Journal of Business & Industrial Marketing

New service development in India's business-to-business financial services sector

Intekhab (Ian) Alam,
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 New service development in India’s
business-to-business financial services sector
Intekhab (Ian) Alam
School of Business, State University of New York (SUNY), Geneseo, New York, USA

Abstract
Purpose – Few research studies have been done to investigate the issue of new service development (NSD) in an emerging market. To address this gap
in the literature the aim of this paper is to document a study of the NSD process and the strategy of business-to-business financial service firms in India.
Downloaded by UNIVERSITY OF INTERNATIONAL BUSINESS AND ECONOMICS At 03:41 30 December 2017 (PT)

Design/methodology/approach – The author conducted surveys of 148 multinational service firms operating in India and 126 local and indigenous
Indian service firms belonging to the financial services industry.
Findings – The findings suggest that significant differences exist between multinational service firms operating in India and local/indigenous Indian
firms. That is, service firms belonging to these two varied groups use different strategies to compete in the industry and emphasize different sets of
development stages in service innovation.
Research limitations/implications – The analysis has been restricted to one emerging market, i.e. India. This suggests the need for further studies of
NSD in other emerging markets of the world.
Practical implications – The findings of this research validate the initial contention that NSD practices vary from company to company, and thus there
cannot be a “one size fits all” approach to service innovation. The insights from this study can help service managers to better understand and manage
their NSD programs in an emerging market such as India.
Originality/value – To the best of the author’s knowledge, this research represents the first attempt to investigate empirically the NSD practices of
financial service firms in India.

Keywords Service innovation, Emerging markets, India, Business-to-business services, Financial services, Innovation

Paper type Research paper

An executive summary for managers and executive
readers can be found at the end of this article.
Introduction
In the last two decades, the economies of developed nations
have seen a big shift away from being manufacturing-oriented
to being more service-dominated (Ostrom et al., 2010). In
addition, many emerging economies have achieved a growing
share of trade in service sectors worldwide. This economic shift
has created a need for more thorough understanding of the new
service development practices of firms in emerging economies
(Alam, 2007). Although a large number of studies on new
service development (NSD) have appeared in the literature (see
reviews by Droege et al., 2009; De Jong and Vermeulen, 2003),
very few explicitly answer the question related to the NSD
process in emerging countries. Of the studies on NSD, a
majority focus on Australia (e.g. Alam, 2002; Alam and Perry,
2002; Atuahene-Gima, 1996), North America (e.g. de
Brentani, 1995; Alam, 2003; Bowers, 1989; Scheuing and
Johnson, 1989) and Europe (e.g. Storey and Easingwood,
1996; Edgett, 1994). Surprisingly, Asian and emerging markets
have not attracted much attention. Although some Asian
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nations such as Japan, China, Taiwan and Korea have been the
focus of research efforts, they have been studied in the context
of tangible products rather than services.
Although there are similarities between new product and
service development process (Droege et al., 2009), researchers
have challenged the direct applicability of theoretical concepts
borrowed from the studies of tangible products to the services
(e.g. Hipp and Grupp, 2005; Ostrom et al., 2010). These
phenomena make NSD research in Asian and emerging
markets a ripe area for further studies. Against this
background, the purpose of our study is to understand the
NSD practice in an emerging economic power, i.e. India. In
particular, we compare the NSD practices of multinational
service firms operating in India with that of the indigenous
and local Indian service firms because NSD practices of these
two types of firm could exhibit disparate behavior. Another
related point of this study is to understand NSD in India from
varying perspectives and highlight the challenges and
opportunities faced by a firm from an industrialized nation
in developing new services in an emerging economy. Thus,
this research partially fills a void in the literature and adds to
the compendium of knowledge in the area of NSD. The
implications of our results should be of value to managers
faced with the tasks of selecting and managing NSD projects
as well as those firms experiencing international competition.
More specifically, we pursue the following three research
questions:

Received: June 2010

Journal of Business & Industrial Marketing
27/3 (2012) 228– 241 Revised: September 2010
q Emerald Group Publishing Limited [ISSN 0885-8624] November 2010
[DOI 10.1108/08858621211207243] Accepted: January 2011

228
 India’s business-to-business financial services sector
Intekhab (Ian) Alam
RQ1. What are the differences in the types of new services
developed by the multinational and indigenous Indian
service firms?
RQ2. What are the differences in NSD stages of the
multinational and indigenous Indian service firms?
RQ3. What changes do the global service firms make in their
NSD process while developing NSD in India, and
what types of new services they must develop?
We chose India for this study because India has emerged as a
country of immense industrial power only recently by actively
pursuing the policies of economic liberalization, deregulation
and privatization of its service sector (Karande et al., 1999;
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Ramamurti and Kapur, 2001). It accounts for 80 percent of
South Asia’s GDP, and therefore many global service firms
are increasingly recognizing the importance of India’s service
sector. We chose financial services for this research. This
choice was influenced by the desire to investigate service firms
in a highly competitive and technology driven industry. In
addition, this research focuses on business-to-business
services because business-to-business transactions are
important but under researched (e.g. Fitzsimmons et al.,
1998; Geoffrey et al., 1993). The rest of the article proceeds
as follows. The next section of the article reviews the relevant
literature. We then describe the data collection procedure.
Subsequently, we discuss the results and provide implications
of our work. Finally, we present limitations of the study and
make suggestions for further research. In this research we
investigate two types of firms:
1 multinational firms and their subsidiaries in India; and
2 the firms that are primarily local to India.
These two types of firms are labeled as “multinational” and
“indigenous” firms, respectively.
Literature review
The literature of NSD concludes that the success of a service
innovation depends upon four categories of internal and
external factors:
1 market-related;
2 product-related;
3 NSD process related; and
4 organization-related (e.g. de Brentani, 2001; Edgett and
Parkinson, 1994).
In addition, prior research on innovation suggests that the
factors over which managers exert some control provide a
better opportunity for improving the success rate of new
products or services and the overall performance and growth
of a firm (e.g. Calantone et al., 1996). The process used to
develop new services and the choice of new service types to be
developed are typically under the manager’s control and
therefore key issues in NSD. In addition, a recent review
article considers new service typology and NSD process as
key areas of further research (Droege et al., 2009). Thus, this
research focuses on a comparative study of NSD practices of
indigenous and multinational service firms in the emerging
market of India.
New service typologies
New service typologies denote the innovativeness of the
services. Because different categories of innovation are
potentially linked to the levels of new product or service
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Journal of Business & Industrial Marketing
Volume 27 · Number 3 · 2012 · 228 –241
development related risks, it seems important that the firms
adjust their approach depending on the types of new services
they develop (Veryzer, 1998; de Brentani, 2001). Scholars
have recommended that a firm must decide first the types of
innovation it intends to develop. The study of NSD types in
the global context is another attractive option, because
researchers have argued that findings about the types of new
product and services developed in Western countries may not
apply in emerging markets (Iyer et al., 2006).
In an early study, Booz Allen Hamilton (1982) developed
six typologies for new tangible products. Adapting this finding
to services, Gadrey et al. (1995) proposed four types of
financial service innovation: innovations in service products,
architectural innovations, modifications of service products,
innovations in processes and organization for existing service.
As noted by Droege et al. (2009), several terminologies have
since been used to describe the types of innovation both in
service and tangible product literature. Acknowledging this
variety in the use of innovation terminologies, Gallouj and
Weinstein (1997) synthesized the findings both from tangible
product and service literature and introduced six types of
service innovation:
1 radical;
2 incremental;
3 improvement;
4 combinatory;
5 formalization; and
6 ad hoc innovations.
However, Chan et al. (1998) have suggested a triad
categorization of service innovation:
1 breakthrough innovations;
2 distinctive innovations; and
3 incremental innovations.
More recently, Avlonitis et al. (2001) explored the typology of
product innovativeness in the financial services industry and
presented another synthesis of new service types as shown in
Table I.
Although all of the above typologies seem useful in studying
the new service types, this more recent categorization of
financial services by Avlonitis et al. (2001) appears to capture
varying levels of service innovativeness fairly well. They
distinguish among six types of innovation:
1 new-to-the market services, including new-to-the-world
services;
2 new-to-the company services, i.e. services that are new to
the firm but not new to the market;
3 new delivery processes, consisting of lines new to a firm,
but not new to the world;
4 service modification, i.e. major improvements or
modifications of an existing service;
5 service line extension, i.e. additions to a firm’s existing
lines; and
6 service repositioning, i.e. repositioning of an existing service.
Based on the comparison of major typologies of new services
in Table I, we conclude that Avlonitis et al.’s (2001) study
offers a rather useful theoretical basis for studying the new
service types because it is more recent and relates specifically
to financial services. Thus, we use this typology for developing
scales and measurement items for the construct of NSD
types. Previous studies have also used this typology for NSD
research (e.g. Alam, 2006, 2007).
 India’s business-to-business financial services sector Journal of Business & Industrial Marketing
Intekhab (Ian) Alam Volume 27 · Number 3 · 2012 · 228 –241

