Total Quality Management Vol. 22, No.

5, May 2011, 535 551

The service excellence and innovation model: lessons from IKEA and other service frontiers
Bo Edvardsson and Bo Enquist
CTF-Service Research Centre, Karlstad University, SE-651 88 Karlstad, Sweden The objective of this paper is to achieve a better understanding of the role of ethical values in forming and directing a strategy for service excellence, service innovation, and value-incontext. The paper argues that sustainability and corporate social responsibility are the key drivers of value resonance and service excellence. A case-study approach is used in the context of retail service providers, and the main case is the furniture company IKEA. Key values of our case are identied, analysed, and compared with values in other companies. The ndings suggest that the innovation management of these rms has been characterised by: (1) business platforms (such as physical and web-based experience rooms) that facilitate their customers service experiences; (2) service brand and marketing communication based on values resonance among the norms and ethical values of customers, the company, and the wider society; and (3) sharing of corporate values among leaders and employees to provide energy and direction for excellence and sustainable business development. A new framework known as The business model of service excellence and innovation known as the service excellence and innovation (SEIB) model is developed. The new framework focuses on how to create and manage resource congurations that enable, support, and direct customers in value co-creation and service exchange. Keywords: service excellence; service-dominant logic; value creation; values, sustainability; corporate social responsibility; innovation; business model

Introduction In recent years, perceptions of the concept of value and how it is created have shifted from a focus on units of output (in terms of the attributes of goods and services) to a focus on the notions of value-in-use (Lusch & Vargo, 2006; Vargo & Lusch, 2004, 2008) and value-in-context (Vargo, 2008). According to this changed perspective, value is understood as something that is co-created with customers, rather than being pre-dened by providers and incorporated in their offerings of goods and services. In parallel with these developments, the notion of customer value has been extended to include consideration of a companys values. According to this view, excellent companies are distinguished from other companies by their ethical values, and not merely by logical cognitive assessments of value-for-money outcomes (Edvardsson & Enquist, 2009; Johnston & Clark, 2001). Such ethical values have been described by Edvardsson and Enquist (2009) as touch-points or triggers that have the capacity to contribute to value or, alternatively, to destroy it, as perceived by customers and other stakeholders. As a consequence, the present authors have introduced the idea of values-based service as a basis for a sustainable business model for service providers. Such a model shifts

Corresponding author. Email: bo.enquist@kau.se

ISSN 1478-3363 print/ISSN 1478-3371 online # 2011 Taylor & Francis DOI: 10.1080/14783363.2011.568242 http://www.informaworld.com

536 B. Edvardsson and B. Enquist the focus from a control-based norm to a values-based norm, in which corporate social responsibility (CSR) and sustainable development (SD) are recognised as the driving forces for value creation and value-in-use. Against this background, the present article combines insights from case studies of the Swedish furniture supplier IKEA and other values-based rms with aspects of servicedominant logic (S-D logic) (Vargo & Lusch, 2004, 2008) to develop a business model for values-based service for sustainable business. The focus of the proposed model is on values-based service excellence, service innovation, and sustainability. Several authors have argued that there is a need for such a new business model that integrates the co-creation of value with customers, ethical values, sustainability, and service innovation (Edvardsson & Enquist, 2009; Normann, 2001). This article proposes that CSR and S-D logic can be used as pillars for the development of such a new model of service excellence and innovation alternatives to meet the needs of customers in an entirely different way (Hart, 2007; Nidumolu, Prahalad, & Rangaswami, 2009). IKEA provides an appropriate case study for empirical evidence in support of such a new business model. According to Palmisano (2006), businesses are changing in fundamental ways structurally, operationally, and culturally in response to globalisation and new technology. As a result, larger companies are no longer multinational corporations; rather, they have become globally integrated enterprises. IKEA is a good example of a globally integrated enterprise, with a business model that integrates economic, environmental, and social perspectives as a basis for excellence, innovation, and sustainability. The remainder of this article is structured as follows. First, we discuss several theoretical concepts of importance:
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two views of how value is created: (i) the traditional paradigm of goods-dominant logic (G-D logic) and (ii) the emerging paradigm of S-D logic; the distinction between the concepts of value and values; the notions of CSR and sustainability in business; a values-based approach to service systems for service excellence; and the importance of service innovation.

Having discussed these concepts, we then present empirical evidence from several case studies of values-based rms (IKEA, Starbucks, H&M, and the Body Shop) to analyse: (i) how value is created through service as well as through ethical values in the business models of these rms and (ii) how the rms approach the question of service innovation management. Finally, we describe a new, empirically based framework for service excellence and sustainability referred to as the service excellence and innovation (SEIB) model which can be utilised as a platform for service excellence, innovation, and sustainability. Theoretical concepts G-D logic and S-D logic Vargo and Lusch (2004, 2008) distinguished between G-D logic and S-D logic in business relationships. G-D logic is essentially based on the traditional view that business transactions involve the value that is embedded in units of output (usually manufactured goods) through the use of the so-called operand resources (tangible physical resources). In contrast, S-D logic is primarily concerned with the value that is co-created with customers during service interactions through the use of the so-called operant resources

