service innovation - an overview

MIIRO

Video Conference between MBS Manchester and UNAM Mexico, Oct. 2012

Service Innovation and

Innovative Services

Ian MilesManchester Institute of Innovation Research

Manchester Business School(and the Laboratory for the Economics of Innovation, HSE Moscow)

[email protected]

1

MIIRO


Outline

Introductory Remarks

Perspectives on Services and Service Innovation

Service innovation management and policy

Service innovation in the twenty-first century

MIIRO


Traditional view of service innovation

(with very few exceptions)

Service industries play little role in (technological)

innovationand can thus be ignored by innovation

policy

MIIRO


Services as Innovators?

Long neglected: services seen as laggards, “supplier-driven” (by innovations from manufacturing), main focus organisational (eg. supermarkets) But (some) service industries at vanguard

of IT revolution, many firms introducing technology-enabled services Service sector growth makes

study – & policy – inescapable.

Graphs from World Bank “Beyond Economic Growth”

MIIRO


Growing Attention:Publications featuring Keywords in title

KEY PHRASE:

Service ….. ….. ….. innovation

Innovation in ….. services

New service ….. …..development

Innovation in …..service

Source: analysis of data from Harzing’s “Publish or Perish”

2009

MIIRO


Services in Innovation SurveysInnovation surveys (originally the CIS) across Europe since 1980s, including many services since 1990s. Many metrics. Sectoral differences – varying over time.

Share of “innovation active” firms – those engaged in any of: 1. Introduction of a new or significantly improved product (good or service) or process; 2. innovation projects not yet complete or abandoned; 3. New & significantly improved forms of organisation, business structures or practices & marketing concepts or strategies; 4. Activities in areas such as internal R&D, training, acquisition of external knowledge or machinery & equipment linked to innovation activities .

MIIRO


Manufacturing Innovation is (often) Tangible

MIIRO


Manufacturing - Simplified

Consum

ption

Production

Process Innovation Product Innovation

MIIRO


(Some) Services - Simplified

Pro

du

ction

/ C

on

sum

ptio

n

Service Innovation

MIIRO


Service Innovation is (often) Intangible -harder to visualise

Though some things that happen can be captured

MIIRO


Containerisation

MIIRO


Offshored call centre

MIIRO


Financial Services

MIIRO


And more…

MIIRO


It’s relatively easy to depict services’ new use of technology

Technology for delivering services – transport and information systems – platforms and devices.

New infrastructures

New services that have a high codified visual information content

New service operations (literally in the case of surgery)/

MIIRO


Innovation can be technique, rather than technology

MIIRO


It’s possible to represent service activities, and innovations in them, via

service blueprints

Source: Nadin Dörner, Oliver Gassmann, Heiko Gebauer, (2011) "Service innovation: why is it so difficult to accomplish?“Journal of Business Strategy, Vol. 32 Iss: 3 pp. 37 - 46

MIIRO


Clarifications and Distinctions

Service innovation versus innovation in services

Ambiguities in the words “service” and “services”

MIIRO


“Intangible goods” or somethingmore?/ - Service product

innovations

What are Services?

Services as doing things, as opposed to making things.

• Compare to manufacturing industries

• Compare to goods

• Linkage between customer and supplier

• Extended process of activities

Industries Products

Relation-ships

Journeys

SERVICE

Statistical Categories

- Innovation in Services

More than repeat

purchases

SERVICE rather than ServiceS?

MIIRO


Service Industries - StatisticsNACE Rev 1

• Hotels and Restaurants (HORECA)G• Transport, Storage H• Financial Intermediation (FI...I• Real estate, Renting (…RE), Business

Activities J• Wholesale & Retail Trade; Repair of .Motor

Vehicles, Motorcycles and Personal & Household Goods

K• Public Administration and Defence;

Compulsory Social SecurityL• EducationM• Health and Social WorkN• Other Community, Social and Personal Service

ActivitiesO

Includes KIBS

Sections

Industries

MIIRO


Service Industries – New StatisticsNACE Rev 2

• Hotels and Restaurants (HORECA)G• Transport, Storage H• Financial Intermediation (FI...I• Real estate, Renting (…RE), Business

Activities J• Wholesale & Retail Trade; Repair of .Motor

Vehicles, Motorcycles and Personal & Household Goods

K• Public Administration and Defence;

Compulsory Social SecurityL• EducationM• Health and Social WorkN• Other Community, Social and Personal Service

ActivitiesO

Includes KIBS

Industries

MIIRO


Services from Manufacturing

“Servicisation”

Products

MIIRO


people artefacts information

Service Products – getting things done

Service Activities as doing things, as opposed to making physical things.Transforming

Service innovation:New or improved “things”

New or improved “ways of doing things”

Different innovation patterns related to different transformations

What are Service Activities?