Table I Classifications of service innovativeness and NSD typologies

Gallouj and Weinstein (1997)
Radical innovation
Incremental innovations
Improvement innovations
Combinatory innovations
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Avlonitis et al. (2001)
New to the market service
New to the company service
New delivery process
Service modification
Gadrey et al. (1995)
Innovations in service products
Architectural innovations (bundling-
unbundling of existing service products)
Modifications of service products
Innovations in processes and organization
Chan et al. (1998)
Breakthrough innovations (new
technologies and approaches)
Distinctive innovations (improvements
of process requiring new technologies)
Incremental innovations
(improvements of process not
requiring new technologies)

for existing service

Formalization Innovations Service line extension
Ad hoc innovations Service repositioning

New service development process and model
The NSD model is operationalized as a systematic stage-wise
process for developing new services. The development of a
successful new service requires a systematic approach because
a stage-wise development process has been shown to be
invaluable to many service firms (e.g. Cooper and Edgett,
1996; Edgett, 1994; Edgett and Parkinson, 1994; Storey and
Easingwood, 1996). Yet, research shows that many service
firms do not adopt a systematic approach (e.g. Smith et al.,
2007; Alam and Perry, 2002). Therefore, scholars have
argued for more research in this area (see reviews by Droege
et al., 2009; De Jong and Vermeulen, 2003; Johne and Storey,
1998). One NSD model describes a set of eight linear stages
in developing new financial services (Bowers, 1989).
However, this model for services is similar to Booz Allen
Hamilton’s (1982) model of tangible product development,
although several unique service characteristics set services
apart from tangible products (Zeithaml and Bitner, 2000).
Several others studies also refer to the considerable
differences between product and service innovation activities
(e.g. Gallouj and Weinstein, 1997; Hipp and Grupp, 2005;
Stevens and Dimitriadis, 2004). Therefore, recognizing the
uniqueness of services, Scheuing and Johnson (1989) based
on a survey of 66 financial service firms in the USA proposed
an expanded model of 15 stages. In both the models, the
process involves the activities carried out from the moment an
idea is generated up to its launch in the market. Although this
second NSD model’s 15 stages are more comprehensive, the
model does not address the important issues of cross-
functional teams, parallel processing of the development
stages and cycle time reduction that have been highlighted in
several tangible product development models (see Cooper,
1993). Thus, more recently Alam and Perry (2002) based on
the case studies of several Australian service firms developed
another process model containing ten development stages:
1 strategic planning;
2 idea generation;
3 idea screening;
4 business analysis;
5 formation of cross-functional team;
6 service design and process/ system design;
7 personnel training;
8 service testing and pilot run;
9 test marketing; and
10 commercialization.
This new model contains the stage of “formation of cross-
functional team” and facilitates parallel processing of some of
the stages to fast track the overall development tasks. This is
consistent with the stage-gate model of tangible product
proposed by Cooper (1993). This stage-gate system divides
the innovation process into several stages, each composed of a
group of prescribed, related and often parallel activities. The
gates work as quality control checkpoints that essentially
require that certain criteria be met before the project is
allowed to proceed further on to the next stage. We use this
NSD model (Alam and Perry, 2002) to develop scales and
measurement items for the construct of NSD process.
In summary, on the basis of our review of the new product
and service development literature, we conclude that although
the process associated with NSD play a critical role in the
success of most new services, questions concerning inter-firm
differences and similarities in the NSD programs remain
unanswered. In order to gain insight into this question and to
develop a better understanding of managerial practices
associated with NSD, a comparative study of NSD practices
of multinational and indigenous firms was conducted in India.
Methodology
The sampling frame included financial service firms situated
in the metro cities of India – Delhi, Bombay (Mumbai),
Madras (Chennai), Calcutta (Kolkata), Bangalore and
Hyderabad – serving corporate customers by providing
investment banking, trust management, cash management,
global payment services, syndicated loans, commercial
mortgage, money market accounts and equipment finance
and leasing services. The firms in our sample mainly operate
in B2B markets, with a 3.10 average score on a five-point scale
(1 ¼ “turnover totally from B2C” and 5 ¼ “turnover totally
from B2B”). The selection of major cities for the location of
the study was motivated by the fact that all major financial
service firms were located in these big cities. Details of the
firms were obtained from Kothari’s Industrial Directory of
India. Due to budgetary constraints we randomly selected 200
firms in each category. About 52 multinationals and 74
indigenous firms declined to participate because of the
company’s no-survey policy. Thus, 148 multinationals and
126 indigenous firms finally agreed to participate in the study.
We took care to select the key informants through telephone
and e-mail identification and pre-notification method. All the
respondents had two key characteristics. First, they were

