Int. J. Technology Marketing, Vol. 7, No.

2, 2012 99

Service innovation: the challenge of management in

hypercompetitive markets

Sandro Battisti
Department of Management, Economics and Industrial Engineering,
Politecnico di Milano,
Piazza Leonardo da Vinci, 32, 20133, Milan, Italy
Fax: +39-02-2399-2720
E-mail: [Link]@[Link]

Abstract: Service innovation based on high technology is one of the most

challenging subjects in management research, and hypercompetitive markets
seem to be the right empirical field for theory building. The development of
new services and the organisational networks could be designed by enabling
service diffusion in hypercompetitive markets. The emerging research question
is: how do companies integrate concepts of organisational networks, of
technology diffusion and of competitive advantage for developing and
managing service innovation in hypercompetitive markets? The proposed
methodology combines a case study research and a clinical inquiry research.
The main finding is the presentation of a model for service innovation
management in hypercompetitive markets. It suggests that companies must be
able to develop flexible routines to adapt their processes in order to design
services for hypercompetitive markets. Companies that organise structures
enabling to overcome constrains for technology diffusion could increase the
innovation success rate within these markets.

Keywords: service innovation; collaborative innovation; new service

development; organisational networks; technology diffusion; competitive
advantage; environmental turbulence; vehicle security; emerging markets;
hypercompetitive markets.

Reference to this paper should be made as follows: Battisti, S. (2012) Service

innovation: the challenge of management in hypercompetitive markets, Int. J.
Technology Marketing, Vol. 7, No. 2, pp.99118.

Biographical notes: Sandro Battisti is a PhD candidate in Management,

Economics and Industrial Engineering at Politecnico di Milano. His thesis is
related to innovation management and new service development based on
information and communication technologies. His research interests are centred
on technology and innovation management, with a particular focus on
innovation strategy; service innovation; open innovation; technology diffusion
and entrepreneurship. He holds an MBA from the IBGEN and Bachelors in
Electronic Engineering from the PUCRS, both in Brazil. He has ten years of
experience in management of telecommunication services in Brazil.

This paper is a revised and expanded version of a paper entitled Service

innovation: the challenge of management in hypercompetitive markets
presented at The XXII ISPIM Conference Sustainability in Innovation:
Innovation Management Challenges, Hamburg, Germany, 1215 June 2011.

Copyright 2012 Inderscience Enterprises Ltd.

100 S. Battisti

1 Introduction

Service innovation management in hypercompetitive markets is a new challenge for both

academia and practitioners. Hoskisson et al. (2000) argue that analysing emerging
markets using resource-based theory could be a central question and states that little
research has been carried out in this direction. Supporting the understanding of emerging
markets, Arnold and Quelch (1998) suggest that an emerging economy exists where there
is rapid economic development and government policies that enable adoption of a
free-market system. A recent study about hypercompetitive markets in Latin America
carried out by Hermelo and Vassolo (2010) found a lack of specific literature on the
hypercompetition phenomenon. They argue that competitive advantage is becoming less
sustainable in emerging markets and suggest that firms could design resource-based
strategies. From this perspective, the present research suggests that emerging markets
could be considered as hypercompetitive environments.
In hypercompetitive markets, the competitive advantage of companies through user
involvement in the process of new service development is imperative to obtain innovation
acceptance by the market. From the literature of technology management, one important
factor for competitive advantage is to have the innovation as dominant design in the
target market. The adoption of a technological dominant design by the market is a
growing challenge to be managed by the companies that compete under market
conditions of fast-changing, as argued by Christensen et al. (1998). In the same way, the
reconfiguration of companies dynamic capabilities in real-time is also important for
competitive advantage. In this sense, companies with a strategy based on construction of
strong dynamic capabilities are intensely entrepreneurial and they shape the business
ecosystem through innovation management, as argued by Teece (2007). Additionally,
Tushman et al. (2010) argue that these capabilities are results from actions of senior
managers to improve the learning capacity of companies, aiming at the reconfiguration
and transformation of their internal process in face of new markets. Greve (2009)
suggests that investigation of the speed and selectivity of innovation diffusion will be a
valuable addition to the field of strategy, and Gulati et al. (2000) argue that using a
network of companies to manage resources is also important and could be considered a
unique structural pattern to competitive advantage.
Exploring the service innovation literature, Miles (2000) argues about the need for
better understanding the interaction between actors in the process of service innovation.
Tidd and Hull (2003) argue about the importance of research of new structures for service
innovation and successful performance in a market. In the same way, the success of high
technology innovations could be analysed in a decision-making perspective where the
configuration of a network structure seems to be crucial for hypercompetition, as
presented by van Riel et al. (2004). Additionally, service innovation in hypercompetitive
markets could be developed through organisational network of companies, especially in
high-tech markets, as suggests Battisti (2009).
Recent studies focused on new service development (e.g., MacCormack and Verganti,
2003; Calantone et al., 2003; Verganti and Buganza, 2005; Buganza et al., 2009) suggest
that environmental turbulence of certain markets could force companies to develop
processes and organise resources in order to obtain flexibility. Additionally, Dolfsma
(2004) states that the innovation process in the service companies is little studied,
especially regarding the benefits of the formalisation of new service development
processes. Ettlie and Rosenthal (2011) argue that little research has appeared in this field,
 Service innovation 101

