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UAM, Madrid, March 2013 The New Service Economy – Innovation in services Ian Miles (University of Manchester, and HSE, Moscow) [email protected] [email protected] Manchester Institute of Innovation Research Laboratory for Economics of Innovation

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Page 1: The New Service Economy Innovation in services - UAM · The New Service Economy – Innovation in services ... structures or practices & marketing concepts or strategies; ... Process

UAM, Madrid, March 2013

The New Service Economy

– Innovation in services

Ian Miles

(University of Manchester, and HSE, Moscow) [email protected]

[email protected]

Manchester Institute of

Innovation Research Laboratory for

Economics of Innovation

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Overview

Service Innovation, and Innovation in

Services, is NOW (almost) mainstream

How Understanding of Services and

Service Innovation has evolved

New Approaches to Service Innovation

Services and Technological Innovation

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Interest in “Service Innovation” P

ublic

ations w

ith t

he t

erm

in t

heir t

itle

s

0

50

100

150

200

250

300

350

4001978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

20

06

2008

2010

2012

service innovation

new service development

innovation in services

Publish or Perish data

www.harzing.com March 3rd 2013

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0

50

100

150

200

250

300

350

4001978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

20

06

2008

2010

2012

Interest in “Service Innovation” P

ublic

ations w

ith t

he t

erm

in t

heir t

itle

s

Publish or Perish data

www.harzing.com March 3rd 2013

2010

2004

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Service Industries – Innovation IN Services NACE 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 Security L

• Education M

• Health and Social Work N

• Other Community, Social and Personal Service Activities O

Includes KIBS

Sections

Industries

These are the service specialists

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Perspectives on Service(s) Primary industries specialise in extracting

things (raw materials, etc.) from the natural

world (and change and manage parts of that world).

Secondary industries specialise in making

things (from other things): Manufacturing

makes goods, Construction makes buildings,

etc.

Tertiary industries specialise in doing things:

Services (service industries) produce ...

services (service products).

And services can be produced by other

industries, and consumers.

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Innovation

Goods innovation – product and process –

making new things, making things in new

ways. (Largely technological innovation.)

Service innovation then: doing new

things, doing things in new ways.

Whether in service industries (“innovation in

services” or other service suppliers.

... or is it more complicated?

Product and process entangled

User involvement in coproduction; role of service

relationships; organisational innovation

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What Do Services Do?

They effect transformations

physical, chemical, biological, psychological,

informational (etc.)

of Entities Material artefacts (goods, buildings, etc.)

Living entities (especially human beings)

Signals and Symbols

to achieve Effects Maintenance, Movement, Matching...

Problem-solving (versus) Providing Experiences

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Varieties of Service

Transformation Some human corporeal transformation is of

low complexity – personal services like

cosmetic and hairdressing (can be quasi-

medical, though usually routine). Innovation

in aesthetics, consumables.

Other transformations of people and

artefacts are much more

physical – e.g. transport, HORECA, repair/

maintenance. Application of power machinery.

Informational –e.g. providing experiences,

entertainment, education

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Three Transformational Types

Physical Transformations

e.g Cleaning, Transport

Often much manual, sometimes low-skill work

Environmental sustainability, “self-

service”

Power and engine systems; technologies

under repair etc.

Business model change

Human Transformations

e.g. Health, Personal Services

High presence, often high involvement of Consumer/User

Human diversity, Interpersonal relations

Many specialised, from very low to very high-tech

Changing role of public sector

Informational Transformations

e.g Finance, Communications

Range of mass and customised services

Keeping apace of platforms and users, IP

IT and supporting systems (e.g. Batteries)

New functionality (e.g. Location) and knowledge

(e.g. Neuro...)

Manual Activity Knowledge-intensive activity

Examples

Features

Challenges

Technologies

Trends

Many activities, and most service industries, involve some mixture of all three

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Not all service innovation is

technological

Innovating service suppliers often use new

technology, at least in a facilitating role

But even here there are exceptions:

especially in personal services E.g. CBT (.5m treatments in UK in 2012)

Alternative to pharmaceuticals

NHS: “one of the most

effective treatments for

anxiety and depression.”

Can be via book or software

And now “web therapy”

But still usually face-to-face,

Sometimes in groups

Situation

Altered Thinking

Emotional Feelings

Physical Sens-ations

Behaviour

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Opportunities influenced by state of science and

development of practical experience... Health services

involve particularly complex and long-term sequences of

problem-solving, involving many professions and bodies

of knowledge in complex (public-private) institutional

frames...Numerous specific innovations. See:

D.Consoli et al, 2007, “The Process of Health Care

Innovation” in J Costa-Font et al (eds) The Economics of

New Health Technology Oxford University Press

Not all Technological Innovations

in Services are IT-based Many service processes are highly specific

The transformations can benefit from

particular categories of technology.

