Service development success: a contingent approach by knowledge strategy

Purpose – Contingency theory suggests that effective strategies and structures are not universal but dependant upon situational factors. The purpose of this paper is to explore how the way service firms compete acts as a strategic contingency, moderating the effect of a new service development (NSD) system on innovation performance. Two knowledge‐based strategies are tested as contingency factors. One strategy adds value for customers via the delivery of personalized knowledge‐based services; the other strategy adds value by services exploiting codified knowledge. Design/methodology/approach – A sample of 70 large service enterprises is used to test a contingency model of service innovation. The NSD system is a synergistic meld of basic building blocks of NSD systems: people organized cross‐functionally, the discipline of formal processes for guiding development activities, and the deployment of enabling tools/technologies. Regression analysis is used to test the relative impact of these three elements on innovation performance contingent on the type of knowledge strategy employed. Findings – While each element of the NSD system has an effect on performance, the optimal design is contingent on the strategy the firm employs. If firms enact a personalization strategy, NSD systems that score high in the deployment of cross‐functional organization and disciplined processes are higher performers. If firms emphasize a codification strategy, NSD systems that score high in the deployment of tools/technologies are higher performers. Combinations of the two kinds of strategy permit the construction of a four‐cell classification of service firms. This typology is used to further explore the implications for how managers design NSD systems to optimize performance. Originality/value – This paper uses a contingency approach to demonstrate that an optimal NSD system is dependent upon the type of knowledge strategy firms deploy. The impact on performance of three components of NSD depends on the degree of either codification and/or personalization in the service offering. A novel approach based on the knowledge management literature is employed creating a typology of service firm strategies. This is the first time such a typology has been postulated.