and support the importance of using customers as a source for successful new ideas. In
this sense, Schleimer and Shulman (2011) suggest that little is known about how
networks of companies are structured and how to make them collaborate in the
development of new services in a more volatile environment.
From the current understanding of service innovation management, the research
question is: how do companies integrate concepts of organisational networks, of
technology diffusion and of competitive advantage for developing and managing service
innovation in hypercompetitive markets? The paper is organised in five sections as
follows: Section 2 explores the phenomenon of hypercompetitive markets and develops
the theoretical framework; Section 3 describes the methodology for the empirical
investigation; Section 4 presents the data analysis and empirical evidences; Section 5
presents the results and the model for management service innovation in
hypercompetitive markets and finally, Section 6 presents the discussions and conclusions.

2 Theoretical framework

For understanding the phenomenon of hypercompetitive markets, DAveni (1994) and

Volberda (1996) suggest that successful companies must organise strategies for introduce
continuous environmental changes and at the same time develop strategies to learn from
the continuous changes provided by other competitors. From this perspective,
hypercompetitive markets could be considered as environments that force companies to
move more quickly than competitors. These markets could also force strategy changes in
terms of organisational structure for keeping the competitive advantage. The
hypercompetition phenomena is reshaping the competitive landscape worldwide, as
suggested by Ilinitch et al. (1996), especially in emerging markets with highly uncertain
environments and global players.
The equilibrium of hypercompetitive environments depends on continuous changes
and is directly related to the unpredictable behaviour of certain players, as argued by
Anderson (1999). In this sense, companies that are faster than competitors in
decision-making and in learning from environmental changes could obtain higher
competitive advantage. In hypercompetitive markets innovations could be unforeseen to
consumers, and generally managers must anticipate demands before clients need them, as
suggested by Bogner and Barr (2000). In this sense, the integration of the literature on
organisational networks, on technology diffusion and on organisational strategy, could be
a right way to analyse the presented phenomenon. This multidisciplinary perspective is
presented as following and aims at developing a model of support in understanding of the
management of the challenges of service innovation in hypercompetitive markets.

2.1 Organisational networks and technology innovation

The new service development based on high technology innovations is passing from an
individual to a collective process, especially where hypercompetition circumstances force
companies to create partnerships networks for innovation management. In this context,
Dodgson et al. (2008) argue that innovations in networks are a useful way to arrange
companies in order to manage technology based on the complexity to integrate this
technology in the network. As suggested by Rothwell (1992) and Lavie (2007), the focus
102 S. Battisti

is carried through networks of companies based on several different forms of alliances,

constructing relationship with customers, suppliers, and many other partners. Brass et al.
(2004) suggest that actors are embedded within networks to obtain opportunities and
overcome constrains, considering that actors are nodes formed by organisations and ties
represents the relationship between the nodes. In this sense, Gulati (1999) argues that
network resources accessed by each company could be directly related to their company
performance.
Collaborative networks allow companies to develop, to keep and to manage service
innovation, as argued by Pisano and Verganti (2008). In this sense, Rothwell (1992) and
Dodgson et al. (2002) describe innovation as a process of accumulation of know-how
through learning from inside and outside of the company using innovative ways.
Considering that networks must learn to improve their structures, Zaheer and Bell (2005)
argue that if networks are better positioned to exploit internal resources then managers
could focus their attention on building companies internal capabilities for competitive
advantage. Chiaroni et al. (2008) argue that a critical factor in the service innovation
success is the effective exchange of knowledge between organisations, especially in
technical and scientific services companies. In this sense, top managers must have the
ability to structure their networks to identify and exploit new knowledge.
In the context of hypercompetitive environments, the creation of a virtuous circle of
integrated networks enables higher rate of innovations success. In this sense, Gulati
et al. (2000), Brass et al. (2004) and Smart et al. (2007) argue that the organisational
networks configuration could be used to access learning and know-how to improve the
innovations capacity and performance. Considering that changes are based on constant
discontinuity of technologies, Tidd et al. (2005) suggest that complex and uncertain
environments affect the innovations management and performance. In this complex
interaction with the environment, von Hippel (2007) and Bilgram et al. (2008) suggest
that users must be part of the network for enabling companies of understand the real
needs, and suggests that a horizontal innovation network of users could be a tool for
perception of the direct benefits from innovations. In the same way, Goduscheit (2009)
argues about the importance of involving customers in the organisational network.
Additionally, Chiesa et al. (2004) argue that a critical point is to maintain and sustain an
external network of competences, because this network must be interconnected with their
customers.
In order to develop a better competitive performance, networks must have a company
leader acting as a kind of catalyst hub of knowledge and coordination. In this sense,
Dhanaraj and Parhe (2006), and Karttinen et al. (2008) argue about the important role of
hub companies and also multi-hub intermediate companies for the network success. This
kind of companies is crucial in enable competitive advantage, because posses high ability
of pulling together the dispersed resources of the network members to enhance the
innovation success. They also suggest that the entrepreneurial approach of the hub firm
into the network is very important for competitive advantage. In the same way, Lavie
(2007) argues that dominant partners can facilitate joint value creation while an excessive
appropriation of that value could affect each firms individual performance, and Gulati
et al. (2009) argue that competitive advantage derives from identifying the contingent
role of partnering experience.
Based on the previous literature that describes an overview about networks, a set of
attributes is suggested to the empirical analysis, as presented in Table 1.
 Service innovation 103

