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Research on Driving Forces Model and System
Construction of Service InnovationBased on Value Chain
Theory
Zhang Jingmin1,2
1.School of Management,
Jilin University
Changchun, P.R.China
2.School of History and Tourism,Liaoning Normal University
Dalian, P.R.China
[email protected]
Lu Yanqiu
School of Management
Jilin University
Changchun, P.R.China
Wang HuijunSchool of Management
Jilin University
Changchun, P.R.China
Abstract The rise and development of the service industrydepend
on the competitiveness of service enterprises, and service
innovation is the source and power of the competitiveness of
enterprises. In this paper, knowledge management theory isquoted
to explain the formation of service innovation, and then it
takes the value chain theory as a research perspective,
through
an analysis of the value chain of service enterprises, builds
a
service innovation system of service business, and finally takes
a
performance evaluation of service innovation.
Keywords - value chain, service enterprises, service
innovation,
knowledge management, driven model, innovation system
I. INTRODUCTIONService industry has become the main source of
social
wealth. Currently economic development has changed from
product-based economy to service-oriented economy, and
suchstructural changes are brought about by the changes in
thenature of knowledge. The traditional concepts deem that
theservice industry is one of the labor-intensive industries
withlow technological content and lacking innovation. But alongwith
the rise of the knowledge economy and informationtechnology, the
traditional of value chain in service industryare being
reconfigured, and the emerging service industrieswith
knowledge-intensive and high-technology are consideredthe model of
innovation industries
[1]. Service innovation can
not only reduce costs, improve efficiency,
increaseprofitability, but also enhance the overall competitiveness
ofthe service sector.
II. THECONCEPTANDFEATURESOFSERVICEINNOVATION
A. The Concept of Service InnovationOccurred areas of service
innovation have three levels: the
service sector, manufacturing, non-profit public service.
Thusthe concept of service innovation includes two levels of
broadand narrow. In a broad sense, service innovation means
allinnovation behavior and activities related to or aimed at
service; in a narrow sense, it refers to the innovation
behaviorand activities occurred in the service sector
[2].
B. The Features of Service InnovationFirst of all, service
innovation has a rich variety of styles.
Service Innovation not only depends on technologicalinnovation
but also performances through the innovation oforganizational
structure, management mode and awareness.Because of the hidden
nature of these innovation channels andways makes the effectiveness
of service innovation difficult tomeasure. Secondly, service
innovation has a complex process.Service Innovation is more than
from the alternation andcollision between the new and old
experiences, and theresponse of departments and staff to customer
needs, which isan integration process of experience, knowledge and
wisdom.
III. DRIVINGFORCEMODELOFSERVICEINNOVATION
Analyzing driving force of service innovation can help
tosummarize innovation model and innovative system andassociate
with the structure characteristics and the innovation
path of service innovation system. The driving force of
serviceinnovation includes driving force within and outside
theenterprise. The internal driving force includes
enterprisesstrategies and management, staff, innovation sectors and
R&Dsector. The external driving force can be divided into
twotypes: paths and Behavers. Path refers to the common things
incertain sector. As an important external driving force,
itllimpose the impact of enterprise which innovate in the
defined
framework of path. Behavers refer to the external
stakeholders,including customers, suppliers, competitors and the
publicsectors, which are important factors of stimulating
serviceinnovation
[3]. The driven model for service innovation
describes the various internal and external factors
affectinnovation activities in enterprises, which combine together
toreact on the innovation activities. Driving force model ofservice
innovation presented as shown in figure1.
This paper is humanities and social sciences research project of
LiaoningEducation Department (project number: 2008362)
The 1st International Conference on Information Science and
Engineering (ICISE2009)
978-0-7695-3887-7/09/$26.00 2009 IEEE 4424
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Figure 1. The driving force of service innovation
source:Linlei,Wuguisheng.serviceinnovation[M],Tsinghua
university press.
IV.
