Excerpted from Heads-Up! on Organizational Innovation

Professors Christopher Lovelock and George Yip noted the four essential differences between products and services back in 1961. The following 4 points use Sasser’s framework to delve into the emerging discipline of service innovation.

1. Intangibility: Services have no physical form. They cannot be seen before purchase or taken home after.

Advice for service innovators: Provide a tangible artifact that will give cues about the service and create word-of-mouth to help dissemination. For example, when you check into the House of Blues Hotel in Chicago, they give you a CD with blues music from acts that perform at the House of Blues, which is across the street. If it doesn’t get you to go to a show, it might make a nice conversation piece or reminder when you play it later in your car stereo.

2. Inseparability: The act of supplying a service is inseparable from the customer’s act of consuming it. This is true even though most services require literally dozens of people to produce and support it.

Advice for service innovators: If the service only exists in the moment it is produced and consumed, and dozens of people are involved, then you better become skilled at rapid service prototyping so you can get everyone on the same page. Prototyping is religion in the product development world, but services require very different prototyping tools — scenarios, short videos, computer-animation, for example — the use of which is far from commonplace.

3. Heterogeneity: Unlike tangible products, no two service delivery experiences are alike.

Advice for service innovators: You can deliver on two competing goals — standardization and customization — if you customize via
(1) a superbly trained service person with uncompromising customer empathy, or
(2) a sophisticated IT platform. Nordstrom seems to have a knack for the first approach, while ATMs that “speak” Spanish are a good example of the second.

4. Perishability: Services cannot be inventoried. We expect them to be accessible most if not all of the time.

Advice for service innovators: Design your service to take full advantage of peak/off peak opportunities. Restaurant chain Cosi is not only a gourmet coffee shop in the morning, it also serves as the corner bar after work.

These issues are just the tip of the iceberg. During the next 18 months service innovation will become white hot, and a new discipline of service innovation will begin to emerge.
Lovelock, Christopher and George Yip, “Developing Global Strategies for Service Businesses,” California Management Review, Winter 1996, pp. 64-85.