Emerging Trends in New Service Development: Case of Indian Software Industry
Loading ...This research paper(Emerging trends) has looked at various drivers of innovation, External and Internal, to the organization. It has looked at Customer needs and Changes in the Environment as the External drivers of innovation and Market Orientation of the organization, Strategy Plan of the organization, Organization resources, path-dependencies etc. as the Internal drivers of innovation. It has evaluated these drivers of innovation from a perspective of their relevance to the services. This study has looked at drivers that have become dominant in today’s business world. It has found “External” drivers i.e. Customer needs and Changes in the environment, as more dominant than internal drivers in case of services.
Organizations are increasingly focusing on their ‘Core competence’ and attempting to create value by focusing on their core processes and outsourcing their non-core processes. Services related to non-core processes are being outsourced. Therefore new services are being designed to fulfill client’s non-core process needs.
Past two decades have seen rapid changes in the protectionist policies of the countries. It has made the cross-border movement of goods and services easy. This made the raw-materials (bundle of competence in case of services) of various countries available to the organizations. Service producer makes a bundle of competence available to the customer at their disposal which is used by client organizations according to their inputs.
Globalization has increased the availability of ‘bundle of competence’ by making many more countries accessible. Bundles of competence in developing countries cost less. Cost advantage is the trigger for Outsourcing (Coe, 2000). Globalization has given outsourcing an impetus by reducing the cost of ‘bundles of skills’.
The study has identified globalization as a major factor that has given fillip to the outsourcing of services. It hypothesizes that new service design is being driven by –
1. Identification and separation of non-core processes from core processes and outsourcing of their non core-processes
2. Globalization.
It has verified the proposed hypotheses about the drivers and trends of new service design by looking at the dynamics of the service industry. Mehra(1994) has given a model which predicts the industry dynamics based on the complexity of resource mix and competitive differentiation. Model described by Mehra(1994) predicts that industry having firms that are low on competitive differentiation and having complex resource mix (service industry) will venture into other industries to leverage their complex resource mix. Service industry being skill intensive are high on the scale of ‘complexity of resource mix’. In a globalizing world service firms in different countries will find many new bundles of resources that can be made available to the client organization to help them in their objective of outsourcing their non-core processes. New service development in these firms will be focused on seeking these new ‘bundles of competence’.
The study has tried to explain the trend of innovation in the Indian software service industry, which is a service industry, using the proposed model of innovation in services.
Post contributed by Rakesh Ranjan Mishra
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Comments
Very revealing. I would like to discuss more the topic of ‘Intellectual arbitrage’ as the driver of innovation. Cost arbitrage is well understood by now. However Intellectual arbitrage is less discussed phenomena and probably less understood as well. I feel
Cost arbitrage = Same skill different cost
Intellectual Arbitrage = Same cost different Intellectual ability?
Please correct me if i have failed to understand.
Questions that comes to my mind is –
1. What is Intellectual arbitrage?
2. How is it different from cost arbitrage ?
3. Can we sustain Intellectual arbitrage ? etc.
Would love to discuss it with you.
My email address – rakeshr@email.iimcal.ac.in
Cost arbitrage is becoming mundane and Intellectual arbitrage is proving to be the competitive edge. Besides, the link between a specific skill and a social setup is disappearing. In other words, as the global boundaries are disappearing, any skillset from any region can be tapped and managed as one or multiple channel of services. Those who can tap these resource-pockets around the globe and collectively present it with a unified face will be the winners.