Journal of Service Science and Management, 2011, 4, 253-260
doi:10.4236/jssm.2011.43030 Published Online September 2011 (http://www.SciRP.org/journal/jssm)
253
Evolution of Service: Importance, Competitiveness
and Sustainability in the New Circumstances
Abu Saleh Md. Sohel-Uz-Zaman1, Umana Anjalin2
1School of Business, United International University, Dhaka, Bangladesh; 2Department of Business Administration, The University
of Asia Pacific, Dhaka, Bangladesh.
Received April 9th, 2011; revised June 20th, 2011; accepted July 3rd, 2011.
ABSTRACT
In the complex business word, service is increasingly getting the centre stage in the economies across the world. The
exponential necessity of innovative service in one hand is providing excellent opportunity and on other hand, posing a
number of challenges to the firms. In this circumstance, the policy makers of the businesses are aware about the chal-
lenges and are keenly interested to develop a general strategy which will enhance their competency in rapidly changing
business context. They are actively trying to identify the resources and competencies that are necessary for their com-
petitiveness. This study will investigate and examine the factors that are responsible for the gro wth of service sector in
the increasingly complex business world and p ropose a strategic direction to ha rness the competitive edge by con figur-
ing their resources with the help of real world example ; especially, in developing country context. Growth and sustain-
ability through in novative service is the central th eme of this paper.
Keywords: Strategy, Resources, Service, Competency, Competitive Advantage, Innovation Technology, Knowledge and
Network
1. Introduction
The foremost characteristic of today’s economy is that, it
is influenced by many socio-economic factors. Custom-
ers are more conscious about their right and privilege
along with increased demand for customized service.
Organizations are also aware of the increased dominance
of customers over the economy. In such a situation, ser-
vice has become an essential issue for companies. Com-
panies are now offering both the goods and services to-
gether in one package. This business phenomenon can be
called as “the servitization of business” [1]. The change
not only has influenced manufacturing organizations but
also the economies across the world. As a result, the
popularity and necessity of service has been increased
exponentially. This new circumstance, in one hand, has
provided excellent opportunities for growth of the busi-
ness with the help of value added service on the other
hand, has exposed a range of challenges that they (firms)
have to be tackled efficiently. The leaders of these or-
ganisations are quite aware of them. They are concerned
in maintaining the competitiveness of their organisations
through a more value added service along with the core
product.
2. Objective and Scope
The core objective of this paper is to develop a general
strategic direction for innovative service in developing
countries in order to enhance their competitiveness and
ensure long-term sustainability. Various contemporary
issues in service like technology, changes in demogra-
phy, socio-economic condition, innovation, knowledge
management, network, etc. will be critically examined
to have an in depth understanding of the complex nature
of modern business scenario since these are the key
forces of the evolution of service sector in world
economy. These issues (key forces) will be analyzed
and interpreted in reference to the real world examples
in developed and developing countries. Due to the
globalization and free economy, the economies in the
developed and the developing countries are now more
interactive than that of any time before. In this paper,
the role of service in national and international business
has been highlighted in order to demonstrate the grow-
ing influence of service in our national economy. The
context of this paper is developing countries; mainly in
South-East Asia and in particular China and Bangla-
desh.

Evolution of Service: Importance, Competitiveness and Sustainability in the New Circumstances
254
3. Growing Importance of Service in
National and International Economy
At present, service is one of the crucial factors of com-
petitive advantage in many industries across the world.
Initially, it was believed that service itself is not produc-
tive. Even the founding father of Economics Adam Smith
stated in his book, The Wealth of Nations, that among
the service, labor is only productive if it increases the
value of item for which the labor is deployed [2]. Initially
there was a fear that the growth in service sector would
gradually diminish manufacturing sector and hence the
economic growth. Therefore, the services that are not
utilized for the production of tangible goods are not con-
sidered as productive rather those are considered as op-
erating costs. The scenario has been changed gradually
from the beginning of the twentieth century especially, in
the developed nations. In 1950 it was precisely learned
that in world economy service sector became the major
contributor to GDP [3]. In creating job and increasing
gross domestic products service industries are now the
largest contributors in many countries (Table 1) [4]. This
fact has compelled scholars to realize the magnitude of
service sector in the economies. Many new industries have
been emerged due to the boom in the necessity of service.
