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Business Horizons (2013) xxx, xxxxxx

Available online at www.sciencedirect.com

www.elsevier.com/locate/bushor

EXECUTIVE DIGEST

From goods to great: Service innovation in a

product-dominant firm
Lance A. Bettencourt a,*, Stephen W. Brown b

a
Partner, Service 360 Partners LLC & Distinguished Marketing Fellow, Texas Christian University, U.S.A.
b
W.P. Carey School of Business, Arizona State University, P.O. Box 874106, Tempe, AZ 85287-4106, U.S.A.

KEYWORDS Abstract Increasingly, service innovation is a source of competitive differentiation

Services;
Service innovation;
Customer jobs;
Consumption chain;
Customer research
for product-dominant companies such as manufacturers, distributors, and retailers.
However, the relative intangibility of services has led to uncertainty concerning how
to apply product innovation expertise to the services space. We argue that meaningful
service innovation by a product-dominant company must begin with the recognition
that services are solutions to customer needs. As such, the primary goal of a product-
dominant company seeking service innovation should not be to innovate service.
Rather, it should be to help customers get a specific job done better or to help them
get more jobs done. To this end, we offer three approaches for companies seeking new
service innovation based on how customers define value.
# 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All
rights reserved.

1. Service innovation for all
Service innovation is not the exclusive domain of
service companies. In fact, the significance of service
innovation is growing among both product and service
firms (Neu & Brown, 2005). Indeed, service innova-
tion by a product-dominant companysuch as a
manufacturer, distributor, or retailerenables the
company to improve customer relationships, capture
a larger share of revenue, differentiate itself from
the competition, increase revenue stability, and ul-
timately better satisfy customer needs (Brown,
Gustafsson, & Witell, 2009). Consider the case of
* Corresponding author
E-mail addresses: lance@service360partners.com
(L.A. Bettencourt), stephen.brown@asu.edu (S.W. Brown)
IBM, which has come to recognize the possibilities
that service innovation offers not only to support
product offerings but also as stand-alone offerings
to satisfy customer needs. In the past two decades,
IBM has grown services revenue from $10 billion in the
early 1990s to more than $50 billion currently.
With todays competitive realities, product- dom-
inant companies must find ways to innovate value-
added services that complement their product port-
folio. This type of service innovation is not easy to
achieve, as the relative intangibility of services
has led to uncertainty concerning how to apply
product innovation expertise to the services space.
Speaking to the challenge, noted innovation expert
Henry Chesbrough (2005, p. 44) asked: Without
tangible products to prototype and focus on, how
can we determine whether were designing what
customers want? Inasmuch as service innovation is

0007-6813/$ see front matter # 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.
http://dx.doi.org/10.1016/j.bushor.2013.01.008
BUSHOR-1030; No. of Pages 7

2 EXECUTIVE DIGEST

increasingly considered a vital element of a firms
competitive strategy (MacDonough, Zack, Lin,
& Berdrow, 2008), guidance is needed to help
product-dominant companies create value-added ser-
vices that can directly impact the bottom line and
truly differentiate the company in the marketplace.
Sustainable service innovation must begin with the
recognition that services are solutions to customer
needs. They are a means to an end, not an end in
themselves. We hire consulting services to identify
operational improvements. We hire trucking services
to transport goods. We hire support services to trou-
bleshoot an equipment malfunction. The customer
doesnt value any particular service solution; what
the customer values is the ability to get a job done
well (Bettencourt, Brown, & Siriani, 2013; Christen-
sen, Anthony, Berstell, & Nitterhouse, 2007). As such,
the primary goal of a product-dominant company
seeking service innovation should not be to innovate
service. Rather, it should be to help customers get a
specific job done more effectively, reliably, conve-
niently, or affordably, or to help them get more jobs
done. It is only a secondary goal to provide an essen-
tially intangible service to help customers in this way.
This is service innovation based on how customers
define value (Bettencourt, 2010; Gummesson, 1995).
Once the company has a proper understanding of
customer value, it can then systematically discover
service innovation opportunities and develop the in-
ternal processes and capabilities that will enable it to
outperform the competition in a sustainable manner.
2. How to discover service innovation
opportunities
As shown in Figure 1, a company has three options
available to it for new service innovation based on
how customers define value. It can introduce new
services that help the customer (1) get more jobs
done, (2) get a focal job done better, and (3) get jobs
related to product usage or consumption done. Lets
consider each of these options in turn.
2.1. Help the customer get more jobs
done
Customers have many jobs that they are trying to
get done. Some are closely related to the companys
current products, and many of these offer opportu-
nity for service innovation. Because jobs are inde-
pendent of todays solutions, the customer may not
be using a particular solutionlet alone a service
solutionto get the job done. All that matters is
that the customer wants to get the job done. When a
company collects a detailed set of jobs that cus-
tomers are trying to get done, it often discovers
many for which there are currently no solutions.
Therefore, a focus on the many jobs that customers
are trying to get done truly opens up a companys
service innovation possibilities.
The case of PetSmart serves as a good example.
Known until 1989 as PetFood Warehouse, the retail-
er helped customers do the job of providing their
pets with food and related items. Gradually, PetS-
mart came to expand its mission to encompass
lifetime care for pets, which increased its opportu-
nity to help customers get many more jobs done via
new services. These services now include full-ser-
vice pet salons, in-store vet clinics, pet training
services, PetsHotel (a pet daycare service), and
the Smart Nutrition Selector. These services help
customers take care of such jobs as grooming a pet,
taking care of a pets health needs, caring for a pet
when away from home, and providing a pet with
proper nutrition, respectively. Since 2000, when

