Service Innovation - Strategy and Policy

Manchester Institute of Innovation Research

MOSTI - Service Innovation 2009

Service Innovation Policy (and beyond)

Ian Miles

[email protected]

MOSTI service innovation seminar 9



Contents

Lobbying Policymakers and EducatorsSSME, SRII, etc

Why?Why Innovation Policy?

Why innovation policy for services?

What?What policy instruments?

Who can design and implement these? What do we know? Who is doing what?



Major Industry “Buzz!

Especially IT industry promoting notion of service science

Other important action around service quality and service marketing – rise of SDL

http://www.sdlogic.net/



and Service Engineering



IBM - SSME

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



Service Research and Innovation Initiative

At:; http://forums.thesrii.org/srii



Industry impacts on policy

Policymakers respond to industrial concerns

Plus, much of public sector is about services, and in these sectors there are many innovation initiatives (though these may be labelled efficiency, modernisation, or otherwise)


MOSTI - Service Innovation 2009 http://www.institute.nhs.uk/

Example – NHS innovation



General arguments for innovation policy

Should apply to services, if these are not discounted as non-innovative (which does seem to have been the case historically)Market failure, system failureImportant for competitiveness, both directly and as business services supporting business in generalImportant for QOL, esp. non-market services



Specific service innovation policy?

We know that some features of service innovation are distinctive – e.g. R&D less common

Are services worse integrated into innovation systems?

Are services overlooked in policy programme formulation and implementation?



Some reviews and explication of arguments:

EC Expert group Fostering Innovation in Services and various commentaries

Louis Rubalcaba papers, eg “Which policy for innovation in services?” Science and Public Policy 2006

RISE project



Policy Rationales



Policy Areas (Kuusisto, 2008)

Supply-side, demand-side, bridging policies; source: http://www.servicesaustralia.org.au/pdfFilesResearch/TowardsHighPePolicy.pdf



R&D and services

Smaller firms: generally do less R&D.

Even accounting for this, most services report lower R&D than most equivalent manufacturers

Most R&D programmes not service-targeted

But still, incentives via tax credits for R&D. etc.?



The Official UK R&D Survey



Small printDefinition of Research and Development

R&D is a difficult concept to measure. We have attempted below to provide some basic guidelines to follow. In some cases you may need to apply an element of judgement when compiling your figures. We accept approximations. R&D is defined as “Creative work undertaken on a systematic basis in order to increase the stock of knowledge, including the knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications”.The guiding line to distinguish research and development activity (R&D) from non-research activity is the presence or absence of an appreciable element of novelty or innovation. If the activity departs from routine and breaks new ground it should be included; if it follows an established pattern it should be excluded. The guidance in this note is based on the internationally agreed standard established by the OECD and published in what is known as the “Frascati” manual. A summary of the latest edition is available from the ONS.Exclude such activities as:a.Routine testing and analysis of all kinds, whether for control of materials, components or products, and whether for control of quantity or quality. (Testing and analysis as part of an R&D programme should be included.)b. Market research, operational research, work study, cost analysis, management science, surveying, “trouble-shooting”.c. Royalties payments for the use of the results of research and development unless required as an essential part of the research and development programme within the unit.d. Trial production runs where the primary objective is not further improvement of the product.e. Design costs to meet changes of fashion and artistic design work.f. Legal and administrative work in connection with patent applications, records and litigation; work involved in the sale of patents and licensing arrangements; experimental work performed solely for the purpose of patent litigation.

Other steers in definitions of employment: prof S&T, technicians…



Knowing How, Knowing Whom: A Study of the Links

between the Knowledge Intensive Services Sector and The Science Base

IoIR report to Council for Science and

TechnologyJune 2003

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



Sources of Information

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

(TS-A

E)

(TS-R

D)

(IT-C

S)

(IT-T

O)

(FS-B

I)

(FS-R

L)

(PS-L

A)

(PS-I)

(PS-M

)

(TS-P

)

(TS-F

)

(TS-O

)(W

S)HTM

MHTM

MLT

MLT

M

PublicUsed

PublicHighImptPrivateUsed

PrivateHighImpt

Most services less prone to use Universities, government

Many services more prone to use private sources of inf – esp consultants.



Technical services - high levels of collaboration

• Collaboration with Universities uncommon - throughout industry;

•most contact with manufacturing in general;

•5% services, 9% manufacturers;

• But evidence that dynamic innovators collaborate more.

Collaboration



Interviews with KIS Firms

Environmental Services

Business Continuity Services

Long-term Personal Insurance

Market Research / Marketing

- Innovation important, rarely formalised

- Different sorts of knowledge required for business practice and innovation

- Huge differences small/large firms



Human ResourcesMuch variation, but most frequent account is that graduates are valued as source of general skills, specialist skills are sometimes but not often sought

Large firms more likely to be strategic in recruitment

Some KIS have elaborate professional development systems



Information, Expertise and Collaboration

Small firms have few links in generalLinkages often ad hocSearch for right sort of peopleCollaboration rare, some prominent exceptionsLittle awareness of support for collaborative researchImportant sectoral differences in assessment of knowledge base



Supply SideRarely any specific strategies for KIS, some are recognised as having high potential. Scope for more development.

Variations across Universities and KIS

Important role of Centres and Programmes

Some apparent linkages are not used for knowledge transfer



OverallLack of “absorptive capacity” on both sides

Centres of excellence and other intermediaries provide compass points, accumulated knowledge, know-who, “translation” capabilities



PolicyBetter measurement (sampling, surveys) - not to reach targets faster but to inform policy

Better targeting of “mainstream” R&D and innovation programmes to engage services

beyond the usual suspects

some re-engineering of innovation systems

awareness and promotion (incl. some benchmarking with service examples, etc.)



PolicyBetter measurement - not to reach targets faster but to inform policy

Better targeting of “mainstream” R&D and innovation programmes to engage services

Services-oriented R&D and innovation programmes from science and industrial policy angles (draw on examples of good practice)

relate to ongoing initiatives where useful

support for new generations of innovation management

...



Interventions may promote change:

Generally services neglected in innovation and R&D policy - but there is now some R&D policy for services and R&D-relevant initiativesInitiatives like IBM’s “service science”, NSF “service engineering”



Some overviews

SIID, and more recently IPPS



Many countries active:Some have established service innovation (Finland), R&D (Germany, Canada), engineering (USA) programmes U.S. Congress - National Innovation Act - add “Fostering the Field of Service Science” to studies conducted by the National Science Foundation Some countries have instigated projects to explore prospects (UK, Eire)Also international bodies (EC) – the EU has identified service and non-technological innovation as one of nine strategic priorities of its innovation strategy; funding programs to create a policy framework and establish knowledge platformsJapan’s “New Economic Growth Strategy” - six key service areas for service policy initiatives – funding for advanced business models in health and welfare, childcare, tourism, business support services and distribution services.Much interest – action very patchySome more detail…



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

Mainly B2B

IPPS funded from this to explore policies



R&D Policy Initiatives – e.g. BMBF



German Initiatives - BMBF









Changing Innovation Policy?

Kuusisto 2008



End of Presentation

Service Innovation - Strategy and Policy

Business

business services

service research

features of service

nonmarket services

innovation initiatives

innovation systems

services smaller firms

development rd