Economic activities such as transportation, communication,
construction, infrastructure, tourism, public administration,
restaurants, hotels, storage, defense, trade, banking, insur-
ance, financing, real estate, social and personal services,
business services, community services, etc.―all are in-
cluded in service sector.
The contribution of service in income generation, em-
ployment creation, and foreign exchange earnings has
increased significantly over the last two decades; be-
tween 1990 and 2006, the share of service in GDP grew
continuously from 65.4 percent to 73.0 percent in devel-
oped countries and, from 49.6 percent to 50.8 percent in
developing countries; service now account for about 72
than that of developed countries (Tables 2 & 5) [4]. In a
recent statistical year book of UNCTAD it is indicated
Table 1. Contribution of service sector to nominal GDP in
developed economies (%).
Country 1990 1995 2000 2008
USA 70.6 72.6 75.4 77.1
Canada 65.9 66.4 64.5 68.5
UK 64.2 67.5 71.8 75.6
Germany 61.2 66.6 68.5 69.0
France 69.6 72.1 74.3 77.6
Italy 64.4 66.4 68.8 71.0
Japan 59.1 64.9 67.2 69.7
Australia 66.2 67.8 69.9 68.7
Source: UNCTAD Handbook of Statistics (2010).
The importance of service in developing countries like
India, China, etc. is also increasing but at a slower pace
that there is a clear increasing trend of service export and
import in all over the world in recent years (Table 3 &
Table 4) [4] and 35 percent of employment in developed
and developing economies respectively [5].
From the abovementioned tables it is clear that the role
Table 2. Contribution of service sector to nominal GDP in
developing economies (%).
Country 1990 1995 2000 2008
China* 34.3 33.7 38.4 40.1
India 42.5 45.2 50.4 52.4
Thailand 49.7 49.0 49.0 43.8
Bangladesh 47.7 49.1 49.2 52.3
Pakistan 49.2 51.1 51.9 52.9
Sri Lanka 44.9 49.4 52.5 54.6
Nepal 40.5 44.5 46.1 50.7
*China mainland excluding Hong Kong SAR, Macau SAR and Taiwan.
Source: UNCTAD Handbook of Statistics (2010).
Table 3. Value of export of service [millions of dollars].
Economy 2005 2006 2007 2008 2009
Developed
Economy 625,344726,127881,628 1,000,268902,545
Developing
Economy 1,877,3852,102,916 2,496 ,699 2,777,1582,419,806
China* 74,404 91,999 122,206 147,112129,500
India 52,527 69,730 86,965 102,94991,106
Thailand 20,163 24,822 30,357 33,383 330,198
Pakistan 3678 3506 3767 4262 4106
Bangladesh1249 1334 1617 1996 1944
Sri Lanka 1540 1625 1775 2002 1892
Nepal 380 386 511 724 652
*China mainland excluding Hong Kong SAR, Macau SAR and Taiwan.
Source: UNCTAD Handbook of Statistics (2010).
Table 4. Value of import of service [millions of dollars].
Economy 2005 2006 2007 2008 2009
Developed
Economy 703,086817,782989,988 1,161,7961,061,439
Developing
Economy 1,690,190 1,845,496 2,139,426 2,373,931 2,084,228
China* 83,796 100,833130,111 158,924158,900
India 47,287 58,696 70,545 87,896 74,387
Thailand 27,027 33,015 38,425 46,259 38,038
Pakistan 7508 8418 8811 9715 7488
Bangladesh2207 2340 2885 3664 3405
Sri Lanka 2089 2394 2602 3010 2522
Nepal 435 493 723 852 785
*China mainland excluding Hong Kong SAR, Macau SAR and Taiwan.
Source: UNCTAD Handbook of Statistics (2010).

Evolution of Service: Importance, Competitiveness and Sustainability in the New Circumstances255
Table 5. Annual average growth rates of total and per cap-
ita real gross domestic product (%).
Economy 2004 2005 2006 2007 20082009(e)
China* 10.1 10.4 11.6 13.0 9.0 8.7
India 8.3 9.3 9.7 9.1 7.3 5.7
Thailand 6.3 4.6 5.2 4.9 4.8 -2.3
Pakistan 7.7 6.2 6.0 6.0 6.0 2.0
Bangladesh 6.3 6.0 6.6 6.4 6.2 5.4
Sri Lanka 5.4 6.2 7.7 6.8 6.0 3.5
Nepal 3.1 3.7 3.2 4.7 5.6 4.7
*China mainland excluding Hong Kong SAR, Macau SAR and Taiwan.