Figure 1. Approaches to discovering service innovation opportunities

New Jobs Focal Job Consumpon Chain Jobs

Objecve: Discover new or Objecve: Discover ways to Objecve: Discover ways to

related jobs that a service can
help the customer get done
Focus: New or related
customer jobs
help the customer get a focal
job done beer with new or
improved services
Focus: Value criteria on a focal
job
help the customer with jobs
related to product
ownership/usage
Focus: Value criteria on a
specic job related to product
usage or consumpon

Focal Job for Focal Job for

which a Current which a Current
Product is Being Service is Being
Hired Hired
BUSHOR-1030; No. of Pages 7
EXECUTIVE DIGEST
PetSmart adopted the vision statement To provide
Total Lifetime Care for every pet, every parent,
every time and refocused its strategy on providing
services to fulfill this vision, revenue from services
has grown more than 20% per year on average.
An effective approach to uncovering jobs for
which new services might be hired entails identify-
ing a customer groupwhether the company al-
ready serves it or notand deciding on the
context or responsibility area in which to capture
jobs (e.g., jobs related to taking a trip, jobs related
to caring for a pet). These jobs are often captured in
an area that reflects a higher level of abstraction of
the jobs for which current products or services are
being hired. For example, if the company currently
offers products such as pet food and supplies, as is
the case with PetSmart, then an abstracted area in
which jobs might be captured is caring for a pet. A
search in that area would reveal many important,
but not well-satisfied jobs that the company could
target with new services. A subtle variation of this
approach is to consider the other jobs that custom-
ers are trying to get done before, during, and after
using a specific product. For example, the OnStar
car security system supports many other jobs that
drivers want to get done when using a car, such as
contacting emergency services, obtaining roadside
assistance, and determining which route to take.
The jobs that customers are trying to get done
can be uncovered by asking a few simple questions
that tie back to the definition of a job; that is, a goal
customers want to accomplish or a problem they are
trying to resolve (Ulwick & Bettencourt, 2008).
Customers should be asked:
 What are you trying to accomplish in this job area
or during this time period?
 What are your goals and objectives?
 What problems are you trying to prevent or
resolve?
 What are you trying to determine or decide?
 What would the ideal solution help you to get
done?
In the case of a manufacturer of LASIK equipment,
for example, we asked LASIK techs what jobs
they were trying to get done before, during, and
after a treatment. What clinical decisions were
they trying to make, and what problems were they
trying to resolve? By asking these questions, we
found more than 50 jobs in such diverse areas
as patient counseling (e.g., inform a patient of
3
treatment options), preparation for the procedure
(e.g., learn the approved treatment parameters for
the laser), and postoperative care (e.g., support
patient compliance with post-op guidelines), any
one of which would be a suitable basis for new value-
added, stand-alone services.
2.2. Help the customer get a focal job
done better
Although a product-dominant company may help
customers with multiple jobs, many opportunities
for service innovation focus on helping the customer
get a focal job done more effectively, reliably,
conveniently, or affordably. To get a given job done,
customers may use both products and services. In
fact, the optimal solution is often a combination of
product and service, working together. Consider
how the ClearPlay DVD player weds technology
and services to help the customer get a focal job
done better. The DVD player helps families get the
job of watching movies together done through fil-
ters, created on a movie-by-movie basis, that elimi-
nate unwanted profanity, excessive violence, and
nudity from the movie-watching experience based
on the preferences of the individual. An annual
service membership provides unlimited access to
filters for new movie releases that can be quickly
downloaded from the Internet.
As this example shows, a product on its own often
fails to address all the outcomes or value criteria
that customers are hoping to achieve when they are
doing a job (Bettencourt & Ulwick, 2008). Thats
where services come in. When a product partners
with a service, its capabilities are expanded in a way
that helps the customer to get more of the job done.
For example, Kroll Ontrack launched ESI Consulting
in 2007 to address lawyers concerns that relevant
documents might be excluded from capture during
document discovery. ESI Consulting complements
Kroll Ontracks award-winning discovery technology
and software products by offering clients expert
guidance in the various phases of the document
discovery process. To ensure that all documents
are captured, ESI Consulting assesses each clients
data storage methods, puts together an electronic
