Construction and Validation of a Measure of Service Innovation Capability Maturity

The service sector is fundamental to the prosperity of all nations (OECD, 2008). Indeed, the transition of a country’s economy from agricultural, through manufacturing, and ultimately to services, is considered a feature of... [ view full abstract ]

The service sector is fundamental to the prosperity of all nations (OECD, 2008). Indeed, the transition of a country’s economy from agricultural, through manufacturing, and ultimately to services, is considered a feature of its development (Shepherd and Pasadilla, 2012). While the sector presently accounts for 75% of employment and 73.9% of gross domestic product (GDP) in the European Union (Eurostat, 2017), it is predicted to increase further in both size and importance, accounting for 80% of total employment by 2020 (Kemekliene et al., 2007).

As a result, there is general agreement amongst researchers, managers, and policy makers (Giannopoulou et al., 2011; Cheng et al., 2012; Gryszkiewicz et al., 2013; Stryja et al., 2013; Witell et al., 2016; Droege et al., 2009) that service innovation is essential for achieving competitiveness, profitability, and long-term sustainability. Indeed, Ojasalo (2009) describes it as a strategic imperative for most companies, Perks and Riihela (2004) argue that it is critical to their very survival, while Den Hertog et al. (2010) regard an organisation’s ability to develop or improve its services as fundamental to differentiating them from rivals or increasing customer value. This is particularly true for small and medium-sized enterprises (SMEs) who must continuously innovate and adapt to remain profitable, grow, increase market share, and achieve superior performance to that of their competitors (van der Aa and Elfring, 2002; Hogan et al., 2011; Gebauer et al., 2012; Stryja et al., 2013).

While acknowledging the importance of singular or discrete service innovations (Janssen et al., 2015; Snyder et al., 2016), prevailing thought in the innovation and service development literature is that attention should be directed towards the firm-level capability underlying their repeated and continuous introduction (Siguaw et al., 2006; Pöppelbuß et al., 2011). This capability, commonly referred to as service innovation capability (SIC) (Lillis et al., 2015; Nada and Ali, 2015), describes an organisation’s capacity or potential to innovate regularly (Neely et al., 2001) and is accepted as an essential mechanism for perpetually responding to the dynamic needs of customers (Hogan et al., 2011; Gryszkiewicz et al., 2013).

This viewpoint replaces the historic myopia towards one-off innovations that ignores the necessity for organisations to repeatedly introduce new or improved services to survive in the long term (Kindström et al., 2013). Lawson and Samson (2001) and others (Chen, 2011; Santos-Vijande et al., 2013; Saunila et al., 2014) contend that instead of competing on singular innovations, organisations instead compete on this deeper factor. Consequently, sustaining or improving SIC is a key priority for the management of SMEs (C̜akar and Ertürk, 2010) as it allows their organisation to strategically practice service innovation and utilise their limited resources to maximum capacity (Pöppelbuß et al., 2011; Prajogo and McDermott, 2014). This trend is evident from the proliferation of literature on this topic (Panayides, 2006; Tang et al., 2015). However, while it would be reasonable to assume that an abundance of validated SIC measures are well established in this burgeoning literature base, this is not the case.

Despite its significance, psychometrically sound apparatus with which SIC’s performance, or maturity, can be diagnosed, or practical tools to support its management by SMEs are absent from the literature (Janssen et al., 2012; Gryszkiewicz et al., 2013; Kohler et al., 2013). This major deficiency can be attributed to shortcomings in the discipline’s vague and fragmented corpus (Den Hertog et al., 2010; Gryszkiewicz et al., 2013) that overlooks SMEs in favour of large organisations (Pöppelbuß et al., 2011; Hassanpour and Mirfallahi, 2015); fails to agree on a definition of SIC (Santos-Vijande et al., 2016; Witell et al., 2016); neglects the identification its dimensions (Grawe et al., 2009; Daugherty et al., 2011), and devotes inadequate systematic effort to methodological issues in the development of measures (Tuominen and Anttila, 2006; Kohler et al., 2013). Inevitably, SMEs are unaware of their SIC performance and unsure of how resources should be deployed for its improvement, an obstacle to fully realising the organisation-enhancing benefits of this capability.

A tool that is frequently used to support performance measurement and the strategic management of organisational capabilities, is the capability maturity model (CMM) framework (Röglinger et al., 2012; Wendler, 2012). CMMs are rigorously constructed management tools that assume capability improvement is made in distinct stages and capture the effectiveness, or maturity, of an examined capability at a moment in time against defined best practices (Becker et al., 2009; Curley et al., 2012). This allows for the rapid identification of areas of strength and weakness and for targeted improvement initiatives to be implemented which address areas of poor performance (Essmann and Du Preez, 2010). While the benefits of maturity models in guiding performance management have led to this framework being adapted to a variety of domains (Ibbs et al., 2004; Gibson et al., 2006; Wendler, 2012), to the best of the authors knowledge, no study has yet taken the initiative to apply this approach to service innovation capability. Importantly, no measure could be located through which SMEs may quantitatively diagnose their SIC and identify actions for its improvement (Blommerde and Lynch, 2017).

Responding to these shortcomings, the objective of this paper is to fully describe the execution of a procedure to construct and empirically validate a measure for SIC. This rigorous and comprehensive process adheres to best practice, conceptualising and dimensionalising SIC; developing content valid measurement items; specifying the measurement model; evaluating and refining the measure; confirming its legitimacy; and developing norms to aid in the interpretation of scores (Churchill, 1979; Hinkin et al., 1997; MacKenzie et al., 2011; DeVellis, 2017). The fulfilment of these phases is informed by data collected through a national survey utilising a sample of over 22,500 services organisations.

It is envisaged that the advanced techniques of measurement development and validation, reported in this paper, have both academic and practical significance. In addition to their primary outcome, the focal instrument, their implementation enhances SIC literature, defining the term and concretely specifying its subdimensions. For practitioners, the measure allows the management of SMEs to quantitatively diagnose the performance of their service innovation capability and make informed decisions for its enhancement that maximise their scare resources.

References available on request.