Information Technology Represents a Technological Revolution in Service Industries - Coursework Example

Service Innovation This essay gives a brief overview about the role that information technologyhas on the service industries as a whole. An increase in technological innovation has been seen to mark an increase in the growth of various sectors of the economy, one of the fields noticeably growing is the services industry. This does not show that both of them are in the same breadth, however, they complement each other and one leads to the growth of the other. It is important to note that the growth of both of these sectors contributes positively to the economy and both should be aggressively pursued to increase productivity in the country. List of contents Abstract …………………………………………………………………………...2 Introduction ……………………………………………………………………….4 Technological evolution …………………………………………………………..5 Service innovation …………………………………………………………………9 Innovation in the services sector ………………………………………………..…10 The role of information technology for sourcing strategies …………....................11 Role of information technology for innovation in services………………………...14 Case study……………………………………………………………… ………….16 Conclusions …………………………………………………………………………17 Implications of conclusions………………………………………………………….28 Bibliography…………………………………………………………………………21 Introduction Information technology plays a key role in the economy. This field has been known to be the driver behind productivity and innovation. Growth in the technological field is not independent and extends to various other sectors of the economy. As a result, there are alternate innovations in other sectors that use information technology; this makes such fields to also have the same level of growth. Studies carried out from the 1990’s show that there has been an increase in the growth of productivity in the United States while there was a decrease of the same in European countries over the same period of time (Windrum & Koch, 2008) This can be attributed to the fact that the United States has intensified the use of information technology and the effects are now clearly evident. These industries that are information technology intensive have been shown to be the major drivers of productivity growth. In line with this, there is evidence to show that an increase in productivity of labor can be directly linked to the services’ industry. This essay will therefore show the role played by information technology in the services field and how this can be related to innovation activity. It also points out how this innovation represents a growth in productivity and employment. This paper also attempts to show why service and technological innovations have several similarities and differences. I have carried out detailed research and in the end I document my findings. What is a technological revolution? The evolution of technological goods and services can be looked at from different angles. Different categories of Products undergo constant evolution as a result of the cumulative variations and changes in the new product features. This is illustrated by the uptake of new product specifications and features and in the ever increasing boundaries between different generations of the same product. This essay draws from this approach and uses this pattern for forecasting and planning evolution of technology products and the uptake of new product with enhanced features (Gallouj, 2002). This is done by differentiating the basic process behind the process of evolution; this is followed by process formulation at the product category, model levels and product features. The desired approach is as a result of these formulations which combine the primarily (initial) demand-driven uptake of the product category and replacement behaviors of the specific product unit. It also includes the produce feature dissemination that is driven by supply. The approach that is developed is then applied to indicate the features of the evolution of a sample product category: in this scenario we will use mobile phone handsets. The aim is to try and predict the penetration of features of the handsets using extensive cross sectional and longitudinal and cross-sectional data collected from a pre-determined location. It can be concluded that the process of evolution of technology product can be seen as an extensions to joint research on the category of product category, its replacement and diffusion. Service innovation and technological innovation are two different terms but the question lies on whether they can be thought of in the same terms. Given the following factors of service innovation, we have to agree that there are various similarities and differences as well. An analysis of both of these factors will highlight whether technological innovation can be thought of in the same ways as service innovate. Below are some of the similarities of both of these aspects of innovation. Improved or new products Both of these ultimately result in the production of new or improved products. Innovation brings out better features of the products and this have a better appeal to the mass market. In both the technological and service industries, such innovation helps companies deal with competition that is prevalent in the market place. An example is the use of improved software in the mobile telecommunications industry. When Samsung produces new phone models with improved software results in increased sales of their products. Likewise, service industries like the insurance industry also get better sales when they come up with innovative products targeted at select groups of the society. Value addition In most cases, innovation increases the price tag of products and services. Even if this is not the case, there is a huge increase in value addition created by innovation. This shows that innovation is an important factor and can be used to ultimately increase the value of a company, regardless of whether it is in the service or technological field (Jin, 