Managing service innovation in SMEs – identified barriers and a two-node innovation process

Abstract: The service sector is steadily increasing in the worldwide economy, but still, innovation research mainly focuses on tangible products and systems. The purpose with this thesis is to contribute to the blurry boundary between research on product development and service development, by identifying barriers to manage a service innovation process and specifically how a service innovation process shall be adapted to Small and Medium Enterprises (SMEs) providing Knowledge Intensive Business Services (KIBS).The findings are based on a literature review and a case study on a multinational SME providing services within Project Management. The data collection has been made through interviews, a questionnaire, observations and document analysis. Findings from the empirical study were analyzed using an analytic framework, named the 4-Challenges Model, which was developed based on the literature review performed. Grounded on the conclusions in conjunction with the analytic framework, a new conceptual two-node service innovation process has been created.The 4-Challenges Model presents four interrelated challenges to take on a service innovation process: (1) Service-dominant logic (SDL) and defining service, (2) degree of openness, (3) innovation strategic fit, and (4) service innovation propensity. The empirical study confirms these challenges as barriers for the service innovation and business development for SMEs with KIBS. The case study highlights barriers in a transparent, coherent, selective and consistent internal communication derived from a vague vision. The conceptual two-node service innovation process is to help SMEs to develop a structured business with best-practices on all levels, ensuring implementation and commitments, as well as develop leadership for a continuous monitoring and managing of service innovation. The process is made simple to reduce complexity. It consists of two nodes and a core gate. The nodes are open systems which make the process formable and adaptable to different situations. The gate is to maintain structure and to have a stable approach linked to the core business.