Total Quality Management 537 (knowledge and skills). However, the distinction between G-D logic and S-D logic is not simply based on the obvious distinction between goods and services; indeed, services can be based on G-D logic as well as on S-D logic. For example, Gummesson (2007) has argued for the demise of services marketing (which he posits as being essentially based on conventional G-D logic) in favour of service marketing (which is more related to S-D logic). In a similar vein, Edvardsson, Gustafsson, & Roos (2005) contended that service is better understood as a perspective than as an activity. In their explanation of S-D logic, Vargo and Lusch (2004, 2008) argued that a servicecentred view of the relationship between suppliers and customers implies that value must be dened by, and co-created with, customers as value-in-use rather than being embedded in notions of output, dened products, or service attributes (as posited by nroos (2008) supported the notion of value-in-use, but disagreed on G-D logic). Gro nroos (2008), only the question of who creates (and co-creates) value; according to Gro the customer or user creates value. In a similar vein, Strandvik, Holmlund, and Edvardsson (2008) stated that providers must participate in, and contribute to, the customers value creation by aligning their service to the customers strategies, resources, and setting. According to Vargo and Lush (2004, 2008), a business based on S-D logic is essentially customer-oriented and relational. S-D logic denes service as the application of operant resources (knowledge and skills) to do something that is benecial for (and in conjunction with) another entity, as part of an exchange process (Vargo & Lusch, 2008). These operant resources are acting in concert with other resources to create value. S-D represents a shift from static resources (such as plants and equipment) to human resources (employees, other value-creation partners, and customers). From value to values The notion of customer value is not restricted to economic value but also encompasses ethical values. Such values include the principles, standards, ethics, and ideals that guide the actions of people and organisations alike. These ethical values drive customer value in various ways. First, individual customers are guided by their own norms and beliefs in selecting the attributes (and the expected level of these attributes) that they will use to assess alternative products, services, brands, or companies in making purchases or forming relationships. Secondly, a companys core values provide the basis for its organisational culture, which, in turn, determines the direction and energy demonstrated by organisational members in carrying out their work and making decisions. Thirdly, the foundation values of society in general, which are not restricted to a specic target group of customers, also play a role in determining customers value perceptions (and thus value-in-use) depending on whether the rms understanding of its CSR is in accordance with the generally accepted foundation values of the society in which it is operating. It can thus be argued that three categories of ethical values (i) individual customers norms and beliefs; (ii) a companys core values and organisational culture; and (iii) societys foundation values and CSR expectations all play a role in driving perceptions of customer value and value-in-use. If there is a certain resonance among these three types of ethical values, it is likely that customer value will be enhanced. Values can thus be understood as a benchmark measure of qualitative dimensions to which all stakeholders (including customers and employees) pay attention. Moreover, it should be noted that such benchmark ethical values are almost invariably more stable and enduring (and thus more signicant) than the quality attributes associated with transitory market offerings.

538 B. Edvardsson and B. Enquist CSR and sustainability Although the notion of CSR has become a driving force in many businesses in recent years, the topic of social responsibility has been discussed in general terms in the management and marketing literature for decades (Berle & Means, 1932). Indeed, Lazer (1969, p. 3) called for a broader understanding of the marketing concept 40 years ago when he argued that marketing be extended beyond a short-term focus on prot to become an institution of social control instrumental in reorienting a culture from a producers to a consumers culture. The contemporary understanding of CSR refers to a companys commitment to its social and environmental obligations in forming bonds with customers and other stakeholders. In this regard, Waddock (2006) emphasised the importance of ethical companies having a strong sense of social and environmental responsibility in addressing the concerns of its main stakeholders including its customers, employees, the media, suppliers, shareholders, and investors. With the growth in CSR, ethical values have increasingly been incorporated into the core values of many companies in their efforts to secure long-term sustainable growth and protability. Vogel (2005a, 2005b), who described CSR as the market for virtue, argued that CSR does make business sense for some rms in specic circumstances, e.g. when competitors use unethical business methods, and child labour or production methods that pollute air or water are put forward in news media and cause negative publicity, the social responsible companies may not only improve their image but customers may also switch to them. Xueming and Bhattacharya (2006) showed that there is a positive relationship between CSR and prot in the case of innovative rms. Innovative rms such as IKEA, Starbuck, Boby Shop, and H&M all pay attention to CSR issues and someone in the top executive team is responsible. They actively seek new and innovative ways to use and combine resources to create customer value and at the same time use less resources. The present authors not only contend that a business case can be made for CSR in the short term, but also argue that CSR is actually a prerequisite for a sustainable business in the longer term. Drawing on this understanding of sustainability, together with the notions of co-created customer value and CSR discussed earlier in this article, a sustainable business can be understood as:
. . . a long-term successful business built on co-created competitive customer value combined with ethical, social, and environmental responsibility. (Edvardsson & Enquist, 2009, p. 39).