Source: UNCTAD Handbook of Statistics (2010).
and necessity of service is increasing across the world
though the rate of contribution is varying in the devel-
oped and the developing countries. At present, service is
an important source of economic growth; particularly in
market economy. However, the export of service is less
than the import of service in the developing countries in
comparison to the developed countries. But this trend
will change if the economies of these developing coun-
tries improve, i.e. export of service will be greater than
the import of service and thus, the positive contribution
to the GDP like developed countries will be ensured.
4. Forces behind the Evolution of Service
Sector
Modern economies are dominated by service sector. It is
impossible to say exactly when, how and why service
started getting increased importance. Since the world war
two, world economy has become more and more com-
plicated. A dramatic change has been taken place in the
composition of the economies across the nations. These
changes could not be identified very precisely as signifi-
cant service output is created from unrecorded household
work, many hidden services in large corporations, asso-
ciated service in the manufacturing sectors and so on [6].
For example, the contribution human resources functions,
logistics, maintenance, etc. are not recorded or recog-
nized accurately.
Various social, economic and technological factors, in
addition to political factors have started influencing the
firms more directly. It is quite difficult to say which fac-
tor(s) is responsible for the steady growth and popularity
of service. In fact, there are a number of factors that have
played a crucial role in this connection. Perhaps the most
influential factor is the “need for service”. In common,
the factors are higher level of disposable income and
customers’ buying behavior, change in the demography,
technological advancement, increase in the pace of glob-
alization, intensification of professionalism, and chang-
ing nature of competitiveness of the businesses and as
well as nations, etc.
Consumers’ buying behavior changes as the dispos-
able income changes. Famous statistician Ernest Engel
observed a phenomenon, which is known as Engel’s
Law1. The people in the marginal level of the society
spend almost their entire income for essentials like food
and accommodation. But as the income increases,
spending on the necessities decreases rather a tendency
for spending in recreation, personal care and luxury in-
creases. People with higher income spend relatively
more on services and less on goods. A trend of eco-
nomic development has been observed in many devel-
oping countries like China, India, Thailand and to some
extent in Bangladesh, etc. in recent years. The increased
joining of women in the workforce has brought a change
in the domestic functions played inside the home. They
are not confining themselves in traditional family terri-
tory. This has made a dramatic change in many devel-
oping countries. Women are now having less time for
cooking and other household activities. In China, a large
number of urban middle class have their breakfast, lunch
and dinner in cheaper food corners or hotels since hus-
band and wife both are working or involved in their in-
come oriented activities (e.g. running grocery). Guardi-
ans are now more interested in sending their children in
day care centers or day long school. Car owners are tak-
ing their cars for carwashes other than washing the cars
by themselves. The standard of living has gone up with
the increase in income. The rise in the number of dual
career families also has created a greater demand for
consumer services like housekeeping, retailing, real es-
tate, tourism, personal finance services, etc. As a result,
spending on entertainment, hospitality and tourism ser-
vices has gone up.
Similar trend is also visualizing in Bangladesh. A large
portion of garment workers are women. During this study
several interesting facts came out. For example, they
(garment workers) are sending their cloths to small laun-
dries in their localities for washing since they have lim-
ited time to spare whereas, they used to wash those by
themselves before. They buy their lunch from the food
suppliers (caterer) at a cheaper rate. On the other hand,
due to the economies of scale (as their number is quite
large) they (food suppliers/caterer) can supply foods at a
cheaper rate than the lower income restaurants for con-
sumers. Increased disposable income gives rise to other
from of business. With the dramatic increase in life ex-
pectancy, the world is now experiencing a rise in the
population of retirees which, in turn has given rise to the
new demand of leisure and travel, healthcare, insurance,
and the like.
Consumers today are more demanding and not easily
1Engel’s Law is the observed phenomenon that when a family’s income
increases, the proportion of money they spend on food decreases.

