Innovation in Knowledge Intensive Business Services

This article talks about the various aspects that Knowledge Intensive Business Services (KIBS) firms needs to consider to formulate their innovation strategy.

Knowledge-Intensive Business Services (KIBS) are those services in which the core offering to the client or customer is heavily reliant on knowledge specific to a particular domain. KIBS have adopted innovation to enhance their offering and create a sustainable competitive advantage. Innovation, for KIBS, involves providing new, efficient, and a more optimized solution to the clients, consequently this also impacts the employment prospect for the employees in the client firms and the KIBS firms.

As per The Community Innovation Survey (CIS), Innovation is of four types: Product, Process, Marketing and Organizational. KIBS, like any other sectors, adopted more than one innovation type at a given time. The level of a particular kind of innovation varies among organisations, and this level depends on the life-cycle stage of the firm, risk appetite and exposure, the region of operation (developed or developing economy), etc. KIBS have adopted a majority of the innovations, but the intensity depends on the sector of operation.

Service characteristics that influence the way innovations and the innovation process are dealt with, and which may initiate a service-specific innovation dynamism

The Human Factor

Organizational innovations are mostly carried by human factors. The human capital is a significant asset for the KIBS; hence, driving an organisational innovation requires high-level involvement by the employees.

Area of innovation

While technology is the primary innovation method which is R&D focused, but this is an outdated analogy. R&D is a significant contributor to innovation for manufacturing, but for KIBS, there is a deviation from R&D focused innovation. There needs to be innovation in sales & marketing and other areas as well. This is backed by the fact that KIBS have less R&D expenditure.

Innovation output typologies

Since innovation in KIBS is less R&D focused; it has little proprietary rights over it; hence it can be copied easily. To sustain the competitive advantage, KIBS needs to adopt a continuous innovation strategy; this, in turn, results in some radical innovation outcomes.

Intangibility

The outcome of a service offering is not immediately observable because they are mostly intangible; hence it is difficult to explain to the customer the quality and value of the offerings. This lag in noticeable outcome hinders the protection of the services offered by the KIBS. This lack of acknowledgement reduces the incentives for innovation.

Customer integration

The reputation of a KIBS depends significantly on the client (customer) relationships; therefore, the integration of clients with the processes of the KIBS is essential. The customers are integrated through the simultaneous production and consumption of the service. Thus, there is a need to take inputs from the customers on innovation strategies.

Regulatory issues

The KIBS place utmost emphasis on the regulations and laws they are subjected to. With frequent changes in the rules, there needs to be a dynamic innovation strategy, which ensures compliance with all the laws.

There is no single equation that takes into consideration all the above elements, and the elements themselves may not be an exhaustive list. Hence, to carry out an innovation process, KIBS needs to focus on a concept (a chart, or a dependency diagram) that includes all the factors and captures the heterogeneity that comes along with all the factors put together. Sensitivity analysis for all the factors (as a pair or as a group) must be done to realise the impact of innovation and make changes in the factor input when the outcomes are not acceptable.

References

(Hipp & Grupp, 2005), Link

Miles, I. D., Belousova, V., & Chichkanov, N. (2019), Link