Service innovation included on the bottom line

The new research centre for service innovation uses companies as a laboratory, while the companies now have access to the researchers' expertise.

28.03.2012 - Espen Bolghaug

'An innovative concept is good, but far from enough in itself,' says Yngvar Skar, chief designer at the insurance company Tryg.

When the Norwegian School of Economics (NHH) opened the Centre for Service Innovation (CSI) this spring, the insurance company Tryg signed up as one of the companies that the researchers will be cooperating with. Other big companies such as Telenor and Storebrand are also part of the team.

'The Ministry finally realised that not enough funds had been allocated to research on service innovation, and NHH took up the challenge of establishing a centre for this purpose. We are in the service business, and we feel that it is crucial to our operations that we also help to develop this field,' says Skar when he is asked why Tryg invites researchers into the company.

Must earn money

Chief designer Yngvar Skar is in the 'Innovation room' in Tryg's Bergen office together with Kjerstin Fyllingen. She is Executive Vice President for the corporate market in the Nordic countries and agrees with Skar that innovation is also important when working in insurance.

'We are very clear about the fact that the resources we spend on innovation must be reflected on the bottom line. We have to earn money on this,' she says firmly.

The insurance industry is not known for being particularly innovative, but new consumption patterns, widespread use of the internet and fierce competition are forcing companies like Tryg to think in terms of innovation. The company has had service innovation as an explicit focus area since 2005.

'We have always been concerned with development, but it was only around that time that we became more aware in relation to innovation. Focusing on innovation was also fairly "in" back then,' says Fyllingen.

Chief designer Yngve Skaar is in the 'innovation room' in Tryg's Bergen office together with Kjerstin Fyllingen. She is Executive Vice President for the corporate market in the Nordic countries.

Foto: Eivind Senneset

Systematics

Although Tryg's 'Innovation room' invites creativity and play, the methods used to develop new services are by no means arbitrary.

'We can't just sit around throwing balls to each other and drawing lots. Innovation has to be systematic, it must be related to the business and it must be possible to capitalise. If not, we would just be inventing things for their own sake,' says the chief designer.

'I think that the idea that creativity and systematic work methods are opposites is a myth and a common fallacy,' Kjersti Fyllingen adds. Both Fyllingen and Skar believe that the collaboration with NHH is a way of quality assuring the work they do themselves.

'We are dependent on expertise and insight into the most recent ideas in the field of service innovation,' Fyllingen believes.

Finland as an arena for learning

Initially, the NHH researchers will help with a pilot project in Finland. This is Tryg's smallest market and it is therefore well suited for testing new self-service solutions.

'These are web-based solutions, where the customers will serve themselves online instead of speaking to a customer service representative on the phone,' Skar explains.

The researchers' job will be to measure how customers experience the new service. By carrying out measurements before and after implementation and comparing the change in the customer experience with the rest of the market, it should be possible to determine how the customers' experience is affected by having to do more of the job themselves.

'Research shows that self-service can actually improve the customer's experience of a service. Perhaps the customer has a greater feeling of ownership and increased control of the service, so that the experience improves.' Helge Thorbjørnsen, professor at NHH, says that giving the customer more to do could be a competitive advantage.

'But isn't self-service primarily a way of cutting costs?'
'Cost-cutting is clearly a motive, but if done right, you can also improve the service,' Professor Thorbjørnsen believes.

A win-win situation

The challenges facing service innovation research are not unlike those found elsewhere in the social sciences. It is difficult to conduct controlled experiments, as is usually the case in the natural sciences.

'That's why it is important to cooperate with the business community. The companies will be our laboratory and provide us with insight into how innovation takes place in enterprises,' says Professor Thorbjørnsen.

Direct participation by commercial players in research projects like CSI used to be controversial. This is now changing, according to Tryg's chief designer Yngvar Skar.

'In my opinion, there are clear benefits of including companies in projects, even though they are financed by public funds. The researchers come to us with good theories and valid empirical findings, while we, in return, can provide realistic and practical adjustments to the theoretical framework that the academics work within.'

Companies can submit problems and questions to the research centre, which then selects those that are interesting on the basis of the researchers' expertise. They also form the basis for several master's studies carried out by NHH students.

'It is great that money will be earmarked for service innovation research. This is something that society needs and the business sector calls for,' Skar believes. And the figures confirm how important service innovation is: In Western countries, the service sector is now responsible for 70 per cent of value creation and more than 80 per cent of jobs.

How can customers' experience be measured?

Self-service can yield benefits in the form of an improved customer experience and reduced costs. The disadvantage is that you also lose traditional customer contact.

The monitoring of phone conversations between customers and customer service representatives is used in the service sector to measure how customers experience the service. The choice of words, pitch and speaking speed are variables used to arrive at the customers' experience. As web-based services become more and more predominant and the good old phone conversation is on its way out, new methods must be used to uncover the customers' thoughts and feelings.

'We have to find good methods for uncovering these variables. One such method is to monitor how customers write and their click patterns on the website. If they navigate the pages quickly, this could mean that they are uncertain or nervous,' says Yngvar Skar.

So-called economic experiments, where participants are placed in front of computer screens and have to carry out various tasks, are often conducted at NHH. The chief designer does not rule out that this could be something Tryg also wishes to avail itself of.

Innovation in times of crisis

The next few years are looking very uncertain, for both Norway and Europe. Many people will probably experience problems paying their bills and will drop insurance of their house and family. This will not affect our desire to innovate, however, Kjersti Fyllingen tells us.

'In times of crisis, innovation is more important than ever,' says the Executive Vice President.

'But isn't experimenting with innovation a little too risky when all the indications are negative?
'It is easy to end up in a vicious spiral where you stop innovating and only succeed in making things even worse. The good solutions often come when your back is against the wall,' she says.