Evolution of Service: Importance, Competitiveness and Sustainability in the New Circumstances
256
contented with what they have. The aspiration level has
also risen. The fast changing environment has forced to a
greater competition and naturally, a greater demand for
learning institutions, in order to hone and develop skills
that are essential for the survival of the fittest. This has
led to the opening of knowledge and information based
services. The trend towards globalization and greater
demand for communication, travel and information has
nurtured growth in these services, which, in many cases
have been brought about by the information superhigh-
way and the advent of modern media and gadgetry. The
increased specialization within the economy has directed
to a dependence on specialist service providers like mar-
keting communication or marketing research as support-
ing functional sectors of the economy. In this way, firms
that at one time employed their own lawyers now use the
services of law firms. The offering of cheap labor in the
third world countries have given rise to the service called
“outsourcing” which, with the help of state-of-the-art
communication system does not require the mother com-
pany and the supporting outsourcing company to be lo-
cated in the same country.
There is no disagreement that the technological pro-
gress is the single most influential factor. The techno-
logical-evolution has changed the dimension of service
radically, especially the way the service is configured
and delivered to the customers. Traditional banking ser-
vice has been changed in many developing countries.
Automated Teller Machine (ATM) or Instant Cash Boo-
ths are now available in all major cities in Bangladesh.
As a result, the number of account holders in private
banks has increased more than that of the government
owned commercial banks. In counties like China, India,
Bangladesh, with the help of information technology, all
banks irrespective public or private sector, have a huge
network; an account holder of any bank can use his or
her ATM card or instant cash card in any bank in any
place at any time all over the country. The new technol-
ogy has not only modified the service package but also
aided in obtaining economies of scale and a new scope of
business with little additional cost [7].
5. Strategic Importance of Service in
Business
Today firms compete on the basis of services, and not on
the basis of physical products [8]. Service is the key de-
terminant of competitive advantage since products are
quite difficult to differentiate. Traditional manufacturing
sector is gradually being overshadowed by the rise of
service sector. Customers are no longer satisfied with the
physical products alone. At the same time, since products
are so similar in terms of feature and performance and
therefore, customers often cannot differentiate the prod-
ucts. In such a situation, embedded service is the one of
the key determinants in differentiating products. Market-
ers are trying to attract customers by providing higher
level of service than that of their competitors [9]. For
example, to a customer, there is no apparent difference
between a TCL television and a Konka television; it is
the service that is offered by the retail store really differ-
entiates these two products. In 1985, there was an inter-
esting advertisement by IBM. The slogan of that adver-
tisement was “If everybody wants to have an IBM ter-
minal, it is because IBM service is the best”. This adver-
tisement did not highlight the tangible product rather it
highlights the service component of tangible product.
Amazon.com keeps its customers loyal through its
customer service. The prompt and satisfactory explana-
tion and action regarding any order whether in transit or
misplaced makes the customers truly loyal to the com-
pany. Clients are made satisfied and wowed about their
service via their up-to-date information that relieves the
customer from anxiety. The orders that are made through
express delivery can be tracked from the port of original
departure till the last port of destination (via DHL’s
tracking system integrated with customer’s amazon.com
account) and until the package reaches the customer’s
doorstep. The customers while ordering can also get to
look inside the books online to have an idea on the con-
tent and the company lives up to their brand promise of
replying within 6 to 12 hours, with a quicker and detailed
reply even before the stipulated time of 6 to 12 hours of
feedback upon every inquiry. Each letter is carefully
written using the business communication strategies of
dealing with the customers without making them un-
happy.
The Sheraton Hotels and Resorts Worldwide ventured
into making their unhappy/dissatisfied customers loyal
with their “WOW” concept of service since its inception
in 2002. The disgruntled guest when expresses dissatis-
faction, the authority tries to solve it immediately by
showing a goodwill gesture. Suppose, if the tea at the
lobby café turns cold when served; the lobby café atten-
dant not only replenished the order with a new coffee,
s/he delights the guest by extending an order of cookie
free with the compliments of the house. Similarly, if any
guest mistakenly even forgets to switch off the DND (do
not disturb) sign and orders room service a pet bottle of
mineral water and the room service delivery goes back
after seeing the DND sign and the guest demands apol-
ogy even when the guest is at fault, the authority shows
that they care about every guest they promise to take care
by giving one carton of mineral water bottle free. The
WOW budget for extraordinary service gives every indi-
vidual working for the hotel the discretion of wowing the
guest (Here WOW stands for: What’s the problem? Own

Evolution of Service: Importance, Competitiveness and Sustainability in the New Circumstances257
it and solve it! Wow the guest!)
From the above discuss it is clearly appeared that em-
bedded service is a decisive in attracting customers irre-
spective of nature of the offering. Certainty it (service)
has become an effective means of competitive advantage.