Table 1 Network attributes

Attributes The suggested description Main references

1 Collaborative Companies are organised in networks for Brass et al. (2004),
innovation obtaining opportunities and overcome constrains Lavie (2007)
2 Learning from Users participate as part of the network to help Gulati et al. (2000),
users companies to enhance service innovation von Hippel (2007)
3 Learning from Managers enhance ability to exploit and explore Rothwell (1992),
managers new knowledge in the network of companies Zaheer and Bell
(2005)
4 Structure Networks are designed for enabling access to Pisano and Verganti
design external know-how for innovation management (2008), Chiesa et al.
(2004)
5 Structure The most influential company of the network Dhanaraj and Parhe
coordination must be the hub to manage the innovation process (2006), Lavie (2007)

2.2 Technological diffusion and early adoption

The diffusion of innovative services based on high technology in hypercompetitive
environments could be considered as an important field of study. In this sense, Geroski
(2000) argues about the importance and the vast literature on technology diffusion. The
development of diffusion of service innovation in these markets is not explored. From
this perspective, Tidd (2010) presents that companies could obtain success in the
technology diffusion if their innovations are translated into social and economic benefits
in a certain social system.
The innovation success depends on the understanding of the service innovation by the
market, as argues Tidd (2010). In the same way, Zahra and Nielsen (2002) suggest that
the internal and external resources of company significantly influence the technologys
commercialisation. In this sense, Rogers (2003) suggests that diffusion is the process
where an innovation is communicated through certain channels, in a specific time
between members of a society. Diffusion is a special type of communication where
messages are related to new ideas and concepts. In this sense, Gibbons (2004) suggests
that local aspects of networks design impact on the speed of its diffusion. Greve (2009)
argues that uncertainty about the value of innovation is an important reason for its
selective diffusion. He also suggests that firms can obtain competitive advantage by
being early adopters of the innovation inside the network. Also important for
determination of market success is the integration of early adopters inside the network, as
argued by Chiesa and Frattini (2011) in their recent study about technology innovations.
In the process of organising resources for technological diffusion is imperative for
companies the understanding of the particularities of hypercompetitive markets. From
this perspective, Verganti (2008) suggests that companies could develop deeper
understanding of user needs applying the concepts of design thinking, an approach
defined by him as design-driven innovation. This approach enable companies to interpret
the context of the social systems, and in this sense the companies can anticipate radical
changes in meanings of the service innovation that will be commercialised in
hypercompetitive markets. Additionally, Verganti (2011) states that companies that use
design thinking are more propensity to have their innovation diffusion in the market. It is
occurring because the high levels of intuitiveness provided by the costumers through the
104 S. Battisti

exploration and sharing the innovation in an interconnected way. In this sense,

Chakravorti (2004) argues that managers need to develop new alternative ways to diffuse
innovations into the markets, especially through the understanding of the nature of
market resistance for new ideas. It mainly could occur when competitors are closely
interconnected with users, as suggested by Attewell (1992).
For developing structures to be interconnected with users, Rogers (2003) argues about
the importance of understanding the nature of the communication channel. He argues
that these channels are processes where actors create and share information to reach a
reciprocal agreement and is a way in which new ideas are passed from person to person
aim to achieve high rates of diffusion. Rogers (2003) also states that communication
channels can be massive or interpersonal. The former is more effective in spreading the
general idea in the market and the latter is more effective in the decision of market
adoption. Chanda and Bardhan (2008) argue that companies could develop decision-
making processes based on competitive marketing variables. These variables could help
on the prediction of the new service adoption process, especially in technology industries,
as suggested by Norton and Bass (1987). Regarding to the adoption of service innovation,
Ratten (2009) argues that companies could take into account the frequency of the
environmental changes because it could affect the intention of costumers for innovations
acquisition.
Based on the previous literature that describes an overview about diffusion, a set of
attributes is suggested to the empirical analysis, as presented in Table 2.
Table 2 Diffusion attributes