2011). A clear example is in the stock market. When companies announce that new products are coming up, there is usually an increase in investor activity and as a result the general value of such companies go up. When Sony announced the launch of the PlayStation 4 console, the shares of the electronic company went up significantly. Value addition is a key factor in innovation. Use of skilled labor In both field, innovation requires higher competencies of staff. This is because innovation is quite knowledge intensive and requires the concerned parties to undergo additional training. It is common for companies that have embraced innovation to incur additional costs in form of consumer training (Lopez, 2011). This is important as the consumers feel as part of the innovation and are encouraged to increase uptake of the products. There is however various differences between service and technological innovation that may make them seem apart. In most technological innovations, particularly in the manufacturing industry, there is more likely to report the requirement for new structures and strategies when products are relatively new to the specific company or the concerned industry. Services on the other hand are more likely to turn novelty into success. Services are significantly likely to have a brief beta testing process and to use general manager (internally sourced) ideas for new ideas and offerings as another form of alternative to formal structures of innovation. However, both manufacturing and service show a similar tendency to use customer (externally sourced) ideas for new products and offerings. The potential contribution of this essay is to point the direction for future work in the nascent research stream of service innovation, highlighting areas where there appear to be fundamental differences between the innovation process in services and other sectors of the economy. major differences that appear to be in the following areas: the alternative ways that service industries formalize the process of innovative process, the distinct way services test new customer concepts, and the cumulative role of professionals and general managers and professionals in the process of development. These differences have implications on managerial practices. Working closely customers and service managers should proceed with their own select approach to the process of innovation, especially in regard to beta testing and prototyping. Senior managers in organizations in the service industry should take part in the idea creation process to successfully offer new services; this can be part of their strategy-making responsibilities. Service innovation A service represents a commodity which is intangible. During transactions, one party pays for the service while the other party performs the service. An example is in the financial industry, banks and financial planners offer financial advice and this is usually paid for. This represents a service that is being passed between the two parties. Service innovation in a company results in improved products or totally new products. There can be an aspect of technological improvement associated with service innovation. Service innovations usually have a double benefit. It helps both the consumers and the producers. The consumers get to have improved products at their disposal hence getting maximum value for their money. On the other hand, the producers are able to use efficient production methods and this lowers their production costs (Fuglsang, 2008). Service innovation may occur across four basic platforms. Client interface, systems for service delivery, technological options and the concept of service. The service concept is a new mode of service that is totally new to the target market. It’s reached by simply finding alternative ways of solving the problems that afflict a given community. An example is introduction of specialized business accounts by banks operating in an area with various businesses in the area. The system for service delivery indicates the link between the various clients and the providers of a particular service. It can also apply to the internal organization of the company whereby the workers are able to assess the way they conduct their daily affairs and come up with a manner in which they can each perform their tasks that leads to better service delivery. An interface is a link between two parties. A client interface connects the clients to the service provided. This plays a key role in customer’s experience. This is because first impressions last for a long time to most consumers. This can mark the turning point of a business, either positively or negatively. For any business, clients play a key role in production of services (Tidd, 2003). An example is fuel filling stations that have adopted a self-service policy. Clients do not wait for any attendants but have to get out of their cars to perform the tasks involved Technological options are important in innovation. Technology changes production on another level because it enables greater effectiveness and efficiency in production and processing of required information. Of late, there has been an upsurge of services being accompanied by physical products. An example is loyalty cards for customers that are available in all the major retail stores in the world. In the practical world, most service innovations usually involve various combinations of the four aspects of service innovations mentioned above. Examples in this regard are: People can nowadays keep up with the progress of goods they expect to receive via courier on a real time basis. Better platforms have come up for service delivery for the benefits of the clients; online banking is one such feature. Most of these new services will furthermore require a new system for delivery and a change in the client interface. The retail world is fast changing with many global brands having online avenues where the clients can look at the catalogues, order and even pay for them. Burberry, a