230
 India’s business-to-business financial services sector Journal of Business & Industrial Marketing
Intekhab (Ian) Alam Volume 27 · Number 3 · 2012 · 228 –241

experienced practicing managers in service development or a
related position; second, they were closely involved in their
respective NSD projects. In addition to an initial check via
telephone and e-mail conversations, the questionnaire
included an item that asked key informants to provide a
self-report of their knowledge of NSD issues under study. The
mean score of this item was 4.4 on a five-point scale (1 ¼ not
at all knowledgeable and 5 ¼ highly knowledgeable). These
informants held titles including marketing manager, product
manager, vice president, customer relations manager and new
product manager. Informants’ tenures with their firms varied
between seven and 11 years, and on average the key
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After the elimination of careless respondents and a list-wise
deletion of missing cases, 94 questionnaires were retained,
resulting in an overall response rate of 47 percent. However,
only 91 Indian firms returned valid and completed
questionnaires, resulting in a response rate of approximately
46 percent. To assess non-response bias, the responses were
divided into two groups based on the date on which they were
received. We tested non-response bias by comparing early
versus late respondents using a t-test (Armstrong and
Overton, 1977). No significant differences in means were
found between the two groups at p , 0:05. Using the new
service project as the unit of analysis, we requested the

informants had worked on 13 NSD projects in this period. managers to provide information about a new service project
These characteristics of the key informants imply that they for B2B market that was completed most recently (e.g. Sethi,
had the necessary knowledge and confidence to respond to 2000). A significant number of previous NSD studies have
the NSD issues under study. The demographic profiles of the successfully used this project-level approach (see the review
respondent firms are summarized in Table II. article by Johne and Storey, 1998). Only most recent projects
Questionnaires were mailed to the respondents along with a were chosen for data collection because we expected that the
cover letter outlining the objectives of the research, a non- respondents would have a better memory of new service
disclosure agreement and a self-addressed stamped return projects in which they were most recently involved.
envelope (Yu and Cooper, 1983). As an incentive for
participation in the study the respondents, were promised
and eventually received an executive summary of the research Measure development and validation
findings. In India, an unsolicited letter asking for the survey We followed the standard psychometric scale development
has little chance of a response; therefore the trade associations procedures of Churchill (1979) and Gerbing and Anderson
for financial service industries were used to facilitate the (1988). We were guided by a review of the literature (i.e.
contact for companies. They endorsed the survey by including construct definitions and existing scales used in NSD research)
a letter highlighting their support for the study. Hoskisson as well as by the results of eight field interviews with
et al. (2000) suggest that in an emerging country, practitioners. These sources provided the foundation for a
collaboration with a local researcher is important for construct item pool that was subjected to several rounds of
obtaining reliable and valid information. Therefore, we peer review by experts in the field of NSD. In the field
asked a marketing professor from a leading Indian business interviews, we asked the participants to discuss whether or not
school to assist in administering the survey. After three follow- the stages of NSD mentioned in the literature adequately
up letters and phone calls and multiple faxes, 102 described their experiences and how would they modify the
multinational firms returned the completed questionnaires. stages. We also showed them a list of preliminary scale items
developed from the literature. They were asked to assess the
Table II Demographic profiles of responding firms extent to which each item measured the constructs it was
intended to measure and to suggest possible corrections,
Multinational Indigenous deletions and additions. The respondents proposed several
Demographic characteristics (n 5 94) (n 5 91) refinements, modifications and new items. To establish content
Total assets in India validity we then submitted the list of scales and measurement
Up to $US1bn 14 23 items to a panel of 11 academic colleagues with expertise in
$US1.1bn-$US20bn 24 32 NSD research and asked them to assess each item for clarity
$US20.1bn-$US30bn 20 22
and representativeness. Particularly, we asked these academics
to assign each measure to the construct they believed was
$US30.1bn-$US40bn 18 12
appropriate and also suggest additional measures. The
Over US$40bn 24 11
resulting questionnaires were then pre-tested in a small
Types of business (major operations) survey of managers (n ¼ 9). This process eliminated a few
Investment banking, venture items that were found to be ambiguous. Three items were
capital and asset management 49 31 modified to make them appropriate for the research context.
Loans, leasing, financing, These steps assisted in increasing the content validity of the
commercial mortgages 43 57 research instrument (Hunt et al., 1982).
Other financial services 8 12
Number of years in business in India
New service typologies
We examined six types of services in an 11-item scale derived
0-20 years 16 02
from the literature (such as Avlonitis et al., 2001) and field
21-30 years 28 11
interviews. These scales were designed to measure the extent
31-40 years 32 22
to which new services developed by the participating firms
41-50 years 13 24
were new-to-the world rather than imitative or me too. The
Over 50 years 11 41
variables were measured on a five-point Likert-type scale that
Note: Figures shown are percentages focused on the firm’s most recent new service. All the scale
items were anchored at 1 (strongly disagree) to 5 (strongly

