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This article was downloaded by: [Universite De Paris 1]On: 25 August 2013, At: 13:27Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registeredoffice: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK
Asian Journal of Technology InnovationPublication details, including instructions for authors andsubscription information:http://www.tandfonline.com/loi/rajt20
Technological and non-technologicalinnovations in B2B mobile services inKoreaSeunghye Hong a & Kumiko Miyazaki aa Graduate School of Innovation Management , Tokyo Institute ofTechnology , Tokyo , JapanPublished online: 09 Jul 2013.
To cite this article: Seunghye Hong & Kumiko Miyazaki (2013) Technological and non-technologicalinnovations in B2B mobile services in Korea, Asian Journal of Technology Innovation, 21:1, 1-20,DOI: 10.1080/19761597.2013.815480
To link to this article: http://dx.doi.org/10.1080/19761597.2013.815480
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Technological and non-technological innovations in B2B mobile services inKorea
Seunghye Hong∗ and Kumiko Miyazaki
Graduate School of Innovation Management, Tokyo Institute of Technology, Tokyo, Japan
This article examines the characteristics of business-to-business (B2B) mobile services inKorea in order to identify technological and non-technological innovations. A statisticalanalysis of 242 services was done to characterize B2B mobile services in Korea.Subsequently, service products were grouped into seven types based on servicecharacteristics: mobile office/education solutions, network solutions, multimedia broadcastsolutions, business analytical solutions, security and safety solutions, payment processingsolutions and machine-to-machine (M2M) solutions for facility management. From acharacteristics-based approach, ‘new’ service characteristics after 2009–2010 are linkedwith radical innovation while service characteristics prior to 2009–2010 (but have been‘improved’) are linked with incremental innovation. A combination of ‘improved’ and ‘new’service characteristics are linked with semi-radical innovation. Subsequently, incremental,radical and semi-radical innovations were distinguished. From the perspective of non-technological innovation, recombinative and customized innovations were identified to focuson the direct competences of service providers and users.
Keywords: service innovation; technological innovation; non-technological innovation;business-to-business mobile service; Korea
1. Introduction
Service characteristics include inseparability (simultaneous production and consumption), hetero-geneity (the requirement for human effort and interaction) and perishability (the inability to bekept in stock) (Lovelock 1983; Zeithaml, Parasuraman and Berry 1985). These inherent featurespose more challenges to innovation than in the case of physical goods and innovation in servicesshould be considered differently from innovation in goods.
A mobile telecommunication service shows some intermediate features of pure services andproducts; in addition, when compared to pure services (e.g. healthcare and personal services), it isstandardized and mass-produced (similar to products). Technology-enabled innovations activelyoccur in the current mobile market. The rapid development of advanced hardware and softwaretechnologies related to mobile services has brought a number of service brands to expand the cus-tomer base and market size in Korea. However, a mobile service can produce many new identicalbrands easier than physical products without any technological development. A service character-istic is in itself an important innovation sources, whereas products often follow only technologicalinnovation.
# 2013 Korean Society for Innovation Management and Economics (KOSIME)
∗Corresponding author. Email: [email protected]
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This article focuses on mobile solution services for enterprises, i.e. business-to-business(B2B) mobile service, which is one of the most promising and growing business areas formobile carriers. In this article, B2B mobile service is defined as a business solution service forenterprise customers that supports various business functions across sales and marketing, com-munications, general management, finance and operations through a fixed and mobile networkinfrastructure.
Motivated by the above theoretical and empirical backgrounds, this article contributes to theresearch on the different dynamics of innovation in B2B mobile services by addressing the fol-lowing two research questions:
(1) What are the types of innovation in B2B mobile services? How do they differ from eachother?
(2) What are the dynamic competences of mobile carriers and their B2B customers used inthe different types of innovation? And how do they interact with each other?
This article identifies technological and non-technological innovations in an importantexample of a South Korean mobile telecommunications service, namely the B2B mobile services.The article comprises six sections. Section 2 introduces the Korean mobile industry. Section 3examines earlier studies on service innovation and develops a research framework. Section 4describes the research methodology as well as characterizes and classifies B2B mobile services.Then, Section 5 identifies technological and non-technological service innovations. Section 6 dis-cusses implications and directions for future studies.
2. Mobile telecommunications industry in Korea
As of July 2012, the total number of Korean mobile subscriptions exceeded 53 million, demon-strating that almost 100% of potential users were using mobile telecommunication services(Korea Communications Commission 2012). It becomes difficult to generate revenue fromvoice communication as demand exceeds supply.
Mobile services in Korea are served by three operators: SK Telecom, KT and LG U+. As ofJune 2012, SK Telecom has a dominant position in the market with 50% market share, followedby KT with 31% and LG U+ with 19%. Table 1 summarizes the market performance of mobilecarriers in Korea and their business areas.
KT and LG U+ merged their wired and wireless communication business into a single brandat the end of 2009 and in 2010, respectively. SK Telecom also has expanded its business beyondthe scope of the existing mobile network business by strengthening alliance with subsidiary com-panies (e.g. SK Broadband and SK Telink). All three mobile carriers are now integrated wired/wireless telecommunication service providers. In this regard, the B2B mobile services includeboth mobile and fixed network solutions.
There is a significant change of the Korean mobile telecommunication market behind thegrowth of the B2B market. First, the government’s telecom policy moved towards ‘openness’.In 2005, the Korean government made it mandatory for all mobile-phone makers and content pro-viders to use a software standard for Internet access, called wireless Internet platform for Intero-perability (WIPI). However, the world’s handset market was rapidly changing from a closedplatform to an open mobile operating system. In order to keep pace with the trend, the regulationof mandatory use of WIPI was abolished as of April 2009.