Service systems for service excellence Renewal is essential for sustainable success and business excellence. This requires service systems that promote both excellence and innovation (Rubalcaba, Gallego, & Den Hertog, 2010). The question is whether the rms service system and culture provide the right knowledge, skills, operand resources, incentives, culture, structure, and support to deliver service excellence. Several authors have argued that service excellence is dependent on excellence in the design and management of service systems (Lusch, Vargo, & Tanniru, 2010; Vargo, Maglio, & Akaka, 2008). In this regard, Maglio, Vargo, Caswell, & Spohrer (2009) have contended that service systems provide the foundation for service exchange (and hence value co-creation) as actors interact with one another within social structures. In a similar vein, other authors have noted that service systems are embedded in social systems and those social forces and values therefore have a signicant impact on value

Total Quality Management 539 co-creation because social factors determine how service systems are used and understood (Edvardsson, Tronvoll, & Gruber, 2010). In other words, service systems are social constructions. According to social constructionist theory (Berger & Luckmann, 1967), people understand the social reality within social systems as a result of the meanings they give to its different resources, actors, activities, and phenomena. Giddens (1984) argued that human actors are knowledgeable agents who understand the consequences of what they do in their everyday lives and have the inherent capacity to change social circumstances. In the context of the present discussion, this includes the capacity to change the social/ service systems to co-create customer value and service excellence (or service failure) occur. Spohrer et al. (2010) contended that:
. . . the foundations of service systems are: 1) a dynamic conguration of resources; 2) a set of value co-creation mechanism between suitable entities; 3) an application of competenciesskills-knowledge by any person(s) in job or stakeholder roles; 4) an adaptive internal organisation responding to the dynamic external environment.

How these four factors of dynamic service systems resonate and support one determines whether there is a basis for service excellence. Excellent service providers such as Singapore Airlines, Ritz Carlton, Google, Banyan Tree, IKEA, and SAP have all created, and subsequently been able to renew, their service systems to deliver excellence as perceived by customers in a variety of different industries and value-creation contexts. The notion of service excellence refers to a provider being perceived to be excellent (by both professionals and customers) in the eld and capable of delivering excellent services that result in customer delight, loyalty, and long-term protability. Service innovation The concept of innovation is multifaceted. A service innovation may not only involve new services, but also require new technology, new organisational models, new forms of leadership, new procedures, and new business models. Moreover, such innovations can be radical or incremental, and can be based on utilitarian principles or be experience-based. Product innovations have traditionally been based on technological, production, and resource logic whereby value resides in product attributes and is created by the company. In contrast, service innovations are based on customer-focused S-D logic whereby value is co-created with customers who are resource integrators (Baron & Harris, 2008). Service innovation is thus not only about developing new and better resource congurations, but also about how such resource congurations can be made available for customers to utilise in specic ways to co-create value with the provider. In many instances, this will require changes in the customers role or new combinations of existing resources. In other words, the challenge is to mobilise existing resources to co-create value in innovative ways. In referring to the service innovation process, we include all of the various phases that are involved in the development of an innovative service from the generation of new ideas to the actual market launch (with at least some acceptance of the new service in the market). Such service innovation might refer to new services for a given organisation, or further development of existing services in that organisation, or even services that are new to the world. In other words, in using the term service innovation, the present article does not distinguish between incremental innovations and radical innovations.

540 B. Edvardsson and B. Enquist There are many potential sources of such service innovations. In this regard, Sundbo (2010, p. 281) noted that the complex character of service means that many actors and trajectories can be involved. These can include: (i) users as a source of innovative ideas; (ii) employees as a source of innovative ideas (acting as corporate entrepreneurs); (iii) technological trajectories (new technology and technology suppliers); (iv) management trajectories (new management ideas); and (v) new values and priorities in society. Many service innovations have the consequence of changing the role of the customer in service production (Edvardsson, Gustafsson, Kristensson, & Witell, 2010a, 2010b). As a consequence, customer integration is receiving increasing attention as a potential means of listening to the customer and translating customer information into valuecreating offerings (Alam, 2002; Edvardsson, Enquist, & Hay, 2006). Empirical evidence from case studies Background to the case studies To gain further insights into values-based service for sustainable business in a real business context, case studies were undertaken of service companies that have demonstrated a long-term commitment to values-based service excellence and obvious success in terms of growth and protability. The rms selected for these case studies were: (i) IKEA; (ii) Starbucks; (iii) H&M; and (iv) The Body Shop. The main case study concerned IKEA. Although some might argue that IKEA is a product retailer, rather than a service company, IKEA views itself as a service provider because the companys focus is not on the furniture itself but on solutions to real-life problems and making a contribution to a better life for the majority of people. This is clearly a service concept in which the physical products are perceived as platforms for service experiences that create customer value. Moreover, IKEA is a service-oriented company in the sense that it emphasises serving people with well-designed quality products at a price they can afford. In this regard, IKEA is a successful and protable company; indeed, it is the global leader in its industry. The rm is known for a strong service culture that emphasises company core values and a strong sense of CSR. IKEA has demonstrated an ability to serve customers and renew its business at a time when many other companies have been more focused on narrow conceptions of shareholder value and internal issues. The aim of this case study was to achieve a better understanding of the role of ethical values in forming and directing a strategy for service excellence, service innovation, and valuein-use for customers. The case study shows that IKEAs corporate values not only determine the vision and business strategy of the organisation, but also guide the attitudes and behaviours of the rms leaders and employees in ensuring value-in-use for its customers. The case studies of H&M, Starbucks, and the Body Shop also concerned rms with a commitment to vales-based service excellence. H&M has been one of the most rapidly expanding clothing retailers in the world in recent years and has great potential for continued growth in the future. The rm now has almost 2000 retail outlets in more than 30 countries. H&M believes in good product quality, which is ensured by rigorous quality controls. In addition, the rm is committed to producing its clothing items with minimal impact on the environment and under good working conditions for all employees. H&M practises CSR with regard to its supply chain and the wider environment. Although H&M is a public company, the chairman of the board and major owner is Stefan Persson, who is the son of the founder. This family lineage has helped the company to retain the founders sense of responsibility to its customers and the environment.