231
 India’s business-to-business financial services sector
Intekhab (Ian) Alam
agree). Items measuring the constructs of new service types
are given in Appendix 1.
NSD process and model
The key informants were requested to indicate the extent to
which they engaged in ten NSD stages when developing a new
service. These NSD stages were measured by a 30-item scale
derived from the field interviews discussed above and various
NSD models given in the literature (e.g. Alam and Perry, 2002;
Bowers, 1989; Scheuing and Johnson, 1989). Although items
were developed specifically for this research, other
measurement items derived from existing well-validated scales
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from the tangible product literature were also used (e.g. Song
et al., 2000; Kleinschmidt, 1994). In addition, multiple-item
scales were used to measure the conduct of each of the ten
stages of NSD. Closed-ended questions using a five-point
bipolar scale anchored by “not at all conducted the activity” (1)
and “conducted the activity to a large extent” (5) were
employed to measure each item. The measurement items of
the NSD stages and their reliability coefficients are reported in
Appendix 2. In addition, the descriptive statistics for the
constructs of new service types and NSD process and model
are shown in Appendix 3.
Using AMOS 7, we performed confirmatory factor analysis
to assess convergent and discriminant validity of the
constructs in a measurement model that combined all
constructs simultaneously. In addition, confirmatory factor
analysis was used to further refine the measures so that the
final numbers of items reasonably represent each construct
(Anderson and Gerbing, 1988). Using the procedure
suggested in Fornell and Larcker (1981), we obtained the
discriminant validity by demonstrating that the average
variance extracted exceeds the squared correlation between
all pairs of the constructs. Construct refinement was achieved
via the test of covariance matrix residuals and modifications
indices supplied by AMOS. All item standardized loadings for
each constructs were significant (p , 0:01), which supports
the unidimensionality of the constructs. The x2 value with 41
degree of freedom is 225.61, p ¼ 0:12. The goodness of fit
index (GFI), the adjusted goodness of fit index (AGFI) and
the comparative fit index (CFI) indicate a good fit because
they are above the 0.9 threshold (GFI ¼ 0:91, AGFI ¼ 0:94,
CFI ¼ 0:92). A root mean square error of approximation
(RMSEA) value of 0.048 and a standardized root mean
residual (RMR) value of 0.057 are within the recommended
upper limits of 0.1 and 0.08, respectively. Thus all the fit
indices reported in this research are consistent with Hu and
Bentler’s (1999) recommendations.
The reliabilities of the individual scales reported in
Appendices 1 and 2 provide further evidence of sound
psychometric properties of the measures – ranging from 0.66
to 0.89 for coefficient a and 0.70 to 0.89 for composite
reliability (Baumgartner and Homburg, 1996). Essentially,
Cronbach’s a and composite reliabilities exceed the minimum
recommended levels in the samples of both multinational and
indigenous service firms. The average variance extracted,
which assesses the amount of variance captured by the
constructs’ measures relative to measurement error and the
correlations among the latent constructs, is also reported.
Estimates of 0.50 and higher indicate validity for a construct
measure. Together, the results provide evidence that the
measures have sound psychometric properties.
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Journal of Business & Industrial Marketing
Volume 27 · Number 3 · 2012 · 228 –241
Results and general discussion
Our analysis employs a t-test to compare various aspects of
NSD in the multinational and indigenous service firms. We
prefer the t-test over other more stringent statistical testing
methods because the nature of the study is exploratory rather
than confirmatory. For example, the main purpose of this
study is to draw scholarly attention to service innovation in
emerging countries, an area that has received relatively little
focused research attention. This t-test analysis and the overall
data pattern suggest that the two types of firms use different
new service strategies to compete in the industry and
emphasize different sets of development stages in developing
new services.
New service typologies
The key informants were requested to indicate the choice of
their innovation types by indicating the types of new services
they had developed. Their responses were analyzed in two
steps. First, to obtain a preliminary picture of the differences
in the types of services chosen by indigenous and
multinational firms, the t-test was employed (Table III). To
complement this analysis, the frequency for the choice of new
service types was also calculated. To test for the significance
of difference between the two samples, a x2 test was
administered (Table IV).
As summarized in Table III, multinational and indigenous
firms differ considerably on strategic dimension for their NSD
programs. The multinationals have a stronger tendency to
target new markets with their new services – enter a new
market (3.92 versus 2.09) and develop new-to-the world
services (3.08 versus 1.84). However, both multinational and
indigenous firms were virtually the same in terms of their
strategy for developing less innovative services such as modified
services (2.14 versus 2.17), line extension of a service (1.52
versus 1.79) and repositioned services (1.42 versus 1.59).
Looking at the pattern of frequencies summarized in Table
IV, it appears that the multinationals develop a significantly
greater number of highly innovative, i.e. “new-to-market
services”, than do the indigenous firms (34 percent versus 15
percent). This indicates that multinational firms recognize the
benefits of highly innovative services and are willing to take
the risks involved in such a venture. The result is not
surprising given the fact that traditionally, indigenous service
firms have been averse to risk-taking (Alam, 2007). Generally,
a highly innovative service takes more time to develop and
consumes more resources. On the other hand, a low and
moderately innovative service costs less and can be introduced
into the market in a much shorter time. Thus, the
development of an innovative service involves more risk
than other types of new services. The above differences in
strategic choice can also be explained by the perceptual
differences that exist among managers across the two samples
regarding the benefits of pioneering innovations. This
empirically supports the notion that the culture of risk
taking can have a measurable influence on the new service
types adopted by a service firm. Another interesting finding
from the data analysis summarized in Tables III and IV
pertains to the middle of the road moderately innovative
services. For example, a majority of firms in both samples
develop moderately innovative services. In particular, a total
of 69 percent of indigenous and 51 percent of multinational
firms developed moderately innovative services such as new-
 India’s business-to-business financial services sector Journal of Business & Industrial Marketing
Intekhab (Ian) Alam Volume 27 · Number 3 · 2012 · 228 –241

Table III New service types choice (results of t-test)

Multinational Indigenous t test (significance of
NSD typologies firms firms mean differencesa)
The service allowed the firm to enter a new market 3.92 2.09 0.019
The service was totally new for the world 3.08 1.84 0.005
The service offered completely new features versus competitive services 2.18 1.22 0.001
The service created new service line for the firm 3.98 4.67 0.009
The service was totally new to the firm 4.08 4.35 0.050
The service required the installation of new software and/or hardware 2.87 2.19 0.008
The service required a change in the customers’ buying behavior 2.76 2.19 0.007
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The service was a modification of an existing service of the firm 2.14 2.17 NS
The service was revision of an existing service 2.21 2.17 NS
The service required similar NSD and marketing efforts compared to firm’s current services 1.52 1.79 NS
The service was a repositioning of an existing service of the firm 1.42 1.59 NS
Notes: Each item of NSD strategies used scale of 1-5, where 1 is “not at all” and 5 “to a great extent”. aIndicates the significance level of differences in means;
two-tailed t-test; NS ¼ not significant