As a result of the openness policy, the iPhone was launched in Korea in November 2009 andMotorola ‘MOTOROI’ (the first Android-based phone) was introduced in February 2010. Therapid spread of smart devices accelerated the demand for high-speed networks. Mobile carriers
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began to offer a high-speed wireless data communication services over a long-term evolution(LTE) network that enabled improved services for video calls, navigation and cloud services.
Such a paradigm shift in the mobile telecommunication industry changed the characteristics ofmobile services and accelerated the launch of mobile solution services for enterprises. This led toa variety of radical or incrementally new B2B service products. Therefore, we consider that a sig-nificant paradigm change occurred from 2009 to 2010.
3. Conceptual background representing innovation in service
3.1 Innovation in service
Innovation in services especially has become of great importance in recent years (Miles 1993).There have been various attempts to define service innovation: technologist, service-orientedand an integrative approach (Gallouj 2002). The oldest studies tended to take a ‘technologist’approach that focused on the introduction of technical systems into service firms and organiz-ations (Barras 1986; Miozzo and Soete 2001). More recent studies have sought to highlight theimportance of service innovation. These ‘service-oriented’ approaches criticize the technologistapproach for their short-sightedness that consider innovation in services a superficial adaptationto manufacturing-based innovation (Gadrey, Gallouj and Weinstein 1995; Coombs and Miles2000). Instead, these new approaches have developed an extended approach to innovation thatincludes technological innovation that also embraces other forms such as intangible productsand processes.
Lately, ‘integrative’ approaches have recognized the trend towards convergence and the blur-ring of the boundaries between products and services (Miles 2000; Gallouj 2002). Theseapproaches do not underestimate the importance of technologies or the possible role of non-technological forms of innovation, such as organizational or managerial process innovations.
Table 1: Summary of mobile service market overview
SK Telecom KT LG U+No. of
subscribers 26,678,718 16,466,099 9,947,840Market share 50.2% 31.0% 18.7%
Main B2Cbusinessareas
4G LTE, roaming, onlineapp. store, onlineshopping mall, mobilemusic portal service,wireless and wiredInternet portal, phone-based navigation serviceand mobile TV
4G LTE, WiFi (wired/wireless) broadbandInternet service, smart TV,house telephone service,Internet phone service andsmart homes
4G LTE, Internet phoneservice, high-speedInternet, digital phone,Internet HD TV, cable TVtransmission line serviceand Webhard services
Main B2Bbusinessareas
Mobile prescription service,smart learning, corporatecloud computing, mobileoffice service, cloud-based business solutionand geographicinformation system-based solutions
Leased line service and otherdata communicationservice, call centreoutsourcing, businessadministration solution,customized video/broadcasting service andcloud computing
Internal infrastructurecommunication networkand leased lines, corporatecloud computing,electronic payment,mobile office service,education solution anddigital media services
Sources: Annual reports and investor relations reports of SK Telecom, KT and LG U+ average revenue per user: defined asthe total wireless revenue divided by the number of mobile subscribers.
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This study contributes to the integrative approach by revising the theory to enable reasoning aboutrecent mobile service innovations.
3.2 A characteristic-based approach to understand innovation dynamics
Lancaster (1966, 1971) observed that products can be described as a bundle of ‘service charac-teristics’ or attributes that a good/service embodies. Lancaster postulates that consumers do notdesire a product in itself but rather the particular bundle of service characteristics that it offers.In accordance with the Lancasterian perspective, Gallouj (2002) argues that service characteristicsare considered from a user’s point of view and defines innovation as any change affecting one ormore terms of these characteristics.
We define service characteristics as the characteristics associated with a service that is per-ceived by service users in the dynamic production and consumption process of the service. Inthe most general representation of a service, the service characteristics are obtained by mobilizingsimultaneously internal and external competences and tangible and intangible technical character-istics (Saviotti and Metcalfe 1984; Gallouj 2002). The concern is with ‘modes’ or ‘models’ ofinnovation that describe the particular dynamics of characteristics. It is furthermore supportedby prior studies on the mobile-service sector in that characteristics of mobile services, devicesand mobile technologies influence the diffusion and innovation in mobile services (Jonssonand Miyazaki 2004; Miyazaki and Wiggers 2005; Suryanegara and Miyazaki 2010a,b).
3.3 Models of service innovation
The studies of service innovation have applied Schumpeter’s original concept on innovation toservices (Drejer 2004; Windrum and Garcıa-Goni 2008; Camison and Monfort-Mir 2012) thatencompass the introduction of a new good (radical innovation) or a new quality of a good (incre-mental innovation).
Gallouj (2002) distinguished innovation in services into a wide range of different forms basedon the observations of Lancaster (1966) where a product is defined as a set of characteristics. Sixtypes of innovations were observed in the service context: (i) innovations in service products(radical/ameliorative/incremental innovations), (ii) recombinative innovation which is a formof innovation that relies on the basic principles of combining or splitting service characteristics,(iii) ad hoc innovation which is a unique solution, co-produced specifically to resolve a client’sproblem and (iv) formalization innovation which standardizes the service delivery system.
3.4 Research framework
Prior studies argue that the term ‘radical innovation’ denotes the creation of a totally new product,i.e. a new bundle of service characteristics which is new to the market. Ameliorative innovation,by contrast, simply increases the quality of certain service characteristics. Incremental innovationinvolves the addition of one or a few of the existing characteristics (Gallouj 2002). The OsloManual defines innovation as ‘the introduction of a good/service that is new or significantlyimproved with respect to its characteristics or intended uses’ (OECD 2005).