Total Quality Management 541

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H&M shares its values through qualied employees to ensure an easy and pleasant shopping experience. The company also communicates through advertising, the Internet, and its customer club.

Starbucks is the biggest coffee house in the world, with more than 40 million customers per week worldwide. The Starbucks brand promises customer satisfaction as a result of a consistently high-quality product and the relaxed atmosphere of its coffee shops where neighbours meet and enjoy the Starbucks service experience. This experience consists of three ingredients: (i) its coffee; (ii) its people; and (iii) the ambience of its coffee shops. The so-called Starbucks experience aims to offer an inviting and enriching environment an oasis in which the customer can seek respite from the pressures of home and work. Starbucks has always referred to the values of its leader, Howard Schultz.
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Starbucks motto is: Were not in the coffee business serving people. We are in the people business serving coffee. This message is communicated by employees, who are seen to be the most important means of inspiring customers to return.

Body Shop International PLC, which was established in 1976, is a leading global retailer of high-quality skin and body-care products. The rm has over 2500 stores in over 60 countries, including Europe, USA, Middle East, Africa, and Asia-Pacic region. As a producer and marketer of ethically sourced and naturally based beauty products, Body Shop is regarded as one of the pioneers of the modern social responsibility movement. For example, in 1996, Body Shop was one of the rst companies to publish a values report. Body Shops core brand identity has been its prots-with-a-principle philosophy, which has associated the brand with a social-justice agenda. In March 2006, The Body Shop agreed to a 652.3 al. It was reported that Anita and Gordon Roddick, who set up million takeover by LOre The Body Shop 30 years previously, made 130 million from the sale.
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Body Shops customer-focused values are communicated through advertising, publicity, the Internet, The Body Shop at HomeTM a home party experience, and directly in their stores as employees interact with and help customers.

The present authors have been studying IKEA for several years. This has involved: (i) extensive study of documents; (ii) multiple interviews with IKEA managers; (iii) collection of narratives about IKEA from the media, the Internet, books, and internal material from IKEA; (iv) personal observations at IKEA stores and service centres in Europe, Asia, and North America; and (v) supervision of 15 masters theses and eld reports on related subjects. This research activity has resulted in a large number of articles and books (Edvardsson & Enquist, 2002; Edvardsson, Enquist, & Johnston, 2005; Edvardsson, Gustafsson, & Enquist, 2005; Edvardsson et al., 2006). The case studies of Starbucks, H&M, and the Body Shop (which, in the present context, largely serve as comparisons with the larger IKEA study) have been conducted since 2006. These studies have also resulted in several articles and book chapters (Edvardsson & Enquist, 2009; Edvardsson, Enquist, & Johnston 2010; Enquist, Edvardsson, & Petros Sebhatu, 2007, 2008; Enquist, Sebhatu, & Edvardsson, 2010).

Findings with regard to values-based service Values-based service: insights gained from IKEA The insights to be gained from the study of IKEA (Edvardsson & Enquist, 2009) can be summarised in ve areas as follows: (i) a new entrepreneurial business model; (ii) the