6. Emerging Issues in Service
In the new millennium, the nature of service has been
changing rapidly due to the increased customer integra-
tion into the core of the business, customization and so
on. Information technology has appeared as the key en-
abler of increased customer empowerment. Advances in
information technology (IT) have reduced the life-cycle
of products and dramatically changed the way in which
business is managed in the new economy [10]. World-
wide people are currently connected to the Internet.
Internet facilitates customer for higher degree of self-
service or customization while selecting their products
[11]. Electronic mass media is playing a vital factor in
empowering customers, too. The new state of condition
is characterized by both the opportunity and the chal-
lenge. In several occasions, it has been so observed that,
it is pretty difficult even to differentiate the services pro-
vided by many organizations. For example, in China,
Haier, Midea and Gree—the three local giant home ap-
pliance producers offer similar products with similar ser-
vice promises. Often customers find themselves in a
point of indifference. Likewise in Bangladesh, in mobile
phone industry it is becoming more difficult to identify
which mobile phone package is more desirable and
which one provides real value to the customers because
mobile telecommunication service providers like Gra-
meenPhone and Banglalink are offering almost identical
package in different brand names and using different
slogans. These service providers are busy in grabbing
their competitors’ market share by massive marketing
campaign instead of offering new service, which is sim-
ply a waste of huge financial and other resources. There-
fore, the time has come for more intelligent and innova-
tive service configuration for the informed customers.
Innovation in service is the demand of the new millen-
nium. In addition to innovation, there are a range of as-
sociated issues which are equally critical and need sys-
tematic addressing.
Innovation has become an essential element of firms’
competitive proposition. In many organizations innova-
tion is at the top of the agenda. In highly globalized
economy, it has become the key force for growth, com-
petitiveness and economic development; through innova-
tion an enterprise enhance their productivity and meet the
increasing and constantly changing market demand, and
countries thereby achieve sustainable economic growth
[12].
It is widely recognized and appreciated that the ability
to innovate can change the fundamental rules of competi-
tion [9]. The capability to innovate and to bring innova-
tion successfully to market will be a crucial determinant
of the global competitiveness of nations over the coming
decades [12]. According to Muller et al., development of
innovative capabilities is the only means by which com-
panies can sustain a competitive advantage [13]. It is
very much implied that the extent an offer is differenti-
ated that is innovative and creative the greater is the
chance of sustainable competitive advantage [14]. Inno-
vation promotes growth of a firm through the develop-
ment of competence-enhancing products, processes and
services [15].
An institutional approach is equally important in con-
figuring an effective service. Since the service function
of a firm concerns and interacts with almost every activ-
ity or part or segment of the firm [10], thus, it needs a
holistic approach [15] by incorporating all segments of
an organization. The blue ocean strategy proposes to
align entire system of a firm along with all of its re-
sources all its resources in pursuit of differentiation and
lost cost in order to ensure competitiveness in long-term
[16].
The influence of technology is a never ending story.
Technological advances influence the growth of service
directly; particularly in the case of independent service
offering and being a part of the total product package, etc.
Thus, Service has become a business essential in manu-
facturing [17] as well as the foundation for the new
product development. For example, Singer in Bangladesh
provides after sale service to the customers in the form of
repairing and maintenance, installation, training and de-
velopment. It is possible to book air ticket in China-
Eastern Airline through internet. In all Chinese universi-
ties, students are given a Digital Student Card. This card
can be used for multi-purposes, such as a library card,
debit card in the dinning room and medical centre, bank
instrument, etc. Consequently, service in conjunction
with product and service provides customers an aug-
mented service that is a real value. When service is added
with the physical product or with another service, then a
new offer is created.