Table IV Frequency of types of new services developed by the participating firms

Multinational firms Indigenous firms
New service strategies (service types) n 5 94 Percent n 5 91 Percent x2
New-to-the market service 32 34 14 15 18.21 (p ¼ 0.02)
New-to-the company service 36 38 42 46 12.90 (p ¼ 0:04Þ
New delivery process 12 13 21 23 6.18 (p ¼ 0:01)
Service modification 6 7 8 9 5.34 (p ¼ 0:08) (NS)
Service line extension 4 4 4 5 10.25 (p ¼ 0:10) (NS)
Service repositioning 4 4 2 2 7.75 (p ¼ 0:09) (NS)

to-the company services and new delivery processes. A
plausible reason for this outcome is that a moderately innovative
service is a low-cost and less risky strategic option. This finding
runs counter to the assumption in much of NSD literature that
suggests that the service firms mostly be developing more
innovative “new-to-the market services” because the
competition in financial service sector is fierce and the overall
industry is changing very fast due to deregulation and
technological advancements (e.g. Ennew and Waite, 2006).
As expected, the low innovative services such as service
modification, service line extension and service repositioning
are the least popular options among the service firms because
they are more likely to fail in the marketplace. A significant
amount of prior studies have also argued that the lack of service
differentiation and uniqueness has a negative effect on
innovation performance (e.g. de Brentani, 1995; Edgett, 1994).
New service development process
The data pattern suggests that the there are significant
differences between multinational and indigenous firms in the
way they execute their NSD stages. Table V shows the mean
results for various stages of NSD used by the firms in the two
samples. Overall, the managers of multinational firms appear to
conduct most of the development stages “to a larger extent”
than their indigenous counterparts. For example, multinational
firms in the sample had a considerably more rigorous idea
generation process than the indigenous firms. On a five-point
scale, the multinational firms rated themselves a 4.24 compared
with indigenous firms with a more neutral 1.95. One reason for
this difference is that the multinational firms’ managers tend to
involve customers extensively during the idea generation and
idea screening stages. The difference was also highly significant.
Similarly, multinational firms tended to conduct more test
marketing (3.94 versus 2.15) and service testing (4.02 versus
3.70) than did indigenous firms. One reason for this difference
could be that the multinational firms develop more innovative
services, which entail more robust idea generation and a
rigorous test marketing activity. Our finding is therefore
symptomatic of the lack of strategic approach that many
indigenous firms adopt with respect to these NSD stages.
There was clearly more evidence of a well-defined team/
project leader for NSD projects in the multinational firms,
because the multinational managers used a cross functional
team to a much larger extent (a relatively high 3.86 versus
3.02 for indigenous firms). The finding agrees with the
previous studies that suggest that the customer uncertainty
and heterogeneity of a service may encourage a greater inter-
functional coordination and teamwork in financial service
innovations (e.g. Atuahene-Gima, 1996; Edgett and
Parkinson, 1994). There was also a significant difference
between the two sample firms regarding the provision of
personnel training during NSD. Because of their propensity
for developing more innovative services, many multinational
firms took personnel training stage more seriously and as a
result their mean was much higher (3.54 versus 1.64). They
took considerable care in the selection and training of service
delivery staff and did extensive internal marketing to obtain
staff understanding and support for the innovations. A recent
study confirms this finding and suggests that service managers
should provide training to their employees during the course
of NSD so that they fully understand their tasks and
responsibilities for service innovation efforts (Cadwallader

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 India’s business-to-business financial services sector
Intekhab (Ian) Alam
Table V The conduct of new service development stages (results of t-test)
NSD stage Multinational firms
Strategic planning 2.98
Idea generation 4.24
Idea screening 4.02
Business analysis 3.23
Formation of cross functional team 3.86
Service design and process/system design 3.75
Personnel training 3.54
Service testing and pilot run 4.02
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Test marketing 3.94
Commercialization 4.12
Notes: NSD stages correspond to the following question: To what extent did you engage in the following NSD activities? Consider each item on scale of 1 to 5,
where 1 is “not at all” and 5 is “to a great extent”. aIndicates the significance level of differences in means; two tailed t-test; NS ¼ not significant
et al., 2010). However, indigenous firms conducted the
business analysis stage (i.e. profit and return on investment
analysis for the innovations) more rigorously than did the
multinational firms (a score of 4.64 versus 3.23). It seems
reasonable for a firm developing moderately innovative services
to conduct the stage of business analysis carefully to get a better
idea of profit, sales and market share of the new services. This is
because a moderately innovative service may have to directly
compete with the original services already firmly entrenched in
the market. This corroborates the findings of Avlonitis et al.
(2001), which indicate that business analysis is a crucial stage
for developing a moderately innovative service.
There are a few similarities that were discovered between the
two samples despite several macro differences. For example,
the stage of strategic planning was not found to be different for
firms operating in the two samples and the overall means for
both the samples were also weak (2.98 and 2.65, a more
neutral, midpoint of the scale). The findings may suggest that
all the firms fared poorly on aspects that describe a strategic
thinking and approach to NSD. There were also no differences
between the two samples in conducting the commercialization
stage of the NSD process. The multinational score was higher
here (4.12 versus 3.45), and the overall mean score was also
high indicating that managers in both the samples took launch
activities very seriously. Similarly, there was no significant
difference between the firms in two samples for the service
design and process/system design activity of NSD process.
Both the indigenous and multinational managers rated the
service design activity somewhat more positively, as the means
for the two samples were relatively high (3.75 and 3.38). Key
differences and similarities in the types of new services
developed and the stages of NSD process used by the two types
of firms are summarized in Table VI.
Managerial implications
Academics and practitioners strongly emphasize the
importance of new services and their contribution to a
firm’s growth and prosperity (Droege et al., 2009).
Consequently, NSD is a significant area of interest for
managers interested in stimulating sustainable growth in their
organizations. Despite growing interest in this area, little
empirical research has investigated the topic of NSD in any
emerging market of the world (Iyer et al., 2006). This research
extends the literature of NSD by comparing the service
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Volume 27 · Number 3 · 2012 · 228 –241
Indigenous firms t test (significance of mean differencea)
2.65 NS
1.95 0.020
1.75 0.016
4.64 0.021
3.02 0.012
3.38 NS
1.64 0.019
3.70 NS
2.15 0.039
3.45 NS
development practices of indigenous and multinational service
firms in India and answering the question: “What managers
should do to develop new services in an emerging market?”.
Thus the results of our study provide implications for both
indigenous and multinational managers. For many service
firms, a highly innovative service is the most desirable strategic
option. Yet, our findings suggest that a less risky option of
developing moderately innovative services is the most popular
strategic choice of both multinational and indigenous firms in
India. A potential explanation of our findings is that because of
the characteristics of intangibility and heterogeneity, financial
services are much easier, faster and less expensive to imitate
(Song et al., 2000). Consequently, a proliferation of me-too
services typically follows the launch of a successful original new
service, making a long-term competitive advantage very
difficult to sustain. Thus for the Indian market, the service
managers should make a paradigm shift from developing highly
innovative services to moderately innovative services. Yet
despite being risky, highly innovative services are also
important because they provide substantial competitive
advantage and are more likely to succeed in the market place
(de Brentani, 2001; Kleinschmidt and Cooper, 1991). On the
other hand, our findings indicate a much lesser use of low
innovative services (i.e. modifications, line extensions and
repositionings) because they are not innovative enough to
provide any advantage to a firm.
In the past, managers have been offered competing theory
prescriptions on how to conduct various stages of NSD that
will impact the performance of new services. By way of
comparison of the practices of two types of firms in India, we
validate our initial contention that NSD varies from company
to company and there cannot be a “one size fits all” approach
to NSD. For example, all the stages of service innovation
process are not equally important. Service managers should
pay more attention to the initial stages of idea generation and
idea screening. In particular, a firm that develops innovative
services might focus heavily on the stages of idea generation,
idea screening, formation of cross-functional team and
personnel training. The findings pertaining to the initial
stages of development process implicate customer interaction
in NSD. Customers should be involved extensively in the idea
generation and idea screening stages. Customers can help
crystallize service concepts and critically evaluate the overall
service delivery blueprints and final offerings. In these key
aspects, multinationals do better: they conduct more rigorous
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Intekhab (Ian) Alam Volume 27 · Number 3 · 2012 · 228 –241