TOBUILDSERVICEINNOVATIONSYSTEMBASEDONTHETHEORYOFVALUECHAIN
A. Analysis of Value Chain in Service Enterprises1) Analysis of
general value chain
Value chain is a concept which Michael Porter put forwardin his
book "competitive advantage". He described the value
chain as the process of converting raw materials into the
finalproduct, each segment is an integral part of value increase,
andenterprises meet customer needs in order to enhance
thecompetitive advantage by a series of value added processes
[3].
2) Service profit chainBased on Michael Porter's value chain
theory, Heskett and
other scholars have put forth the internal value
chainspecifically aimed at service enterprises, which is also
called
profit chain theory, which elaborated the relations
amongprofits, customers, employees and business, proposed the
linksamong profitability, customer loyalty, employee
satisfactionand productivity. The internal logic is: the growth of
turnoverand profit comes from loyal customers, which is from
customer
satisfaction. Service value provided by the enterprises
decidescustomer satisfaction, and high-quality service is from
thehigher employee satisfaction, which is determined by
variousaspects, including job design, work environment,
incentivemechanism, the selection and training, service tools
andtechnical support. The management model of service profitchain
was shown in figure2.
Figure 2. Service profit chain
Source: (United States) James L. Heskett, W. Earl Sasser, and
Niu Hai-peng,
et al. Service Profit Chain [M]. Beijing: Huaxia Publishing
House.
3) Knowledge value chainKnowledge value chain roots in knowledge
management
theory, which refers to the process that organization absorb
andstore external knowledge as implicit knowledge, and thencreate
explicit knowledge through spread. During the serviceenterprises
knowledge value chain was based on thecomposition of the
organizational structure, corporate culture,information technology
as support platform, run through the
financial sector, marketing, human resources and
otherdepartments, composed by knowledge input, knowledgediffusion,
knowledge output and knowledge creation, whichconstitutes a closed
cycle development knowledge value chain.In the knowledge value
chain, through a series of activities newknowledge can be finally
produced and made value chainvalue-added. Knowledge value chain was
shown in figure3.
Figure 3. Knowledge Value Chain of Corporate
B. Innovation System Construction in Service EnterprisesBased on
Knowledge Value Chain
1) Analysis of knowledge value chain in serviceenterprises
Knowledge input. Knowledge input is the upstreamlink of
knowledge value chain. In this process througha variety of
channels, enterprises obtain access tooutside information, make
explicit knowledgegradually collate into implicit knowledge
ofemployees, and finally become the accumulation ofstaff
experience.
Knowledge activity. Knowledge activity is theintermediate links
of knowledge value chain, whichtransform staff personal experience
into explicitorganization overall knowledge through
knowledgesharing such as teamwork exchange, empowermentand
organizational learning. In this process, explicitknowledge and
implicit knowledge interact to form
innovative service products and personalized service.
Knowledge output. After the above activities, servicecompanies
have formed a stable organizationalknowledge, and can translate the
knowledge intostandardized service products by means of
Internet,information systems to bring economic benefits
toenterprises.
Knowledge innovation. Knowledge innovation is thedownstream link
of knowledge value chain. After thelinks of input,activities and
output, knowledge formed
M a n a g e m e n tt ra jectory
Innovat ion
Interna l fac tors
T echno log i ca lt ra jectory
Systemtrajectory
Profess ionalt ra jectory
S oc i e tyt ra jectory
E xtera l f ac tors
Strategy andm a n a g e m e n t
S taff R & D
C om pe t i t o r
C s t o m e r
S upp l i e r
Publ icS e to r
Employee
productivity
Improvement of
Quality andproductivity
High-
quality and
low-cost
Design anddeliver
services to
meet theneeds of
target
customer
Retainning
customers
Repeat purchase
Customer
recommending
Internalservice
quality
Staff
satisfaction
Staff
RetainningValue ofexternal
service
Customer
satisfactionCustomer
Loyalty
Workplacedesign
Job design
Staff selection
and training
Staff reward
and recognition
Customer
service tool
Income
Increase
Profit-
ability
Knowledge
innovation
Knowledge
inputKnowledge
activity
Knowledge
output
Competitive
advantage
Financedepartment
Marketingdepartment
Humanresources
Informationtechnology
Organizationalstructure
EnterpriseCulture
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customized personalized services through continuousaccumulation,
development and innovation.