global clothing brand introduced this online platform in the year 2010 and extended it to include catwalk pieces after fantastic response from their buyers. Innovation in the services sector To enable us understand the impact of the innovations in the service sector, consider the knowledge production function. New knowledge can be produced based on certain factors of input. The main factors in this regard are capital and research and development. These are considered the core input factors. Indicators that show knowledge acquisition is the presence of significantly improved or new products and processes. It can also be by a share of sales that are as a result of such innovations. Therefore, the knowledge production function is also known as the innovation production function (Betz, 2011). Basically, innovation is a major factor in the growth of productivity. There is a large proportion of services industries in the economies of European Union Countries, therefore,, innovation in this field can lead to increased growth in the economy. This can lead to the decline in the gap of productivity that exists between these countries and other industrialized countries. Innovation is seen as the putting in place of an improved product or service, method of marketing or new business practices within the workplace or in regards to external relations. This is important as it represents the only way a firm can improve its competitiveness and performance in the field. Increase in performance can be obtained in two ways, this van be by reducing costs or increasing the demand of the company’s products. The most feasible way to increase demand is by coming up with new services or products. Competitive advantage is therefore gained over competitors in the same field. Services have a number of characteristics that make their exact measurement on the impact of the economy. These include interactivity and intangibility. Unlike manufacturing products, products in the service industry are difficult to transport or store. Most are not tangible in the traditional sense of products. In majority of the circumstances, the buyer and seller of the service products have to be present for the transaction to take place. The services industry can however not be categorized as one unit, there are various activities some of which require high technological use while others require low levels of technology. An example is the telecommunication industry and housecleaning activities. Both of these are in the service sector, however, one is labor intensive while the other hardly requires technology. There are many factors that determine the rate of innovations in the services sector. These include the size of the firm, information technology, competence technologically and innovative experience. There are two sources of knowledge that also drive innovation. This can be internal or external. Internal refers to information that is shared between the company employees while external information sources are obtained from suppliers, customers and the general business community (Rothkopf, 2009). These sources provide important information to the company who therefore work so as to come up with innovative products that suit their demands. National funding also contributed to increase innovation. In countries where funding was provided for service industries, there was an increase in the rate of research and development compared with countries that lacked this innovation. Therefore, this form of funding has a positive impact on innovation in the services sector where it was most concentrated. Countries in the European Union have lower budgets compared to the United States. As a result, studies show that there is higher rate of innovation in the services sector in the United States than in the European region within the same period of time. The role of information technology for sourcing strategies Apart from providing a direct platform for innovation, information technology provides a platform for using strategies that make innovation possible. It enables business processes to be outsourced. This provides a platform by which there can be input from professionals in the business operations. This external input provides benefits for the company in terms of costs and technical knowledge. Research has shown that there is a direct relation between economic impact and outsourcing. The intensity of outsourcing is related positively to productivity of labor in service industries. Outsourcing enables the company gain advantage by specializing in their core business and having smooth production cycles. This is because any given company has a wide range of services that can be outsourced ranging from certain business services to procurement of inputs. Information technology reduces the cost of procurement by supporting the search for the right suppliers and to constantly monitor the subcontractors. Information technology is a means by which by which information is rapidly availed and exchanged. In service companies that outsourced non-core functions like accounting or marketing, there was n increase in the labor productivity by about 10%. In conclusion, when business services that are knowledge intensive are outsourced, there is a positive effect on the productivity of the company. However, in the long term, outsourcing has a negative impact on the performance of the business since major processes are out of control of the company’s management. When businesses in the service industry outsource their IT functions, they face several advantages such as cost reduction, and flexibility while they focus on their main business. Such providers of information technology have access to lower costs of equipment, focused expertise and can achieve economies of scale. They operate at lower costs unlike it departments within the company. The company also has access to new improved technologies without large capital investments or human resource requirements. Firms that engage in business outsourcing