**2.6 Non-technological innovation: service innovation**

Service innovation may be described as an innovation which includes the introduction of new services or incremental improvements of existing services [18]. Service innovation is not limited to the services sector; it goes beyond and equally applies to other sectors like manufacturing and others, which can benefit from the addition of other services to its current portfolio of value offerings. Service innovation may also be viewed as new innovative service offerings which are valuable to customers. Service innovation may be driven by new technologies or a firm's competencies that can create additional value for the customer. Service innovation is not limited to improving existing services and offerings; it also involves replacing existing products and services with more value-added products and services.

For clarity, let us consider the following examples:


Service innovation is about value co-creation where both the firm (service provider) and customer are involved in delivering the service. In service systems, the customer is a significant part of the service inputs. Service systems depend on people, technology, and the co-creation of value. Service systems involve the integration of people and technology to provide value to customers. Hence service systems are complex socio-technical systems. Service innovation integrates people, both customers (people) and service providers (people resources), technology and value. Value co-creation is a WIN-WIN situation for both the customer and the service provider. They both work synergistically to co-create the service offering.