This article defines innovation as ‘new’ or substantially ‘improved’ services introduced to themarket. These two distinctive service characteristics are identified by the criterion of whether theyappeared before or after the paradigm shift of 2009–2010. ‘New’ service characteristics (i.e.newly emerged after the paradigm shift) bring radical systemic changes to B2B customers.‘Improved’ service characteristics (i.e. existed prior to the paradigm shift) increase the qualityof service characteristics that become greater in B2B mobile services after the paradigm shift
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versus pre-existing business-to-consumer (B2C) mobile services (Figure 1). Therefore, ‘new’service characteristics are linked with radical innovation, and ‘improved’ service characteristicsare linked with incremental innovation. A combination of ‘improved’ and ‘new’ service charac-teristics can be linked with semi-radical service innovation.
In this article, the above three forms of innovation are regarded as technology-enabled inno-vation because the implementation of new or improved service characteristics involves the util-ization of many technologies such as network infrastructure, devices connected to it, digitalcontent and applications that converge different Information and Communications Technology(ICT) fields.
Technology can replace services (in whole or in part) which mean that it can determine inno-vation in services; reciprocally, services can contribute to the diffusion, production orco-production of technological innovation (Bessant and Rush 1995; Den Hertog 2000). An increas-ing amount of empirical evidence has been shown that technology does play a role in services(Sirilli and Evangelista 1998). Many prior studies argue that the utilization of advanced technol-ogies, notably ICT, has enabled innovation in services (Barras 1986; Rai and Sambamurthy2006). Such technology-based innovations can be characterized by their impact on the final formof service characteristics. In this regard, the following framework was developed (Figure 1).
Previous studies of innovation in service industries suggest that non-technological innovationplays a very important role in the service sector (Miles 1995; Djellal and Gallouj 1999). Forexample, innovation can be based on the re-use or re-combination of existing components bycombining or splitting the characteristics of two or more existing products. It draws service inno-vation from existing competences, but may use them creatively in combination with new ones toform a uniquely different product defined as ‘recombinative’ innovation.
The value of service is co-created with the customers (Vargo and Lusch 2004; Gronroos 2007)which is consistent with the service-dominant (S-D) logic. S-D logic was not developed as a newtheory but was proposed as a ‘counter paradigmatic’ challenge to the goods-dominant logic ofmarketing. Vargo and Lusch (2004) broadened this service logic to include services marketing,relationship marketing and market orientation. Thus, service users are recognized as importantsources and co-developers of innovations.
This article proposes two innovation modes with a focus on the interaction of mobile carriersand B2B mobile service users (recombinative and customized innovations) to identify innovationin B2B mobile services from a non-technological perspective. Such innovations are regarded as
Figure 1: Research framework of technological innovation in service
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innovation in service process, for instance innovation during the process of developing and deli-vering services whereas the three types of technological service innovation are analysed withrespect to the product level.
Figure 2 shows the following framework was developed for the two non-technological inno-vations, focusing on the competences of mobile carriers and their B2B customers.
4. Methodology and data analysis
4.1 Industry analysis
In the beginning, mobile telecommunication market data and information were collected fromvarious sources such as mobile carrier’s annual reports, news articles and industry reports pro-vided by private and public research institutions. We looked at the market and then analysedthe collected information with a focus on regulation, technology and market aspects in theKorean mobile telecommunication industry.
4.2 Innovation indicator
Unlike traditional innovation indicators such as R&D expenditure and patents, new productannouncement is a new output indicator that measures innovation directly (Kleinknecht, VanMontfort and Brouwer 2002). In addition, it is possible to split the data by type of innovation.
Therefore, we examined the web pages of SK Telecom (http://www.biztworld.co.kr/), KT(http://biz.olleh.com/) and LG U+ (http://biz.uplus.co.kr/). Those websites provide the line-upof all B2B mobile-service brands of the three mobile carriers (SK Telecom, KT and LG U+).A total of 242 service products were selected as a sample among the total line-up of about 300service brands that represent the main B2B mobile services of the three mobile carriers. Then,we detected keywords that describe each of the 18 sub-characteristics to examine whichservice characteristics a certain service product is based on.
4.3 Statistical data analysis
The service characteristics of B2B mobile services were identified as the first phase of the dataanalyses. We scrutinized 242 B2B mobile-service products of three major Korean mobile carriers:SK Telecom, KT and LG U+. Then, we extracted all service characteristic categories from those
Figure 2: Research framework of non-technological innovation in service
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service products and divided them into detailed sub-categories. Through multiple analyses, thecategories had finally included only service characteristics. In the process, other variablesrelated to mobile carrier’s competences (i.e. ‘consulting’) and technologies (e.g. wired networkand wireless network) were excluded.
The service characteristics are classified into 18 sub-characteristics (Table 2).The characteristics of each service product were converted into a set of 18 dummy variables (1
¼ having a given characteristic and 0 ¼ not having it); subsequently, a 242×18 matrix of dummyvariables was constructed. Factor analysis was then conducted using principal component analy-sis with varimax rotation. It reduces a large number of observed variables into a smaller number offactors. Factor scores were calculated from the factor analysis. In the next step, hierarchical clusteranalysis was performed on the factor scores derived from the sub-characteristics to classify the242 service products into proper categories. The objective of a cluster analysis is to groupservice products into as homogeneous groups as possible with respect to the service character-istics. The number of categories constituting it was simplified and service products were summar-ized into several groups according to the categorized service characteristics. The results werefurther analysed with a one-way analysis of variance (ANOVA) as post-hoc test to determinethe statistical differences between each group.
Data analyses were performed using Excel (Microsoft 2007) and IBM SPSS Statistics 19.
4.3.1 Result of factor analysis: characterizing B2B mobile services
After conducting the factor analysis, seven characteristics variables (whose eigenvalues weregreater than 1) were extracted. Table 3 gives that factors can be found to represent variableswith similar aspects.
