Total Value Development: How To Drive Service Innovation

How to Drive Service Innovation

Frank M Hull, Christopher David Storey

• Publisher: ICP
• Year: 2016
• eBook ISBN: 9781783267156
• Topic: Biological Sciences
• Subtopic: Science General
• Index: Biological Sciences

Total Value Development provides a framework to help businesses innovate and derive greater value from the services they offer. The secret is to devise an innovative model built on total value creation, identified as the total value development (TVD) model.

The TVD model has broad applicability for any large organization. Here, case studies are presented showing the effectiveness of the TVD model in its practical application within companies. Statistical evidence is used to recommend improvements to performance outcomes, such as time compression, cost reduction, quality and innovation. Studies of over 100 service enterprises in the United States and the United Kingdom provide compelling evidence for benefits from business model innovation. Additional material in the form of guidance forms give readers the tools needed for the implementation and recording of successful in-project value development.

Providing both a practical framework and real-life examples of adding value to current business practices, this book is essential reading for executives, managers and researchers in the field of business and innovation.

SECTION D

CONFIGURING
INVESTMENT IN
HUMAN CAPITAL
TO OPTIMIZE VALUE

CHAPTER TEN

PATTERNS OF SIMULTANEOUS INFLUENCE AND THE CONTINGENCY OF RADICALNESS

Overview

A strategy of developing radical offerings is often a vital method for gaining competitive advantage. Innovation, however, is demanding of human capital. Fortunately, the services data provides a rich opportunity for exploring how influence by 10 functions affects innovative performance at three phases of the development cycle. The goal of this chapter is to provide guidance for deploying total simultaneous influence to optimize innovative development throughout the life cycle, from concepts to post-launch augmentation. Early Simultaneous Influence has positive impacts on performance at the concept phase that is even stronger under the contingency of radicalness in both the service and goods datasets. However, only in the services data does influence by some functions have a positive association with performance at the post-launch phase. The intangibility of some services provides opportunities for augmenting offerings in innovative ways. Therefore, performance is measured not only for differentiating features, but also delivery. Profiles of the role 10 functions play in developing and delivering service offerings note the extent to which each is affected by the contingency of radicalness. As detailed below the engagement by some functions enhances performance even more so under the condition of radicalness, and affects delivery as well as differentiation performance.

10.1.Investing in Human Capital for Radical Innovation

A rapidly growing number of service enterprises are attempting to differentiate themselves from competition by offering new features. Although Moore's law was formulated for the semiconductor industry, the demand for new features has rapidly affected the service sector. One reason is because computer information technology is increasingly pervasive. In an earlier era, many service enterprises relied upon traditional offerings. Today many are attempting to rapidly innovate. A growing number are consolidating responsibility for NSD into a cross-functional group, a practice common in goods industries. However, the development of new offerings remains Balkanized in the majority of service enterprises where one functional department or another takes the lead in development within the confines of a mechanistic hierarchy.

Managers tend to closely oversee expenditures. The issue with regard to innovation, however, is that most of the opportunities to innovate occur at the front-end where only a relatively small percentage of funds are expended. As the development cycle progresses, much more money is spent. Under-managing the front-end and over-managing the back-end of the development cycle is common. However, human capital is needed throughout the development cycle, especially at the front-end. The more complex the development, the greater the need for human capital of all kinds. Novelty is a driver of complexity and the need for human capital. In goods companies manufacturing small batches or service companies varying their offering based on interpersonal delivery, the need for the management of human capital is relatively high for achieving success.ⁱ

Skimping on human capital at the concept phase limits innovative thinking about new ways of creating value

Total simultaneous influence is an expansive concept integrating activities from the seeding of concepts to post-launch augments. The well-spring of innovation is the creative input of diverse people from heterogeneous functions. The cross-fertilization of ideas is optimized by multifunctional engagement. Early simultaneous influence at the concept phase is critical for innovation as a wider array of options are available at the outset of the development cycle. However, many functions are required to realize a product concept in actual practice and especially in services where delivery processes are an important dimension of value added. Cross-functional collaboration in value development stretches from concept to customer delivery and requires continual feedback among functions.

To optimize return on investment, multiple functions not only need to be engaged, they must also actively cross-fertilize their ideas. To achieve innovation in a high-performance system, the key is to build collaboration so that:

People from different functions accept personal
responsibility for project development outcome
regardless of their individual job role.