Attributes The suggested description Main references

1 Market The users perception about the innovation as Rogers (2003),
understanding the best solution for solving problems Verganti (2008)
2 Market The users perception about the consistency Zahra and Nielsen
compatibility between the companies proposal and real (2002), Greve (2009)
needs
3 Market The results of the innovation are visible, Chakravorti (2004),
interconnection intuitive and interconnected in technology Verganti (2011)
markets
4 Innovation The users perception about the difficulty of Rogers (2003), Tidd
complexity understanding and use the innovation (2010)
5 Innovation The innovation may be experimented in a Rogers (2003), Chiesa
trialability limited basis enabling early adoption and Frattini (2011)

2.3 Organisational strategy and competitive advantage

The development of strategies for innovation management under highly uncertain and
rapidly changing environment has an important role, in acting as the key element for
emerging perspectives (Bessant et al., 2005). In this sense, the ability to recognise
external information, and actualise new products based on the specific clients needs is
presented by Cohen and Levinthal (1990) as absorptive capacity, and by Zahra and
George (2002) that this capacity could be divided in two types, where potential capacity
comprises knowledge acquisition and assimilation capabilities, and realised capacity
 Service innovation 105

centres on knowledge transformation and exploitation. In this sense, companies have to

develop core skills to guarantee a positive path-dependency for competitive advantage.
As Barney (2001) suggests, resource-based theories can be used to evaluate the
competitive potential for the companies strategy.
Strategic decision-making is associated with extensive use of real-time information,
as argued by Eisenhardt (1989b), where top managers seeking to review information to
develop the right routines to respond rapidly in front of pressing situations. The main
factor of competitive advantage, as suggested by Teece et al. (1997), is dynamic
capabilities: the capacity to renew competences when time-to-market is critical and the
role of strategic management in configuring internal and external resources. In this sense,
Zhang (2009) argues that absorptive capacity is a dynamic capability for obtaining
benefits of learning and generating market intelligence. Taking into consideration a
strategic marketing positioning, Winter (2003) argues that strategic innovation is not a
particular and repetitious routine, but is a real-time response to novel challenges from the
environment. In this sense, Eisenhardt and Martin (2000) suggest that the dynamic
capabilities represent a set of specific and identifiable processes such as product
development, strategic decision-making and alliances. They also argue that in
high velocity markets capabilities are considered as consistent simple rules for real-time
knowledge creation.
Based on the managers perspective, Tushman et al. (2010) suggest that dynamic
capability is the ability of a company to reconfigure assets and existing capabilities.
Additionally, Brown and Eisenhardt (1997) argue that continuously changing
organisations are likely to be complex adaptive systems with semi structures based on
sequenced steps, aiming to grow over time. In this sense, Boer and Gertsen (2003) argue
that continuous innovation is the ability to combine operational effectiveness and
strategic flexibility. Tushman et al. (2010) argue that the ability of senior managers to
seize opportunities through the orchestration of assets to overcome inertia and path
dependencies is the core of dynamic capabilities.
For successful innovation strategy, Brown and Eisenhardt (1997) argue that managers
can improvise current projects by combining responsibilities with communication
and freedom. In this way, Teece (2007) suggests that entrepreneurial managers are
responsible for maintaining dynamic capabilities, through sensing and transformation of
them for competitive advantage. Additionally, Smith and Tushman (2005) argue that the
performance of the organisation depends on top management effectiveness in exploring
and exploiting of resources in an appropriate way. Zollo and Winter (2002) argue that
dynamic capabilities are shaped by learning mechanisms of knowledge codification as
systematic patterns of organisational activities for generation and adaptation of operating
routines.
From the emerging markets context, Ethiraj et al. (2005) suggest that dynamic
capabilities are a useful way to understand performance differentials between companies
and suggest that capabilities are context-specific and it is necessary to conceptualise and
study them accordingly the environment. Ambrosini and Bowman (2009) argue that
dynamic capabilities are processes that impacts upon resources and evolved through time
as a quite stable phenomenon that includes coordination and integration, learning and
reconfiguration.
Based on the previous literature that describes an overview about strategy, a set of
attributes is suggested to the empirical analysis, as presented in Table 3.
106 S. Battisti