MIIRO


Service Products – getting things done

Service Activities as doing things, as opposed to making physical things.Transforming

Service innovation:New or improved “things”

New or improved “ways of doing things”

Different innovation patterns related to different transformations

Broad Innovation Trajectories

people• Bio- Psycho-

and Social Transformations

• MANY SPECIFIC TECHNOLOGIES e.g. Surgery; INSTITUTIONS & SOCIAL ROUTINES

artefacts• Physical,

Chemical Transformations

• ENERGY AND MOTOR TECHNOLOGIES MATERIALS…

information• Data and

Symbol Transformations

• INFORMATION AND COMMUNICATION

• TECHNOLOGIES

• ORGANISATION STRUCTURES

Personal, health

services

Trade, repair,

transport services

Communication, finance,

business services

MIIRO


and as many more traditional service sectors displayed

considerable technology

adoption and innovation

Increasingly hard to sustain this view as technology-based services become important to innovation in all sectors

Traditional view of service innovation

(with very few exceptions)

Service industries play little role in (technological)

innovationand can thus be ignored by innovation

policy

Approaches to Services

MIIRO


A similar (not identical) approach had already been developed in the

1990s by Gallouj – see recent work like F.

Gallouj and F. Djellal (eds) (2010). The

Handbook of Innovation and

Services, Edward Elgar: Cheltenham

Framework developed by R Coombs & I Miles, 2000, “Innovation, Measurement and Services: the new problematique” in J S Metcalfe & I Miles (eds) Innovation Systems in the Service Economy Dordrecht: Kluwer

New Perspectives on service innovation

Dis-missal

Syn-thesis

Dismissal


Dem

arca

tion A

ssimilation

MIIRO


Services are qualitatively distinctive, due to INTANGIBILTY and INTERACTIVITY : different forms of innovation and innovation process

Assimilation Perspective

Dis-missal

Syn-thesis

Dismissal

“Service innovation is not distinctive; it can be studied and

organised in ways familiar from

analysis of manufacturing”

Services are qualitatively distinctive, especially due to INTANGIBILTY, INTERACTIVITY, etc. different forms of innovation & innovation process

Tend to focus on techno-logical

innovation (though some

theorists insist this is distinctive)


Dem

arca

tion A

ssimilation

MIIRO


Services: Innovators like any others?

Innovation in Service firms is now accepted and measured using standard toolsOn average, service industries are slightly less

innovative than manufacturing, substantially less likely to undertake R&D or take out patentsSome service sectors

are highly innovative(like high-tech?), others

much less so (and sointerpret in terms of

“barriers” like smallscale, difficult processes)

UK CIS 2007

Is this a policy

problem?

MIIRO


Services: Innovators like any others?

Innovation in Service firms is now accepted and measured using standard toolsOn average, service industries are slightly less

innovative than manufacturing, substantially less likely to undertake R&D or take out patentsMaybe this suggests problems with the R&D and

patent systems themselves – too restrictive in what you can count as R&D, or patent as innovation

Experiments with wider definitions, new types of patent or innovation support tool – versus - Education and awareness raising among services

Is this a policy

problem?

