Innovation as the core competency of a service organisation: the role of technology, knowledge and networks

Abstract

Services lie at the very hub of the economic activity of all societies, and interlink closely with all other sectors of the economy. The exponential growth of services internationally has not only intensified competition, but has also simultaneously posed a challenge and an opportunity for the managers of services. This study examines the factors underlying the growth of services, and emerging views on what constitutes a “resource” for service organisations. To this end, the roles of technology, knowledge and networks are examined as interdependent factors. It is argued here that today’s “resources” are the culmination of various advances in knowledge. Technology facilitates the maintenance of networks with customers and partners inside and outside the firm. The network of relationships renders the firm’s capabilities “amorphous” in nature. This study suggests that this amorphous knowledge represents the true “resource” in a service firm, and ultimately provides the creative potential for “innovation” – the so‐called “core competency”. However, innovation per se does not benefit the firm unless it manifests superior value in the customer‐driven marketplace. Moreover, this study argues that service innovation results only when a firm is able to focus its entire energies to think on behalf of the customer.