Book Review: Open Services Innovation
Every once in awhile, a business book comes along that is so timely, so helpful to the right audience and so filled with common sense principles that you kick yourself for not thinking of it! But being in the right place at the right time with what is most needed is why people like Dr. Henry Chesbrough, the "Father" of Open Innovation, are so successful. His latest book, Open Services Innovation, is just such a tool that is so needed for business today.
In a global economy stung by commoditization and a lack of differentiation, only those organizations that stand out via services, business models, operating processes and customer focus will succeed. The premise of Open Services Innovation is that, in a product-based economy, after the exchange of a product is executed between provider and consumer, the provider's "job" is essentially done. But in a services-based economy, the exchange of a service between provider and customer is not complete until the customer's need is fulfilled. This gives the provider much more time to interact with the customer, understand their needs, analyze trends, and study behaviors, all to simply discover ways to better serve that customer and their needs. And that results in a closer relationship. And that results in growth. Get it?
Not yet? Okay, how about this great anecdote from the book about a Wal-Mart data mining initiative that studied customer purchasing trends in the lead up to Hurricane Charlie. Wal-Mart, traditionally thought of as a simple product provider, noticed through their analysis of the purchase trending data that people tended to stock up on, among many "normal" survival products, Pop-Tarts and beer. Oh, and not just any Pop-Tarts, but Strawberry Pop-Tarts. So, fresh with this knowledge, and with Hurricane Frances taking aim on Florida, they sent added supplies to Florida stores, including more Strawberry Pop-Tarts and beer, which promptly flew off the shelves. The combination of customer insight and a service mentality sold more product. Get it now?
Look, unless you've been under a rock for the past few years, you know "open innovation" is hot. Opening up R&D to outside ideas, banishing "not-invented-here" corporate mindsets, reaching out to customers and interacting with them to learn about their "jobs to be solved" have all changed the innovation management landscape. But where this book steps clear of the other "open innovation" offerings is how it extends these concepts beyond current thinking and into the service-based economy.
Dr. Chesbrough takes us into places where there aren't typically R&D functions. Services don't typically evolve from prototypes and research experiments. But, despite these differences in traditional innovation models, some service organization have leveraged open innovation concepts to get closer to their customer's needs and thus, closer to their wallets. Cool ideas like experience point mapping, specialization, niche services, co-creation and business model changes now fill the open services innovation management space. This is key...because in a world rapidly being consumed by the commoditization of products, you only really have services left in which to interact, participate, share and otherwise wow the customer. If you can leverage the best of what we know from traditional open innovation strategy and transform the services-based experience, you just leapfrogged your competition. How cool is that?!
Dr. Chesbrough also delivers what few business writers can nowadays, and that is cold, hard examples from not just the "big guys" like Xerox or KLM, but smaller firms that you've never heard of...yet, and global firms that are just starting to emerge. Remember that great Gary Hamel quote that basically says "somewhere, in some garage, someone is crafting a bullet with your organization's name on it?" Well, these emerging market service providers, who are learning to master the concepts of open innovation and customer observation, are those "someone's" and "somewhere's."
Please, do yourself a favor and get this book. Sit down and dedicate some time to really study it. Fold the corners...highlight it...write in it. Its only 200ish pages. But it is chock-full of information you need to keep pace with, and then lead, the transition from a product-based economy to a services-based economy.
Henry Chesbrough is professor and executive director of the Center for Open Innovation at the Haas School of Business at the University of California, Berkley. Previously, he was a professor at the Harvard Business School. His book, Open Innovation was named a Best Business Book by Strategy & Business magazine, and the best book on innovation on NPR's All Things Considered. His second book, Open Business Models, was named one of the 10 best business books by BusinessWeek, and Scientific American rated him as one of its Top 50 business and technology leaders.
In a global economy stung by commoditization and a lack of differentiation, only those organizations that stand out via services, business models, operating processes and customer focus will succeed. The premise of Open Services Innovation is that, in a product-based economy, after the exchange of a product is executed between provider and consumer, the provider's "job" is essentially done. But in a services-based economy, the exchange of a service between provider and customer is not complete until the customer's need is fulfilled. This gives the provider much more time to interact with the customer, understand their needs, analyze trends, and study behaviors, all to simply discover ways to better serve that customer and their needs. And that results in a closer relationship. And that results in growth. Get it?
Not yet? Okay, how about this great anecdote from the book about a Wal-Mart data mining initiative that studied customer purchasing trends in the lead up to Hurricane Charlie. Wal-Mart, traditionally thought of as a simple product provider, noticed through their analysis of the purchase trending data that people tended to stock up on, among many "normal" survival products, Pop-Tarts and beer. Oh, and not just any Pop-Tarts, but Strawberry Pop-Tarts. So, fresh with this knowledge, and with Hurricane Frances taking aim on Florida, they sent added supplies to Florida stores, including more Strawberry Pop-Tarts and beer, which promptly flew off the shelves. The combination of customer insight and a service mentality sold more product. Get it now?
Look, unless you've been under a rock for the past few years, you know "open innovation" is hot. Opening up R&D to outside ideas, banishing "not-invented-here" corporate mindsets, reaching out to customers and interacting with them to learn about their "jobs to be solved" have all changed the innovation management landscape. But where this book steps clear of the other "open innovation" offerings is how it extends these concepts beyond current thinking and into the service-based economy.
Dr. Chesbrough takes us into places where there aren't typically R&D functions. Services don't typically evolve from prototypes and research experiments. But, despite these differences in traditional innovation models, some service organization have leveraged open innovation concepts to get closer to their customer's needs and thus, closer to their wallets. Cool ideas like experience point mapping, specialization, niche services, co-creation and business model changes now fill the open services innovation management space. This is key...because in a world rapidly being consumed by the commoditization of products, you only really have services left in which to interact, participate, share and otherwise wow the customer. If you can leverage the best of what we know from traditional open innovation strategy and transform the services-based experience, you just leapfrogged your competition. How cool is that?!
Dr. Chesbrough also delivers what few business writers can nowadays, and that is cold, hard examples from not just the "big guys" like Xerox or KLM, but smaller firms that you've never heard of...yet, and global firms that are just starting to emerge. Remember that great Gary Hamel quote that basically says "somewhere, in some garage, someone is crafting a bullet with your organization's name on it?" Well, these emerging market service providers, who are learning to master the concepts of open innovation and customer observation, are those "someone's" and "somewhere's."
Please, do yourself a favor and get this book. Sit down and dedicate some time to really study it. Fold the corners...highlight it...write in it. Its only 200ish pages. But it is chock-full of information you need to keep pace with, and then lead, the transition from a product-based economy to a services-based economy.
Henry Chesbrough is professor and executive director of the Center for Open Innovation at the Haas School of Business at the University of California, Berkley. Previously, he was a professor at the Harvard Business School. His book, Open Innovation was named a Best Business Book by Strategy & Business magazine, and the best book on innovation on NPR's All Things Considered. His second book, Open Business Models, was named one of the 10 best business books by BusinessWeek, and Scientific American rated him as one of its Top 50 business and technology leaders.
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