Reflections on module 4 –Service innovation
In a previous post “Service Logic in my industry” I wrote that the medtech companies are struggling with decreasing product margins and tougher competition from low cost countries. To grow, either through acquisitions or organically, is important in order to stay in business and not be a victim for an acquisition. Organic growth through product innovation and development of medical equipment takes longer time than many other products because of the medical directive regulations, risk assessments and formal documentation requirements. A faster avenue for growth is to expand the offering beyond existing products. This has already started to change the medtech industry and it will probably continue to do so even more.
I believe the most common way to be innovative in this area is to combine products with services into solutions which also is called Recombinative innovation*. An example of this is combining a patient lifter with a smart software that can help the customer to monitor the usage of the equipment and encourage not frequently used lifters to be more utilized by the caregivers in that department (and thereby giving more value-in-use and operational benefits that improve cost-effectiveness of the investment)
Another common type of service innovation is Formalization*. This means to standardize and formalize the performance of a procedure. Examples of this are procedures carried out by hospitals (like e.g. laundry) that can be turned into a service and offered by a service provider.
A radical* service innovation today offered by bigger medtech equipment companies are the “Guaranteed solutions”. Some of these services focus on preventing adverse advents e.g. patient falls or caregiver back injuries and consists of a 2-3 years improvement programs with a guaranteed outcome that will lower the operational costs for the hospital. Such programs include both products, product training, process changes, monitoring and follow up of the outcome. Referring to the Diamond model** in, this service innovation is truly multi-dimensional and consists of process innovation, social innovation and business model innovation. #mssl141
* Gallouj, F. & Weinstein, O. (1997) Innovation in services. Research Policy, 26, 537– 556.
** Developed by CTF – Centrum för tjänsteforskning in Karlstad