Table 3 Strategy attributes

Attributes The suggested description Main references

1 Absorptive Companies ability to update service Cohen and Levinthal
capacity innovation based on the user-needs (1990), Zahra and George
(2002)
2 Decision-making Managers ability to develop routines Smith and Tushman (2005),
for respond rapidly in pressing Eisenhardt and Martin
situations (2000)
3 Resource Companies ability to develop processes Teece et al., (1997),
recombination to recombine dynamic capabilities Tushman et al., (2010)
4 Competitive Managers ability to act for sensing and Brown and Eisenhardt
advantage transforming of dynamic capabilities (1997), Teece (2007)
5 Context Companies ability to recognise, to act Zollo and Winter (2002),
specificity and to learn in hypercompetitive Ethiraj et al., (2005)
markets

3 Methodology

This research is exploratory and based on the empirical field of vehicle security services
in Brazil. In this context, the eight main competitors were analysed through secondary
data. The Uniconn Group (now defined the network) is the unity of analysis for the
in-depth study. The proposed research methodology combines a case study research from
September 2005 to February 2007 and a clinical inquiry research from February 2007 to
February 2009, as presented in Table 4. This methodology could be the most appropriate
when aiming at theory building and achievement of necessities of both academics and
managers alike.
Table 4 Set of research activities

Research activities Timeline

1 Preliminary market analysis: understanding the innovation September/05October/05
2 Deep market analysis: understanding competitors October/05April/06
3 Secondary data-collection: preparing questions for interviews May/06August/06
4 Interviews: six in-depth interviews of around two hours each September/06February/07
5 Companies asking help for massive innovation diffusion February/07-March/07
6 Acting by intervening on meetings to problem solving March/07December/07
7 Acting by analysing companies performance in the market December/07January/08
8 Acting in real-time because of hypercompetitive changes January/08February/08
9 Acting in problem solving and methodology fit February/08February/09

At the case study research stage: building a theory from case study research is iterative,
where the process itself involves continuous iteration backward and forward between
steps, as argues Eisenhardt (1989a). Flyvbjerg (2006) argues that good social science is
problem driven and not methodology driven, in the sense that it employs those methods
for a given problem, which best helps to answer the research question. He also suggests
that case study is a necessary and sufficient method for certain important research tasks.
 Service innovation 107

From Yin (2009), and Eisenhardt and Graebner (2007), a single case study can enable the
creation of emerging theories, because in single cases the researcher can apply their
theory exactly to the particular case and as whole inductive research is a good tool to
develop, measure, and create propositions. In this sense, the main reason to choose this
empirical field is the innovativeness and the high velocity environment changes. In the
research process, the researcher went to the empirical field to obtain the multiple
evidences from the network. The analysis of the main documents (technical manuals,
websites and yearbooks) and the portfolio of products of the three companies were
carried out. Direct field observations were carried out visiting mainly the sectors of R&D,
production and marketing. In-depth interviews with the six top managers (two directors
of each company of the Uniconn Group) were carried out.
At the clinical inquiry research stage: the network has needs to solve problems and
ask for a clinical inquiry research. This model makes the research start with the needs of
the client, where the client drives and involves the researcher in the clients issues rather
than involving the client in the researchers issues. This dynamic nature of the
relationship between actors frames the inquiry process through systematic data collection,
as argued by Shani et al. (2004). Schein (2008) suggests that a research approach to
inquiry must be followed by principles that always stay in touch with the customers
reality. Stebbins and Shani (2009) argue that clinical inquiry research if conducted in a
precise way could provide for the researcher a greater access to the organisation and the
possibility to generate theory. In this way, the researcher acts as a process facilitator
helping his customer in real-time actions such as observation, reaction, judgement and
intervention in order to intervene and make a change in solving a specific organisational
problem (Coghlan, 2009). In this context, the researcher participated in the
decision-making meetings. The researcher conducted data gathering between these
formal meetings that occurred weekly and the duration was 3 to 4 hours of discussion on
how to improve the service innovation strategies for diffusion. The researcher presented
the main questions at the beginning of the meeting and acted as a full participant in the
discussion process, stimulating the data collection. The last 12 months of field work
between researcher and the network was dedicated to solving problem and methodology
fit through the analysis of the empirical evidences.
As suggested by Edmonson and McManus (2007), a nascent theory research could be
fit based on a diversity of materials from empirical field to the development of insights
and propositions for further research. In this sense, the combined methodology above
could be the best way to understand this kind of study towards a clear research
contribution for theory and practice.

