Innovation in service firms is an important topic, not only for entrepreneurs but also for policy makers. Despite their economic importance, services have received relatively little attention in innovation research. A broad overview of the current insights in innovation in service firms is necessary. Therefore, EIM has executed a strategic study. It provides an overview of the  most important findings in academic research: what innovation in services is about, the new service development (NSD) process, the antecedents of successful innovation, and the results of innovation in services.

When defining innovation in services, the usual distinction between product and process innovations does not apply. This is due to the often simultaneous production and consumption of services. Instead, innovative output in service firms can be characterised by changes in (1) the service concept, (2) client interface, (3) delivery systems and (4) technological options. Supplying examples for the extremes of these dimensions is difficult. In practice, new services are a mixture of these four dimensions.

The new service development (NSD) process tends to be informally organised. However, it  can be structured as a two-stage process that differs markedly from the process of  developing new products. It starts with the so-called search stage. This divergent stage focuses on gathering and selecting ideas. Activities that have to be performed include idea generation, screening and commercial evaluation. Then follows the implementation stage in which promising ideas are transformed into concrete results. This stage includes the development of a new or renewed service offering, testing and market launch. All activities are not strictly carried out successively. Activities should be allowed to overlap in time.

Some antecedents of innovation success are closely related to the NSD process: people, structure, resources and networking. People are at the heart of successful NSD. The co-workers of a service firm have to generate innovative ideas, and develop, test and implement the new services. Other antecedents tend to create a firm climate that is supportive to innovation. One can distinguish between: culture and leadership, strategy and other company characteristics. Finally, part of the innovation success can be managed only in an indirect way or not at all. External conditions that affect the results of the NSD process include: market conditions, knowledge infrastructure and government policy. Profit-seeking service firms invest efforts in innovation in the anticipation of economic rewards. The impact of innovative efforts can be threefold: financial benefits, increased customer value and strategic success. Besides, innovation in services can result in changing market conditions. There is no doubt that when a new service proves to be successful in a particular sector, other service firms will follow.

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