 2012).

Implications
The paper will have both academic and practical implications. It makes a novel and useful contribution to the existing body of knowledge, providing insights into the critical importance of service innovation capability to SMEs, in addition to detailing a solid foundation upon which future research can be built. The service innovation capability maturity matrix can be used to measure and enhance the underlying capability that continuously drives innovative service outputs or as a decision support instrument, directing the attention of managers to critical process areas. The proposed matrix extends existing maturity models through its application in the services sector and represents an important step towards understanding the capabilities required for service innovation. Importantly, it provides managers with a tool to diagnose, understand, and control the dimensions where their service innovation capability is suffering, allowing them to strategically upgrade their innovative maturity mode (Daugherty et al., 2011; Smith-Eckhardt, 2015).
 
References
Adams, R., Bessant, J. and Phelps, R. (2006) 'Innovation management measurement: A review', International Journal of Management Reviews, Vol. 8, No. 1, pp. 21-47.

Agarwal, R. and Selen, W. (2009) 'Dynamic Capability Building in Service Value Networks for Achieving Service Innovation', Decision Sciences, Vol. 40, No. 3, pp. 431-475.

Alam, I. (2013) 'Customer interaction in service innovation: evidence from India', International Journal of Emerging Markets, Vol. 8, No. 1, pp. 41-64.

Albu, E. and Panzar, C. (2010) 'A New Tool for Assessing Maturity Alignment: The Enterprise Maturity Matrix', Performance Improvement, Vol. 49, No. 9, pp. 35-47.

Basterretxea, I. and Martínez, R. (2012) 'Impact of Management and Innovation Capabilities on Performance: Are Cooperatives Different?', Annals of Public and Cooperative Economics, Vol. 83, No. 3, pp. 357-381.

Bettencourt, L. A. (2013) 'Shaping a job-centric service innovation strategy', Marketing News, Vol. 46, No. 3, pp. 26-34.

Blommerde, T. and Lynch, P. (2014) 'Dynamic Capabilities for Managing Service Innovation: Towards a Conceptual Framework', Paper presented at the Irish Academy of Management, 3-5 September, Limerick, Ireland.

Chen, T. F. (2011) 'Building an integrated service innovation model: A case study of investment banking', Paper presented at the International Conference on Economics, Trade and Development, Bali, Indonesia.

Daugherty, P. J., Chen, H. and Ferrin, B. G. (2011) 'Organizational structure and logistics service innovation', The International Journal of Logistics Management, Vol. 22, No. 1, pp. 26-51.

den Hertog, P., van der Aa, W. and de Jong, M. W. (2010) 'Capabilities for managing service innovation: towards a conceptual framework', Journal of Service Management, Vol. 21, No. 4, pp. 490-514.

Eisenhardt, K. M. and Martin, J. A. (2000) 'Dynamic capabilities: what are they?', Strategic Management Journal, Vol. 21, No. 10/11, pp. 1105-1121.

Remaining references available on request.

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