‘General office work supportive’ supports daily business tasks by collecting and analysingbusiness information or by dealing with a large volume of data. It also includes convertingpaper-based tasks to internet-based. ‘Facility management’ is the remote control or the automaticmonitoring of IT facilities. ‘Location-based security/safety’ means security for equipment orhuman safety. It often benefits from location-based information. ‘IT infra management’ buildsand manages IT infrastructure in a company, and maintains the adequate level of data security.‘Seamless working condition’ makes a suitable environment to conduct mobile business by con-verting paper-based or internet-based tasks to the mobile-based system so that workers can doordinary tasks without time and location restrictions. ‘Real-time broadcasting’ provides real-time-based broadcasting services. ‘Transaction information delivery’ transmits the informationon payment or transactions via fixed-mobile network.
4.3.2 Result of cluster analysis: typology of B2B mobile services
B2B mobile-service products were classified into seven groups that have different service charac-teristics through a cluster analysis (Table 4).
Table 5 presents the results of post-hoc analysis for differences between service groups; sub-sequently, the classified seven groups have different service characteristics from each other andindicate a significant difference between pairs of groups in terms of the seven servicecharacteristics.
After investigating which service characteristics are strong in each group, the service groupswere characterized as seven service groups having different characteristics: (1) mobile office/edu-cation solutions, (2) network solutions, (3) multimedia broadcast solutions, (4) business analyticalsolutions, (5) security and safety solutions, (6) payment-processing solutions and (7) machine-to-machine (M2M) solutions for facility management.
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Table 2: Definition of service characteristics
Service characteristics DescriptionExamples of extracted
keywords
X1 Communication Communication and knowledge sharingwith co-workers, customers or externalpartners
Phone, web fax, messenger,video conference andcommunication
X2 Mobility Access to corporate IP network (i.e.intranet, system) to manage a taskanytime anywhere (i.e. when workingoutside or on business trip)
Remote network access,anytime any place andmobility
X3 Mobilization Converting the existing web-basedgroupware (or system) into mobilegroupware (or m-system)
Mobilization, mobilegroupware, mobile officeand mobile system
X4 Infra maintenance Establishment, maintenance and repair ofall kinds of IT resources (i.e. network, H/W and S/W)
Maintenance and repair
X5 Remote control Remote control system for equipment,facility and device
Remote control, far-off, distantand M2M control
X6 Automation Automatic detecting (or monitoring) ofabnormality or malfunction (i.e. virusattack and abnormal network traffic) ofIT infrastructure. Automatic update
Automatic monitoring,automated monitoring
X7 Real-time Real-time response towards dealing withbusiness operation. Real-time customerinteraction. Real-time broadcasting
Real-time, 24 hour, all the time
X8 Data security Security of data, application or network Data security, networksecurity, contents securityand backup
X9 Building entrancesecurity
Security of entrance and exit areas Entrance security and buildingsecurity
X10 Equipment security Security of devices, equipment or vehiclesin case of loss or theft
Device security and anti-theft
X11 Information searchand delivery
Collecting and searching businessinformation such as market data, sales,finance, stocks and cash flow
Information search,information collecting andinformation delivery
X12 Information storage Storing and managing a large volume ofdata and information
Information storage andmanaging data
X13 Information analysis Analysing the collected data andinformation
Analysing, managing data,creating report and forecast
X14 E-task Converting a manually createdadministration task to ‘e-task’, i.e. a web-based system
E-approval, e-finance and e-task
X15 Location-based Obtaining logistics info or trackingtransportation
Location-based and GlobalPositioning Satellite (GPS)
X16 Broadcasting Creating the customized media contentsand broadcasting them through a videochannel
Broadcasting channel andmedia contents
X17 Emergency care/safety precaution
Safety of human beings (i.e. workers andresidents) to prevent accidents
Emergency health care andemergency rescue
X18 Transactioninformationdelivery
Delivering payment/transactioninformation via fixed-mobile network
Billing system, wireless billingdevice and e-payment
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Table 3: Result of factor analysis∗
Component
Sub-service characteristics
(1) Generaloffice worksupportive
(2) Facilitymanagement
(3) Location-based security/
safety(4) IT infra
management
(5) Seamlessworkingcondition
(6) Real-timebroadcasting
(7) Transactioninformation
delivery Communalities
X13 Info analysis .761 2.033 2.010 .039 2.041 .102 .016 .594X11 Info search and
delivery.684 .190 .278 2.211 .163 .066 .144 .678
X12 Info storage .629 .224 2.237 .080 2.125 2.045 .006 .526X14 E-task .564 2.316 .128 2.141 .122 2.132 2.173 .517X05 Remote control .001 .767 .173 .165 .020 2.030 .012 .647X09 Building entrance
security.011 .763 2.149 2.316 .018 2.016 2.011 .704
X06 Automation .241 .550 .130 .302 2.087 .398 .022 .635X10 Equipment security 2.056 .203 .736 .177 2.003 2.047 .008 .619X17 Emergency rescue/
safety precaution2.095 2.049 .732 2.187 2.085 .048 2.046 .594
X15 Location-based .350 2.073 .643 2.109 .117 2.007 .107 .579X08 Data security 2.010 2.064 2.020 .841 .049 2.057 .072 .722X04 Infra maintenance 2.126 .128 2.120 .688 2.278 .115 2.142 .630X03 Mobilization .019 2.051 .103 2.020 .869 2.024 2.113 .783X02 Mobility 2.002 .053 2.116 2.106 .851 2.041 .121 .768X16 Broadcasting 2.255 2.178 .019 2.233 2.099 .787 .081 .788X07 Real-time .283 .221 2.054 .243 .037 .724 2.039 .717X18 Transaction
informationdelivery
2.082 2.096 2.064 2.114 .100 2.168 .809 .726
X01 Communication 2.122 2.143 2.126 2.105 .110 2.282 2.725 .680Eigenvalues 2.553 2427 1.655 1.521 1.403 1.251 1.157% of variance 14.2 13.2 9.2 8.5 7.8 6.9 6.4Kaiser-Meyer-Olkin
(KMO).588
Bartlett’s test ofsphericity
852.000
Significance .000
Note: Rotation method: varimax with Kaiser normalization.∗Extraction method: principal component analysis.