4 Data analysis

The market of vehicle security services received a large quantity of new product for
vehicle tracking with the arrival of cellular technologies in Brazil in 1995 (Battisti et al.,
2008). At the last stage of the present research, the market had eight main competitors
that were focused on the development and commercialisation of end-to-end solutions for
vehicle security using high technology innovation. The competitors are classified taking
into consideration the secondary data of the research study. Three levels in terms of
develop competitive service process (high, medium and low) are proposed according to
108 S. Battisti

the theoretical framework previous described in Tables 1, 2 and 3. The main competitors
in the Brazilian vehicle security are presented in Table 5.
Table 5 Main competitors

Companies Networks based Diffusion based Strategy based

1 Chipsat Medium Medium Medium
2 Protesat Medium Medium Medium
3 Falconsat Medium Medium Medium
4 Sascar Medium High High
5 Carsystem High High High
6 Lojack High High High
7 Ituran High High High
8 Uniconn group High Low High

The preliminary analysis shows that the network presents low levels of competitive
processes in terms of diffusion attributes. This is the main reason that the present
research was focused to solving emerging problems of the companies. Is also important
describe the formation of the network and the main features of the technological service
solution developed by them.
The network was officially established in early 2005 by three companies of
small-medium size in the southern region of Brazil: Perto, Magaldi and Neoset. The
Perto Company is located in the city of Gravata-RS and is the second biggest
company of bank automation in Brazil with 800 employees. It holds market share about
30% of the Brazilian market for bank automation and is controlled by a holding
known as Group Digicon. The Magaldi Safety Group is located in the city of Porto
Alegre-RS, specialised in safety solutions, sales of weapons and training of shooters. It
holds a database with more than 24,000 students and holds a shooting club with more
than 1,500 active members. The Neoset Engineering Group is located in the city of Porto
Alegre-RS, formed by an engineering team specialised in service innovation solutions
based on mobile communications systems. It operates in the design of new service
development process and in the business strategy for service innovation based on high
technology.
The main objective of the network was to present an innovative service solution
based on mobile technology for vehicle security in the whole Brazilian territory. The
main features of this service innovation are presented in Table 6.
The solution concept was thinking not only to protect a customers car, but also to
keep their personal security. Beyond addressing the social and economic needs of the
population, the service also allows customers to have a new opportunity to save
money, considering the high costs of private insurance in Brazil. Aiming to provide for
the populations social and economic needs, the network provides the highest
innovative service standards. In order to better understand the relation between the three
companies of the network, a list of evidences from Neoset Company is presented in
Table 7.
 Service innovation 109

Table 6 Service innovation features

Features General description of the service innovation

1 Technology Communication through mobile networks. It permits easy access of the
remote central station that is connected between companies and costumers.
The localisation of vehicles is supported by location-based services (LBS)
with the web portal and the mobility experience of users.
2 Simplicity The service innovation does not need remote control by the users because
the system is based on automatic standard procedures. The security actions
do not depend on the driver. The security solution is monitored by the
remote central station.
3 Interactivity The social interaction is based on the context observed in the
hypercompetitive markets. The service innovation enable users to easy
access to information in real-time about the robbery.
4 Accessibility The technology offers intelligent anti-robbery and anti-kidnapping, that
enabling to send warnings to the relatives of the driver to inform about the
position and the situation of them and the car.
5 Safety The service innovation allows the management of robbery in real-time.
The anti-robbery system blocks the vehicle immediately after the
command of the remote central station.

Neoset has operated for several years in service innovation based on high technologies
and for this reason it was chosen to be the hub firm in the network. The most relevant
challenge for the top managers of Neoset was finding new ways to diffuse the innovation
based on the network relationship. Continuing to get information from the network, a
list of evidences from Magaldi Company is presented in Table 8.
From the perspective of user needs, it was important to participate in meetings with
customers, which permitted better understanding of the emergent problems of each single
customer and single specific reality. The joint creation of a small equipment testing
developed between Neoset and Magaldi was a key element to connect users to the
network. The device was a miniature vehicle connected to the hardware and to the
software in the central office in order to simulate the real process of a vehicle being
stolen. In this process, Perto Company interacts only with the recall for maintenance of
the service innovations hardware part. The main role of Perto Company is described in
the list of evidences presented in Table 9.
In the last 12 months of the empirical research, it was verified that the network was
searching for a better service innovation solution with capacity to produce the hardware
in large scale. It was observed that the service diffusion is possible, mainly based on the
communications channels of the Perto Company.
Closing the understanding of evidences it was verified that the available network
structure and the strong interaction between each key-person in the network was
influencing the innovation results in a positive way. The cooperation through sharing
specific dynamic capabilities was very important for the successful process of innovation
management.
The constant exchange of information between the technological patents developed
by each company was fundamental, because the catalyst hub firm management was
performed by Neoset. The service innovation in networks configuration is a way that the
competitors use in the development of strategies towards specific market needs.
110 S. Battisti

