Hanna Kostama and Marja Toivonen 1 INTRODUCTION In current research, users are seen as an important resource for service innovation or even as the very basis of service innovation (Alam and Perry, 2002; Howells, 2004; Oliveira and von Hippel, 2009; Sundbo, 2008). A corresponding shift is taking place in the research on organizational development, which nowadays often applies so-called design science approaches. Organizational changes are mobilized by involving users at every stage of the design process, from problem diagnosis to solution generation and implementation (Mohrman, 2007). Experience-based design and direct user participation have been found to be beneficial for the improvement of organizational processes, performance and effectiveness. These approaches appreciate subjective experience as an important perspective in addition to the ‘objective’ service features (Bate and Robert, 2007). Curiously enough, the mainstream of the literature described above does not discuss the economic situation in which user-based service innovation or user participation is taking place or is being pursued. Studies on user-based service innovation – as well as studies on service innovation in general – have developed in isolation from those studies which tackle the issues of efficiency and productivity in services. Sometimes it even seems that the problem of scarce resources has not been considered relevant in the contexts where services are developed and renewed. The targets of cost-cutting and profitability, and the challenges of downsizing and restructuring, have only rarely been addressed in these contexts. However, the efficiency and productivity of services are highly topical issues today, and the strategies and processes...
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