For example, medical services may apply

tools and knowledge concerning:

Pharmacology

Radiology

Surgery

Physiology

Genomics...

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Information Technology is

nevertheless pervasive

While there are many specific service

technologies

Surgical tools, hairdryers, trains, trolleys,

fast-food containers, clipboards....

Most services are information-intensive,

in front and back offices

Thus most are IT-intensive

Barras: IT represents an industrial

revolution for service sectors: IT

investment is very heavy from them.

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Information Technology

evolution 70s 80s 90s 00s 10s 20s?

Inspired by Marc Weiser et al: - cf: I Miles (2005) “Be Here Now”, INFO Vol.

7 No. 2, pp49-71

Mainframe mini

VANs

Experts

Centralised

Numbers

Micro PC

LANs

Profess-ionals

“End-User”

Text/ graphics

Networks & laptops

Web

Public

Content

Commun-ication

Tablet, smartphone

WiFi, 3G

Wide public

Web2.0,

P2P

Multimedia

Sensors, Actuators

WiMax, 4G,cloud

Ubiquit-ous

Internet of things,

locations

Control

Biodevice

+ + +

Ambient

Semantic web

Enhance-ment

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Mainframe mini

VANs

Experts

Centralised

Numbers

Micro PC

LANs

Profess-ionals

“End-User”

Text/ graphics

Networks & laptops

Web

Public

Content

Commun-ication

Tablet, smartphone

WiFi, 3G,

Wide public

Web2.0,

P2P

Multimedia

Sensors, Actuators

WiMax, 4G,cloud

Ubiquit-ous

Internet of things,

locations

Control

Biodevice?

+ + +

Ambient

Semantic web

Enhance-ment

Information Society

70s 80s 90s 00s 10s 20s?

One for

Many

People

One for a

Few

People

One for Each

Person/Place

A Few for

Each

Person/Place

Many for Each

Person/Place

Page 16: The New Service Economy Innovation in services - UAM · The New Service Economy – Innovation in services ... structures or practices & marketing concepts or strategies; ... Process

Mainframe mini

VANs

Experts

Centralised

Numbers

Micro PC

LANs

Profess-ionals

“End-User”

Text/ graphics

Networks & laptops

Web

Public

Content

Commun-ication

Tablet, smartphone

WiFi, 3G,

Wide public

Web2.0,

P2P

Multimedia

Sensors, Actuators

WiMax, 4G,cloud

Ubiquit-ous

Internet of things,

locations

Control

Biodevice?

+ + +

Ambient

Semantic web

Enhance-ment

Information Technology Use is

one shaper of Service Economy

70s 80s 90s 00s 10s 20s?

One for

Many

People

One for a

Few

People

One for Each

Person/Place

A Few for

Each

Person/Place

Many for Each

Person/Place

Evolving Views of Service Economy (& Service Innovation)

Service

Economy

1.0

Service

Economy

2.0

Service

Economy

3.0

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Service Economy 1.0 “Post-Industrial Society” - 1960s-’80s

0

20

40

60

80

100

120

140

160

180

200

Service Economy

Post Industrial Society

Service

Economy

1.0

Phrases in titles: Harzing’s Publish or Perish 3/1/2013

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Service Economy 1.0 “Post-Industrial Society” - 1960s-’80s

Economy of services sector(s)

Growth driven by consumer demand,

welfare state provision, low productivity growth

Innovation relatively low, supplier-driven

Industries are pre- or post-industrial - too

complicated or particularised for mass production

MoT thus seen as adoption of technology

from elsewhere

Exceptional services sequestered

Examples: Bell, Fuchs,Touraine

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Services, textiles and agriculture

high-tech firms in industries such as

pharmaceuticals and electronics

large firms producing basic materials and

consumer durables, e.g. automobile

manufacture

specialized machinery production and

high-tech instruments.

Supplier-dominated

firms

Science-based firms

Scale-intensive firms

Specialised equipment

producers

Sectoral Patterns of

Innovation – traditional view

Original formulation of

Pavitt (1984): four broad

types of innovation

Sectors include:

Thus, diffusion is the issue: and maybe slow

uptake is the “problem”

Innovation – overwhelmingly identified

as technological.

Pavitt, K. (1984) ‘Sectoral Patterns of Technical Change: towards

a taxonomy and a theory’ Research Policy 13 (6) pp. 343-373

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Manchester

Institute of

Innovation

Research

Traditional view of service innovation

Dismissal

(with very few exceptions)

Service industries play little

role in (technological)

innovation and can thus be ignored by innovation

policy

Increasingly hard to

sustain this view as

technology-based

services become

important to

innovation in all

sectors

and as many more

traditional service

sectors displayed

considerable

technology

adoption and

innovation

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Service Economy 2.0 Knowledge-Based Economy: 1980s-2000s

Phrases in titles: Harzing’s Publish or Perish 3/1/2013

Service

Economy

2.0

0

500

1000

1500

2000

2500

Service Economy

Post IndustrialSociety

Information Society

KnowledgeEconomy

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Service Economy 2.0 Knowledge-Based Economy: 1980s-2000s

New Information Technology widely

adopted in service organisations- especially

back-office in large organisations.

