How to Build a Growth-Driven Service Innovation Portfolio

A balanced mix of sustaining, adjacent, and transformational innovations is essential for long-term success in B2B manufacturing, but many companies struggle due to unclear strategy, an overfocus on incremental improvements, and poor portfolio management.

The Changing Role of Service Innovation in B2B Manufacturing

Service innovation in B2B manufacturing is undergoing a fundamental shift. It is no longer just about improving efficiency or optimising service operations—it is becoming a primary driver of business growth. Digitalisation, sustainability, and changing customer expectations are reshaping the competitive landscape, demanding that manufacturers rethink their approach to service development.

For years, many companies have viewed service innovation as a support function—an add-on to their core product business. But today, leading manufacturers use service-oriented value propositions to differentiate, create new revenue streams, and future-proof their business. Digital and data-driven services are at the heart of this transformation, driving the performance of existing product-related services and driving growth by solving other (emerging) customer needs.

However, adapting to this new reality requires more than investing in the latest technologies. It demands a strategic approach to service innovation—one that balances sustaining, adjacent, and transformational innovations to drive short-, medium-, and long-term growth.

The Problem: Innovation Portfolios Not Geared for Growth

Many B2B manufacturers struggle to turn service innovation into a true growth engine. While they invest in service development, their innovation portfolios are not structured for long-term success. The result? Incremental improvements that maintain the status quo but fail to unlock new revenue streams, expand markets, or create disruptive value.

Root Causes: Why Innovation Portfolios Fall Short

Lack of Strategic Direction

Innovation initiatives are often reactive rather than aligned with long-term business goals. Without a clear strategy, companies end up chasing trends (e.g., AI, predictive maintenance) rather than developing a service innovation roadmap for sustained growth.

Narrow Focus on Incremental Innovation

Many companies over-invest in sustaining innovations that optimize current services but fail to drive market expansion or business model transformation.

No Clear Framework for Portfolio Management

Without structured portfolio governance, companies struggle to balance short-term efficiency gains, mid-term adjacencies, and long-term transformational opportunities.

Inefficient Resource Allocation

Companies often prioritize today’s business needs over future opportunities, leading to underinvestment in disruptive innovation and missed growth potential.

To build a growth-driven innovation portfolio, companies need a structured approach that aligns innovation with strategy, applies proven portfolio management frameworks, and ensures disciplined resource allocation. The next section outlines how to achieve this.

Why Innovation Balance Matters

Failing to balance an innovation portfolio is not just a missed opportunity—it is a direct threat to competitiveness. Companies that overinvest in sustaining innovations while neglecting adjacent and transformational innovation risk losing their market position to more agile, forward-thinking competitors.

The Widening Gap: Leaders vs. Laggards

The lesson from Amazon, Microsoft, Tesla, and other digital leaders is clear: Companies that structure their innovation portfolios for long-term growth consistently outperform those that do not.

Conversely, the failures of Kodak, Nokia, and traditional airlines serve as warnings: delaying innovation decisions reduces relevance to customers.

Missed Growth Opportunities

In fast-moving industries, companies that lead in service transformation capture new markets before others even recognise them.

In the early 2000s, most tech companies saw cloud computing as an internal infrastructure challenge. Amazon, however, recognized an untapped market for cloud-based services. By investing early in Amazon Web Services (AWS), they built an entirely new business model that now dominates the cloud computing industry. Traditional IT service providers, who were slow to respond, were left scrambling to catch up.

Slower Competitive Response

The pace of service innovation is accelerating, and incumbents are struggling to keep up. The most dangerous misconception is that companies will have time to react when the market shifts. In reality, disruption often happens faster than expected.

Nokia once dominated the mobile phone industry but failed to recognise the shift toward software-driven smartphones. While Apple and Google built ecosystems around apps and digital services, Nokia remained focused on hardware. By the time they tried to pivot, it was too late—competitors had already secured their market position.

In B2B manufacturing, service transformation follows the same pattern. Companies still sticking to traditional service will find it increasingly difficult to compete against data-driven, innovative service providers that offer greater value with lower friction.

The Solution: Structuring a Service Innovation Portfolio for Growth

Service innovation in B2B manufacturing must be strategic, balanced, and diversified to drive sustainable growth. Companies need a structured portfolio approach that ensures they are not just maintaining the status quo but also actively unlocking new market opportunities. A well-designed service innovation portfolio aligns with long-term business goals, diversifies investment across different types of innovation, and ensures measurable impact at every stage of development.

Guided by a Winning Service Strategy & Strategy Roadmap

Aligning Innovation with Long-Term Strategic Objectives

A service innovation portfolio must align with where the business wants to be in the future. This requires clarity on four key strategic questions:

• Winning Aspiration – What kind of service business does the company want to build?
• Where to Play – Which markets, customer segments, and value propositions will drive innovation?
• How to Win – What service capabilities and differentiators will give the company a competitive edge?
• Must-have Core Capabilities – What core capabilities are essential to win and will need to be developed?