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Table 4: Result of cluster analysis
Servicecharacteristics
Service classification One-wayANOVA
1(n ¼ 19) 2(n ¼ 151) 3(n ¼ 11) 4(n ¼ 31) 5(n ¼ 9) 6(n ¼ 11) 7(n ¼ 10) F-value Sig.
(1) General officework supportive
20.097 20.244 21.166 1.902 20.430 20.374 0.055 53.858 .000∗
(2) Facilitymanagement
20.271 20.052 20.815 20.508 0.649 20.438 3.665 73.682 .000∗
(3) Location-based/equipmentsecurity/safety
0.010 20.216 0.088 0.121 4.237 20.291 20.718 104.483 .000∗
(4) IT inframanagement
0.052 0.241 21.065 20.210 0.193 20.523 21.517 10.009 .000∗
(5) Seamless workingcondition
2.878 20.332 20.453 20.090 20.298 0.459 0.086 114.792 .000∗
(6) Real-timebroadcasting
0.006 20.226 3.601 0.209 20.314 20.770 20.077 76.139 .000∗
(7) Transactioninformationdelivery
20.512 20.230 0.372 0.033 20.096 3.700 20.053 85.442 .000∗
Name of servicegroups
Mobile office/educationsolutions
Networksolutions
Multimediabroadcastsolutions
Businessanalyticalsolutions
Security andsafety
solutions
Paymentprocessingsolutions
M2M solutions forfacility
management
∗P , .001.Bold values indicate higher correlation between variables and factors.
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Table 5: Results of the one-way ANOVA post-hoc test
Comparison 1�2 1�3 1�4 1�5 1�6 1�7 2�3 2�4 2�5 2�6 2�7 3�4 3�5 3�6 3�7 4�5 4�6 4�7 5�6 5�7 6�7 F-value Sig.
General officeworksupportive
n.s. ∗ ∗ n.s. n.s. n.s. ∗ ∗ n.s. n.s. n.s. ∗ n.s. n.s. ∗ ∗ ∗ ∗ n.s. n.s. n.s. 53.858 .000∗
Facilitymanagement
n.s. n.s. n.s. ∗ n.s. ∗ ∗ ∗ n.s. n.s. ∗ n.s. ∗ n.s. ∗ ∗ n.s. ∗ ∗ ∗ ∗ 73.682 .000∗
Location-based/equipmentsecurity/safety
n.s. n.s. n.s. ∗ n.s. n.s. n.s. n.s. ∗ n.s. n.s. n.s. ∗ n.s. n.s. ∗ n.s. ∗ ∗ ∗ n.s. 104.483 .000∗
IT inframanagement
n.s. n.s. n.s. n.s. n.s. ∗ ∗ n.s. n.s. n.s. ∗ n.s. n.s. n.s. n.s. n.s. n.s. ∗ n.s. ∗ n.s. 10.009 .000∗
Seamless workingcondition
∗ ∗ ∗ ∗ ∗ ∗ n.s. n.s. n.s. ∗ n.s. n.s. n.s. ∗ n.s. n.s. n.s. n.s. n.s. n.s. n.s. 114.792 .000∗
Real-timebroadcasting
n.s. ∗ n.s. n.s. n.s. n.s. ∗ ∗ n.s. n.s. n.s. ∗ ∗ ∗ ∗ n.s. ∗ n.s. n.s. n.s. n.s. 76.139 .000∗
Transactioninformationdelivery
n.s. ∗ n.s. n.s. ∗ n.s. n.s. n.s. n.s. ∗ n.s. n.s. n.s. ∗ n.s. n.s. ∗ n.s. ∗ n.s. ∗ 85.442 .000∗
Notes: n.s., not significant; 1, mobile office/education solutions; 2, network solutions; 3, multimedia broadcast solutions; 4, business analytical solutions; 5, security and safety solutions;6, payment-processing solutions; and 7, M2M solutions for facility management.∗Significant at P , .001.
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Mobile office/educations enable B2B mobile-service users to seamlessly operate an insti-tutional system ubiquitously. Network solutions ensure fast and stable voice and data trans-mission. Multimedia broadcast solutions simultaneously transmit broadcast contents. Businessanalytical solutions provide database-based analytical services to manage a large volume ofdata. By using location-based information, security and safety solutions protect the equipmentof an institutional user in case of theft or loss. Payment-processing solutions deliver transactioninformation and help B2B customer operations to be efficient by making payment on the move oron delivery. M2M solutions for facility management secure a building entrance or large facilities.
5. Modes of innovation from a characteristics-based approach
5.1 Technological innovation in B2B mobile services
Section 3.4 compared the changes of the seven service characteristics before and after the para-digm shift of 2009–2010, and distinguished between (i) ‘improved’ service characteristics and (ii)‘new’ service characteristics.
As the next step, we matched those improved and new service characteristics with servicegroups (Table 6). The new service characteristics led to radical innovation and the improvedservice characteristics led to incremental innovation. In this procedure, we finally determinedwhich service groups belong to incremental, radical or semi-radical innovations.
Each type of service innovations is described in detail in the following sections.
5.1.1 Incremental innovation
Location alert services for safety, internet access services, video streaming services and mobilepayment services have been useful service features in the mobile telecom service for individualusers; however, those services became stronger in B2B mobile solutions versus previous B2Cservices.
