Open innovation practices applied to service innovation : a study of the Norwegian service sector

Abstract

Open Innovation (OI) has become one of the most predominant topics in innovation management. However, most literature has evolved around the effects and best practices for product manufacturers. Nevertheless, service industries represent 60-70 percent of GDP in most western countries. Therefore, this thesis is motivated by a desire to see how the practices of OI apply to this largely overlooked industry. The OI concept involves going beyond company borders to include external inflows as well as internal outflows, but also involves opening a company’s business model to facilitate these flows. Firstly, the thesis examines the existing academic literature on the topic. Thereafter, it analyzes the theoretical fit between OI practices and service innovation, before studying whether OI practices are applicable to service innovation in the six Norwegian case studies. The findings show that theoretically OI is a valuable concept in service innovation, due to the similarity of OI and service innovation practices. However, the empirical findings indicate that OI practices within five of the companies are limited to external inflows, whereas the sixth company that provides knowledge intensive services is limited to internal outflows. The discoveries indicate that the incentives for internal outflows are not obvious for management, and therefore this affects their likelihood of adapting an open business model. Investments in OI management skills are absent in all firms, resulting in the lack of acknowledgement towards the importance of having a holistic perspective on innovation efforts. This is important because open innovation will ultimately increase profit through alternative revenue streams. However, the study shows that the lack of tradable intellectual property might inhibit the outbound innovation processes in service firms. This emphasizes the importance of creating more heterogenic service experiences for customer’s instead of standardized, which are easier to imitate. To excel in open innovation, companies need to find their point of differentiation, which will serve as their “protection mechanism”. The thesis suggest that when a company has found their leverage point, they will no longer be characterized by their fear of sharing new ideas, risk aversion, change reluctance and dread of failure. The security of their leverage point will enable them to out-innovate their competitors. Due to the unexplored nature of the concept, the study appeals for future research in the field of open service innovation.