discovery response plan, and helps the client devel-
op policies and guidelines for managing the entire
data discovery process.
There are at least two lessons we can learn from
these examples. First, a focus on the entire job for
which a product is hired will naturally point to
service innovation opportunities. Second, taking a
broader, rather than a narrower, view of the job the
customer is trying to get done is more likely to
reveal service innovation opportunities. If service
BUSHOR-1030; No. of Pages 7
4 EXECUTIVE DIGEST
Figure 2. Illustrative job map for administering anesthesia
Dene Locate
Pull drugs,
Formulate the
anesthesia
anesthesia
supplies, and
plan
equipment
Wake the Adjust the
paent and medical and
transfer to post- temperature
op care therapy
Conclude Modify
innovation is the goal, for example, it is better for a
medical device manufacturer such as DePuy to de-
fine the surgeon job as treat the patient condition
rather than more narrowly as replace a hip joint. It
is the broader job definition that is more likely to
reveal service innovation opportunities.
To uncover opportunities to help customers get
focal jobs done better, a product-dominant compa-
ny should begin by mapping the customer jobs for
which its current products or services are being
hired, using as a guide the universal set of steps
that customers must accomplish (Bettencourt &
Ulwick, 2008). These steps include defining goals
and resource needs for the job, locating required
inputs, preparing or evaluating inputs or the job
environment, verifying readiness or choices, exe-
cuting the job, modifying job execution, making
required adjustments, and concluding the job.
Next, for every step in a customer job, the company
should uncover and prioritize the criteria that cus-
tomers use to measure the successful execution of a
job (Ulwick, 2002; Ulwick & Bettencourt, 2008). For
each step in a job map, customers should be asked:
 What makes [this step] time-consuming or slow?
What makes it cumbersome or inconvenient?
 What makes [this step] problematic or challeng-
ing? What causes it to be inconsistent or to go off
track?
 What makes [this step] ineffective or the output
of poor quality? What would the ideal result look
like?
In one case, we studied the job of an anesthesiologist,
with the goal of revealing innovation possibilities for
Prepare Conrm
Prep the paent Verify
and equipment readiness &
for surgery procedure plan
Monitor the
Administer
paent
anesthesia
condion
Monitor Execute
our client, a leading provider of surgical equipment
and supplies. We defined the job as administer anes-
thesia. So construed, the job was broad enough to
span complementary solutions and encompassed job
steps from formulating the anesthesia plan to trans-
ferring the patient to post-operative care, as illus-
trated in Figure 2. Anesthesiologists, for example,
desired several criteria related to the step of formu-
lating an anesthesia plan. They included:
 Quickly determining surgeon requirements for
patient anesthesia.
 Quickly determining how an anesthesia plan
should be adjusted based on the patients partic-
ulars (e.g., age, allergies, diseases).
 Ensuring that an anesthesia plan only requires
drugs that are available at the facility.
These value criteria do not presume a particular
solution. Either a product or a service innovation
or bothcould satisfy them.
2.3. Help the customer get jobs related to
product usage or consumption done
In addition to discovering service innovation oppor-
tunities related to the focal job for which customers
hire a product, a company can discover opportuni-
ties by focusing on the difficulties customers have
with the ownership activities they must get done in
order to receive full and continuing value from the
product (MacMillan & McGrath, 1997)what we call
consumption chain jobs.
For most durable goods, customers must execute
the following consumption chain jobs: they must
BUSHOR-1030; No. of Pages 7
EXECUTIVE DIGEST
select a product, purchase it, install and/or deploy
it, learn how to use it, actually use it, move and/or
store it, maintain it, upgrade it, and eventually
dispose of it. There are opportunities for innovation
at any point at which customers are not satisfied
with their ability to get these jobs done.
Hewlett-Packard (HP) is one company that has
taken advantage of the opportunities that consump-
tion chain jobs present, offering services throughout
the ownership life cycle of its products. At the start
of the cycle, HP offers financing services to help with
making a purchase. It also offers installation and
deployment services for its servers, storage devices,
networking hubs, PCs, and printers. To keep things
running, HP offers support and repair services. It
also offers classroom training by accredited instruc-
tors to help professionals learn how to get the most
from the technology they are purchasing. And, at
the end of the ownership life cycle, HP offers asset
recovery services to help with disposing of equip-
ment that is no longer wanted.
To reveal opportunities to help customers get
consumption chain jobs done better, the company
