Academic journal article Innovation: Organization & Management

Randstad's Business Model of Innovation: Results from an Exploratory Study in the Temporary Staffing Industry

Academic journal article Innovation: Organization & Management

Randstad's Business Model of Innovation: Results from an Exploratory Study in the Temporary Staffing Industry

Article excerpt

1. INTRODUCTION

Despite the increased importance of service innovation for the economy, we know surprisingly little about the drivers, strategy, organization and decision-making culture of innovation processes within service companies. This study explores these features of service innovation in detail. The core of this article is the introduction of the Randstad model of service innovation in the temping industry. This company offers a benchmark concept of corporate innovation by illustrating how the balance between strategy, structure and decision-making processes can be shaped in the context of large service enterprises without sacrificing long-term performance.

Many advanced countries have been moving away from agriculture and manufacturing towards information, knowledge and service economies. Services are ubiquitous and form the key to the much needed productivity growth of many developed economies (Howells, 2004; Van Ark et al., 2000; Inklaar et al., 2007). Market services alone, for example, account for 45 to 55 percent of the total value added in most OECD countries and the overwhelming majority of all European employees work in service companies (European Commission, 2003; 2005). Hence, the competitiveness of service companies is crucially important for the economic growth of advanced nation states. Innovation and/or research and development within service companies - and across service companies in 'systems of innovation' (Metcalfe & Miles, 2000) - are key to achieving a sustainable competitive advantage (Cainelli et al., 2006; Dodgson, 2000; Verspagen, 2005; Pilat, 2001); the more so as services are becoming increasingly tradable and therefore subject to international competition (Mankiw & Swagel, 2006).

There are many good reasons why service companies need to innovate (Sundbo & Gallouj, 2000; Den Hertog, 2000). From a corporate perspective, the aim of innovation is mainly instrumental, delivering increased efficiency and productivity as well as access to new markets and clients (Ozdemir et al., 2007). It is apparent that market situations and competitive structures are subject to constant change and that the pace of dynamic innovation has accelerated unmistakably. Against this background of increased competition, successful companies no longer try to achieve decisive advantages through cost leadership or advances in quality or technology alone (Foss & Knudsen, 1996; Peteraf, 1993; Conner, 1991). They tend to differentiate themselves through innovative services that give them a decisive unique selling proposition compared with their competitors (Barney, 1993; Dahlgaard & Dahlgaard, 1999; Sharma et al., 2005; Tether et al., 2001). Thus, innovation allows service companies to continuously offer enhanced or new services in the market and be quicker than the competitor. They are therefore better able to find and produce new opportunities and reap the associated benefits. We will associate this proposition with our case company, i.e., Randstad.

Surprisingly, however, many service companies seem to ignore the importance of innovation and/or R&D for the performance of their corporation (Van Ark et al., 2003). Official statistics suggest that relative to their economic performance, service sectors only account for a small share of total R&D (OECD, 2005a; 2005b). The average R&D intensity tends to be much lower in services than in manufacturing. Although not all service sectors are the same - and the intensity to engage in innovation and R&D varies between service sectors - the statistics nonetheless indicate that service companies find it difficult to create new products and services. To some extent, we can explain the less optimal innovative performance of service companies in the official statistics. It is argued, for example, that service companies are more inclined to invest in various forms of organizational ('soft') innovation rather than in (technological) R&D - that often aims at technological ('hard') innovation - and for that reason are not covered in the statistics. …

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