542 B. Edvardsson and B. Enquist logic of values and the logic of value creation; (iii) service experience for customers; (iv) service brand and marketing communication; and (v) service leadership. Each of these is discussed below. A new entrepreneurial business model land. EntrepreIKEA began in a poor farm village in the southern Swedish county of Sma neur Ingvar Kamprad challenged established views from the beginning. For example, he believed that an entrepreneur should rst make money before spending or investing; he disliked being dependent on loans from a bank. IKEAs original focus was on furniture that had function, quality, and low price, and these attributes (together with the later addition of good design) remain the core components of the business model that is rmly embedded in the IKEA culture. The founders concept of the so-called democratic design provides a good example of this culture and business model in action. In developing the notion of democratic design, Kamprad had sought to address his own rhetorical questions: why must well-designed furniture always be so expensive? and why do the most famous designers always fail to reach the majority of people with their ideas? Kamprad noted that well-designed products (including furniture products) appeared to be only for the rich and privileged; in contrast, the multitude of people with less money were excluded. Kamprads response to this unsatisfactory situation was to innovate and offer a wide range of home furnishings of good design and functionality at a price low enough to be affordable to most people. This idea of democratic design had its natural genesis in IKEAs roots in the poor farming commu land. nities of Sma The three dimensions of democratic design are form, functionality, and low price. With respect to the third dimension low price IKEA designers are always asked to use design to decrease prices, not increase them. In effect, the price tag is designed rst beginning with a decision on what price the majority of people can afford to pay. A production line is then designed to produce furnishings that satisfy the other two dimensions. To achieve this, designers work on the factory oor with production staff, rather than in a prestigious ofce in a distant city. The notion of democratic design was rst proclaimed at the Milan Design Fair of 1995. Members of the public ocked to the IKEA exhibition, the Italian media provided much publicity, and consumers visited IKEAs stores in unprecedented numbers to buy democratically designed furnishings. Since then, the concept of democratic design has continued to be integral to the IKEA concept. It is thus apparent that the notion of democratic design was driven by a combination of (i) social values (reaching out to the majority of people); (ii) environmental values (in accordance with strict environmental guidelines); and (iii) customer value-in-use. The original supply chain and business model of IKEA had to cope with the limited land. But this lack of resources resources that existed in the relatively poor district of Sma had the virtue of stimulating the creation of smart solutions. In focusing on innovative solutions, Kamprad created the concept of furniture that customers could put together themselves. This resulted in lower warehouse and distribution costs, but it did require new ways of producing the products and new packaging (with instructions to the customers on how to assemble it). In effect, the customers became co-producers of the IKEA solutions as some of the activities were transferred to the customers. This is the core of the IKEA business model, which has been further developed by a sophisticated supply chain and a systematic renewal of products and service offerings.

Total Quality Management 543 The logic of values and the logic of value According to the traditional view, value is dened and created in the value chain and incorporated into products during product development and production. In contrast, the emerging view, as adopted by IKEA, is that value is co-created with customers and assessed on the basis of value-in-use and the resulting customer experiences. This conception of the logic of value (whereby customers assess quality in terms of how design and function provide solutions to problems) is combined at IKEA with logic of values (whereby special attention is paid to the ethical, social, and environmental values that are increasingly playing a prominent role in customers decisions to buy). Consumers have an increasing awareness of environmental, social, and ethical issues, which has resulted in CSR becoming a driving force in business development. IKEAs commitment to CSR is part of its wider commitment to its various stakeholders (including customers, co-workers, and suppliers). The social and environmental policies of IKEA are rooted in the core values of the company. The following example of a CSR initiative in India to prevent the exploitation of children as labour illustrates how values drive value at IKEA. In 2000, IKEA joined forces with UNICEF in India to help prevent and eliminate child labour in the carpet belt. The child rights project in Uttar Pradesh has now grown to cover a population of more than a million, of whom nearly 35% are children under the age of 14, living in 500 villages across eastern Uttar Pradesh. As a result more than 80,000 children in 500 villages are enrolled. They were previously out of school, but can now attend primary school. IKEA and UNICEF will continue the project in the coming years, adding on villages in a planned manner to reach millions more in the region. The self-help strategy has also boosted the economic and social status of women within their families and the wider community, as well as enhancing their self-condence and decision-making abilities. Through education and the economic opportunity provided by micro-loans, women and their families have broken out of the vicious circle of debt, liberating them from child labour and the exploitative interest rates of local moneylenders. IKEAs partnership with UNICEF has thus enabled the company to achieve its business objectives while supporting children and women and enhancing their opportunities for learning and development. Although it cannot be quantied on the rms nancial bottom line, IKEAs actions have built trust which is an invaluable asset within the communities it touches (Edvardsson & Enquist, 2009; Enquist et al., 2007). Service experience for customers Apart from value-in-use after the purchase, IKEA also provides value for its customers through the co-creation of individualised solutions during pre-purchase customer experiences. This simultaneously reduces risk for the customer and enhances customer imagination and interaction with the organisation. An experience room supports customers in their role as co-creators of value (by making the solutions customised and tangible), as well as facilitating the companys communication of its corporate values. In this regard, the IKEA showrooms can be seen as experience rooms, in which customers receive a real experience before purchase. The experience rooms combine functionality with emotional involvement to create a favourable customer experience. Service brand and marketing communication Three essential elements vision, culture, and image must be aligned if a values-based brand strategy is to be successful. In IKEAs marketing, value-in-use for customers is