must uncover the struggles that customers have as
they try to get these jobs done. The company must
first map the steps in getting a particular consump-
tion chain job done and uncover the criteria cus-
tomers use to assess value in that task. Value criteria
that are important to customers but not well satis-
fied are targets for innovation.
Ingersoll-Rand, a manufacturer which now de-
fines itself as a global supplier of products and
services to transportation, manufacturing, commer-
cial and residential buildings, and agricultural in-
dustries, has found success with an innovative
service that addresses many unmet needs related
to maintaining a compressed-air system. Ingersoll-
Rand introduced its PackageCare service in March
2007, and since then, its customer base has grown
quickly. Under the PackageCare fixed-cost service
contract, Ingersoll-Rand replaces a systems parts
before they fail. The service contract provides 100%
coverage of machine upkeep, repair, and parts
replacement. Other benefits, such as coverage of
overtime costs when the system is down, are avail-
able as options. Via regular maintenance visits by
expert technicians, predictive diagnostic tools, and
speedy 24-hour repair service, PackageCare re-
moves the inconvenience of maintaining a com-
pressed-air system, reduces customer costs, and
improves the compressed-air systems operational
efficiency.
To uncover innovation opportunities, Ingersoll-
Rand conducted interviews with individuals respon-
sible for the consumption chain job of maintaining a
compressed-air system, including business owners,
5
maintenance managers, facility managers, and
plant managers. These interviews generated 70 de-
sired outcomes, encompassing eight job map steps
related to performing preventative maintenance.
Next, Ingersoll-Rand asked more than 200 individuals
tasked with maintaining a compressed-air system in a
number of different industries to rate these value
criteria for importance and satisfaction.
The survey results revealed many important but
not well-satisfied outcomes. Ingersoll-Rands Pack-
ageCare service addresses more than a dozen of
these unmet needs, including the following:
 Keeping a breakdown from occurring because
preventative maintenance was not performed.
 Reducing the cost of performing each preventa-
tive maintenance task.
 Avoiding unnecessary expenses because a preven-
tative maintenance task is performed sooner than
needed.
By helping customers avoid problems with maintain-
ing compressed-air systems, Ingersoll-Rand has
benefited as much as its customers.
3. How to create sustainable service
innovation
For product-dominant companies, systematically
discovering service innovation opportunities repre-
sents more than simply creating a new strategy to do
so. For most organizations, strategies succeed or
flounder based upon their congruence with company
culture. And, the present culture of most product
companies is not conducive to service innovation.
Thus, a culture change must first occurone that
moves the firm away from an infatuation with
engineering marvels toward a priority focus on the
jobs customers are trying to get done (Neu & Brown,
2005).
VWR International, for example, is a $4 billion
global distributor of products and supplies for labo-
ratories. Company leaders in recent years have
recognized that its product preoccupation too often
results in a competitive playing field dominated by
price. By adjusting its mindset to focus on helping
researchers in labs be more productivethat is, to
do their jobs betterVWR has spawned a host of
site services including inventory management,
equipment repair, and glass washing. This is very
similar to the way in which Ingersoll-Rands culture
shift from an engineering mindset to a customer
job mindset has enabled the company to look
BUSHOR-1030; No. of Pages 7
6 EXECUTIVE DIGEST
beyond the hardware it sells and take advantage of
opportunities for valuable new services that satisfy
customer needs (Minter, 2010).
In addition to major culture adjustment, product-
dominant companies must make several other
changes if they are to succeed in developing service
innovations. A deep appreciation for and under-
standing of the customers jobs can best come from
associates who frequently touch customers: account
managers, field representatives, and customer ser-
vice people. The conversations have to change,
however, from communications about the com-
panys products to discussions about the customers
(1) focal jobs they want to get done better and
(2) new jobs that a service can help them with.
Such a radical shift in communications with cus-
tomers will not come easy to the firms traditionally
product-preoccupied associates. In business-to-
business product companies, it is even likely to
require discussions with some people in the cus-
tomers organization that these associates may not
have visited before. In the case of account man-
agers, for example, learning about customers jobs
will probably necessitate contact with users rather
than just buyers of the firms products. The ac-
count managers should be given special compen-