First, network solution is a clear example of incremental innovation being created. Comparedto network access services for individuals, those for enterprises became highly enhanced in termsof data security and infrastructure management. The B2B mobile network solution offers wiredand wireless networks, protects a firm’s data, applications and network, and maintains the security
Table 6: Link between service characteristics and innovation types
Service characteristicsChange of
characteristicsMain category of service
group Types of innovation
(1) General office worksupportive
Improved and new Business analytical solutions Semi-radicalinnovation
(2) Facility management New M2M solutions for facilitymanagement
Radical innovation
(3) Location-based security/safety
Improved Security and safety solutions Incrementalinnovation
(4) IT infra management Improved Network solutions Incrementalinnovation
(5) Seamless workingcondition
Improved and new Mobile office/educationsolutions
Semi-radicalinnovation
(6) Real-time broadcasting Improved Multimedia broadcastsolutions
Incrementalinnovation
(7) Transaction informationdelivery
Improved Payment-processing solutions Incrementalinnovation
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level of Internet Data Centre (IDC) through data backup, document conversion server, SecureSockets Layer and Mobile Device Management system.
Second, the service characteristic of ‘location-based security/safety’ has been an importantapplication feature of the telematics service provided by mobile carriers since 2009–2010. Tele-matics, the integrated technologies of telecommunications and informatics, provides safety infor-mation such as road hazards, locations, speeds of vehicles and emergency road to support driversafety. In addition, GPS location technologies used in telematics services help locate children andthe elderly. In the case of B2B mobile solutions, such service characteristics are improved throughupgraded positional accuracy in location-based business services and more intensified emergencyrescue applications to protect the tangible assets and employees of a company.
Third, multimedia services that have been served to individuals have become highly custo-mized. Streaming video technology allows individual users to download and watch a video inreal-time on demand through their mobile phones. The development of network technologyoffers greatly increased data transmission speeds, multimedia broadcast solutions and expandedbusiness opportunities for enterprises through the creation of new communication, advertisingand education channels.
Fourth, mobile finance service allows individuals to take charge of basic banking through amobile phone such as wired transfers and balance inquiries that include stock portfolios andcredit card services. But recent B2B solutions enhanced the service function to develop wiredand wireless complex payment-processing devices. The characteristic of ‘transaction informationdelivery’ is enhanced when combined with smartphones. The device of payment function,equipped with radio-frequency (RF) circuit and integrated circuit chip, attaches to the protectioncover of a smartphone. This allows the solution to easily deliver payment/transaction informationvia a fixed-mobile network.
Improved service characteristics (i.e. ‘location-based security/safety’, ‘IT infra management’,‘real-time broadcasting’ and ‘transaction information delivery’) facilitate incremental innovationto B2B mobile services.
5.1.2 Radical innovation
The appearance of a new service characteristic creates a totally new service product, i.e. radicalinnovation. M2M solutions for facility management, whose characteristic has strong ‘facilitymanagement’, can be referred to as ‘radical innovation’.
‘Facility management’ is a radically new service characteristic that was not necessarily pro-vided to individual users before 2009–2010. But now this characteristic becomes critical, particu-larly in leveraging the security level of enterprises by combining RFID technology with a CCTVcamera. In addition, M2M technology makes it possible to automatically monitor every aspect ofa firm’s IT resources, from the condition of hardware, software and middleware to their networkperformance.
Such solutions bring radical social changes that surpass the personal level. For example, theintegrated infrastructure based on mobile platform and a ubiquitous sensor network helps todesign ‘Smart Campus’, ‘Smart Town’ or ‘Smart City’. In this manner, the unexpressed charac-teristic in B2C services newly appears in B2B services and leads to radical innovation.
5.1.3 Semi-radical innovation
The service groups of ‘business analytical solutions’ and ‘mobile office/education solutions’belong to semi-radical innovation because they enhanced the existing service function but alsohave radically new characteristics to some extent.
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First, ‘general office work supportive’ of business analytics solution is regarded as animproved characteristic; however, it also represents a new characteristic. Searching informationvia a mobile phone was possible before 2009–2010. Data service for individual users deliveredsimple text, images and videos to provide information on weather, sports, stocks and traffic.However, while launching mobile services for enterprises, the quality of data and informationdelivered has significantly improved via a mobile network. Data collection and informationsearch has become more accurate and analytical.
The ‘general office work supportive’ characteristic includes collecting information as well ascompiling statistics on them and analysing data to create a business report. Web analytics softwareand solutions are offered to enterprises via an application service provider that provides computer-based services to customers over a network. Hence, enterprises are now able to deal with morecomplex business information on market data, sales, finance, stocks, HR data or cash flow.They can generate charts, tables and graphs using desktop applications such as MicrosoftWord, Excel, HyperText Markup Language that helps insert text and images into web pages.Such a service feature is completely different from the B2C services before 2009–2010 that pre-viously performed simple tasks (such as personal scheduling and memo functions) via a mobilephone. This analytical function can be seen as a new characteristic that emerged particularly forenterprises. Therefore, the radical change from ‘general office work supportive’ characteristicmakes it possible to conduct highly advanced tasks that cover the whole range of businesswith a high efficiency comparable to desk-based work conditions.
Second, ‘seamless working condition’ characteristic of mobile office/education solution ismade up of a mixture of new and improved sub-characteristics. The service platform or‘mobile office pack’ is an integrated solution that covers groupware and project managementfunctions. This mobilized system radically changes the traditional work style performed duringthe regular working hours. This also creates a flexible mobile workplace where workers canconduct routine work anytime, anywhere. The 3G mobile telecommunications network previousto 2009–2010 provided mobility to individual users watching video, playing games or download-ing multimedia content on the move. Now, the full nationwide deployment of a 4G LTE networkand LTE-enabled smartphones enhance network speed and performance to improve the mobilityof workers.