Table VI Key differences and similarities among the multinational and indigenous firms
Multinational firms Indigenous firms
Types of new services
Highly innovative services Develop highly innovative services to a much larger Develop small number of highly innovative services
extent Aversion to risk-taking
Willing to take more risks Risk-taking culture is evolving
An established culture of risk-taking for service Reluctance to devote time and resources to innovative
innovation services

Moderately innovative services Tendency to develop more moderately innovative services Developed a large number of moderately innovative
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services
Low innovative services Least popular option Least popular option

New service development process

Strategic planning
Idea generation and idea screening Use more rigorous idea generation process
Business analysis
Cross-functional team
Service design and process/system
design
Personnel training
Service testing and pilot run
Test marketing
Commercialization
Poorly executed NSD stage Lack of strategic thinking
Use less rigorous process
Interact with customers efficiently Minimal customer interaction
Less emphasis on business analysis stage Extensive analysis of profit and return on investment for
the innovations
Use a well-defined NSD team project leader Roles and responsibilities of team leader is fuzzy
Use cross-functional teams extensively Cross-functional teams are used sparingly
Conducted efficiently and rigorously Conducted efficiently and rigorously
Spend massive time and resources on training service Minimum training of the service delivery personnel
delivery personnel before the launch No internal marketing before the new service launch
Considerable care in the selection and training of service
delivery staff
Extensive internal marketing to obtain staff
understanding and support for the innovations
Use rigorous service testing Minimal service testing
Used customers for service testing Didn’t involve customers
Extensive test marketing Minimal test marketing
Conducted rigorously Conducted rigorously

idea generation and screening, utilize cross-functional teams
more, and handle decisions regarding personnel training more
efficiently. Our findings also suggest that because of their
exposure to western markets, the multinational service firms
in India are strategically positioned to develop innovative new
services and conduct NSD stages more systematically. In
contrast, indigenous firms are relatively inexperienced with
customer interaction aspect of NSD. Indeed, economic
reforms and opening of Indian markets are promoting tough
competition among service firms (Rao and Tiwari, 2009;
Uppal, 2009). As a result, many service firms are gradually
embracing the customer orientation principle. Nevertheless,
India’s service sector is still product-rather than customer-led
in their approach, as evidenced through standardized new
service offerings by many indigenous service firms (Uppal,
2009). Thus our data point to the importance of indigenous
firms managers’ close monitoring of multinational firms’
independent strategy moves. For example, to compete with
multinationals, indigenous firms must become more
innovative and customer oriented. To achieve this goal they
should nurture and develop a climate of customer interaction
within their firms. They must conduct all the stages of NSD
more proficiently and systematically and interact with
customers during the stages of idea generation, idea
screening and concept development to obtain innovative
new service ideas. It is important to note that customer
interaction is a key success factor for new services (Alam,
2002, 2007).
Firms that want to develop low innovative services may be
better off putting more emphasis on the business analysis and
commercialization stages of the NSD process. Indigenous
firms tend to emphasize the business analysis stage by
collecting more analytical information about their projects
because they mostly develop low innovative or me-too
services. Typically, new services are developed from the
adaptation of successful concepts and services originally
developed in overseas markets. Thus there are clear
opportunities for the multinational service firms to
introduce new services in India that have already been
successful in the global markets. In essence, multinational
firms can borrow successful service concepts from their
subsidiaries and branches in developed countries and redesign
them for the Indian market. However, they need to conduct
the business analysis stage of the development process
vigorously that would entail feasibility assessment of the
service concepts as well as a clear statement of customer
acceptance, market trends and competitive situation.
Policy implications
Given the economic impact of NSD and the global marketing
of new services on the economy of a country, service
innovation is also a significant area of interest for policy makers

