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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]
Manchester Institute of
Innovation Research Laboratory for
Economics of Innovation
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
Interest in “Service Innovation” P
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service innovation
new service development
innovation in services
Publish or Perish data
www.harzing.com March 3rd 2013
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Publish or Perish data
www.harzing.com March 3rd 2013
2010
2004
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
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.
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
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
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
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
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
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...
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.
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
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
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
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
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
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
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
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
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,
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
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
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)
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
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.
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
Manufacturing vs Services -1
Factory
Goods
Goods Consumer
Service Producer
Services
Service Consumer
versus
Separation Closeness, Coproduction
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
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.
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
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
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)
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
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
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
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
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
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
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.
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
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)
End of Presentation