Innovation should not be a disconnected effort; it should be an intentional part of the business strategy, directly contributing to service growth, profitability, and differentiation.

Evaluating Market and Technology Trends for Opportunity Spotting

To structure an innovation portfolio effectively, companies must proactively identify emerging opportunities. This requires ongoing monitoring of:

• Market shifts and customer expectations – What new pain points, demands, and service preferences are emerging?
• Technology advancements – Which digital tools, data-driven services, or automation trends can create new value?
• Competitive landscape – How are competitors and potential new entrants evolving their service models, and where are the white spaces for differentiation?

Organisations should adopt a systematic approach to trend evaluation by monitoring weak and early signals. They can use tools such as scenario planning, ecosystem mapping, and early-stage prototyping to explore future service opportunities.

Strategic Alignment

Each innovation initiative must be connected to the company’s service business objectives. This means searching for projects that enrich the portfolio in meaningful ways:

• Does it support the company’s service revenue model?
• Does it align with customer demand and emerging market needs?
• Does it leverage existing strengths or require new capabilities?

Several proven frameworks help organisations build a balanced, strategic service innovation portfolio.

Categorisation of innovations

Hybrid Innovation Matrix

The Hybrid Innovation Matrix categorizes innovation efforts based on two dimensions:

• Business Logic(Horizontal Axis) – Differentiates between Common Business Logic, which follows existing industry norms, and New Business Logic, which introduces new ways of operating, often inspired by other industries or market shifts.
• Magnitude of Change(Vertical Axis) – Ranges from Small Changes (incremental improvements) to Big Changes(radical shifts).

The matrix forms four quadrants:

• Bottom-Left: Adaptive and Incremental Improvements– Small-scale optimizations within existing business logic (e.g., process enhancements, minor service upgrades).
• Top-Left: Pushing Frontiers with Larger-Scale Changes– Major innovations that extend current practices without changing business logic (e.g., advanced automation, large IT rollouts).
• Bottom-Right: Reconfiguring and Extending Business Models– Shifts in business models leveraging new logic (e.g., servitization, subscription-based services).
• Top-Right: Co-Evolution of New Solutions and Markets– The most disruptive innovations, creating entirely new service ecosystems and industries.

A healthy innovation portfolio includes a mix of all three categories​.

21 Innovation Tracks

This model breaks down innovation opportunities into value promise (customer value), value delivery (service execution), and value capture (revenue model innovations). It encourages companies to explore multiple angles rather than focusing narrowly on one type of innovation, ensuring a balanced approach to service transformation and growth.

1. Value Promise (What You Offer to Clients):

• Customer Segments: Targeting specific groups to address their unique needs.​
• Customer Needs: Identifying and solving critical problems for clients.​
• Brand: Developing a strong brand that resonates with customers.​

2. Value Delivery (How You Deliver the Promised Value):

• Technology: Leveraging new technologies to enhance service delivery.​
• Processes: Optimizing internal processes for efficiency.​
• Channels: Utilizing various channels to reach and serve customers effectively.​
• Partnerships: Collaborating with other organizations to enhance offerings.​
• Resources: Allocating necessary resources to support innovation.​
• Activities: Implementing key activities that drive value delivery.​

3. Value Capture (How You Capture Part of the Value):

• Revenue Streams: Identifying various sources of income from your offerings.​
• Cost Structure: Managing costs to ensure profitability.
• Pricing Mechanisms: Developing pricing strategies that reflect the value provided.​

By exploring and integrating these tracks, manufacturers can uncover new opportunities for growth and differentiation in their service offerings.​

The time horizons

A time-based model for balancing short-, mid-, and long-term innovation:

• Today – Continuous improvement of existing service models.
• Tomorrow – Mid-term business model shifts and digital transformation.
• The Day After Tomorrow – Radical new service ecosystems and disruptive innovations

Companies should allocate resources strategically across these three horizons to maintain both short-term performance and long-term growth potential.

Types of Service Innovation

Different categories of service innovation should be explored:

• Product Support Innovations – Advanced maintenance, predictive analytics, lifecycle services.
• Performance & Uptime Innovations – Outcome-based service contracts, remote monitoring.
• Workflow & Process Innovations – End-to-end process efficiency improvements for customers.
• Outsourcing - ​ and service offerings in which customers outsource operating the equipment.
• Ecosystem Innovations – Platform-based service models, connected services and industry partnerships.

Commitment and Funding

Securing Buy-In from Leadership

Leadership engagement is critical. To gain executive support:

• Align innovation goals with business priorities (e.g., revenue growth, customer retention).
• Demonstrate ROI potential with clear financial models and case studies.
• Showcase competitive risks if innovation is deprioritised.
• Secure early business cases with early revenue streams to show success and generate funding for further innovation.