235
 India’s business-to-business financial services sector
Intekhab (Ian) Alam
whose major objective is to stimulate sustainable export and
growth among local and indigenous firms (Czinkota, 2000).
Policy makers are also increasingly recognizing the need for the
firms to be prepared for the challenges of global market. The
government must develop policies that can help a firm grow
and compete both locally and globally (Czinkota and
Ronkainen, 2009). The findings of this research will help
policy makers understand the weaknesses of the local Indian
service firms in regard to service innovation. By comparing the
practices of multinationals and indigenous firms, our results
also provide a benchmark for various innovation activities that
can be used by the Indian policy makers in their policy
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initiatives. For instance, indigenous firms may require
incentives for risk taking and developing innovative services
capable of succeeding in global market.
Research contributions and implications for
global managers
We believe our study makes several key contributions to the
global services marketing literature. First, to the best of our
knowledge this research represents the first attempt to
empirically test the similarities and differences in NSD
practices of the multinational and indigenous firms in India.
Previous studies that have examined the issue of service
innovation were based on the sample from only one type of
service firms mostly in developed countries. Thus the point of
departure for this study is the desire among researchers and
practitioners to gain understanding of NSD as they relate to
companies both indigenous and multinationals in this
increasingly globalized world. Note that the findings from
only one type of sample firms can give only partial insights
into NSD practices. Second, this study reflects the current
academic and practitioner interests in the emerging role of
India, not just as the user of new services, but also as an
increasingly strong player in developing global new services
capabilities. The process of trade liberalization started in
India in 1991 has ushered in a rapid change in the services
industry in that country. As a result, India is witnessing a
transition from agriculture-based economy to a service-based
economy and becoming an important export market for many
global service firms (Sharma and Srinivasan, 2008).
Particularly, business-to-business market in service
industries is booming globally and India is no exception
(Zimmerman, 1999). This growth phenomenon is creating
opportunities for innovation in a variety of service sectors in
India (Ramamurti and Kapur, 2001). With this remarkable
acceleration of the service-based economy, understanding the
process and antecedents of NSD in India represents an issue
of essential importance. Thus, our findings may be of
considerable value and interests to service managers in
developed nations faced with the complex tasks of marketing
and developing new services in an emerging country. They
will benefit from the deeper understanding of the service
innovation process outlined in this research.
Although our research relates to India, the research
implications discussed above may also apply to other
emerging markets, particularly China. As an emerging
economy, India possesses many features similar to China
and other emerging countries in terms of technology
development, consumer behavior, market system and
government and economic reforms (e.g. Zhou et al., 2005;
Iyer et al., 2006; Khanna and Palepu, 1997; Ramaswamy,
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Journal of Business & Industrial Marketing
Volume 27 · Number 3 · 2012 · 228 –241
2001). In addition, some of the fastest growing industries
such as financial services, healthcare services, information
technology and several other knowledge-intensive services are
found in emerging countries in Asia (Styles et al., 2005).
Because of the general characteristics of services (particularly
intangibility and inseparability), many services are inherently
similar in nature (Lovelock and Gummesson, 2004). Our
findings, although subject to further verifications and
refinements in future studies provide some preliminary
insights into two key areas of service innovation, service
types and NSD stages, in several knowledge-intensive and
other complex, technology-oriented services, such as the
financial services sector, which was our study context.
Limitations and future research agenda
Several limitations of this study must be mentioned. These
limitations also provide avenues for further research. First, the
samples of our study are restricted to one emerging country,
i.e. India. This suggests the need for further studies of NSD in
other cultures and countries. Second, the location of the study
is another key limitation. Although the major cities of India are
the most populous regions, they may not typically reflect the
values and practices of the entire population. Third, the results
reported here are limited to business-to-business financial
services, and therefore the generalizability of the findings to
other types of financial services, and to other service sectors in
general, is limited. Further empirical investigations are
required to determine the transferability of the findings to
other types of innovations related to both services and tangible
products. Fourth, this study considered only two key factors of
service innovation, i.e. NSD process and new service types.
Future research needs to examine additional variables, such as
new service failure and success factors, cross-functional
integration and NSD cycle time in an emerging market.
Fifth, we are not able to measure the success of the new
services studied in this research. Further research could
ascertain the performance implications of NSD. Finally,
because our study is exploratory in nature, it could be
replicated with different types of service firms in different
emerging markets and the findings could be re-examined via
more stringent statistical testing to arrive at empirical
generalizations. Another avenue for further research is to
conduct in-depth, longitudinal, qualitative studies to identify
the main sequence of events of NSD process while they happen
rather than rely on self-reported data (i.e. avoid ex post
rationalization phenomena). However, this research has taken a
first step towards a more complete understanding of new
service strategies and NSD activities of service firms in India.
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Appendix 1. Measure validation for new service

typologies (multinational (MN) and local firm
samples shown separately)

Table AI Measure validation for new service typologies (multinational and local firm samples shown separately)
Average
variance Composite
extracted Coefficient a reliability
New service typologies Items MN Local MN Local MN Local
New-to-the market service The service allowed the firm to enter a new market
The service was totally new for the world
The service offered completely new features versus competing services 0.81 0.67 0.87 0.73 0.89 0.84
New-to-the firm service The service created a new service line for the firm
The service was totally new to the firm 0.63 0.69 0.79 0.74 0.76 0.81
New delivery process The service required the installation of new software and/or hardware
The service required a change in the customers’ buying behavior 0.61 0.60 0.79 0.74 0.81 0.77
Service modification The service was a modification of an existing service of the firm
The service was a revision of an existing service 0.64 0.58 0.72 0.71 0.79 0.77
Service line extension The service required similar NSD and marketing efforts compared to
firm’s current services 0.68 0.72 0.74 0.82 0.79 0.86
Service repositioning The service was a repositioning of an existing service of the firm 0.77 0.72 0.88 0.83 0.88 0.84

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 India’s business-to-business financial services sector Journal of Business & Industrial Marketing
Intekhab (Ian) Alam Volume 27 · Number 3 · 2012 · 228 –241

Appendix 2. Measure validation for NSD Stages

(multinational and local firm samples shown
separately)

Table AII Measure validation for NSD Stages (multinational (MN) and local firm samples shown separately)
Average
variance Composite
extracted Cronbach’s a reliability
Stages Items MN Local MN Local MN Local
Strategic planning Chart the direction and mission
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Develop corporate objectives 0.59 0.68 0.85 0.78 0.83 0.80

Idea generation Systematically search for the ideas
Probe customers’ needs and preferences, their choice criteria, likes and dislikes 0.65 0.69 0.85 0.80 0.82 0.75
Idea screening Initial screening of the service ideas
Translate the idea into full service concept
Translate the service into business terms 0.59 0.54 0.88 0.81 0.85 0.76
Business analysis Identifying market trends
Analyze competition
Identify target market and its size
Conduct economic analysis to justify the project (investment/profit, etc.)
Obtain commitment of resources from top management 0.72 0.71 0.77 0.80 0.71 0.82
Formation of cross Search and identify appropriate personnel from various departments
functional team Assess their expertise and compatibility with the project
Form a team and choose a team leader 0.82 0.76 0.80 0.73 0.82 0.70
Service design and Decide on the final service specifications
process/system Develop a service delivery blueprint
design Install, refine and debug the service delivery mechanism 0.63 0.65 0.73 0.66 0.73 0.74
Personnel training Train the service delivery workforce
Prepare them for encounters 0.77 0.73 0.88 0.84 0.84 0.82
Service testing and Test the service blueprint
pilot run Develop a mock service delivery process
Implement design change and refinements 0.58 0.54 0.89 0.84 0.86 0.79
Test marketing Examine the marketability of the service
Limited roll out in the selected markets
Evaluate the results and take corrective actions 0.69 0.65 0.83 0.84 0.81 0.79
Commercialization Plan promotional campaign
Roll out in the market
Receive feedback from customers
Modify according to the market conditions 0.76 0.63 0.81 0.86 0.89 0.77

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 India’s business-to-business financial services sector Journal of Business & Industrial Marketing
Intekhab (Ian) Alam Volume 27 · Number 3 · 2012 · 228 –241

Appendix 3. Descriptive statistics of the two

samples

Table AIII Descriptive statistics of the two samples

Mean Standard deviations
Constructs No. of measures Multinational Local Multinational Local
New service typologies
New-to-the market service 3 3.10 3.05 1.10 1.21
New-to-the firm service 2 3.40 3.14 0.87 0.91
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New delivery process 2 3.12 2.97 0.90 1.10