The combination of improved and new service characteristics, ‘general office work suppor-tive’ and ‘seamless working condition’, has created semi-radical innovation to B2B mobileservices.
5.2 Non-technological innovation in B2B mobile services
5.2.1 Recombinative innovation
A frequent mechanism to create a new service brand without the use of technological capabilitiesis a ‘recombinative’ way of mobilizing service characteristics (i.e. recombinative innovation).Recombinative innovation often occurs particularly in network solutions, payment-processingsolutions and M2M solutions for facility management.
Network solutions service is the service group that best describes this mechanism. The serviceis indicative of how two (or more) existing service brands are combined and launched under a newbrand name. In the case of enterprises that need more intensive communication (e.g. voice com-munication, data transmission and messaging) than individual users, mobile carriers often bundleinternet phone (VoIP, or Voice over Internet Protocol), mobile phone services (3G) and wirelessLAN to provide them with one bundled product. The dedicated hosting package is anotherexample of the creation of a new network solution brand. A hosting package service can be
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offered by bundling different network management and monitoring systems over a single packageservice to provide a full range of ‘IT infra management’ features. It is also bundled with a dedi-cated line service.
Recombinative innovation occurs more frequently when network solutions are combined withpayment processing or facility management solutions. For example, a specialized mobile devicefor payment-processing solutions is easily bundled with fixed-mobile communication brandsbecause it is equipped with all the functions of a normal mobile phone. E-payment service isalso bundled with network solution products and mobile office solutions. M2M solutions for facil-ity management can also create a security package service brand by combining CCTV digitalvideo recorders, cameras and network facilities.
Such combinations of existing service brands enhance the performance of service character-istics. Network solution services can better strengthen corporate data security and IT infra man-agement in combination with different similar solutions than those provided alone. Itscombination with other solutions makes the service more multi-functional and provides superiorservice characteristics to corporate users. In this manner, recombinative innovation is achievedwithout direct support of technological advance.
5.2.2 Customized innovation
Another non-technological mechanism is the ‘customized’ way of mobilizing service character-istics (i.e. customized innovation). Customized innovation may be unrecognized until after theservice is provided to users. Such an innovation usually appears during the process of deliveringall the seven categories of B2B mobile services. We identified two types of customized inno-vations: adaptive customized and fully customized innovation.
First, enterprises are allowed to select individual service components for subscription ratherthan being required to purchase predefined packages. While recombinative innovation wasbrought with the pre-designed packages by service providers, customized innovation enablesmobile carriers to provide the selection of service components that are related to service subscrip-tion conditions called ‘adaptive customized’ innovation.
The innovation type prevails in pricing. Basic optional service pricing of network solutionsincludes various service charges of voice, data, multimedia, messaging and roaming. OtherB2B mobile solutions such as mobile office, multimedia broadcast and facility managementrequire composing more delicate selection regarding software (e.g. servers and applications)and hardware (e.g. devices and IT equipment). In addition, enterprises can choose the way toimplement a solution. For example, they can establish a videoconferencing room within anoffice by purchasing relevant equipment such as CODEC (a device capable of encoding anddecoding a digital signal and displays) or they adopt a web-based videoconferencing serviceby leasing a mobile carrier’s server that charges monthly fixed-rate and uses a PC monitor. Enter-prises are able to choose the most appropriate service price and components according tocompany size, business purpose or office IT environment to create maximum customer benefit.
Second, ‘fully customized’ innovation is investigated when specific B2B mobile services areprovided. In the provision of B2C mobile services, mobile carriers are a mass-producer of stan-dardized service products. However, they play a role of IT consultants in B2B mobile services.Before enterprises build up IT infrastructure or implement highly sophisticated solutions (e.g.business analytical solutions, mobile education and M2M solutions for facility management),mobile carriers offer a 1:1 consulting service. They examine the work process of client firms,investigate the corporate IT infrastructure that includes all hardware and software, and helpdesign customized solutions. Enterprises can anticipate the entire service framework and con-vince themselves to successfully implement the service.
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The customized service characteristics of the user interface bring customized innovation toB2B mobile services without technological support. Based on the evidence, customized inno-vation does not create a new service brand; however, customization does help improve B2B cus-tomer satisfaction.
5.3 Summary of the results
We devised a scheme to distinguish ‘new’ and ‘improved’ service characteristics (i.e. whetherthey appeared before or after the paradigm shift in the Korean mobile telecommunicationmarket) from a characteristics-based approach. A combination of two kinds of service character-istics produced three (incremental, radical and semi-radical) service innovations. The role of tech-nology was investigated to examine how technological characteristics of B2B mobile serviceinfluence their service characteristics; subsequently, the findings identified the three technologicalservice innovations. Table 7 gives the different dynamics of technological service innovationsdriven by the advanced ICT among the B2B mobile-service groups.
From a non-technological perspective, the competences of mobile carriers and B2B mobile-service users are represented as ‘recombinative innovation’ and ‘customized innovation’, respect-ively. Table 8 summarizes recombinative and customized service innovations.
6. Conclusions
6.1 Main findings
This article identified the service innovations in B2B mobile services through statistical tech-niques and an in-depth examination of the mobile business solution services provided by thethree Korean mobile carriers. Subsequently, the five types of service innovations were identified:incremental, semi-radical, radical, recombinative and customized service innovations.