2) Impact mechanism of knowledge value chain on
serviceinnovation
From the above analysis we can see the service
enterprisesgenerate knowledge innovation after knowledge
input,knowledge activity and knowledge output. Learning
explicit
knowledge of the service enterprise means to find out demandsof
customer and employee through internet, learn from theadvanced
enterprises, adjust the strategy and improve theorganizational
structure and management methods to achievestaff satisfaction, and
then transform staff satisfaction intohelpful activities through
the sharing and transformation ofinternal knowledge, such as they
are aware of the importanceof their work, willing to provide
high-quality service, and eveninnovate services products and
optimize service processes.Knowledge output refers to show high
quality and convenientservice products to customers to gain
customer satisfactionespecially customer loyalty. The last link
knowledgeinnovation means that customer loyalty brings stability
ofcustomer and have more customers and markets as a result of
formation of great customer publicity and brand. To sum up,the
process of knowledge input, knowledge activities,knowledge output
and knowledge creation has led to a widerange of service
innovation, and staff satisfaction, customersatisfaction, customer
loyalty can be achieved. The impactmechanisms of knowledge value
chain are as shown in figure4.
Figure 4. The Mechanism of Knowledge Value Chain Influence
Service
Innovation
3) Innovation systems construction based on value
chaintheory
From the above analysis we can learn that innovation is
thenecessary means to gain the competitive advantage.
Serviceinnovation not only depends on the concerted efforts of
thevarious departments inside the enterprise, but also needs
thesupport of upstream and downstream links and external
macro-environment. In this paper, construction of service
innovationsystem is based on value chain of service enterprises as
shownin figure 5.
a) Among the three external resources of enterprises,policies,
industries and markets, except that policy belongs to
national macro-control factors, industries and markets can
becontrolled by the cluster and industry reorganization. For
the
enterprises located upstream and downstream links in the
same region and same industry chain, they can improve the
industry competitiveness through cluster. For the same type
of
business in different regions, they can improve service
quality,increase products and form a influential brand by means
of
alliances and association.
Figure 5. The services innovation system based on the value
chain
b) Right strategy is the winning guarantee incompetition, which
originates in the understanding of internal
and external resources. To internal resources, human,
material
and financial resources, and information is the four pillars
of
operations, in which the control of human resources is the
foundation and key. The enterprises need innovation inmanagement
and organizational structure to train and select
talents, at the same time they also need strategy innovation
to
guide the long-term development of business and employees.
c) The enterprises satisfy employees through goodinternal
service. In the circumstances, employees will
initiatively receive innovation strategy, result in the sense
of
innovation, and actively improve service quality and rich
product range to gain customer satisfaction, feedback,
recommendation and repeat purchase, which can not only
increase the profits of enterprises but help to expand and
open
up the market.
d) The enterprises should keep people-orientedmanagement
thoughts, establish an internal service profit
chain by using various forms of innovation to satisfy staffs
and customers and further enhance the competitiveness, at
thesame time, enterprises need to take all various links into
account, in a certain macroeconomic context, enhance the
overall strength of industry through collaboration andcollective
efforts.
V. THEPERFORMANCEEVALUATIONOFSERVICEINNOVATION
A. Performance evaluation indicators of service
innovationStudies have shown that service innovation brings the
benefit on financial index, improving image,
marketing,deversification etc. Service innovation performance
appraisalcan be divided to two aspects: the benefit for product and
the
Customersatisfaction
Staffsatisfaction
Knowledgeinput
Knowledge
activity
Knowledgeactivity
Knowledgeactivity
Knowledgeoutput
Knowledgeinnovation
Knowledgeinnovation
Customerloyalty
Market
Innovation
ConsciousnessInnovation
Quality
Innovation
ProductInnovation
StrategicInnovation
Management
Innovation
OrganizationalInnovation
Clusterinternal
Industry Value Chain
StrategicInnovation
ManagementInnovation
OrganizationalInnovation
Innovative system of
service enterprise
Enterprise external
Clusterinnovation
Clusterexternal
AssociationAlliance
Customersatisfaction
Staffsatisfaction
Customerloyalty
Market
Innovation
onsciousnessInnovation
QualityInnovation
ProductInnovation
Service Profit Chain
Trade organizationinnovation
Enterprise internal
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benefit for enterprise. Performance evaluation index
includes:1)benefit for product: sales, market share on domestic
andinternational, income, profit margins, return on investment.
