LOGISTICS INNOVATION: A CUSTOMER VALUE-ORIENTED SOCIAL PROCESS

Journal of Business Logistics, 2005 by Flint, Daniel J, Larsson, Everth, Gammelgaard, Britta, Mentzer, John T

INTRODUCTION

Innovation is critical to the success of many fums, including providers of logistics services. Anecdotally, conversations with leaders at a leading Danish logistics service provider emphasized the need to continuously drive innovation with customers and remain focused on increasing the value created for customers in order to compete effectively. Academic research also emphasizes the importance of customer-focused innovation to firm performance. Specifically, innovation, new product development, market orientation, customer value, and organizational learning research all point to the importance of studying the marketplace and utilizing that knowledge for product and process improvements linked to organizational performance. However, logistics research has largely ignored the concept of innovation.

The global marketplace, with ever changing technological and relational options, has driven businesses to look for new ways to innovate. Companies have many choices and a great deal of advice available on managing innovation (e.g., Chesbrough 2003; Christiansen 2000a, 2000b; Cobbenhagen 2000; Hargadon 2003; Kahn 2001; Rogers 1995). However, much of what is written about innovation focuses on general product innovation and more specifically on highly technological innovation. Insights can be gained regarding the challenges inherent in managing both technological and market uncertainty (Chesbrough 2003) or influencing the acceptance rate of innovations in the marketplace (Rogers 1995). However, very little has been written about service innovation, although initial insights are emerging in Scandinavia and elsewhere (e.g., Fuglsang 2002; Gustafsson, Edvardsson, and Sand�n 2002; Mattsson 2002; Zacharia 2001). Yet, we essentially do not know much about how logistics innovation occurs today and whether or not that innovation is purposefully managed or more ad hoc, informal, and spontaneous. Without a descriptive understanding of how innovation occurs, it is difficult to suggest examples of successful logistics innovation management, suggest normative models on how it ought to be managed, or indicate how logistics service providers can avoid harmful mistakes. Simply adopting models from other contexts may not be, and is often not, the best solution.

Therefore, our objective was to glean what we could about innovation from the literature and to use those insights to sensitize us to theoretically important concepts as we explored innovation through the eyes of managers trying to be innovative within a logistics context. Essentially, our aim was to begin to construct a theory of logistics innovation from the ground up and compare it to extant literature. Our intent was not to completely explain logistics innovation and even less to arrive at a normative model of best practice, but to start down the path of exploration in this important area of logistics management. This paper describes the research process and understanding gained, beginning with a review of relevant literature.

LITERATURE REVIEW

In this literature review we identify important innovation relevant concepts from the research areas of innovation/new product development, market orientation, customer value, organizational learning, and process management.

The Concept of Innovation

We adopt a broad definition of innovation that is not limited to technological breakthroughs or products alone. Innovation can occur within services, processes, or any social system (Schumpeter 1934). It does not only emerge from the realms of engineering, hard science, or manufacturing; "Innovation is an idea, practice, or object that is perceived as new by an individual or other unit of adoption" (Rogers, 1995, p. 11). An innovation does not need to be new to the world, merely new in the eyes of the beholder. As such, by logistics innovation, we mean any logistics related service from the basic to the complex that is seen as new and helpful to a particular focal audience. This audience could be internal where innovations improve operational efficiency or external where innovations better serve customers. Our interest here is on externally-focused innovations. To customers, "new," more helpful service is innovative. An extreme case of logistics innovation would be a logistics service that is new to the world, i.e., no service provider has offered the service under question before. For example, the initial shift to inter-modal containers was an innovation that resulted in industry-wide change. Similarly, radio frequency identification has the potential to radically change visibility, albeit maybe at a slower rate than many customers would like, due to technological challenges. In product development terms, such innovations may be referred to as radical innovations. At the other extreme would be incremental innovations, such as a change in package design or implementation of a new warehouse management system. In between these two extremes are "middle space" innovations (Kahn 2001 ), such as development of an improved customer relationship management system to better serve customers.