Table 7 Neosets evidences

Topic Empirical evidences

1 Networks 1 Act as responsible for certifying the service innovation with the
insurance companies
2 Act as hub firm in the updating of customers database and feedback
environment
3 Act as hub firm in the process of client billing and rendering service
responsibility
4 Act as hub firm in providing support in the process of vehicle recovering
and sales
5 Training external network partner to carry services in special critical
areas
6 Consulting of R&D for Magaldi regarding the integration of the
software part
2 Diffusion 7 Presenting the service innovation through technical focus meeting all
over Brazil
8 Carried out contact with customers to plan retention and measure
satisfaction level
9 Responsible for contacting customers and insurance companies in
problem solving
10 Technical real-time monitoring of the stolen vehicle to customers
satisfaction
11 Manage the mass diffusion process through the specific website of the
service innovation
3 Strategy 12 Make the first contact with the police to manage the process of stolen
vehicle recovery
13 Manage business and technical service innovation, except vehicle
installation
14 Manage the service innovation contract with customers and insurance
companies
15 Manage real-time contact with customers to verify veracity of theft in
order to keep innovation performance

Table 8 Magaldis evidences

Topic Empirical evidences

1 Networks 1 Consulting for Neoset regarding the integration of the hardware part
2 Selection, training and certification of external installation partners
3 Management of the users innovation network from other security services
2 Diffusion 4 Presenting the innovation in Brazilian security meetings
5 Responsible for the early adoption inside the network and partners
3 Strategy 6 Responsible for security consulting with Neoset employees
7 Management of the innovation service installation on customers vehicles
 Service innovation 111

Table 9 Pertos evidences

Topic Empirical evidences

1 Networks 1 Responsible for the production of the hardware part in the industrial plant
2 Responsible for hardware and software updates for customers recall
2 Diffusion 3 Responsible for the mass diffusion through large insurance companies
4 Managing the payment of commission, giving awards and sales bonus
3 Strategy 5 Managing the network agreement of Perto, Magaldi and Neoset
6 Focused in certificating the innovation in the Regulatory Agency

The costumers perceive the service innovation with large advantage comparing other
service solution, because good market compatibility and less technology complexity.
Using networks structure increases the possibility of spreading an innovation quickly in
the market, taking into consideration the social values of the social system.
The user-needs are accessed by the network through special routines that were
developed for constant exchange of information. The market tends to absorb the
innovation when it comes from different communication channels. It was observed in the
Brazilian vehicle security that companies organise processes and strategies differently
that in technology markets. This analysis came from the fact that the constant exchange
of information between costumers and companies in this market are higher than in
standard technology markets.
Based on the high speed of changes observed in these hypercompetitive markets,
managers designed processes for supporting the update of the service innovation with
new information coming from the customers. This provides a continuous feedback within
the market to update the innovation based on the real user-needs by combining dynamic
capabilities in real-time.
The previous empirical evidences obtained from the in-depth data analysis of the
network in Brazilian vehicle security market are used to help on build a model that is
presented in the next section.

5 Results

The findings are based on a model that combines six propositions for further
research in service innovation management in the context of hypercompetitive markets.
The first two propositions were designed aligned with the network attributes, the
next two propositions were designed aligned with the diffusion attributes and the
last two were designed aligned with the strategy attributes. The model is presented in
Figure 1.
112 S. Battisti

Figure 1 The model for service innovation management

Diffusion
attributes
P3, P4

Network
attributes Companies Innovation
P1, P2 success

Strategy
attributes
P5, P6

Hypercompetitive markets

Propositions 1 and 2 are suggested for the network-based perspective, in which the
analysis of service innovation could be done by companies collaborating to overcome
constrains, learning from users and managers for better network design and coordination.
Proposition 1 Companies which design the development of service innovation process
based on high technology and are organised through configuration in
network structure, increases the successful rate of the innovation in
hypercompetitive markets.
Proposition 2 Companies that manage the development of service innovation using a
hub-firm for enabling access to external know-how and for managing the
network structure, increases the successful rate of the innovation in
hypercompetitive markets.
Propositions 3 and 4 are suggested from a diffusion-based perspective, in which the
innovation should be perceived for the users and managers as the best and a consistent
idea supported by user experimentations and considering the social specific context.
Proposition 3 Companies that develop routines for keeping and improving service
innovation diffusion where the technological specifications are designed
based on the social system needs, increases the successful rate of the
innovation in hypercompetitive markets.
Proposition 4 Companies that design their processes enabling understanding the social
systems needs and for organising the early adoption inside the network
for reduction of the uncertainty, increases the successful rate of the
innovation in hypercompetitive markets.
Propositions 5 and 6 are suggested from a strategy-based perspective, in which
companies should develop strategies for continuous service innovation, developing their
absorptive capacity through resource recombination where hypercompetition in real-time
is the challenge.
 Service innovation 113