Structuring Resource Allocation

A successful innovation portfolio requires dedicated governance and funding mechanisms:

• Follow the 70/20/10 investment model:
  • 70% for sustaining innovations (efficiency, cost reduction).
  • 20% for adjacent innovations (market expansion).
  • 10% for transformational innovations (disruptive service models).
• Create an agile decision-making structure that allows faster approvals and adaptation.

Fostering a Culture of Innovation Beyond R&D

Innovation must extend beyond the R&D department. Companies should:

• Encourage cross-functional collaboration between service, sales, and digital teams.
• Empower employees with structured innovation programs (hackathons, pilot programs).
• Build external partnerships with technology providers, startups, and research institutions.

Summary & Next Steps

Service innovation is no longer an optional add-on for B2B manufacturers—it is a critical driver of growth, differentiation, and long-term success. However, too many companies remain trapped in incremental improvements, focusing on sustaining their existing business rather than unlocking new value.

To stay competitive in an era of digital transformation, changing customer expectations, and emerging service models, companies must structure their innovation portfolios strategically. This means balancing short-term efficiencies with mid-term expansions and long-term transformation.

Key Principles for Structuring an Innovation Portfolio for Growth

A well-structured service innovation portfolio follows these essential principles:

1. Diversification – Ensure a mix of sustaining, adjacent, and transformational innovations to balance risk and reward.
2. Strategic Alignment – Every innovation initiative should contribute to the company’s long-term service strategy and business objectives.
3. Balanced Investment Across Lifecycles – Innovation efforts should be distributed across ideation, scaling, and market penetration.
4. Governance & Funding Discipline – Allocate resources using structured frameworks like the 70/20/10 rule to maintain a future-focused portfolio.

Why Now is the Time to Rethink Service Innovation

The market is evolving at an increasing speed. Digital-first competitors, customer demands for new service-oriented value propositions, and sustainability-driven transformations are reshaping the landscape. Companies that fail to adapt risk falling behind, while those that take a proactive approach will lead the next era of service excellence.

• Disruptors are moving fast – Companies like Amazon AWS and Microsoft capitalised on emerging service models before the competition caught on.
• Customer expectations are shifting – Businesses are demanding more integrated, data-driven services rather than traditional maintenance contracts.
• New service models are emerging – Data-driven performance solutions, platform-driven, and ecosystem-led service strategies are proving more scalable and resilient.

Waiting to innovate is not an option. The gap between leaders and laggards is widening, and companies that fail to evolve will struggle to maintain relevance.

Your Next Steps: Take Action Today

Now is the time for service leaders to take a hard look at their innovation portfolios and make strategic adjustments. Here’s what you can do today:

1. Assess your current portfolio – Use frameworks like the Hybrid Innovation Matrix, 21 Innovation Tracks, and the 3-Box Framework to evaluate the balance of your service innovation efforts.
2. Identify gaps and opportunities – Are you overinvested in sustaining innovations? Are you missing adjacent or transformational opportunities?
3. Engage leadership and secure buy-in – Drive internal alignment on the importance of service innovation as a strategic growth driver.
4. Allocate resources strategically – Apply the 70/20/10 funding model to ensure long-term innovation success.
5. Join the conversation – Learn from industry leaders by attending the Service Transformation Summit, where we dive deeper into strategies for accelerating service innovation.

The companies that take action now will define the future of B2B services.

Join the Service Transformation Summit: Driving Service Innovation for Growth

Innovation doesn’t happen in isolation. The most successful service leaders learn from each other, exchange ideas, and collaborate on new strategies. That’s why we’re bringing together global service executives, strategy leaders, and innovation pioneers at the Service Transformation Summit—the premier event for accelerating service transformation in B2B manufacturing.

Why Attend?

At the summit, you will:

✅ Refine Your Innovation Portfolio – Gain hands-on insights into balancing sustaining, adjacent, and transformational innovations for long-term growth.
✅ Learn from Industry Leaders – Hear from companies that have successfully transformed their service businesses, driving new revenue streams and competitive advantage.
✅ Engage in Deep-Dive Discussions – Participate in interactive sessions and networking opportunities with peers facing similar challenges in service innovation.
✅ Discover Proven Frameworks & Strategies – Walk away with practical tools to assess and optimize your service innovation roadmap.

Take Action Today

🔹 Step 1: Assess Your Innovation Portfolio – Use the frameworks shared in this article to evaluate your current approach.

🔹 Step 2: Register for the Service Transformation Summit – Join a global network of service innovators who are shaping the future of B2B services.

🔹 Step 3: Be Part of the Conversation – Share your challenges, ask questions, and connect with industry experts who can help guide your transformation journey.

👉 Check out this Service Transformation Summit today!