Title: Human Resource Strategies and Its Effect on Quality in Singapore

THE ART AND SCIENCE OF INNOVATION IN SERVICES

Kitson Leonard LEE [email protected]

Singapore Quality Institute 66 Tannery Lane #06-07 Sindo Building Singapore 347805

ABSTRACT

There has been a lot of focus on product innovation over the years, but very little discussion or thought on innovation in the services sector – despite the vast growth of that part of our (Singapore) economy. In the Annual Survey of Services conducted by the Singapore Department of Statistics in 2006, it was noted that the services sector comprised 138,000 establishments; employed a total of 1,128,000 workers; collected $1,294.2 billion in operating receipts, an increase of 17.7% over 2005; and contributed approximately 64.7%, up from 63.5% in 2005 to our Gross Domestic Product. Total value added also grew from $101.9 billion in 2005 to $113.8 billion in 2006, an increase of 11.6%.

Innovation has often been “played-up” by the industry but a quick online check revealed that innovation is simply, an act of introducing something new (The American Heritage Dictionary), the successful exploitation of new ideas (Department of Trade and Industry, UK), or a change that creates a new dimension of performance (Peter Drucker) and there is certainly room for improvements in the services industry. We are not talking about quantum leaps or breakthroughs in services but rather incremental improvements to customer service to meet the changing needs of customers and such incremental improvements to customer service can be as effective as laboratory-based innovations. But what is holding us back in this area? Is our service personnel too pre-occupied in trying to achieve their daily sales targets or in safeguarding the rules of the organisation?

Ultimately, all innovation is associated with PEOPLE who make it happen. This paper will discuss the art and science of introducing innovation in services.

Keywords: Service Innovation, Customer Service, Services Industry

of 7 INTRODUCTION

There has been a lot of focus on product innovation over the years, but very little discussion or thought on innovation in the services sector – despite the vast growth of that part of our (Singapore) economy. In the Annual Survey of Services conducted by the Singapore Department of Statistics in 2006, it was noted that the services sector comprised 138,000 establishments; employed a total of 1,128,000 workers; collected $1,294.2 billion in operating receipts, an increase of 17.7% over 2005; and contributed approximately 64.7%, up from 63.5% in 2005 to our Gross Domestic Product. Total value added also grew from $101.9 billion in 2005 to $113.8 billion in 2006, an increase of 11.6%.

Innovation has often been “played-up” by the industry but a quick online check revealed that innovation is simply, an act of introducing something new (The American Heritage Dictionary), the successful exploitation of new ideas (Department of Trade and Industry, UK), or a change that creates a new dimension of performance (Peter Drucker) and there is certainly room for improvements in the services industry. We are not talking about quantum leaps or breakthroughs in services but rather incremental improvements to customer service to meet the changing needs of customers and such incremental improvements to customer service can be as effective as laboratory-based innovations. But what is holding us back in this area? Are our service personnel too pre-occupied in trying to achieve their daily sales targets or in safeguarding the rules of the organisation?

Hans Snook, former Chief Executive of Orange, the mobile communications company, once mentioned that “companies are too focused on quarterly earnings and meeting the expectations of the stock market to grasp the fact that only by meeting the needs of customers can they deliver growth.”

Ultimately, all innovation is associated with PEOPLE who make it happen. This paper will discuss the art and science of introducing innovation in services.

of 7 CHALLENGING BUSINESS LANDSCAPE

Businesses today cannot exist without customers – True or False? Businesses exist because of profits – True or False? Profits come from customers – True or False? These are certainly irrefutable facts! It is believed that no business can exist without the interest and investment of at least one customer and profits in business come from customers. Profit generally is the making of gain in business activity for the benefit of the owners (or shareholders) of the business and the word comes from Latin meaning "to make progress". Straker (1998) accentuate that all businesses are founded on profit. Profits sustain businesses. Profits in business comes from repeat customers, customers that boast about your products and service, and that brings friends with them (Deming, 1986). The legitimate purpose for existence of any businesses should therefore be to make progress and for their customers.

We know that attracting the interest and investment of that one customer is getting more challenging as customers today are spoilt for choices and they indisputably demand for better service. Customers are individuals and they would judge their providers on different criteria and would assess their performance in a wide variety of ways which are meaningful and important to them. The ever-changing competitive business landscape where each business aims to outdo each other in terms of product and service offerings, variety and range of merchandise, pricing as well as promotional mechanics, et cetera for economic sustainably also contribute to the challenges.

We habitually push our top executives for new business ideas, our sales and marketing teams to design new service packages, and perhaps even our frontline service personnel to drive sales, but the real success of any business really depends on how well its customers are treated.

We often hear the phrase that, “customers are the purpose of what we do and rather than them depending on us, we very much depend on them”. Being customer-focused nowadays has to be accepted as a bare necessity to conduct business and as some would say; it is the “license to practice”' only (Mohamed Zairi, 2000). The customer must be the organisation’s top priority as the organisation’s survival depends on the customer; reliable customers are the most important customers (Merli, 1990). Quality

of 7 pioneer Juran (1989) explains that customers’ needs do not remain static. There is no such thing as a permanent list of customers’ needs. Whatever the definitions that exists, the very essence of customers is that they provide any organisation the bare necessities for a sustainable business growth.