MIIRO


Demarcation Perspective

Dis-missal

Syn-thesis

Dismissal

“Services are qualitatively distinctive, especially due to features of INTANGIBILTY, INTERACTIVITY, etc. different forms of innovation & innovation process”

Service innovation is not distinctive; it can be studied and

organised in ways familiar

from analysis of manufacturing

Much discussion of

service specificities

(and the huge

diversity across

services) in marketing

and management research as

well as innovation

studies


Dem

arca

tion A

ssimilation

MIIRO


Classic distinctions - between Product and Process Innovation (as in Innovation Surveys) and Incremental and Radical Innovation - are problematic because of:

Customisation & Specialisation of Service Products

Services - Beyond Manufacturing, Not just Intangible Goods

in Business Services like consultancy, but

also in the “experience economy” (Pine and

Gilmour, etc)

Pine II, B., & Gilmore, J. (1998) “Welcome to the experience economy”, Harvard Business Review, 76(4), pp97-105

MIIRO




Involvement of Client/Customer:

Blurring of Product and Process (service experience)

Coproduction of Service and Value

Innovation in Delivery and at Supplier- -Customer Interface


•Manufacturer

•Good

•Consumer

•Service Firm

•Service

•Consumer

MIIRO




Involvement of Client/Customer:

Blurring of Product and Process (service experience)

Coproduction of Service and Value

Innovation in Delivery and at Supplier-Customer Interface

Technology Focus – but also innovation in business models, marketing, etc.


MIIRO


Different Innovation Styles (INNOVA survey)

0 5 10 15 20 25 30 35 40

ORGANISATION

Organisation + Process

Organisation + Product

PRODUCT

Product + Process

PROCESS

Services

Manufacturing

“Which of these areas are your innovation efforts focussed on?”

Max. choice = 2)

Howells, J. and Tether, B. (2004) Innovation in Services: Issues at Stake and Trends Inno Studies Programme (ENTR-C/2001), Brussels:.Commission of the European Communities available at: http://www.cst.gov.uk/cst/reports/files/knowledge-intensive-services/services-study.pdf

http://www.cst.gov.uk/cst/reports/files/knowledge-intensive-services/services-study.pdf

MIIRO


Do we need different models & metrics for service innovation?

There have been some efforts to create specific models – for example the Reverse Product Cycle approach*. (This is still very popular, but mainly focus on learning processes consequent upon adoption of new IT – from back-office efficiency to new front-office services.)

There have been numerous specific services innovation surveys – now largely incorporated into CIS. (Public services now under examination.) * Barras, R. (1990) ‘Interactive Innovation In Financial

And Business Services: the vanguard of the service revolution’, Research Policy, vol.19, pp. 215-237

MIIRO


Service Production

Back Office

(back stage)

Front Office

(front stage)

User (wider user communitie

s)

EmployeesOrganisati

onInfrastructu

reInfostructu

re

Business Partners The Service Product:often coproduced[in the service relationship]

The Service Organisation

[Rob Glushko has written extensively on front and back stage processes in service design]

MIIRO


Exploring Service Innovation6 Dimensions from den Hertog

Back Office

(back stage)

Front Office

(front stage)

User (wider user communitie

s)

EmployeesOrganisati

onInfrastructu

reInfostructu

re

Business Partners

Service Concept

Customer Interaction

Value Chain/ System

Delivery (Technology)

Delivery (Organisation)

Revenue Model

MIIRO


den Hertog: 6 dimensions of SIP den Hertog, W van der Aa, M W. de Jong, (2010) "Capabilities for managing service innovation: towards a conceptual framework"

Service Concept


Value Chain/ System



Revenue Model

Journal of Service Management Vol. 21 (4) pp.490–514

An innovation MAY involve just one dimension

But many innovations are multi-dimensional

MIIRO


Capabilities for Service Innovation

Service Concept


Value Chain/ System



Revenue Model

Partnering, M&A,

procurement

Sales, after sales

TechnologyHRM

Finance, strategy

New se

rvice

solut

ions

and

expe

rienc

es

Marketing

MIIRO


How service innovation takes placeR&D structures (managers, labs…) are rare outside of the high-tech services and/or very large service organisations

Innovation organisation is often via project teams or similar “transient” arrangements

Much innovation is “ad hoc”, on-the job, “in-practice”; such innovation is often “lost” and not replicated. (Scope for using new knowledge management approaches here.)

Scaling up can be a major problem.

Professional associations and similar networks often transfer innovation-relevant knowledge – but otherwise services are poorly linked to “systems of innovation”.

MIIRO


Features of service innovationInformation Technology is pervasive, and will provide ongoing opportunities (and raise issues of heritage, standards, security, etc.)

Service innovation trajectories include: self-service and coproduction (often using IT);

24 hour –isation;

mobility;

industrialisation (modularisation and mass customisation) but also specialisation and value-added services;

Greater division of labour, use of paraprofessionals.