544 B. Edvardsson and B. Enquist primarily of an instrumental nature, as communicated through the catalogue, the website, and the store showrooms. However, in IKEAs marketing strategy, there is also communication beyond the instrumental level, whereby IKEA narrates a sustainable corporate story in which vision, culture, and image complement one another in a successful branding strategy. Taken together, IKEAs vision, business idea, and market positioning provide a framework for brand-building that is used in the entire rms marketing communication worldwide. The brand embodies and expresses values that add value when customers experience solutions to real-life problems at home. To ensure sustainable business success, a company needs to focus on a few basic values that are attractive to customers, employees, and other stakeholders. In particular, it is essential that the companys values and those of the customers achieve the so-called values resonance. The IKEA brand is built on associations with values such as cost-consciousness, design, unconventionality, and environmental awareness. IKEA also demonstrated its approach to marketing communication when it emphasised social values in the co-creation of value when entering the Japanese market. Because women have signicant inuence in making decisions about the purchase of interior decoration in Japanese households, IKEA focused on female customers when launching its concept in Japan. The IKEA advertising campaign used such slogans as: The home is the most important place in the world; Have you seen your kids today?; and Stay home today!. These advertisements were rather controversial in Japan; indeed, one railway company refused to use the advertisements on billboards on the grounds that the advertising message encouraged people to stay home from work. However, the advertising campaign did achieve its purpose in communicating the message that IKEA planned to change the status quo in the Japanese furniture market. IKEA also opened a childrens day-care centre at its store to make it easier for women with children to work at IKEA. The rationale was to assist women who had children to be able to get back into working life, which can be difcult to achieve in Japan because the governments scheme for childrens day care is rather weak. To ensure that Japanese people understood the IKEA concept, the company organised exhibitions to showcase compact living. This involved the placement of various boxes around cities to demonstrate what can be achieved in a small Japanese apartment with IKEA furniture. IKEA undertook a great deal of market research and careful preparation before opening its rst store in Japan in 2006. Finally, in discussing IKEAs approach to service brand and marketing communication, it should be noted that the company recognises the importance of training, empowering, and rewarding leaders and co-workers to live the brand in their interactions with one another, customers, suppliers, other partners, the media, and owners. Living the IKEA brand is learnt by co-workers and leaders in their day-to-day work, in on-the-job training, and through educational programs that explain the so-called IKEA way. Service leadership IKEA has created a strong culture built on authentic leadership and knowledge sharing. Most of the rms leaders are identied, developed, and promoted from within the organisation. Within the IKEA network, the values and skills of the organisation are cultivated by shared knowledge and authentic leadership. Leaders are promoted on the basis of their personal values, skills, potential, and what they have delivered so far. The sharing of IKEA values among leaders and co-workers ensures that values resonance within the rm provides energy and direction for sustainable business development. The IKEA values

Total Quality Management 545 are thus embedded in the work environment at IKEA and facilitate knowledge sharing across borders (Edvardsson & Enquist, 2009). IKEA trusts its leaders, co-workers, and customers and emphasises the importance of their involvement. Trust is a pre-requisite for openness, creativity, and involvement. It is built from the top through authentic leadership, involvement, responsibility, and empowerment. In IKEAs view, when co-workers and leaders grow, the business is growing. In the IKEA network, reverse knowledge ows and lateral knowledge ows ensure that new smart solutions become a reality and have an inuence on the global concept. Values-based service: comparisons with Starbucks, H&M, and Body Shop As noted above, in addition to the insights gained from the major case study of IKEA, the present authors also studied several other rms that could be described as innovative values-based service providers. The insights gained from these other case studies (of Starbucks, H&M, and Body Shop) can be compared with those gained from the IKEA case study under the same subheadings. A new entrepreneurial business model All four of these case-study companies were founded by energetic entrepreneurs: Kamprad at IKEA; Schultz at Starbucks; Persson at H&M; and Roddick at the Body Shop. All of these entrepreneurs have been innovative in their various consumer industries. They have built distinctive business models in their companies, and these have been retained and developed over decades through the dissemination of the entrepreneurs values throughout their organisations. All four companies also have a business model for future success based on: (i) various forms of the so-called triple bottom line (TBL) thinking (which refers to taking account of social and environmental issues, as well as nancial issues in a rms bottom line); (ii) attractive offerings in attractive stores; and (iii) strong supplier chains governed by social and environmental responsibility and the requirements of good citizenship. In addition, they have growth strategies based on investment in sustainable resources IKEA in energy conservation and managing social and environmental responsibility; Starbucks in recycling and community development; H&M in environmentally friendly products; and the Body Shop in sustainable products. All four companies have strong corporate values and a clear focus on serving customers in a broad international target market. The logic of values and the logic of value creation In accordance with the logic of value creation, all four companies exert control over the design and development of the service offering and use suppliers in the value chain to control price, time, and quality. Moreover, in all four companies, the logic of value creation is driven by the logic of (ethical) values. All take a TBL perspective with respect to logistics, stores, and production, and all have their own code of conduct to ensure that their social, environmental, and quality standards are maintained. They also attempt to engage their suppliers in positive empowering relationships that create value for the suppliers themselves. Service experience for customers The studied retailers have a focus on serving customers and have developed management policies and systems with regard to the co-creation of value with customers. The IKEA