Many IT-related services assisting this -

KIBS as supporting business processes

and innovation across the economy.

New services and service delivery, new e-

services.

Information Society, Knowledge Economy

Examples: Barras, Gershuny,

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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

Perspectives on service innovation

Dis-missal

Demarc-ation

Syn-thesis

Assim-ilation

Dismissal

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Different Disciplines

Converge and Collide

Service Management:

stress coproduction

New Service Development:

stress intangibility

Innovation Studies:

stress information and

information technology

Management studies, esp. HORECA & trade

Marketing, esp. E-business Industrial economics, esp. High-tech, KIBS

Demarcation

Assimilation

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Services are

qualitatively

distinctive, due to

INTANGIBILTY

and

INTERACTIVITY :

different forms of

innovation and

innovation

process

Assimilation Perspective

Dis-missal

Demarc-ation

Syn-thesis

Assim-ilation

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

technological

innovation

(though

some

theorists

insist that

even

technological

innovation is

distinctive)

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Supplier-dominated

firms

Science-based firms

Scale-intensive firms

Specialised equipment

producers

Patterns of Innovation

rethought: varieties of service

firm as innovator

Many traditional service sectors – personal and

retail trade services, many public services

Production-intensive scale-intensive sectors:

large organisations with much back-office

innovation (incl some supermarkets, etc.)

Network sectors – physical networks (e.g.

transport, wholesale), information networks (e.g.

telecomms, banking)

Specialised technology suppliers and science-

based sectors – computer & engineering

services

(1989 and 2000) – mainly tech focus

Soete, L. and Miozzo, M. (2001). “Internationalization of Services:

A Technological Perspective”

Technological Forecasting and Social Change 67, 159–185

From Pavitt to Soete & Miozzo

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Services in Innovation Surveys Innovation surveys (originally the CIS) across Europe since 1980s, have included many service industries

since the 1990s. Recent UK data featured below..

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.

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Demarcation Perspective

Dis-missal

Demarc-ation

Syn-thesis

Assimilat-ion

Dismissal

Services are

qualitatively

distinctive,

COPRODUCTION,

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 Extensive

discussion of

service

specificities

(and the huge

diversity

across

services) in

marketing

and

management

as well as

innovation

studies

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Manufacturing vs Services -1

Factory

Goods

Goods Consumer

Service Producer

Services

Service Consumer

versus

Separation Closeness, Coproduction

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Manufacturing vs Services

Innovation 1

Factory

Goods

Goods Consumer

Service Producer

Services

Service Consumer

versus

Separation Closeness, Coproduction

Process

Innovation

Product

Innovation

Process and

Product

Intertwined:

Ideas of (e.g.)

Delivery

Innovation,

Servuction

Innovation

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Back Office

Consumer

Communities

Back Office

Manufacturing vs Services – 2

Factory

Goods

Goods Consumer,Use

of Goods

Front Office

Services

Service Consumer: action and transformation

versus

But not all

service

process is

immediately

in the

coproduction

front-office

space – much

back office

invisible

preparation

and support

Not all

manufactur-

ing

processes

are in

tangible

production:

much back-

office work

here too.

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Back Office

Consumer

Communities

Back Office

Manufacturing vs Services -

Innovation 2

Factory

Goods

Goods Consumer,Use

of Goods

Front Office

Services

Service Consumer: action and transformation

versus

Barras:

Reverse

Product

Cycle

model: IT

introduced

for

efficiency

in back

office,

then

applied to

improved

quality and

eventually

new

services in

front office

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Service Economy 3.0 Economy of Service(s) 2010s-

Service

Economy

3.0

Service orientation (Service-

Dominant Logic) to forefront

“Service Science”, SSME

Product-service systems – and

responses to Grand Challenges

Not just technology – but

emergent processes and practices

will be invigorated by use of new

technologies like sensors, data

analytics, etc.

Examples: Gallouj, Spohrer,

Vargo/Lusch

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Dismissal

A Synthesis?