Service modification 2 2.87 2.76 0.93 0.97
Service line extension 1 2.30 3.12 0.89 0.91
Service repositioning 1 3.30 3.15 1.02 0.92

New service development stages

Strategic planning 2 2.22 2.17 0.96 0.89
Idea generation 2 3.87 3.21 0.91 1.11
Idea screening 3 3.12 3.14 0.92 1.01
Business analysis 5 2.98 2.76 0.81 .093
Formation of cross functional team 3 3.11 2.79 1.01 1.13
Service design and process/system design 3 3.86 3.12 0.93 0.94
Personnel training 2 3.17 2.86 0.89 0.86
Service testing and pilot run 3 3.11 2.74 1.01 1.21
Test marketing 3 3.31 2.89 0.84 0.96
Commercialization 4 3.45 2.89 0.87 0.91
Note: The range for all the constructs was 1-5

About the author
Dr Intekhab (Ian) Alam is a Professor of Marketing in the
School of Business, State University of New York (SUNY) at
Geneseo, New York. He received his PhD from the University
of Southern Queensland in Australia, a Master’s of Business
in Marketing (by research) from the Queensland University of
Technology in Australia, and a MBA from Aligarh Muslim
University, India. Dr Alam conducts research in the area of
new product and service development and global marketing.
His research has been published in Journal of the Academy of
Marketing Science, Journal of Product Innovation Management,
Industrial Marketing Management, Journal of Services
Marketing, Asia Pacific Journal of Marketing and Logistics,
Journal of Marketing Management, Journal of Services Research,
Service Industries Journal, Journal of Global Marketing, Journal
of Service Management, International Marketing Review,
Qualitative Market Research, Journal of International
Marketing and Exporting, and in several international
conference proceedings. He also has extensive consulting
experience in the areas of new product/service development.
Intekhab (Ian) Alam can be contacted at: alam@geneseo.edu
Executive summary and implications for
managers and executives
This summary has been provided to allow managers and executives
a rapid appreciation of the content of the article. Those with a
particular interest in the topic covered may then read the article in
toto to take advantage of the more comprehensive description of the
research undertaken and its results to get the full benefit of the
material present.
There are clear opportunities for multinational service firms
to introduce new services in India – a country which has
emerged as an immense industrial power – that have already
been successful in global markets. They can borrow successful
service concepts from their subsidiaries and branches in
developed countries and redesign them for the Indian market.
However, they need to conduct the business analysis stage of
the development process vigorously, entailing feasibility
assessment of the service concepts as well as a clear
statement of customer acceptance, market trends and
competitive situation.
But what of indigenous firms, which are relatively
inexperienced with the customer interaction aspects of new
service development (NSD)? India’s service sector is still
product- rather than customer-led in its approach, as
evidenced through standardized new service offerings by
many indigenous service firms. Because of their exposure to
Western markets, multinational service firms in India are
strategically positioned to develop innovative new services. It
is therefore important that managers of indigenous firms
closely monitor multinational firms’ independent strategy
moves. For example, indigenous firms must become more
innovative and customer-oriented.
To achieve this they should nurture and develop a climate
of customer interaction within their firms. They must conduct
all the stages of NSD more proficiently and systematically and
interact with customers during the stages of idea generation,
idea screening and concept development to obtain innovative

240
 India’s business-to-business financial services sector
Intekhab (Ian) Alam
new service ideas. Customer interaction is a key success factor
for new services.
In “New service development in India’s business-to-
business financial services sector” Intekhab (Ian) Alam
compares the NSD practices of multinational service firms
operating in India with that of the indigenous and local Indian
service firms. More specifically:
.
What are the differences in the types of new services
developed by the multinational and indigenous Indian
service firms?
.
What are the differences in NSD stages of the
multinational and indigenous Indian service firms?
Downloaded by UNIVERSITY OF INTERNATIONAL BUSINESS AND ECONOMICS At 03:41 30 December 2017 (PT)
.
What changes do the global service firms make in their
NSD process while developing NSD in India, and what
types of new services must they develop?
The success of a service innovation depends upon four
categories of internal and external factors:
1 market-related;
2 product-related;
3 NSD process related; and
4 organization related.
The study used the Avlonitis et al.’s categorization of financial
services which distinguishes between six types of innovation:
1 new-to-the market services, including new-to-the-world
services;
2 new-to-the company services, i.e. services that are new to
the firm but not new to the market;
3 new delivery processes, consisting of lines new to a firm,
but not new to the world;
4 service modification, i.e. major improvements or
modifications of an existing service;
5 service line extension, i.e. additions to a firm’s existing
lines; and
6 service repositioning, i.e. repositioning of an existing
service.
The findings show significant differences between the
multinational and indigenous firms in the way they execute
their NSD stages. Managers of multinational firms tend to
involve customers extensively during idea generation and idea
screening stages. They also tend to conduct more test
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241
Journal of Business & Industrial Marketing
Volume 27 · Number 3 · 2012 · 228 –241
marketing and service testing. One reason for this difference
could be that multinational firms develop more innovative
services, which entail more robust idea generation and
rigorous test marketing activity. This seems to be
symptomatic of the lack of strategic approach that many
indigenous firms adopt with respect to these NSD stages.
There was clearly more evidence of a well-defined team/
project leader for NSD projects in multinational firms,
because the multinational managers used a cross-functional
team to a much larger extent. There was also a significant
difference regarding the provision of personnel training during
NSD. Because of their propensity for developing more
innovative services, many multinational firms took personnel
training more seriously, took considerable care in the selection
and training of service delivery staff and did extensive internal
marketing to obtain staff understanding and support for the
innovations.
For many service firms a highly innovative service is the
most desirable strategic option. Yet, the study findings suggest
that a less risky option of developing moderately innovative
services is the most popular strategic choice of both
multinational and indigenous firms in India. A potential
explanation is that because of the characteristics of
intangibility and heterogeneity, financial services are much
easier, faster and less expensive to imitate. Consequently, a
proliferation of “me-too” services typically follows the launch
of a successful original new service, making a long-term
competitive advantage very difficult to sustain.
Service managers should make a paradigm shift from
developing highly innovative services to moderately innovative
services. Despite being risky, highly innovative services are
also important because they provide substantial competitive
advantage and are more likely to succeed in the market place.
On the other hand, findings indicate a much lesser use of low
innovative services (i.e. modifications, line extensions and
repositionings) because they are not innovative enough to
provide any advantage to a firm.
(A précis of the article “New service development in India’s
business-to-business financial services sector”. Supplied by
Marketing Consultants for Emerald.)
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