Organisational innovation is typically especially important – but innovators tend to be active on most fronts

New service design communities, methods and principles are emerging

MIIRO


Service Design – Communities, Networks

Using methods such as:- Blueprinting- Storyboarding- Simulation- User engagement, ethnography..- - Prototyping, assessment…

From industrial and informatics design, using approaches developed in creative industries, interaction design, etc…

MIIRO


Dismissal

A Synthesis?

Dis-missal

Demarc-ation

Synthesis

Assim-ilation

All sectors have diverse features,

and many “service” elements

“Servitisation” of

manufacturing

(Knowledge intensive) service

activities

Services become more technology-

intensive and “industrialised”

Exploration of Service Innovation has identified aspects of innovation that are generically important – not just to services

Innovation analysis – and measurement and policy – needs to account for all of these aspects (or if not, to explain why some sorts of innovation are privileged)


MIIRO


Sectoral convergence and differentiation

• Similar technology, some similar applications• White collar workforces and offices• Customer orientation• Customisation (“post-Fordism”)• Many ways in which manufacturing and

services look more alike• Services become “productised”• Other sectors “servicised”.

(1) Standardisation /mass production

(2) Service package includes physical product

MIIRO


Services are extremely diverse

Solving business problems, providing customer experiences, supporting government functions

[Markets]

Transforming the state of Artefacts, of People, of Symbols

[Products and Technologies]

Using the most and least knowledge-intensive employees, in tasks from the most sophisticated to the most routine

[Skills and Work Organisation]

Repair Transport HealthFinanceTelecommunications

Engineering DesignCateringCleaning

Restaurants EntertainmentConsultancy Temporary Labour

Pubic Services Administration

Which is bound to lead to diverse innovation levels and trajectories

MIIRO


Services Skill Levels vary widely

0

10

20

30

40

50

60

70

80

90

100H

otel

s an

dre

stau

rant

s

Who

lesa

le a

ndre

tail

trad

e

Tra

nspo

rt a

ndco

mm

unic

atio

n

Oth

er s

ervi

ces

and

hous

ehol

ds

Hea

lth a

ndso

cial

ser

vice

s

Bus

ines

sse

rvic

es

Edu

catio

n

Fin

anci

alin

term

edia

tion

Pub

licad

min

istr

atio

n

Low skillshare

Medium skillshare

High skillshare

The most high-skill intensive

sectors

Low skill intensive

Medium skill

intensive

Also high growth (skills indicative of specialisation?)

EU, 2000

Mo

re p

hys

ical

tr

ansf

orm

ati

on

s –

req

uir

e m

ob

ilit

y o

r p

rese

nce

More routine (informational activities can

often be offshored)

EU, 2000

MIIRO


Implications

Roles for: • Enterprises• Government• Research and

Training

It is time to recognise the importance of service innovation (challenge for managerial assumptions – rise of service dominant logic and SSME)Organisational and other innovations should not be neglected (challenge for innovation policy)But there is an ongoing wave of technological innovation in services (challenge for ICT sectors to reach SMEs, public services - and to build in service design principles)Both are important for the whole economy as well as for social wellbeing and confronting grand challenges Complex skills are often required, combining knowledge and capabilities for dealing with business and end-users, and integrating the competences of different professions in service systems (challenge for training)

MIIRO


END OF PRESENTATIONSome additional slides follow

MIIRO


CIS4 resultsUK data

Other Business Sers.Legal Sers.

Architecture

Financial sers.

WholesaleReal Estate

Labour Recruitment

Other Transport sers.

Vehicle trade

RetailHORECA

Courier + post

Extractive, Construction, Utilities

Manufacturing

TelecommsComputer Sers.

