innovating in a service-driven economy & the service innovation triangle
TRANSCRIPT
Innovating in a Service-Driven
Economy & The Service
Innovation Triangle
Presenter: Stephen Ezell, Vice President, Global Innovation Policy
August 12, 2015
Value: innovation outcomes
Management: innovation ability
Resources: innovation capacity
Layers of In
no
vation
: Reso
urces, m
anagem
ent, valu
e
Value
Service system
Business model
Customer experiences
Tangible
assets
Technology
Financial
assets
People
Intangible
assets
Owners 2
The firm and its environment Service
Innovation T r i a n g l e
http://www.bi.edu/PageFiles/214077/Service%20Innovation%20Triangle%20Booklet.pdf?epslanguage=en
Value
Service system
Business model
Customer experience
Tangible
assets
Technology
Financial
assets
People
Intangible
assets
Apple Advantage/ Differentiator
Parity
Nokia Advantage/ Differentiator
vs.
© Cuthbertson, Ezell, Furseth, 2015.
Customer Experience
• Steve Jobs “Humanized technology and made it work in wondrous ways that genuinely improved our lives.”
• Jobs set out to build products (and services) in the iPod, iPhone, and iPad that “he would want himself as a customer.”
• Used design principles not only to make elegant devices but also to create elegant and seamless experiences.
• Solving real problems that enhanced the user’s experience.
• Breakthrough insight for Nokia had been viewing the mobile phone as a fashion accessory.
• In the 2000s, Nokia phones with their personalizable cases were viewed as hip fashion accessories.
• Catered to mass of younger customers, beyond the business customers that dominated mobile phone use at the time.
• But, over time, customer experience deteriorated and Nokia lost core customers.
Apple vs. Nokia – Customer Experience
© Cuthbertson, Ezell, Furseth, 2015.
Apple vs. Nokia – Intangible Assets (Brand)
• Valued as high as $185 billion, Apple has became the world’s most valuable brand.
• Now Apple has the “hip” products.
• By 2010, one UK customer satisfaction survey of Nokia phone owners planning to get a new one found they would not recommend Nokia to a friend. They were almost ashamed to own Nokia phones.
Intangible Assets
© Cuthbertson, Ezell, Furseth, 2015.
Apple vs. Nokia – Technology
• iTunes (and later AppStore) were revolutionary Internet content platforms.
• iPhone and iPad introduced breakthrough technologies to phones and tablets
• Seven critical years passed before Nokia developed a similar site to iTunes. Nokia fundamentally failed to anticipate the threat that the iPod/iTunes ecosystem posed.
• Nokia’s response to the iPod/iTunes/iPhone trilogy was largely to try to build better smartphones.
Technology
© Cuthbertson, Ezell, Furseth, 2015.
Apple vs. Nokia – Service System
• Though not without a few hiccups, has performed far better at coordinating service operations behind launch of new iPhones and iPad products.
• As it scrambled to catch up with Apple, Nokia tool to announcing new smartphone models (e.g. Lumia 820 & 920) without stating when they would become available, where to buy them, or what they would cost.
• That frustrated carriers, consumers, and app developers for those details let consumers plan purchases, carriers plan marketing promotions, and app developers schedule new updates.
Service System
© Cuthbertson, Ezell, Furseth, 2015.
Apple vs. Nokia – Tangible Assets
• The 450 Apple Retail Stores generate more revenue per square foot than Tiffany’s stores.
• Confounded skeptics in establishing the first truly successful retail store by an electronics/computer manufacturer.
• Apple retail stores encourage “tryout” and “play” with Apple’s products.
• Some successful retail stores in major European cities, but never reached global critical mass.
Tangible Assets
© Cuthbertson, Ezell, Furseth, 2015.
Apple vs. Nokia – People and Culture
• Apple’s location in the heart of Silicon Valley made it easy to acquire the very best engineering and software talent.
• Jobs managerial style was combative but often brought out the best work in his people.
People
• Perception in high-tech community that Apple offered better environment for risk-taking and financial reward “posed a challenge for Nokia’s management in attempts to hire software engineers.”
• Risk-averse and consensus-based culture lacked innovation and entrepreneurial spirit; not able to keep up with pace/speed of digital innovation.
• Decisions being made within the firm were often cancelling each other out.
• Complacent, overly bureaucratic structure with poor accountability.
© Cuthbertson, Ezell, Furseth, 2015.
Apple vs. Nokia – Business Model
• Built product/service ecosystem with iPod, iTunes, iPhone, iPad, Mac, and AppStore that encourages cross-sales
• Developed the iPhone in part to cannibalize the iPod (fearing competitors would do so).
• Open approach with 70/30 split allows others to monetize Apple platform; generating more revenues for Apple.
• Developers have earned a cumulative $25 billion from the sale of apps and games
• Retail store space generates more revenues per square foot than Tiffany’s.
• Generated an advantage by producing just one phone (e.g., Southwest Airlines model), unlike rivals like Nokia who made multiple devices.
• To the end, predominantly focused on manufacturing technologically superior smartphones.
• Drove stake in its own heart by shutting down Symbian OS and going with Microsoft.
• Ovi app store underwhelmed and was shut down.
• Failed to demonstrate clear commitment to U.S. market (pre-MSFT purchase); had only 2% share of U.S. smartphone market.
• Fought a multi-front war and lost. Lost on high-end to Apple/Android and on low-end in developing markets to cheaper feature phones from Asian manufacturers.
Business Model
© Cuthbertson, Ezell, Furseth, 2015.
Apple vs. Nokia – Value
• Today’s smartphone business is less about specific devices than about ecosystems—combinations of hardware, operating systems, and applications.
• Nokia lost because its ecosystem was bested by Apple’s iPhone (and Google’s Android), as these ecosystem platforms have attracted the most developers, investors, and users.
Value
© Cuthbertson, Ezell, Furseth, 2015.
Twitter: @sjezell
Facebook: facebook.com/innovationpolicy
Blog: www.innovationpolicy.org
Website: www.itif.org
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Thank You Stephen Ezell