Dis-missal

Demarc-ation

Synthesis

Assim-ilation

All sectors have diverse features, and many “service” elements

Exploration of Service Innovation has identified aspects of

innovation that are generically important

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)

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Dismissal

Aspects of a Synthesis

Dis-missal

Demarc-ation

Synthesis

Assim-ilation

All sectors have diverse features, and many “service” elements

Manufacturing features:

(KNOWLEDGE

INTENSIVE) SERVICE

ACTIVITIES AS

INNOVATION AGENTS

Services feature:

Exploration of Service Innovation has identified aspects of

innovation that are generically important

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)

“SERVITISATION”

SERVICE

DOMINANT

LOGIC

TERTIARISATION GREATER

TECHNOLOGY-

INTENSITY

INDUSTRIALISATION

“PRODUCTISATION”

ENCAPSULATION

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Back Office

Consumer

Communities

Back Office

Innovation - Manufacturing

and Services 1

Factory

Goods

Goods Consumer,Use

of Goods

Front Office

Services

Service Consumer: action and transformation

versus

Page 37: The New Service Economy Innovation in services - UAM · The New Service Economy – Innovation in services ... structures or practices & marketing concepts or strategies; ... Process

Back Office

Consumer

Communities

Back Office

Innovation - Manufacturing

and Services 1

Factory

Goods

Goods Consumer,Use

of Goods

Front Office

Services

Service Consumer: action and transformation

versus

Back office innovation –

similar trajectories of IT use,

organisational innovation

Process innovation – similar features of automation,

etc., but much variety across sectors in terms of

specific processes and transformations

Tertiarisation,

convergence

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Back Office

Consumer

Communities

Back Office

Innovation - Manufacturing

and Services 2

Factory

Goods

Goods Consumer,Use

of Goods

Front Office

Services

Service Consumer: action and transformation

Back office innovation –

similar trajectories of IT use,

organisational innovation

Process innovation – similar features of automation,

etc., but much variety across sectors in terms of

specific processes and transformations

Tertiarisation,

convergence

Product innovation –

new / improved goods –

and services

Relationship

and Delivery

innovation

Product innovation – new

/ improved services (often

for new goods platforms)

Innovation in marketing and e-business, e-

commerce, aftersales, use of functionality

provided by good or service

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Consumer

Communities

Back Office

Loci of Service Innovation

Front Office

Services

Service Consumer

• Revenue

Models

Ele

ments

of B

usin

ess M

odel

• Position in Value Chain

• Management of suppliers

• Office systems

• Service work organisation, scripts

• Service Value Proposition

(Concept and Content)

• Service Delivery Systems

• Interface with, relation to,

consumers and their platforms

• Role of consumers (and

communities) in coproduction

• Target Markets and Marketing

Techniques

Value Chain

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Consumer

Communities

Back Office

Skills for Service Innovation

Front Office

Services

Service Consumer

• Revenue

Models

Ele

ments

of B

usin

ess M

odel

• Position in Value Chain

• Management of suppliers

• Office systems

• Service work organisation, scripts

• Service Value Proposition

(Concept and Content)

• Service Delivery Systems

• Interface with, relation to

consumers and their platforms

• Role of consumers (and

communities) in coproduction

• Target Markets and Marketing

Techniques

Value Chain

Sp

ecific

te

ch

no

log

y

ma

na

ge

me

nt &

gra

sp

of n

ew

op

po

rtu

nitie

s

Gra

sp o

f financia

l

managem

ent

& n

ew

models

Grasp of KM & informatics

Service design capabilities

Service technology capabilities

Grasp of users, uses

Service design capabilities

Service design capabilities

Grasp of business environment, scope for merger,

acquisition, joint ventures, collaboration, open innovation

Grasp of markets, trends, marketing

Grasp of HR, team management

Aw

are

ne

ss o

f

co

mp

etito

rs a

nd

esp

.

Dis

rup

tive

po

ssib

ilities

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The Synthesis Approach

needs to recognise

Many diverse forms and dimensions of innovation

Varying in frequency and intensity across different

types of organisation.

Often these occur and are managed relatively

independently, even within the organisation

Though some changes trigger others

Some are interconnected from the start

Business model innovation may involve alignment of

many innovations

Existing classifications and categories of innovation

styles and activities – even R&D – may be of

limited use. Study new design approaches.

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Challenges for Innovation

Management

Even servicisation has often proved challenging

Requirements for wide range of new knowledge,

especially about user behaviour and wider

contexts

Needs to combine different types of knowledge

Numerous sites of innovation, turbulence for

innovation management

Wicked problems in Grand Challenges

Cognitive alignment

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Conclusions Often service innovation requires diverse knowledge types, and

ability to combine multiple component offerings from multiple

actors. New tools for service design are emerging.

Many parties play role in development of capabilities for service

innovation, including policymakers, HEIs, leading companies,

professional bodies

Important to retain and enhance scope for individual and

organisational learning, as requirements for multiple

competences evolve

Central role for management capability to identify, mobilise,

coordinate requisite professionals and skill sets

SMEs may need specific support

Grand challenges and complex problems – transformational

innovations spanning social and technological innovation (e.g.

AAL, sustainability)

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End of Presentation