ABSTRACT
The purpose of any business is to create and keep customers, therefore requiring two vital actions – marketing and innovation. Innovation helps organizations to ensure a unique customer experience, so it's important for service managers to adopt a strategic approach to innovation to build competitive advantage. In today's rapidly changing business environment, service innovation is a core driver of competitiveness. Service managers and marketers thus greatly benefit from understanding how to foster innovation in a way that enhances the customer experience and delivers exceptional service. Service leaders must approach innovation both from an external perspective, by adopting a customer orientation that focuses on value co-creation, and from an internal perspective, by intentionally creating a culture of continuous experimentation and learning. This chapter addresses the specific nature of service innovation, assesses the different types of innovation, introduces service models that facilitate innovation, and provides insights into new and emerging ways that artificial intelligence (AI) can support innovation. This chapter concludes with examples of how innovation is used to transform service firms and ensure their long-term sustainability.
