Who takes ownership of Service Innovation?

One of the common challenges we face in my workshops is “Who takes ownership of Service Innovation”?  My initial template answer would be “It depends”.  Why?  Because every industry has its own structure, ecosystem participants, consumer behavior, government regulation on contestable and non-contestable parts of the value chain etc. We really need to understand the dynamics before prescribing a formula. Let me see if I can exemplify this complexity with my recent experience.

Recently I attended a “Smarter Cities” Roundtable hosted by IBM.  IBM’s “Smarter Planet” theme’s underlying tenet is “Service Innovation”.  Basically it is all about empowering consumers with valuable experiences be it be with utilities like (electricity, gas, water, refuse removal), health, education or transport services.

IBM’s Smarter Building theme focuses on offering sustainable and green experiences to consumers.  We can divide the building industry value chain into 2 main parts: 

- Pre-Build

- Post Build.

The pre-build value chain consists AECMEP community of Architects, Structural Engineers, Consultants, Mechanical Engineers, Electricians, and Plumbers and of course all material vendors and relevant regulatory agencies like BCA.  In the round-table, all these participants were very eager to architect, design and develop green and sustainable properties.  In fact they demonstrated savings of up to SGD 2 Million in some of their developments. To me they are quiet ahead of the curve in fulfilling their  “Green” mission.

But the issue is what happens in the post-build stage? Who is responsible for “Green Operation” on day to day basis?  Is it the owners, facility operators or utility retailers?

I think we need to segment the market into 3 categories as each may require different approaches.

1. Commercial Properties  (large factories, offices, shopping centers, food courts
2. Public Places   (Airports, Schools hospitals etc)
3. Residential units

The reason I tend to split is because each of these categories require different diversity and intensity of “Smarter Building” services. For eg: surveillance may not be so desired in homes compared to airports where security is very important. Similarly air quality services may be more important to hospitals compared to homes or public places.

For the commercial property category, the onus of offering “Smarter Building Services”  should  probably come from the owners themselves or their facility managers.  The facility managers should see such services as their key competitive advantage to attract and retain their tenants at competitive prices and other innovative service offerings that complements just the physical space. I would even recommend that an owner who owns a set of large commercial properties demonstrate strategic leadership by implementing   “Smarter Building Service Platform” that instruments, interconnects and creates substantial intelligence for the whole eco-system and facilitates collective competition. Please refer to my earlier posts on definition of “Platform”

Since some public places are owned by government and some by private entities, the strategy could largely be as discussed for category 1.

As residential segment is very sensitive to higher prices due to “Smarter Building” service additives, the issue may largely be dependent on government policy on how they want to tune it for public and private housing.  Most governments (including Singapore government) are in the process of de-regulating and liberalizing this segment making “Utility Retailing” a contestable business along with power generation as well. The transmission and distribution part of the value chain will remain as “Natural Monopoly” as it makes perfect economic sense.  Remember all types of utility businesses (including telecoms) were “Natural Monopolies” not too long ago but this is changing very fast and this creates opportunities for the private sector.

I believe “Utility Retailers” will then find “Smarter Building” service innovation offering as a great competitive offering to add to their portfolio.