Proposition 5 Companies that develop routines that enable to combine both the
exploitation of dynamic capabilities in top manager level and the
exploration of new opportunities, increases the successful rate of the
innovation in hypercompetitive markets.
Proposition 6 Companies that develop practices to stimulate the recombination of
dynamic capabilities through the ability of the top managers of
coordinate, evaluate, learn and act on reconfiguration of strategies to
compete in real-time, increases the successful rate of the innovation in
hypercompetitive markets.
This set of six propositions aims to present a contribution to the understanding of how
companies manage service innovation in hypercompetitive markets. The use of this
empirical field on the research focus aims to analyse the new reality of the service
innovation that is based on high technology solutions.
The model suggests that to manage service innovation in hypercompetitive markets is
necessary different ways that to manage them in standard technological markets. The
main reason that confirms this evidence is the hypercompetition in this markets that force
companies to move quickly to obtain competitive advantage. The six propositions have
the objective to describe the present challenge of management service innovation in
hypercompetitive markets.

6 Discussions and conclusions

A model for service innovation management in hypercompetitive markets is suggested. It

is based on a set of six propositions that could be useful for academic and manager where
high velocity environments must be understood and managed. This set of propositions
was aimed to support the understanding of the context-specific of high velocity markets.
The Brazilian market understanding and the network understanding was important for
helping on theory building. From this analysis, it was possible to verify that innovative
organisations are able to develop routines for adapting their process for developing of
service innovation based on the velocity of environmental changes in the launch of new
services in emerging markets.
The combined research methodology is strongly useful for understanding the
phenomena and to present a clear research contribution. More specifically, clinical
inquiry research could be the most appropriate methodology to fit theory building in
conditions of hypercompetitive markets. This methodology also enable managers to find
the main companies problems and propose the appropriate solution in real-time for the
specific needs both for the companies and customers. The qualitative approach was
fundamental considering the lack of literature regarding service innovation in
hypercompetitive markets. Several studies analyse service innovation and the new service
development in technology markets, and for this reason, the analysis of the literature
applied for hypercompetitive markets could be considered as nascent theory. This nascent
theory could be better analysed through the using of qualitative methods rather than
quantitative, mainly because the service innovation in hypercompetitive markets could be
considered as a new phenomenon that aims to deeper understanding.
114 S. Battisti

The main limitations are related to the hard process of obtaining data for the reasons
of high level of information security and privacy laws of the market of service security in
Brazil. Another limitation is that the in-depth analysis was carried out only with the
network that represents one of the main eight competitors in the market. For this reasons,
the secondary data analysis carried out with the others seven competitors could be not
enough to permit the understanding of the hypercompetition phenomenon. Another
important limitation is the lack of collection of quantitative data to test in the market the
model with the six propositions.
The main implications of this research suggest that the academy will gain with a set
of propositions aiming to improve the literature of service innovation management, that
are related to organising networks for technology diffusion in environments where the
design of flexibility process are imperative. The managers will gain with the presentation
of the reach and relevance of the study about how to organise processes for enabling
network robustness and overcome constrains, taking into consideration the companies
attempts to improve competitive advantage under conditions of hypercompetition. The
managers also should recognise and measure the turbulence provided by this kind of
markets, it means that this action will help managers to better organise resources and
manage risks in order to improve competitive advantage. The society will gain indirectly
with a way for user involvement in the development of innovative services to solve
emerging real problems, by addressing the social and economic needs.
The future research priorities could be addressed on the management of the
development processes that enable service innovation in hypercompetitive markets. In
this sense, the avenue for further research could be based on the five main routes:
1 the identification of the main drivers that enable the integration of costumers in the
processes to the new service development
2 the analysis of processes that enable radical design thinking for service innovation in
hypercompetitive markets
3 the exploration of the drivers that enable decision-making effectiveness for service
diffusion based on high technologies
4 the identification of which are the main variables that express the turbulence of
hypercompetitive markets
5 the identification of which are the main variables that express superior performance
of companies for competitive advantage in hypercompetitive markets.

Acknowledgements

I would like to thank Professor Roberto Verganti from Politecnico di Milano, Professor
A.B. (Rami) Shani from California Polytechnic State University and Politecnico di
Milano and Professor Harry Boer from Aalborg University for helpful comments and
suggestions, as well as from two IJTMkt anonymous reviewers. I appreciate feedback
received from participants of the 7th CINet PhD Seminar in Milan, Italy and XXII ISPIM
Conference in Hamburg, Germany, in the earlier versions of this paper. I am grateful for
the financial support of Politecnico di Milano.
 Service innovation 115

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