sation consideration, in light of their duties
involving talking with new people about their jobs
and the longer sales cycle often experienced
selling new services.
A product-dominant company must also institute
the processes and build the capabilities required to
systematically understand where and when custom-
ers struggle in doing their jobs. This should be
handled by a dedicated team of innovation cham-
pions. It is important that some members of this
team be responsible for finding and implementing
service innovations specifically so that the natural
momentum of the organization and other priorities
do not get in the way of meaningful service innova-
tion (Govindarajan & Trimble, 2010). These team
members will also need a fundamental understand-
ing of how service solutions are different from
products and what it takes to successfully develop
and deliver a new service (Cooper & Edgett, 1999;
Zeithaml, Bitner, & Gremler, 2009).
Service innovations offer another advantage
over product innovations: it is easier to sustain a
competitive advantage with a service innovation.
Although service innovations can also be copied, it
is more difficult to do. This is due, in part, to their
intangible nature and to the human element often
woven into their development and delivery. Fur-
ther, a product-dominant company enhances its
likelihood of success if its emphasis on service
innovation is accompanied by a change in culture
and processes that orient the whole firm to its
customers and their jobs. Though such a change
is a challenging undertaking, the resultant trans-
formation will enable the company to produce on-
going service innovations that lead to sustainable
competitive differentiation.
Meet the authors
Lance A. Bettencourt, PhD
Lance A. Bettencourt is a Partner with Service
360 Partners, LLC, a service experience man-
agement consultancy, and Distinguished Mar-
keting Fellow, Neeley School of Business, Texas
Christian University. Prior to starting his own
consulting firm, Dr. Bettencourt was a strategy
adviser with Strategyn, Inc., the pioneer of
Outcome-Driven InnovationTM. In his consulting,
he has worked with many of the worlds leading
companies to uncover product and service in-
novation opportunities, including Abbott Medi-
cal Optics, Microsoft Corporation, Collective
Brands, Hewlett-Packard Company, TD Bank
Financial Group, Kimberly-Clark, and J&J Medi-
cal. His research on services and innovation is
published in Harvard Business Review, MIT Sloan
Management Review, California Management
Review, Journal of Applied Psychology, Journal
of Retailing, Journal of Personal Selling & Sales
Management, and Journal of the Academy of
Marketing Science, among others. He is author
of Service Innovation: How to Go from Customer
Needs to Breakthrough Services (McGraw-Hill,
2010). Prior to consulting, he was a marketing
professor at Indiana University.
Stephen W. Brown, PhD
Stephen W. Brown is the Edward M. Carson Chair
of Services Marketing and Professor of Marketing
Emeritus with the W.P. Carey School of Business,
Arizona State University. He currently is a Distin-
guished Faculty with the Center for Services
Leadership. From its founding in 1985 until
May 2011, he served as the CSLs executive
director. He is also a former national president
of the American Marketing Association. Dr. Brown
has co-authored and co-edited 23 books and over
100 articles. Much of his research and writing
focuses on the science of service and the topics of
strategic services marketing, service excellence
and recovering from service failures. He has been
identified as one of the ten most frequent
contributors to the English-language services
BUSHOR-1030; No. of Pages 7
EXECUTIVE DIGEST
marketing literature in the world. Hes been
awarded honorary doctoral degrees from the
HANKEN School of Economics in Finland and
from Karlstad University in Sweden. He is the
recipient of the Career Contributions to Services
Marketing Award from the American Marketing
Association and the Educator of the Year Award
from the Association for Service Management
International. He serves as a speaker and seminar
leader for conferences and business meetings
around the world. Dr. Brown has co-founded
three companies, and he serves on the boards
of directors of several companies and a nonprofit
organization.
Appendix A. Research methodology
In addition to using a job-centric innovation
approach with dozens of product-dominant com-
panies (Abbott Medical Optics (AMO), Ingersoll-
Rand, Microsoft, DePuy, etc.) to identify service
innovation opportunities, we collected 26 case
studies to understand how firms are approaching
service innovation (Hewlett-Packard, Avnet,
IKEA, Honeywell, etc.). These case studies fea-
ture several companies that are exemplars of
service innovation focused on the customer job
and several that are not. Ultimately, both types
of case study informed our thoughts on the
limitations to current service innovation pro-
cesses and our recommendation of a model that
shifts the innovation focus away from the service
and to the customer job.
7
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