are able to optimize on gaining data from the external suppliers and therefore are more innovate as they can change their business processes to more efficient systems. However, despite the clearly marked benefits of business outsourcing, it also has several disadvantages. The most obvious is that information pertaining to a certain company can be leaked as it is being shared between the company and the external supplier. This can be used by competitors for their advantage. This is particularly disastrous in the service industry where such information can be put to profitable use within a very short period of time. Customer call center are the most common type of business outsourcing. This involves setting up call centers in developing countries such as India and Africa. All customer queries are therefore directed to these countries where the costs of labor are significantly lower. This has been made possible by innovations in the field of technology; the increase in product portfolios has also made customer relations an important factor in large businesses. External outsourcing also has a negative influence on employee involvement in innovation activities. This is because the employees become relaxed and comfortable in their roles, this leaves the act of innovation to third parties. Role of information technology for innovation in services In the service sectors that are knowledge intensive, information technology plays various roles in regards to innovation. First, information technology can produce a new process or product independently. An example is new software applications. Secondly, use of information technology can result in alternate investments in organizational, innovation and training activities. Finally, use of information technology can enable companies to adopt certain strategies such as internalization and outsourcing. Information technology is important as it helps to reshape their business processes and optimize them to produce maximum gains in productivity. This shows that innovation is necessary for there to be a gain in the productivity of any given firm. For innovation to take place in the services sector, organizational flexibility and employee participation play a key role. There is a direct relation to innovation and total capital investment in information technology as a percentage of total sales. Firms that constantly upgrade their Information technology have a tendency to have processes that are improved. This is however reduced in firms with older workers, this group of individuals’ impact negatively on a firm’s profitability that can be realized by adopting the innovative processes. Information technology applications also play a key role in coming up with innovative products. These include Customer Relationship Management, software for Enterprise Resource Planning and Supply Chain Management (Macaulay, 2012). Customer relationship management is an important factor in innovation of products. It helps to obtain feedback from customers which are important in knowing which services to improve. Those companies that use such software have a higher chance of increased innovations in their products. Availability of broadband access also plays a key role in the innovation of products. Companies that adopted the use of internet activity had a major noted increase in their product and process innovation activity. This is more pronounced in the services industry. In such a scenario, information technology helps to promote innovation of processes, products as well as organizational innovations. In one way or another, all companies in the service industry are dependent on technology. Information technology plays a key role in many spheres of our lives. An example of a service company is large hotel groups like the Hilton group of hotels. These hotels have come up with improved features like online bookings that make service delivery more convenient to the customers. This shows the strong link between service delivery and information technology. Case study: I surveyed data relating to several companies in the services sector. I wanted to look at the various innovations that they have undergone and the importance of technology in this aspect. For my study, I went to 3 industries: a bank, large hotel and a restaurant. Methodology Use of questionnaires: I prepared a number of questionnaires that I went round with to the three sample locations. The questionnaires focused on recent innovations that they had put in place, the technology used and the impact this innovation has on their business. Conducting interviews: I came up with a list of questions that I asked selected individuals in the companies that I visited. These individuals were the overall manager, the services manager and the IT managers. I wanted to find out their views on innovation. I also set aside a few questions to ask the clients I would find randomly using any of the three establishments. Findings and analysis All the managers were of the opinion that innovation was good for their businesses. This is because it enables them to increase the quality of services they offer. The managers were also willing to spend more so as to purchase better technology. This is because technology provided them with a competitive edge over their competitors. They were willing to buy computers and mobile devices for use in their establishments. Software was also a major factor in their businesses and they were constantly searching for new products in the market. The clients that I interviewed were of the view that what mattered to them was service delivery. To the clients, it was of little significance whether the technology used was the latest or not. Their satisfaction was based on the following factors: The clients at the restaurant were only concerned with the quality of food served. Most liked the unique style of cooking and it was this that kept them constantly coming back. If the restaurant were to adopt new technologies, there was a possibility that the taste of