Service Innovation Policy

A UK Perspective

Allan Mayo

Services Policy Unit

Dept for Business

KnowINNO

R&D and Innovation in Services

Paris, 27 September 2011

2

UK output and employment has shifted away from

manufacturing towards knowledge services

-2 -1 0 1 2 3 4

Other Manufacturing (2.6%)

Metal, Plastic And Non-Mineral Products (2.4%)

Food, Beverages, Tobacco Manufacture (1.6%)

Building And Repairing Of Ships And Boats (0.1%)

Industrial Machinery And Transport Equipment (2.1%)

ICT, Precision Instruments And Aerospace (1.3%)

Chemicals (0.7%)

Pharmaceuticals (0.8%)

Transport, Storage And Distribution (10.7%)

Agriculture, Forestry & Fishing (0.8%)

Utilities (2.4%)

Real Estate Activities (9.2%)

Hotels And Restaurants (2.8%)

Retail (5.3%)

Public Admin. And Defence (5.0%)

Other Community, Social And Personal Services (3.9%)

Mining And Quarrying (2.9%)

Construction (6.3%)

Post And Telecommunications (2.5%)

Research And Development (0.4%)

Renting Of Machinery And Equipment (1.0%)

Education (5.9%)

Computer and Related Activities (3.1%)

Health And Social Work (7.3%)

Other Business Services (9.8%)

Financial Services (9.1%)

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change in share between 1998 and 2008 (percentage points)

Workforce Jobs

GVA

Share of UK GVA

3

Trade in knowledge-based business

services

4

Investment in tangible and intangible assets by the

market sector 1998-2007

5

Components of the Innovation Index

NESTA

6

7

Drivers of Business Services Growth

8

Proportion of Degree workers in main sectors of the UK

economy 2010

9

World Class Business Schools

10

UK output and employment has shifted away from

manufacturing towards knowledge services

-2 -1 0 1 2 3 4

Other Manufacturing (2.6%)

Metal, Plastic And Non-Mineral Products (2.4%)

Food, Beverages, Tobacco Manufacture (1.6%)

Building And Repairing Of Ships And Boats (0.1%)

Industrial Machinery And Transport Equipment (2.1%)

ICT, Precision Instruments And Aerospace (1.3%)

Chemicals (0.7%)

Pharmaceuticals (0.8%)

Transport, Storage And Distribution (10.7%)

Agriculture, Forestry & Fishing (0.8%)

Utilities (2.4%)

Real Estate Activities (9.2%)

Hotels And Restaurants (2.8%)

Retail (5.3%)

Public Admin. And Defence (5.0%)

Other Community, Social And Personal Services (3.9%)

Mining And Quarrying (2.9%)

Construction (6.3%)

Post And Telecommunications (2.5%)

Research And Development (0.4%)

Renting Of Machinery And Equipment (1.0%)

Education (5.9%)

Computer and Related Activities (3.1%)

Health And Social Work (7.3%)

Other Business Services (9.8%)

Financial Services (9.1%)

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Te

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Ma

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change in share between 1998 and 2008 (percentage points)

Workforce Jobs

GVA

Share of UK GVA

11

Analysis of Productivity

Performance

12

Societal challenges – the built

environment

13

Societal challenges - Population

14

care

profs

Friends and

family

Tele-carer

Care response

service

Emergency

services

NHS

Direct

Care

professionals

Home Hub

Appliance

Elderly living

independently

Records

• NHS

• Social Care

• Housing

• Personal Health Record

Tele

healt

h

Tele

care

H

om

e a

uto

mati

on

Cholesterol

monitor

Blood-

pressure cuff

Pedometer

Glucose

meter

Sensor

networks

Medication

tracking

Lights

Doors /

Windows

Motion /

Activity

Bed

Kitchen

Bathroom

Service

Hub

15

Traffic and Transport

16

Intelligent Transport Systems

17

Sustainable Communities

Community,

Town, Factory,

Store,

Home

Excess

Heat

IC ENGINE

FUEL

CELL

GAS TOP

UP

PYROLISE

GASIFY

DIGEST

FERTILIZER, COMPOST WASTE GLASS & METAL

COOLING

ELECTRICITY

HEAT

CLEAN

GAS

GRID TOP UP WIND TURBINE

EXTRA WASTE SORT

Waste

VEHICLE

FUEL

18

Smart Cities

19

Leisure Services

20

Creating Dynamic Regions

21

Percentage urban

0

20

40

60

80

100

1990

1995

2000

2005

2009

2010

2015

2020

2025

2030

Years

% o

f p

op

ula

tio

n

Brazil

China

India

Indonesia Urban populations

0100000200000300000

400000500000

600000700000

800000900000

1000000

1990

1995

2000

2005

2009

2010

2015

2020

2025

2030

Years

tho

usan

ds Brazil

China

India

Indonesia

Source: Population Division of the Department of Economic and Social Affairs of the

United Nations Secretariat, World Population Prospects

22

Income Elasticities of Demand

23

24

Technology Change: Web 2.0 to

Web 3.0

25

People and

Skills

R&D

Societal Challenge

Or

Market

Infrastructure

Market

Framework

R&D

Complex Modelling

Design Tools

Sensor Technology

Processing power

Communications

Intelligent Search

Virtual Reality

Man Machine interface

Security

% MBAs, Grads, Technicians

Investment in Training

Broadband: speed/price

Internet access/coverage

Interoperable standards

Regulatory Environment

Business Churn: exit and entry

VC start up funds

% Public Sector Outsourced

Export/FDI Performance

Access to Public Data

ICT/Software

CRM/EDI Uptake

Cloud Uptake

26

UK Policy Priorities for Innovation and

Growth

• Infrastructure

• Finance for Growth

• Regulatory Barriers/Red Tape

• Trade: Barriers and Opportunities

• People: Education/Skills/Diversity/Immigration

• Public Service Reform and Open Data

• Demonstrators and Research

• Sectors: Services and Manufacturing