546 B. Edvardsson and B. Enquist policy promotes customer placement in store showrooms (experience rooms). For Starbucks, their customer-oriented policy is described as promotion of the Starbucks experience. H&M promotes shopping as an easy and pleasant experience. The Body Shop aims for an enjoyable customer experience in their shops and at home. In all four cases, customer-oriented policies aim to promote favourable service experiences. Service brand and marketing communication All case companies have well-known values-based global service brands. However, they do not explicitly use CSR in their market communication. All of the brands are positioned in accordance with the rms views on environmental and social responsibility. The rms ensure that their brands are supported by the communities with whom they do business, that their suppliers are empowered, and that they engage with a range of environmental and social initiatives. Service leadership In all four companies, the knowledge and drive of employees are of fundamental importance in developing a strong corporate culture with regard to living the brand and sharing corporate values. Within IKEA, employees are referred to as co-workers; Starbucks refers to partners; H&M uses the term colleagues; and the Body Shop talks about our people. All service leaders are expected to act as role models. Leadership performance is judged in terms of operational skills, cooperation with others, and sharing values and meanings. All four companies focus on investing in leadership performance and focus on the development of individual leaders and employees as a key strategy for company success. All rms are also seeking leaders from diverse backgrounds to create a multicultural employment environment reecting the diversity among their present and potential customers. Gender equality in employment is also a goal of all companies. Findings with regard to service innovation Service innovation: insights gained from IKEA The environmental problems faced by IKEA over the years have been transformed in numerous small steps from a threat to the companys reputation to an opportunity to use social and environmental issues in a proactive manner by virtue of the companys vision of everyday business contributing to genuine long-term sustainability. The norms and values of the service culture of IKEA have been, at one level, regulators of what is possible and not possible and, at a higher level, have acted as a source of energy and direction for every co-worker and manager. In other words, the IKEA corporate culture provides guidelines for action at all levels of the organisation. IKEA can be understood as a stakeholder value network of shared values and meanings. The interactions among stakeholders are social constructs that produce the IKEA service culture. The values-based culture in IKEA facilitates work coordination, strategy implementation, quality control, and price control in a S-D logic that aims to create value for customers (Edvardsson & Enquist, 2009). IKEAs success is founded on these processes of excellence and innovation in socially constructed service systems. In particular, the companys commitment to innovation management enables IKEA to view social and environmental issues as a challenge to produce smart solutions, rather than as burdens and costs. The most prominent example of such a

Total Quality Management 547 smart solution is IKEAs idea of at packs of unassembled furniture, which the customer puts together, thus becoming a co-producer of the solution (Edvardsson & Enquist, 2002; Normann, 2001). This is clearly not a high-tech innovation; rather, it represents an innovation in resource integration among suppliers, co-workers, and customers. Understanding and interacting with their customers are other important aspects of IKEAs innovation management. The extensive research that IKEA carries out before launching in a new country is not only reected in the product range but also in the experience rooms that are located in the stores. In China, the size of kitchens and rooms were adjusted to mirror those in Chinese homes. In addition, the do-it-yourself (DYI) culture of IKEA has been adjusted to align it more closely with Chinese customers, who do not have a tradition of DYI furniture assembly. Because Chinese customers expect good personal service from local furniture dealers, IKEA recruited special staff to explain the DYI concept to customers in the store. In addition, a delivery-and-assembly service was established to cater for customers who insisted that they did not want to assemble their furniture by themselves. Another example of innovative service production was IKEAs idea of a so-called kitchen planner, which enables a customer to test-drive a kitchen before purchase. The kitchen planner allows a customer to build different models of a kitchen that ts the measurements of their home kitchen space, and then test these models in a virtual environment. Such a hyper-real experience (Edvardsson et al., 2005) is an important aspect of IKEAs sustainable service innovation (Edvardsson, Enquist, & Johnston, 2005; Edvardsson, Enquist, & Johnston, 2010). Service innovation: comparisons with Starbucks, H&M, and Body Shop Starbucks, H&M, and the Body Shop follow similar service-innovation processes to those of IKEA; in particular, service innovation in these rms is based on the shared values and shared meanings of each rms stakeholder value network. In the case of Starbucks, service innovation seeks to create personalised customer experiences, stimulate business growth, generate prots, energise employees, and secure customer loyalty. Starbucks innovation processes are driven by the original values of the rm in combining service excellence and innovation with community and environmental values (Edvardsson & Enquist, 2009; Enquist et al., 2010) H&M is a values-based company with a strong commitment to all its stakeholders including shareholders, customers, employees, suppliers, and strategic partners. H&Ms innovation strategy is rmly based on a desire to design, produce, and distribute clothes at a price that is affordable to the majority of people. H&M was a pioneer in pursuing a strategy of vertical integration in the clothing industry with its distribution network. The rm has changed its CSR focus to concentrate on environmental issues by producing all its garments with lowest possible environmental impact. H&M expands its business in a globally integrated fashion, whereby responsibility, authority, and control systems are extensively coordinated and delegated to stimulate excellence and innovation in the whole service system (Edvardsson & Enquist, 2009; Enquist et al., 2010). Body Shop has always associated its brand with a social-justice agenda. Its innovation strategy is based on the principle of developing all its cosmetics without using animal testing. The company also has a focus on ethical consumption and social issues. Its commitment to these corporate values has provided the brands essential identity. Body Shop has become a role model for other rms in terms of its commitment to service excellence and innovations based on real values (Edvardsson & Enquist, 2009).

