The challenge of how to innovate in services is critical and relevant to all of us.

In the UK, 85% (1) of businesses are now service businesses. In developed countries, service businesses account for 66% (2) of employment and GDP. Many manufacturing businesses now have a service element.

However, much less is known about how to innovate successfully in service businesses than in manufacturing ones.

By far the majority of academic research into innovation has been undertaken among manufacturing industries. Now, to fill the gap in knowledge relating to innovation in services, many IT companies believe that universities should introduce the new discipline of services management and engineering (SSME) - and some universities are taking this forward.

Innovation in a service business differs from innovation in a manufacturing business in 3 major ways:-

1. Innovation in manufacturing is usually focused on the R&D department. In many service businesses there is no R&D department and the innovation occurs in many parts of the organisation.
2. Innovation in service businesses often requires the successful introduction of new technologies and in particular information technologies.
3. For innovations to be successfully implemented in a service organisation, more often than not there is a need for culture change.

Of these three areas, getting the culture change initiatives right is the one that is most often underestimated.

There have of course, been examples of service innovation having been introduced without culture change - and benefits have been achieved. For example, in the last two decades, most companies have reaped significant financial benefits by 'computerising back office.'

However, for some companies' customers this has resulted in what is to them, a major loss of service quality - through the introductions of IVR technologies, for example.

All the 'quick wins' have been made from information technology now. Going forward new technologies need to be introduced which improve the 'customer experience'. In order to do this, appropriate culture change initiatives will be needed to ensure that customers feel they are getting something that truly benefits them.

What do we mean by 'culture change' to enable innovation?

Quite simply a service business that successfully innovates needs people who think creatively and solve problems.

Innovation involves doing things differently. Doing things differently means that 'problems' occur - successively. These problems have to be solved, and in order to do that, employees need to be able to think creatively, generate ideas and decide courses of action...rapidly.

In addition, there needs to be people who can orchestrate the collaboration of workers across departments. There also needs to be innovation champions, who can assess new technologies as they emerge, and identify which of them could have a role to play to help the organisation to innovate.

The prospect of managing such a degree of culture change and learning and development may seem like a momentous task. This might particularly be the case for leaders who might have been influenced by the type of quote I heard the other day - "In order to innovate you need to have innovative thinking in the company DNA."

This analogy does not work for me. We cannot change our DNA. However, any company can develop innovation skills.

Innovative service businesses are made not born - through appropriate innovation training and development.

Over the years the Anatellô team has helped a vast array of Fortune 500 and Footsie companies to do just this.

Forget the DNA for the time being, the important thing is to keep creative thinking and problem solving on everyone's agenda.

Interestingly, many times working on culture change projects, we have found that a remarkable by-product of training staff in creative problem-solving capabilities and empowering them to solve customer problems right away, is how this also stimulates the staff and builds their self-confidence. Often, it rapidly increases engagement, productivity and retention.

(1) Office of National Statistics

(2) ESRC Research on innovation and competition. Institute of Innovation Research. University of Manchester.