Dean Cruchfield: the business of service innovation

Dean Crutchfield explains the secrets of making service innovation a business success - and how to deal with c-suite executives who are afraid of innovation…

Warning: liveblogging

Prone to error, typos and crimes against grammar. Post will be updated and corrected during the talk and over the 24 hours afterwards. 

Service innovation is the best opportunity to change the world we have right now. Germany is the one country that’s actually getting it done right now –  but 65% of the world is service-based businesses. Most CEOs would rather put out a BBQ with their face on it that innovate. “There are three ways to lose money: gambling, divorce and innovation,” said one.

Invention is something brand new. Service innovation is coming up with new ideas around existing services. Uber was set up in 2009, and connects passengers with luxurt car drivers looking to make money on the side. Snapchat is popular because it allows confidentially, and your potential employer doesn’t get to see you running naked down the street with a beer bong. Cox, the third largest cable service in America, create a map which connects customers with staff and prevents some home visits – saving the money.

Connectpoint solves the home delivery problem by placing delivery points in grocery stores and other convenient locations. AdTrap removes advertising at the network level. Costs $130 – and could be a huge game-changer. It could kill content businesses – and has huge implications for advertising and marketing businesses. CEOs are sacred of innovation – but they understand brand extension, and ways of pushing your brand into new markets. Square spotted the opportunity to provide small shops with credit card facilities.

This all means organisations need to think differently. How do you win at service innovation? Be aware of the forces around you – competition, new entrants, substitutes, suppliers and customers. You need to understand the innovation process, and that’s dependent on customer insights. Starbucks have created a system for handling customer complaints – LATTE – a system for dealing with complaints:

  • Listen completely to the customer.
  • Acknowledge the problem.
  • Take action to resolve the problem.
  • Thank the customer for bringing the situation to your attention.
  • Encourage the customer to return.

Rolls Royce “power by the hour” – a system for paying for engines while they’re in use, and not when they’re not.

These services have to be in your DNA, they have to be relevant to your brand. You need to understand what the business is doing. It’s all about supporting the business, not working in a silo. What is the expectation of the service? What revenue is it going to generate? Money, materials, manpower, machines – which of these is it going to need? What new activities do you need – and what internal factors are going to hold you back. Most senior executives don’t get it – it’s your place to explain it.

You need to go from the outside in – and that needs attitude. People rely on their existing brand to launch new ideas – and they fail. They need form, function and strategy. And then you need to both excite the company and the market. One of the most important things about innovation is that you can have four vision statements – it gives you room to change over time. Marketing has changed. The marketing funnel idea has failed. Word of mouth is 70 times more powerful than advertising. People take several brands to the point of purchase – and will only make the decision at the last minute. The customer journey is very different now – but that allows us to look for where service innovation can be introduced into the system.

C-suite of people are scared of innovations. Two thirds of CMOs said they weren’t ready for this kind of innovation in marketing. Burberry reinvented fashion by allowing the customer to sit in the heart of the fashion show process.  But change like that changes every part of your business: strategy, systems, staffing and all.

It’s not traditional markets being changed – it’s emerging ones, too.  OpenStudy – there’s a huge debate around online education. This service allows you to collaborate with people studying the same subject as you wherever they’re studying.

Success isn’t linear. It requires trial and error – and failing fast. If you know how it’s going to make money, and what tools you will need, you can minimise that failure. Things fails because they’re too late, because they’re too costly, or because they’re unprofitable. Those senior people that don’t understand – they’re not the problem. You are, because you aren’t explaining it so they can.

“If people aren’t telling you your idea is crazy, then it is likely not a very good idea,” said Francis Ford Coppola.

goodsearch allows your online activity to support charities – via advertising. It’s a business model of philanthropy. You need to have that business model. But you also need to be abel to spot opportunities and you need to position your product. Are you competing on price differential, or are you competing on the unique idea? There are three wonderful words:

  • Upsell
  • Cross sell
  • Retention

Oh, and have an elevator pitch.