First, mobile carriers’ business has expanded from mobile services for individual users tohighly sophisticated mobile solutions for enterprise users. With the support of advanced technol-ogies (related to a fixed-mobile convergence network, smart devices and other hardware/soft-ware), the service characteristics of previous B2C service have improved or newly emerged inthe recent B2B mobile solutions. Such changes create incremental, radical or semi-radical inno-vation by launching various service brands for B2B mobile services. Radical innovationimplements a new service feature that previously did not exist and creates a radical changethat alters the total system; however, incremental innovation still represents an important role
Table 7: Technological innovation in B2B mobile services and ICT technologies
Types of service innovation Main category of service group Important ICT technologies
Technologicalinnovation
Incrementalinnovation
Security and safety solutions,network solutions, multimediabroadcast solutions andpayment-processing solutions
Mobile carrier’s IDCs, datasecurity software, telematicstechnologies, digitalbroadcasting networktechnologies and smart devices
Radicalinnovation
M2M solutions for facilitymanagement
M2M technologies (e.g. sensornetwork system)
Semi-radicalinnovation
Business analytical solutions,mobile office/educationsolutions
Mobile platforms and applicationsand analytical software tools
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in the mobile carrier’s business. In B2B mobile services, incremental innovations are more fre-quently introduced than radical innovations; therefore, incremental innovation is a commonway to develop new services in the current mobile business.
Second, mobile carriers develop bundled service brands by combining the characteristics oftwo or more existing service products. Such a mechanism is frequent, easy and low-costbecause it relies on re-using existing service components. Many service brands for mobileoffice/education solutions launched in the B2B market are the outcome of this recombinativeinnovation. Operators are able to expand their customer base through the creation of morebundled service products. Conversely, mobile carriers may also create a basic low-specificationservice by separating various characteristics and turning certain elements into independentbrands (i.e. unbundled service products).
Finaaly, another mechanism to achieve innovation is to customize a mobile solution that pro-vides the customized service characteristics for a particular market segment (adaptive customizedinnovation) or a specific user (fully customized innovation). Adaptive customized innovationfocuses on the importance of service users’ perceived needs in providing B2B mobile solutions;however, the fully customized innovation emphasizes the role of the mobile carrier’s direct com-petence as a private IT consultant for enterprise users.
Table 8: Service-oriented innovation in B2B mobile services and corresponding competences of mobilecarriers and B2B customers
Types of service innovationMain category of
service groupCompetences of mobile carriers and B2B
customers
Recombinativeinnovation
† Network solutions† Payment-processing solutions† M2M solutions forfacility management† Mobile officesolutions† Multimediabroadcast solutions
Mobile carriers† Knowledge or techniques related tomethodologies for designing a serviceproduct† Know-how of utilizing the existingproduct line, pricing system, network,etc.
Service-orientedinnovation
Adaptivecustomizedinnovation
† Network solutions† Mobile office/education solutions† Businessanalytical solutions† Payment-processing solutions† M2M solutions forfacility management
Mobile carriers† Understanding of user needs anddemand† Marketing strategies (e.g. marketsegmentation and customer targeting)
B2B customers† Clear vision and objectives ofadopting the innovative mobile solution† Familiarity with smartphone and otheradvanced technologies
Fully customizedinnovation
† Mobile educationsolutions
† Network solutions† Multimediabroadcast solutions† Businessanalytical solutions† M2M solutions forfacility management
Mobile carriers† Ability to meet the needs of aparticular B2B customer† IT consulting know-how† Customer relation skills
B2B customers† Preference for state-of-the-arttechnology† Advanced technological knowledge ofcreating mobile contents and servicedesign according to their preferences
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6.2 Implications for innovation research and mobile carrier’s strategic direction
This article has theoretical and empirical implications.First, the power balance is moving towards the user. We detect that mobile-service users have
a significant potential as active innovators. Users act as a customer as well as a co-developer ofservice innovation. Prior innovation studies insist that user involvement is higher in B2B than inB2C services (Alam 2006; Oliveira and Hippel 2011). Corporate users have more intensiveknowledge of advanced technologies than individuals. They may be a group of lead users orearly adopters; therefore, future studies should focus on the importance of user interaction anduser involvement in service innovation.
Second, the growing adoption of smartphones gives a mobile carrier the opportunity toexpand its revenue base with the development of specialized mobile solutions for private andpublic sector workplaces as well as individuals. However, this also means that the strategies ofmobile carriers are often determined by external factors (such as smartphone operatingsystems). Mobile carriers should re-establish their relationship with other players such ashandset manufacturers and content providers to formulate new partnerships to develop newservices.
The mobile telecommunication service is a highly complex industry where many actors’internal/external competences and various tangible/intangible technical characteristics aremutually dependent and supportive. These issues can be addressed by future research that exam-ines the actor-level innovation.
Third, this article suggests that service innovation can be studied from technological and non-technological perspectives through various research methods such as statistical analysis and anexamination of the innovation indicator at the product level. However, a service innovationstudy is still able to account for a much broader range of possible sources of innovation. Theresearch method in this article could be applied to other industries and other businesses whoseproducts are standardized and clearly detected. This article relied on web-based data collectionand desk research; however, future field interview-based case studies could have more practicalimplications.
Fourth, the article developed a conceptual framework by describing a paradigm change in themobile sector. Isenberg (1998) captured the paradigm change from ‘smart network with dumbterminals’ to ‘dumb network with smart terminals’. In addition to the development of mobilenetwork and terminal technologies, radical technological changes occur frequently in themobile sector. Various service applications based on inter-industry convergence often signifi-cantly impact the characteristics of future mobile services. The conceptual framework of thisarticle can offer a clue for innovation research in the future when taking into consideration thatthe second, the third and the following paradigm shifts may bring more dramatic changes tomobile services.
Based on the research findings, this article has several implications for all mobile carrierswhose market is mature and faces problems of mobile subscriber saturation and fierce compe-tition. Under these circumstances, innovation in B2B mobile services can show the increasingpotential of mobile business opportunities in B2B areas. Such a B2B mobile service isgrowing fast and its transaction volume is large. This suggests that a mobile carrier canproduce further revenue and find new business opportunities in various industries such as edu-cation, healthcare, manufacturing, construction and public services.
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