R&D

0

10

20

30

40

50

60

70

80

0 10 20 30 40 50 60 70 80

Miles, I. (2008) “Patterns of innovation in service industries” IBM Systems Journal Vol. 47 No. 1 pp 115-128; available at http://www.research.ibm.com/journal/sj/471/miles.html

http://www.research.ibm.com/journal/sj/471/miles.html

MIIRO


Some types of servicisationEmbedded services

Product services: complementary to the goods; aiding users; adding more value; support services, KIBS

Servitising goods: not rental

Process services: selling business processes

Software, comms, content [e.g. Kindle]

Aftersales, software sales, systems integration and management

Pay for service, not good

Testing, production, comms, marketing

MIIRO


Andy Neely - services from primary and secondary sector firms

OSIRIS data on >12,000 listed companies with >100 employees

MIIRO


“Servitised” IT firms seek to set agenda

At: http://forums.thesrii.org/srii & http://www-304.ibm.com/jct01005c/university/scholars/skills/ssme/index.html

Influencing policymakers, educators and research funders:1)Need for better skills & analysis

to meet challenges of service economy and innovation;

2)Offering “solutions” to problems of service competitiveness & public service productivity issues.

http://forums.thesrii.org/srii



http://www-304.ibm.com/jct01005c/university/scholars/skills/ssme/index.html

http://www-304.ibm.com/jct01005c/university/scholars/skills/ssme/index.html

MIIRO


Dis-missal

SYNTHESIS

Inspired by P den Hertog et al (2006) Research and Development Needs of Business

Related Service Firms (RENESER Project) Delft: Dialogic innovatie & interactie

Contrasted the three perspectives in terms of R&D, wider innovation, and non-innovation policies


Perspectives on service innovation policies

Assim

ilationDem

arca

tion

MIIRO


Service innovation policies - Assimilation

Dis-missal

Demarc-ation

Synthesis

Dismissal

Service innovation is essentially like manufacturing innovation – but has been

neglected in policies and innovation infrastructure. Thus there may well be elements of system failure to address,

before “sector-neutral policies” are genuinely so. Access is the issue.

• Include service firms in R&D and innovation surveys and support programmes – may require some new formulation and networking

• Develop infrastructure and innovation systems to support service industries

• Support services (esp SMEs)in innovation management and entrepreneurship, develop relevant training, etc. Approaches to Services

Assim

ilation

MIIRO


Service innovation policies - Demarcation

Dis-missal

Synthesis

Assim-ilation

Dismissal

Service innovation also has forms and methods very different from manufacturing

innovation – overlooked in standard innovation indicators, instruments and tools.

Need to address specific features of innovation (intangible, customer-interface and interaction, and experience/content

issues) and its management.

• Specific R&D and engineering programmes for service firms & public sector. Awareness raising

• Adapt R&D definitions as applied in practice.• Service innovation programmes and centres, with more

emphasis on user-driven innovation, etc.• New tools, techniques, communities of practice to be

supported, beyond R&D. Best practice and role models.• IP and Knowledge Management training and strategising.

Approaches to ServicesD

emar

catio

n

MIIRO


Service innovation policies - Synthesis

Dis-missal

Demarc-ation

Assim-ilation

Dismissal

All sectors liable to display multiple forms of innovation, combining technological,

organisational, and business model innovation. Service activities as elements in and

beneficiaries of innovation systems. Services as part of service systems, including those constructed to confront grand challenges

• Integrate nontechnological and organisational issues into R&D programmes.

• Support innovation in service activities• Support KIBS in innovation systems and clusters• User-driven, open and interprofessional innovation (inc

“living labs” and demonstrators)• Regulations, standards, procurement, legal and

financial support (including accounting for intangibles).


SYNTHESIS

MIIRO


There have been many recent overviews of policy

rationales, approaches...

Before these, SIID

MIIRO


Western countries have adopted various approaches

Several countries (UK, Eire, Netherlands) launch studies; Sometimes specific sectors are addressed (creative industries, health, etc,)R&D and related policy initiatives for services, including “service engineering”

MIIRO


R&D Policy Initiatives – e.g. BMBF

MIIRO


Finland - TEKESLaunched 2006; euro100m over 5y;’ TEKES pays 50%

Mainly B2B

IPPS funded from this to explore policies

MIIRO


Shifting focus?

MIIRO


Service Innovation Policy or C21st Innovation Policy?

Kuusisto 2008

• Technological AND organisational innovation

• R&D AND wider innovation support

• Supply and demand side

• User driven AND professional innovation intelligence

(open innovation)

• Multidiisciplinary and multiprofessional innovation teams

• Tackling major socieconomic challenges

• From individual and narrow policies to framework conditions

MIIRO


End of extra slides