One can assume that businesses exist to identify and meet the needs and expectations of their customers, to achieve competitive advantage, and to do this in an effective and efficient manner. Their undying intent ultimately is to maximise profitability and the success of any business depends on how well it treats its customers.

COMPETITIVE ADVANTAGE UNDOUBTEDLY CAN COME FROM INNOVATION IN SERVICES.

With such buoyant growth in the services sector and considering the significant contribution to the economy, there is no doubt that there must be a key differentiator (i.e. Innovation in Services) for those in this industry, in order to remain competitive and economically viable.

Innovation in Services can be a new service concept: where new products or services are offered or where changes are introduced or made to existing products or services; new service delivery: where changes are introduced or made to the means of producing services; new ways to interact with customer: where changes are introduced or made to the means of delivering services, i.e. creating more opportunities for customers to do business with ; or technology innovation supporting either concept, interaction or the delivery process: where changes are introduced to the technologies used to produce or deliver the services.

Simply, innovation is the successful exploitation of new ideas. While innovations in tangible products may be more easily recognised, possibly due to their physical and ‘codifiable’ nature, there is a wealth of excellent examples of services innovation:

Airport runway space – landing planes is a classic service that is intangible and jointly produced by air traffic control and the service users (airline carriers). Despite runways having been ‘full’ for many years, year

of 7 after year major airports continue to increase capacity. This has been achieved by ongoing innovations including improved efficiency in ground operations, greater co-ordination between relevant actors and developments in technology that have facilitated safer spacing of landing times. Much of this has been achieved without additional runways being built.

Financial Services – many banks now offer a whole range of services online, facilitated by ICT, and recently there have been developments such as Open Plan – which is a process/business model innovation introduced by the Woolwich that enables customers to access and link all their financial holdings (savings and current accounts, mortgage, etc.) through one portal. Open Plan customers can use both traditional methods of communication such as branches and automated teller machines, and more recent channels such as telephone call centers, internet and digital television.

Air flights – while the core offer of airlines remains transport between destinations, there has been considerable innovation in this area. For example: Low-fare carriers (e.g. Ryanair, EasyJet) have transformed the airline industry and the travel industry in general. This business model innovation emerged in Europe from the deregulation of European airspace in the 1990s; similar models such as that operated by South West were already operating in the US.

Retail – there have been many innovations in retail services, but perhaps one of the most pervasive has been the use of bar codes. The introduction of bar code scanners linked to information and communication technology has transformed retail. It required retailers to undertake several non- technological changes (e.g. changes to distribution networks, delivery procedures, etc) to take full advantage of the new technology (e.g. more efficient inventory management, measuring the effect of promotions, etc).

While these examples highlight some areas of emphasis of innovation in services, it is essentially important to note that all these are but the works of people. People – who introduced something new; – who successfully exploited new ideas; – who created a new dimension of performance; and – who ultimately met the needs of customers.

of 7 Finally, two fundamental points to consider when embarking on a service innovation journey:

Firstly, service innovation begins with the ultimate objective and belief that what is to be done is for the best interests of the Customer. Customers know what is best for them and are in turn an organisation’s best contributors and innovators.

Secondly, service innovation is not the job of the Service Quality Manager alone or the Innovation Officer of the organisation, but everyone in and out (including our customers and stakeholders) of the organisation. However, building that culture of innovation is not an easy feat and it requires commitment right from the top! The top must be committed not only in words but in actions, that the needs of their customer do come first.

These fundamentals may seem like common sense but I can assure you that these are certainly not common practices and there is undoubtedly much more to discuss on this subject matter. Let us not take innovation in the services sector too lightly but rather recognise the pressing need to continue improving our customer service to meet the changing needs of customers. Just as customers’ needs are constantly changing, our journey of innovation never ends…

REFERENCES

Deming, W E (1986) Out of the Crisis. Cambridge University Press.

Drucker, Peter F (2002) There’re not Employee, They’re people. Harvard Business Review, pp.70- 77

Merli, Giorgio (1990) Total Manufacturing Management. Cambridge, MA: Productivity Press

Juran, Joseph M (1989) Juran on Leadership for Quality. New York, Free Press

Straker, David (1998) The Quality Conspiracy. England, Gower.

Department of Trade and Industry (2007) Innovation in Services. DTI, UK

Zairi, M (2000), Managing Customer Satisfaction: A Best Practice Perspective. The TQM Magazine, 12(6), pp.389-394

of 7 The author is a much sought after speaker on Service Quality, Service Innovation and Business Excellence. He graduated with a MSc in Quality Management from the University of Stirling (Scotland) and holds various appointments which include Executive Council Member, Singapore Quality Institute; British Alumni Singapore; GEMS Service Capability Workgroup; and Associate, Public Service Centre of Organisational Excellence. He was also featured in The Straits Times and on NewsRadio 93.8FM for his strong entrepreneurship spirit and innovative ways of bringing organisational successes to greater heights.