food might be affected. They were not willing to take chances with the food. The clients at the hotel were of a different opinion. They wanted the hotel to adopt certain innovations that were present in other big hotels across the globe. This included features like online booking, faster internet connectivity in the rooms and an integrated system where they can order for food easily from the comfort of their rooms. The clients at the bank also welcomed innovation because it represented one major factor in the financial industry: security. All the clients wanted to have the sense of security that their money was secure. Advanced technology represented modern security features and this could make some of them shift financial providers. Conclusion In the services industry, innovation is very important to facilitate growth. Clients also consider innovation when considering which service provider to choose. Therefore business leaders must ensure they keenly keep track of progress in their industries. Existing research shows that information technology plays a very important role in increasing the productivity of firms in the service sector. The use of information technology brings a lot of possibility for strategies that can have a major impact on the economy. The end result is that such enhancements have a great effect on the service companies and improves their economic performance. Given these facts, it is correct to state that service innovation can be placed at the same level of technology innovations. The management and policy implications of my conclusion Management of service industries has to consider the implications that innovation has on their businesses. All businesses have the aim of increasing returns and if innovation can result in this then the path of innovation has to be taken up. Innovation is directly related to management actions. Management must come up with a strategy to reach its goals or benefits from innovation will be directed wrongly. Innovation is usually a team effort. Management should put in place an environment whereby all the employees of the company are able to express their thoughts freely. This diversity of ideas at all levels within the company is very crucial in regards to the innovation process (Bauman, 2008) This can be by providing time and resources for the team to feel free and express their thoughts. In India, most of the companies are assembly companies. Management provide very little room for innovation and all that is expected from the workers is to come to work, perform their assigned tasks and depart in the evening. Their productivity is measured by meeting set target only and not on their thoughts. Standard operating procedures form the core part of their business. As a result, India is a nation with a large group of workers who have unexploited innovative potential. Most innovators are usually motivated by intrinsic rewards. Most do not require a corresponding financial reward; all they need is for their efforts to be noticed. Management should show interest in such individuals and these acts as a source of motivation for them, unleashing their full potential. Management can also encourage people to work in teams and when there is a new idea; allowance can be made for teamwork to be used in decision making. They should promote people with supporting ideas and opposing ideas so that everybody gives their contribution without any discrimination. Management should therefore adopt a leadership style that promotes such freedoms. There are various forms of leadership. Autocratic leadership is an authoritarian style where the leader has maximum authority and the only decision maker. Laissez- faire is where the leader has an approach that is hands off. The final leadership style is democratic. In this instance the leader is flexible and is open to contributions from the workers. This form of leadership is most important wand should be adopted as it promotes innovation in service industries (Demirkan, 2011) . There are various means by which policy has an impact on innovation. A lot of industry policies have an aim of maintaining healthy competition companies. This sort of regulations ensures that companies have to come up with new products on a constant basis so have to have an edge in the market. Such regulations promote innovation in various sectors and not only in the service sector but in others such as the manufacturing field. Certain regulations are specific to certain fields, such as social regulations. Innovations have to fit within certain parameters and should not have any external effects. This is so as to protect the health and safety of the citizens and the environment as a whole. Workers and consumers’ welfare has to be given foremost consideration. Environmental policies are used as instruments of policy to encourage innovation. Financial regulations are however restrictive of innovation. This is because innovation is seen as a risky venture and should be minimized. Policies should be made in this field that promotes innovation in various sectors so that innovators can present their ideas freely. It can be done in such a manner that is industry specific where information technology proposals have an advantage over other innovation platforms. The presence of intellectual property rights also motivates innovators in the service industry to come up with new products. This acts as an incentive for people to come up with new products as their rights and benefits from such activities are guaranteed. Despite these, improvement can still be done in this regard. This can be by increasing the timing and frequency of reviewing the regulations that are in existence. There should be coordination of policies of related regulatory bodies as this enhances innovation. Regulations in regard to innovation should also be implemented to foster such practices. Finally, there should be increase innovation focus in regards to regulatory policy. 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