2)
benefit for enterprise: improving the profits of other
productsand enterprise image, enhancing customer loyalty,
attractingnew customers, developing new product and market
tostrengthen competitiveness.
B. Service innovation ability evaluation Application of theDEA
method
Service innovation system based on value chain is acomplex
system made of various subsystems and with highinput and output.
The utilization of scientific method DataEnvelopment Analysis (DEA)
can well evaluate the
performance of innovation system and analyze from the aspectsof
economy and management according to the evaluationresults to put
forward improvement measures
[6].
DEA is a multi-indexed evaluation method to evaluaterelative
efficiency of each decision making unit (DMU)according to the input
and output data of the same kind ofDMU. This method makes the
evaluation based on the analysisof initial decision data, and
emphasizes integral optimal effectof the evaluation objects to
provide lots of experienceinformation for future decision. It also
can evaluatecomprehensively the relative efficiency of the same
unit whichhas the characteristics of multi-index input and
multi-index
output. Assign the number of DMUn, X denote the
input indicators,Ydenote output indicators, the number of
input types of each DMU ismand output types number is
s. xij0 and yrj0 are used to denote theiinput and the
routput of the j0th DMUjo. The production possibility set
of model DEA is:
( )1 1
, | , 0, 0, 1,2, , (1)n n
j j j j
j j
T x y x x y j j n = =
= =
Model DEA that fits of the production possibility set is
alsocalled Model C
2R, which is a model evaluating total efficiency
of DMU based on input. The Model C2R using
Nonarchimedean Infinitesimal is as below.
( )
( ) ( )
0
0
T- T +
n-
1
n+
1
- +
M in - e S + e S
X + S = X
- S = Y
0, j=1,2 n;
S 0, S 0
e 1,1 1 , 1,1 1
j j j
j
j j j
j
j
TT
m s
Y
E e E
=
=
(2 )
= =
Let be NonArchimedes Infinitesimal, and the optimal
solution of the programming problem be , S-, S+ ,. While=1,S
+=0,S
-=0, DEA is valid. Scale merit refers to whether the
efficiency of input and output in existing scale is valid or
not,
its denoted byn
j 1
( 1, 2, ..., )mj m=
= .
1) If it existsj
(j=1,2,,m) to maken
j 1
1mj=
, then
the scale profit will get decrement;
3) If it existsj
(j=1,2,,m) to maken
j 1
1mj
=
= , then
the scale profit will hold the line.
4) the scale profit will hold the line.If the scale merit is
increment, should increase investment,
If the scale merit is decrement, should reduce investment,
If
the scale merit is unchanged, output is constant.The evaluation
procedure of DEA is as below: a) select
input and output indexes; b) get sample data through
investigation; c) process data and analyze evaluation result
bymeans of DEA. As making the evaluation of service
innovationsystem, in consideration of the procurability and
quantifiabilityof data, the selected input indexes are: the cost
proportion ofR&D, the numbers of researchers, the cost
proportion ofmarketing service and technical support, the
numbers
proportion of marketing staff, the coverage rate of
marketingnetwork. The output indexes are: the profit margin, return
oninvestment ratio, the sales proportion of new products,
thenumbers of new products or proprietary products, the mumbersof
new customers. It hasnt make the evaluation of
qualitativeindicators such as the innovation atmosphere, the sense
ofinnovation, etc.
ACKNOWLEDGMENTThis paper is humanities and social sciences
research
project of Liaoning Education Department (project
number:2008362).
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