There is another significant change in the global e-
conomy—the increased influence of knowledge across
the world. Drucker mentioned that “We are moving to a
society in which the basic resources of economy is know-
ledge, instead of capital, labor and natural resources”
[18]. According to Stewart, “Knowledge has become the
preeminent economic resources—more important than
raw material; more important, often than money. Con-
sidered as an economic output, information and knowl-
edge are more important than automobiles, oil, steel, or

Evolution of Service: Importance, Competitiveness and Sustainability in the New Circumstances
258
any of the products of the industrial age” [19]. The
knowledge is equally important in the individual organ-
izational level. It (knowledge) is the most strategically
important resources of the business [20] and also the
strategic determinants in success and failure of the busi-
ness. The competitive advantage of the firms can be un-
dercut overnight due to the new knowledge of the com-
petitors. Market Leadership, size, name, recognition
structure no longer guarantee the survival [21] even the
skill and core competency cannot ensure that the firms
will be able to capitalize on the new opportunity and
tackle new challenges. Organizations develop their ser-
vice package according to the expectations of the cus-
tomers. Closer as the service to the customers’ expecta-
tions, more popular is the offer. For example, at Singer
Bangladesh, embedded service is the key factor in their
growing popularity. Their service promise provides a
sense of security to their customers. As the time passes,
service providers modify their service package according
to the changing expectations of the customers. Knowl-
edge is the key player in this case. Knowledge not only
provides an idea about the desired offer but also the de-
sired service innate the product. While developing new
offers, organisations have to develop their own competen-
cy and expertise to materialize the expectations of the
customers. Thus, knowledge has the dual role within the
Table 6. The implications of emerging issues in service.
Emerging Issues Strategic Implications
Information technology
Empowered customer; intense customer
involvement; shared information; similar
offers and shorter product lifecycle, etc.
Holistic approach
Institutional involvement; capacity de-
velopment, efficient alignment of re-
sources, system and activities; intensive
people integration and interaction, etc.
Innovation and creativity
Differentiated offers; greater access to
customer information; capacity to inno-
vate; useful means of sustainable com-
petitive advantage and so on.
Indispensability of service
No product without embedded service;
attracting customers through attached
service, after sales service, customer sat-
isfaction and so forth.
Technology
New offerings; increased utility; greater
value to the customers and organization;
faster and efficient service, technological
capability development, new service idea,
effective communication, and so on.
Managing knowledge
Strategic assets to configure innovative
and intelligent offering; better customer
profiling; better market information; sus-
tainable source of competitive advantage,
development of distinctive capability of
the individuals as well as organizations
and so forth.
organization—developing distinctive capability for the
firm which also is a unique source of competitive advan-
tage; and getting access to the market and the customers’
domain. The firm, which understands customers’ needs,
will be able to mix and match various products and ser-
vices that commensurate with customers’ specific needs.
7. Other Essential Factors of Innovative
Service
In the earlier section we found a number of issues which
are extremely crucial in configuring an effective and at-
tractive service. These issues have a number of strategic
implications (Table 6). These issues directly related with
organization culture, leadership, people (employees and
customers) integration, system, activities, capacity de-
velopment, market and customer information and so on.
Without a dynamic and accommodating organization en-
vironment it is impossible to conceive these strategic
issues effectively. In this regards institutional initiatives
are essential. The initiatives are as follows:
7.1. Business Development Policy and
Supporting Infrastructure
Business development policy is imperative for overall
business activities of an organization irrespective of nature.
A general business development policy should be accord-
ing to the very basic nature of the business. Supporting
infrastructure (information technology, logistics, HR and
administrative policy, etc.) is equally important since suc-
cess of business development policy depends on it.
7.2. Innovative Organization Culture
Innovative organization culture is simply crucial in mak-
ing an organization innovative. In this connection a sup-
port from top management is needed along with other
facilities like research and development, training and
development, creating a learning culture with a shared
vision, encouraging employee participation in service
development. People must be at the heart innovative or-
ganization culture. Creative individuals are the main im-
petus of innovation process. The organization should
recruit creative and innovative personnel. It is also nec-
essary to make innovation is the requirement of the job
description otherwise people will lose their urge for in-
novation. Continuous up-gradation of knowledge-base
through knowledge initiatives; alignment of resources in
the line of business development policy and free flow of
information and ensuring access to the knowledge data-
base by the workers are simply vital.
7.3. A Total Competency—Right Skill, Right
Time Right Place and Right Offer
In the knowledge era, businesses are facing a dramatic

Evolution of Service: Importance, Competitiveness and Sustainability in the New Circumstances259
new competitive environment, which is characterized by
abundant dynamic opportunities, possibilities and chal-
lenges. For the competitive advantage ‘right knowledge’
along with other factors, e.g. right time, place, etc. mat-
ters the most [21]. In service, workers, process and cus-
tomers are directly involved since production and con-
sumption take place simultaneously. Therefore, the right
skill with the right knowledge is a bare need to ensure
right time and place. People are the most inevitable and
valuable resource due to their intellectual input. An inte-
grated approach of human resource management is
needed in order to develop organizational competency.
