The Role of Knowledge Management Strategies and Task Knowledge in Stimulating Service Innovation

Service firms have invested considerable sums in knowledge management strategies, purchasing and implementing systems offered by such companies as Microsoft, SAP, and Sopheon. Some of these systems are designed to aid service innovation through documenting past and current new service development (NSD) initiatives. Other systems emphasise and enhance personal interaction and teamwork during NSD. A pending question is whether the strategy employed matters in improving a service firm's NSD performance and enables a sustainable competitive advantage (SCA). Might a particular knowledge management strategy manifested through a system vary (or not vary) with regards to NSD proficiency and NSD innovativeness, and in turn, have varying impact on the firm's SCA?

The present research addresses these questions and provides insight into the NSD performance outcomes afforded by the two knowledge management strategies called codification and personalisation (Hansen, Nohria and Tierney 1999). Codification is a strategy where knowledge is formally documented and archived, whereas personalisation is a strategy that emphasises personal reflection and interaction. If each strategy affords similar NSD performance outcomes, managers can choose between the two strategies. However, if each strategy has unique NSD performance outcomes, then managers need to carefully implement their knowledge management strategies with an eye towards what type of NSD performance outcome is being sought. Indeed, both knowledge management strategies may be needed.

This issue is particularly important for service firms which face special challenges in capturing knowledge for innovation due to their intangible and inseparable nature (Dougherty 2004). The output of a NSD effort is the service delivery process rather than the service itself (Edvardsson and Olsson 1996), and in many instances the precise service is customized and augmented at the point of delivery. Accordingly, innovation in services needs to be distributed throughout the organisation (Lyons, Chatman and Caneel 2007), and downstream functions such as operations and customer service need to be involved early in the development process for the effective implementation and delivery of new services. As the interdependence among functional units increases, the volume of knowledge sharing needs to increase (De Luca and Atuahene-Gima 2007). Therefore, the relative importance of strategies to collate and integrate knowledge is likely to be higher in NSD contexts.

The paper begins with a discussion of knowledge management strategies, their proposed relationships with NSD task knowledge, NSD performance outcomes, and the firm performance outcome of SCA. Empirical results from a study involving 121 service companies are then presented. We conclude with study implications for managers and researchers.

This research endeavours to improve understanding of how operant resources can drive a SCA. We find that a firm's existing stock of knowledge does not alone lead to a SCA per se, but would appear to promote a SCA alongside more proficient execution of service innovation activities and a perceived positional advantage of innovativeness in the marketplace. Building on the knowledge-based theory of the firm, the study demonstrates the importance of managing knowledge as both a stock and process, and how these working in conjunction with each other can improve organisational performance. For managers, understanding the performance outcomes from different knowledge strategies is invaluable for decisions pertaining to investments by service organisations in NSD knowledge management systems and service innovation processes.

The full working paper can be downloaded at the link below.