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Customer Service Leaders Must Innovate to Excel—And Fast

“Innovation distinguishes between a leader and a follower.”

Steve Jobs’ quip perfectly encapsulates his approach to ideation, invention, and creativity. The late visionary wasn’t content to sell a middle-of-the-pack product. He wanted Apple to lead the way—and innovation is how he intended to get there.

The innovation-fueled success of Apple is no statistical outlier or product of survivorship bias, either. A meta-analysis from the University of Strathclyde confirmed the correlation between innovation and corporate performance

Although innovation requires initial and continuous investments and embracing risks, wrote the researchers, benefits such as differentiation, customer loyalty, price premiums, and entry barriers outweigh the costs. While relatively uncontroversial, the conclusion bears repeating: innovation drives performance.

The connection holds true for specific business units, too. Customer service innovation has a “very strong and significant relationship” with customer value creation. Service innovation also drives improved customer satisfaction, significantly higher productivity, and growth.

With an overwhelming amount of evidence defining the value of innovation, the question for customer service leaders is not, “Should I innovate?” The answer is, of course, “Yes.” The more pressing concerns for leaders are what, when, and how to innovate.

A proven model for service innovation

Despite a glut of research into the benefit of service innovation, didactic papers are scarce. This poses a challenge. Many customer service leaders realize they must innovate to survive, but a sizable proportion doesn’t know where to start.

One lone light comes from Pim den Hertog, partner at research consultancy Dialogic. In 2009, den Hertog, then a research coordinator at Amsterdam Centre for Service Innovation (AMSI), published a six-dimensional framework for service innovation. It was, and remains, one of the only pieces of instructional research into service innovation.

The goal of den Hertog’s model, as indicated by its central position, is the creation of new service experiences and solutions. That includes “a new service, a new service portfolio and/or a new service process that individually or in combination defines a new way of creating value for the customer.”

To reach that goal, the model relies on six dimensions:

  1. New service concept: Often a novel idea of how to solve a problem, challenge, or want of a customer. Commonly, these are “combinatory,” meaning they combine elements of existing services to do something new. For example, telecoms offering integrated service bundles for phone, broadband, and TV.
  2. New customer interaction: New services often require new engagements between business and customer. Consider how banking advancements like ATMs and apps transformed how people interact with financial institutions.
  3. New business partner: Organizations need not innovate alone. Impactful services are regularly the combination of offerings from a coalition of providers. Samsung’s smartphones, for example, rely heavily on Google’s Android operating system and app ecosystem.
  4. New revenue model: As den Hertog bluntly summarizes, “many service ideas fail as the distribution and revenues do not match.” To turn an idea into a sustainable service innovation, organizations require a robust revenue model. Consider how Tesla charges an extra fee for its car’s full self-driving capability.
  5. New delivery system (Personnel, organization, culture): Most—if not all—novel services need people to execute them. New services could easily require new organizational structures, personal capabilities, and team skills. Den Hertog highlights Education First’s summer schools, which required teachers to be available outside of term times.
  6. New delivery system (Technological): Even more so now than when den Hertog published his model, new technology can unlock new services. Think about virtual healthcare. Without intuitive video conferencing tools and powerful security measures, such services could not exist.

Organizations can innovate services along individual dimensions or with multiple dimensions in concert. The relevance and impact of each will vary depending on individual businesses and strategies. As den Hertog admits, “service firms can have various business models in one portfolio and that a service firm may combine various new models in one strategy.”

Where to begin?

Technologists argue that the choice to innovate should come down to, not dollars and cents, but the degree to which an innovation improves a customer’s journey. Oriented towards an activity, not an output. “For an innovation to be successful, you must lead with a purpose and a clear understanding of the role you want to play in your customer’s life,” holds Nimesh Pilla, Associate Director of Innovation at KPMG India. “Among other things, it sets the right expectations around outcomes and prevents you from harboring the heavy burden of delivering on the bottom line right from the start”, he adds. 

Consider this. AT&T’s proactive customer service delivered through personalized video invoices may not have earned back the firm its investment right away. But the activity, innovative through and through, successfully shouldered the burden of outreach from their customers. T-Mobile’s cross-functional Teams of Experts (TEXs) did not necessarily cover its initial development cost. But the effort did elevate the knowledge, capabilities, and impact of frontline customer service teams right at the outset. Amazon poured money into its self-serve customer service for a decade before the company ever turned a profit. But they did make their customer’s problems immediately solvable via the self-serve platform. 

“Innovation should bridge the gap between the needs and aspirations of your customers and your purpose as a company,” holds Nimesh. “Guided by these tenets, businesses stand to unlock value that customers actually care about.”

To unlock tangible value from innovation, leaders must keep their focus on improvements to the customer journey.

However, principles aside, innovation isn’t always a mechanical process. Impactful breakthroughs often emerge, not because of a clear demand, but because of intuition, creativity, and pure chance. Instead of purposefully directing innovation, organizations may opt to carve out scope for unfettered or unguided experimentation across functions and programs. “If you can fundamentally embrace the fact that new can be better and have policies that support creative thinking and ideation, you can create a cradle for innovation and never run short on innovative ideas,” suggests Nimesh. 

Perhaps the best example of this is Google’s 20% Rule, an initiative that allocates one-fifth of each employee’s time for personal, creative, or experimental projects. While few ideas ever qualify as output, Google consistently finds diamonds among the rough—Gmail, AdSense, and Google Maps among them.

The tension between creative and practical innovation is one all leaders must address.

Earlier this year, Jos Harrison, Global Head of Brand Experience & Design at Reckitt, spoke at an event on recalibrating customer experience with innovation. The pandemic had accelerated transformation and both service and experience were racing to catch up, Reckitt said. In our new virtual-first environment, experiences and services could—in some cases, should—be non-transactional. In other words, they ought to be oriented towards activity, not output. 

“What are we talking about by blending a human experience with a digital one?” said Harrison. “We shouldn’t necessarily default to a transaction moment, because the service that we’re providing to the user, may well be information-based, might not be a financial transaction, might not be a product or a consumable. It may even be a referral to a partner brand that can better serve that person’s needs than, say, one of our brands can.”

Culture: The innovation engine

All too often, service teams and leaders struggle for approval. They lack buy-in to their creative innovation and endorsement of their commercial endeavors. With little air cover, they stick with the status quo.

But as we have seen, innovation is an opportunity that can not go untapped.

“It’s dangerous to lead with a ‘replicate this’ mindset,” Nimesh asserts. “Because in effect you’ll be playing it safe, instead of grounding your innovative practice in things like customer experience, core competency, and org strategy.” 

Nimesh argues that a culture of innovation is essential to the success of any innovation, service included. For, no innovation succeeds in isolation – its impact ripples across the board. A firm orientation to the future, a growth mindset, and a commitment to doing right by the customer engender a fertile ground for institutionalizing innovation. 

“It’s one to thing to get innovation right and another to remain innovative,” he adds.

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