Hamel and Prahalad mentioned that managers nurture
and develop competitive intelligence at every level of the
organization in order to build the firm’s competitive ad-
vantage [22]. Collective individual competency and ca-
pacity would convert into organizational competency in
an organizational setting. This organization competency
refers to the capability to produce or configure right ser-
vice for the clients. In future business success will de-
pend on an organization’s ability to imagine and/or cre-
ate a need. Innovation in services reflects the creativity
of the human mind (knowledge) [23].
7.4. Research and Development
Research and development is the fundamental source of
innovative offers. The innovators must have the all types
of resources to play with their ideas. Unless the ideas are
nurtured, implemented and tested those ideas will not
bring any result, and innovators will not be motivated.
Simultaneously, an organization will deprive itself from
getting the benefit from innovation and creativity.
7.5. Social Network for People Integration
Innovative service is the result of “innovative service
concept” and obviously it starts from in depth under-
standing the customers’ needs. Similarly, it is also re-
quired to have a holistic understanding of the customers,
too. For knowledge regarding the market and customers,
a continuous interactive mechanism is needed, i.e. a so-
cial network, between the firms and the market. This
network supplies information on buyers’ value chain, i.e.
total needs of the buyers for today and tomorrow. In the
boundary-less virtual world network between customers
and the organization has become an essential precondi-
tion for innovation, acquiring new knowledge on cus-
tomers and market, and to attain the capabilities in serv-
ing the customers. A technology based network is equally
important. For example, the competitive advantage for
courier service companies like Federal Express or DHL
significantly depends on the technology based network.
It is essential, particularly for tracking during transit.
This network not only helps in tracking the package but
also to integrate people in all steps of the service delivery
process. Furthermore it (technology based network) de-
monstrates the service delivery process to the customers,
which creates a positive impression to them.
8. Role of Government in Service Innovation
Although it may be presumed that innovation is a simple
organization effort yet the real fact is that it is the func-
tion of micro and macro economic factors. Earlier, or-
ganizational aspect more or less has been addressed. It is
also crucial to see the macro-economic factors particu-
larly the role of government in encouraging innovation.
By nature innovation is a complex social process; many
public and private institutions, knowledge bodies, schol-
ars, policy makers, etc. are directly or indirectly involved
in this innovation process. The innovation performance
of a country significantly depends on how these actors
interface each other in this innovation process [12]. Even
though government cannot play a direct role, but obvi-
ously can play an indirect yet vital role in fostering in-
novation. The environment for innovation can be created
improving business climate, establishing well-balanced
IPR intellectual property right systems, investing in hu-
man capital, investment in research and development,
provide more support to small and medium enterprises
(SMEs), acquires, creates, disseminates, and uses knowl-
edge, and so on. In this connection the Chinese experi-
ence may provide useful insight. Promoting sustainable
development through innovation appeared as a huge
challenge to the government of China; to cope with this
challenge, the government of China introduced four ma-
jor measures: 1) proactively offer guidance and support
to promote indigenous innovation; 2) gradually establish
a technology innovation system with enterprises as the
cornerstone, the market as the guide, and industry, aca-
demia, and research institutions fully integrated; 3) pro-
vide more support to small and medium enterprises
(SMEs); and 4) ensure better protection of intellectual
property rights (IPR) [12]. The government of Bangla-
desh has given more emphasis in its running ‘five years
plan’ for the development of infrastructure for the service
sector.
9. Conclusions
In the customer empowered market, customers expect
that firms will delight their customers with their innova-
tion and creativity. By ensuring a continuous flow of
innovation, a firm can attain competitive advantage and
sustainability. In contrast, perhaps it (innovation) is the
single most destructive force in an industry [24]. It can
destroy organization’s capabilities. The dual nature of
innovation necessitates careful managerial attention. To-
day’s success formula might not be effectual in near fu-

Evolution of Service: Importance, Competitiveness and Sustainability in the New Circumstances
260
ture. The present state of competency may not be suffi-
cient for tomorrow’s success. Firms need to balance the
competence-enhancing and competence-destroying forces
in their innovation endeavors. Organisations need a con-
tinuous upgrading in their armor and arsenals through
acquiring the latest knowledge and the new competency
along with the new technology. Otherwise, service will
lose is ability to enhance the true value to the customers,
and the organization will be in a more vulnerable flux in
attaining the competitive edge.
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