548 B. Edvardsson and B. Enquist Research contribution A new framework of service excellence, innovation, and sustainability As this article has argued, sustainability and CSR are the key drivers of service excellence and service innovation in a globally integrated enterprise (Edvardsson & Enquist 2009; Hart, 2007; Nidumolu et al., 2009; Palmisano, 2006). In this regard, Nidumolu et al. (2009) suggested a ve-stage process for sustainability: (i) viewing compliance as an opportunity for innovation; (ii) making value chains sustainable; (iii) designing innovative and sustainable products and services; (iv) developing new business models; and (v) creating a next practice platform. It is apparent that the four case companies have passed the rst four of these stages. However, their continuing success is dependent on continuous renewal of their values-based service systems for excellence and innovation. The present authors business model of service excellence and innovation known as the SEIB model can be utilised as the nal stage (creating a next practice platform) for service excellence, innovation, and sustainability. The SEIB model is built upon: (i) a central challenge; (ii) required competencies; and (iii) innovation opportunities. Each of these is discussed below. Central challenge The central challenge is to create and manage resource congurations that enable, support, and direct customers in value co-creation and service exchange. This requires not only an appropriate conguration of operand and operant resources but also a resonance among the companys norms and values, the customers values, and the wider societys foundational values. To be successful, rms must recognise that dynamic service systems are embedded in social systems in which ethical values are used to construct value co-creation processes and the resulting customer experiences. Required competencies The employees, customers, and other actors who constitute the value co-creation stakeholders should possess the right knowledge, skills, motivation, and energy to produce service excellence. This must be based on a TBL perspective that takes proper account of social and environmental imperatives beyond the narrow resource-based view that has thus far dominated service research (including S-D logic). Innovation opportunities New and better ways to create value through service can be developed by adopting a SD-logic perspective in combination with a recognition of the importance of values resonance. IKEA and the other rms considered in this article have recognised this and have thus been able to identify and manage innovation effectively within their values-based business models. The innovation management of these rms has been characterised by:
.

business platforms (such as physical and web-based experience rooms) that facilitate their customers service experiences; service brand and marketing communication based on values resonance among the norms and ethical values of customers, the company, and the wider society; and sharing of corporate values among leaders and employees to provide energy and direction for excellence and sustainable business development.

Total Quality Management 549 Managerial implications All the studied companies have well-developed processes for renewal and innovative reconguration in accordance with their corporate values. The business model and company culture of the rms have not been static, but have evolved towards excellence by gradual development in their experience of value co-creation over time (Normann, 2001). The overriding orientation of the studied companies has been a genuine commitment to the creation of value for customers in new and innovative ways over time. Superior customer value has been based on positive service experiences, a strong brand, and dynamic marketing communication. The implication for managers of service-providing enterprises is that this model is the basis for service excellence and business success. This requires staying close to the customers, understanding their requirements, and providing solutions that are in accordance with their values and lifestyles. Learning from (and with) customers in various ways is crucial if a company wishes to remain customer-focused. Corporate social and environmental responsibility has been demonstrated to be protable both in the short term and in the long term. Innovative service concepts that utilise physical products as platforms for service and customer experiences can create value-in-use. The logic of values and the logic of value creation are synergistic, protable, and sustainable. Suggestions for future research This article focuses on same aspects of CSR and values creating value for customers and other stakeholders. A few leading companies in different industries have been researched and a new framework has been developed. A natural next step would be to further test and rene this framework by empirical studies in other contexts and include data from other companies in which values including CSR are important but also companies paying less attention to values or emphasising very different company core values but being in the same industry. The airline industry seems fruitful since their environmental responsibility becomes more and more important while at the same time fuel cost is a major issue and has received a lot of attention from top management. Studying different companies such as Singapore Airlines, Ryan Air, and South West Airlines and their company core values, CSR policies and how the leadership strives for value resonance and to avoid values dissonance is one of our suggestions. Another study we would like to do is to get inside logistic companies such as FedEx and DHL. They are also challenged with high cost of physical transportation due to the energy prices; they operate in many different countries around the world and service numerous customers in different cultural contexts and have to cope with sometimes conicting requirements. In both the airline and logistic contexts we suggest a more in-depth analysis of how values create stakeholder value and contribute to performance in terms of (1) innovation, (2) sustainable growth and (3) long-term protability. We thus suggest a more clear focus on the business model and nancial performance that are presented in this article. We also suggest a more solid theoretical conceptualisation of the framework suggested in this article by drawing, on the one hand, on axiology to deepen the understanding of value and values and, on the other hand, on service systems research in the service science and S-D logic literature. We believe that future research should view service systems as embedded in social systems and pay attention also to social forces and structures (Edvardsson, Tronvoll et al., 2010). We suggest Giddens (1984) dimensions signication (meaning), domination (power and control), and legitimating (where CSR is important) as fruitful concepts to use.

550 B. Edvardsson and B. Enquist References

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