Getting cross-functional teams to take collective responsibility for project outcomes seems simple, but it is extremely difficult to achieve. Mechanistic bureaucracies rely on a serial approach where each individual enacts their role serially and separately. Structuring horizontal exchanges requires proactively building cross-functional collaboration. Collaborative responsibility is best achieved by building organic bonds up-front among people responsible for designing, building, and servicing customer offerings. Extensive cross-functional collaboration in creating and developing offerings is very strongly associated with innovative offerings that are also cost-effective because stakeholders from all points in the value stream are engaged throughout the cycle.

A lack of understanding of the value innovation brings to competitive advantage over the life cycle of customer offerings is a barrier to the adoption of concurrent methods of development. Most managers view up-front expenditures for engagement by downstream functions as unnecessarily wasteful rather than a proactive investment. The retention of a serial, non-concurrent approach to development is illustrated by the rarity of adoption of Toyota methods of product development that rely on early simultaneous influence. Many industrial firms have emulated their manufacturing practices, but relatively few realize that much of the same kind of thinking may be applied upstream to the development process.ⁱⁱ However, a few enterprises have engaged multiple functions up-front to consider multiple kinds of alternatives at the concept phase using methods such as set-base design to compare orthogonally different options.ⁱⁱⁱ Open consideration of alternative design options at the front-end enables implementation of a 3P, a Toyota approach to design whereby all stakeholders throughout the value stream are engaged throughout the cycle. The advantages of Toyota development methods, such as 3P, are derived from a socio-technical approach. People and technologies are so closely interwoven that tactile and non-verbal experiences among stakeholders intimately bonds them together. Genie Industries is one of the most successful exemplars of 3P methods.

3P Methods at Genie Industries

Genie has an area on its shop floor that is walled off during phases of new product development. Everyone from the most creative designers to the operational employees who will build and service the product are collaboratively engaged from the outset and throughout the process. All functions collaborate in reiteratively designing a customer offering first in paper/cardboard, then wood, and finally metal. The plasticity of paper and to a lesser extent wood (or 3D printer models), enables creative ideas to be prototyped at low cost and risk. The product is not only innovative, but also low cost because expensive back-end quality and service issues have been addressed up-front. The final prototype works the first time and could actually be put to use by customers.

The generation and use of tacit information in socio-technical development is quite applicable to the design of services. Many services involve physical aspects and even if not, various design and delivery scenarios may be developed by a team of multifunctional collaborators. The generic principle behind concurrency and methods such as 3P is a reiterative approach to multiple design options by a wide variety of stakeholder functions who take responsivity for the customer offering during its whole life cycle from creation to after sale service.

10.2.Barriers to Collaborative Development

A common barrier to holistic development of customer offerings in goods and services is mechanistic bureaucracy. It is the default form of organization for any large-scale enterprise and places employees in a hierarchical structure with defined role expectations. What is startling is how easily delimited roles provide a bureaucratic gestalt for contextualizing work so that employees fail to realize opportunities for cost-effective innovation. The limitations the bureaucratic mindset places on human creativity have been not only documented in scores of studies, but also demonstrated repeatedly in experiential simulations. As noted below, people easily define their role in ways that limit collaboration and creativity occurs in simulated scenarios.

Simulating Development Operations

In DevSim, an experiential simulation of development and delivery operations in a hypothetical corporate enterprise, participants are assigned to perform roles commonly found in large organizations of all kinds, e.g., CEO, CFO, marketing, quality control, finance, sales, delivery, supplier, customer service, etc. Each participant is provided with a description of the role they are asked to enact. However, the initial operational structure typifies mechanistic bureaucracies with hierarchical, serial communication patterns. The customer offering is producible, but there are opportunities for improving its design and delivery that are missed because of a lack of collaboration. In over 40 simulations, participants from major corporations attempted to conscientiously execute their prescribed roles. However, in every instance, a high percentage of deliveries to customers were often late or defective. As performance suffered, each incumbent typically attempted to execute their role ever more efficiently. Some sweated profusely, occasionally cursed, dashed between offices to speed things up, and occasionally cried. Only after a breakout workshop, did part...

Table of contents

• Cover
• Halftitle
• Title Page
• Copyright
• Preface
• Acknowledgments
• List of Abbreviations
• List of Figures
• List of Tables
• Introduction
• Contents
• Section A — Total Value Development Systems: Axioms and Images
• Section B — Evidence for Advantages of a Composite Model
• Section C — The synergistic Elements of the Composite Model
• Section D — Configuring Investment in Human Capital to Optimize Value
• Section E — Championing Transformation for TVD Design Capabilities
• Appendix: Methods of Research and Analysis
• Transformational Workbooks
• Index