Service Innovation - an overview

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1

Service Innovation
and
Innovative Services

Ian Miles
Manchester Institute of Innovation Research
Manchester Business School
(and the Laboratory for the Economics of Innovation, HSE Moscow)
Ian.Miles@mbs.ac.uk

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

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Outline
Introductory Remarks
Perspectives on Services and
Service Innovation
Service innovation management
and policy
Service innovation in the twenty-
first century


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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


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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”

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Growing Attention:
Publications featuring Keywords in title
KEY PHRASE:

Service ….. …..
….. innovation

Innovation in
….. services
New service …..
…..development
Innovation in
…..service
2009

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

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Services in Innovation Surveys
Innovation 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 .


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Manufacturing Innovation is
(often) Tangible


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Manufacturing - Simplified
Production

Consumption
Process Innovation
Product Innovation


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(Some) Services - Simplified

Consumption
Production /
Service Innovation


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Service Innovation is (often)
Intangible -harder to visualise

Though some things that happen can be captured

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Containerisation


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Offshored call centre


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Financial Services


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And more…


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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)/


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Innovation can be technique,
rather than technology


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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


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Clarifications and Distinctions
Service innovation versus innovation in
services
Ambiguities in the words “service” and
“services”


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What are Services? “Intangible
Statistical goods” or
• Compare to • Compare to something
Categories manufacturing goods
- industries more?/ -
Innovation Service
in Services product
innovations
Industries Products

SERVICE

Relation-
Journeys ships
• Extended • Linkage
More than process of between
activities customer and SERVICE
repeat supplier rather than
purchases ServiceS?

Services as doing things, as opposed to making things.

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Service Industries - Statistics
Sections NACE Rev 1

G • Hotels and Restaurants (HORECA)

H • Transport, Storage
Industries
I • Financial Intermediation (FI...

J • Real estate, Renting (…RE), Business Activities Includes KIBS

• Wholesale & Retail Trade; Repair of .Motor Vehicles, Motorcycles and
K Personal & Household Goods

L • Public Administration and Defence; Compulsory Social Security

M • Education

N • Health and Social Work

O • Other Community, Social and Personal Service Activities


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Service Industries – New Statistics
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NACE Rev 2

G • Hotels and Restaurants (HORECA)

H • Transport, Storage

I • Financial Intermediation (FI...

J • Real estate, Renting (…RE), Business Activities Includes KIBS

• Wholesale & Retail Trade; Repair of .Motor Vehicles, Motorcycles and
K Personal & Household Goods Industries
L • Public Administration and Defence; Compulsory Social Security

M • Education

N • Health and Social Work

O • Other Community, Social and Personal Service Activities


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Services from Manufacturing

Products
“Servicisation”

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What are Service Activities?
Service Products – getting things done
Service Activities as doing things, as
opposed to making physical things.
Transforming people artefacts information

Service innovation:
New or improved “things”
New or improved “ways of doing things”
Different innovation patterns related to different
transformations

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Broad Innovation Trajectories
Service Products – getting things done
Service Activities as doing things, as
Personal, health services Trade, repair, transport services
Communication, finance,
business services

opposed to making physical things.
Transforming people artefacts information
• Bio- Psycho- and • Physical, • Data and Symbol
Social Chemical Transformations
Transformations Transformations • INFORMATION
Service innovation:
• MANY SPECIFIC • ENERGY AND AND
TECHNOLOGIES MOTOR COMMUNICATION
New or improved Surgery;
e.g. “things” TECHNOLOGIES • TECHNOLOGIES
INSTITUTIONS & MATERIALS… • ORGANISATION
New or improved “ways of doing things”
SOCIAL STRUCTURES
ROUTINES
Different innovation patterns related to different
transformations

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Traditional view of service innovation

Approaches to
Services

Dismissal

Increasingly hard to
and as many more
sustain this view as
(with very few exceptions) traditional service
technology-based
sectors displayed
services become Service industries play little considerable
important to
innovation in all role in (technological) technology
adoption and
sectors innovation innovation
and can thus be ignored by innovation
policy


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New Perspectives on service innovation
Approaches to Services
A similar (not identical)
Framework developed by approach had already
R Coombs & I been developed in the
Miles, 2000, “Innovation, 1990s by Gallouj – see
Measurement and recent work like F.
Services: the new Gallouj and F. Djellal
problematique” in J S (eds) (2010). The
Metcalfe & I Miles (eds) Dis-
Dismissal Handbook of
Innovation and
Innovation Systems in the
Service Economy
missal Services, Edward
Dordrecht: Kluwer Elgar: Cheltenham

Syn-
thesis


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Assimilation Perspective
ApproachesServices are
to Services “Service innovation
qualitatively is not distinctive; it
distinctive, due to
especi can be studied and
ally due to
INTANGIBILTY
organised in ways
INTANGIBILTY, IN
and
familiar from
TERACTIVITY, etc
INTERACTIVITY :
.  different forms
different forms of analysis of
of innovation &
innovation and Dis-
Dismissal manufacturing”
innovation missal
process Tend to
focus on
techno-
Syn- logical
innovation
thesis (though
some
theorists
insist this is
distinctive)


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Services: Innovators like
any others?
Innovation in Service firms is now accepted and
measured using standard tools
On average, service industries are slightly less
innovative than manufacturing, substantially less
likely to undertake R&D or take out patents
Some service sectors UK CIS
2007
are highly innovative
(like high-tech?), others
much less so (and so
Is this a
interpret in terms of
policy
problem
“barriers” like small
? scale, difficult processes)

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Services: Innovators like
any others?
Innovation in Service firms is now accepted and
measured using standard tools
On average, service industries are slightly less
innovative than manufacturing, substantially less
likely to undertake R&D or take out patents
Maybe 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
Is this a
policy or innovation support tool – versus -
problem
?
Education and awareness raising among services

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Demarcation Perspective
“Services are Approaches to Services
Service
qualitatively innovation is not
distinctive, distinctive; it can
especially due to
be studied and
features of
organised in
Much INTANGIBILTY,
INTERACTIVITY, ways familiar
discussion of
service etc.  different Dis-
Dismissal from analysis of
specificities forms of missal manufacturing
(and the innovation &
huge innovation
diversity process”
across
services) in
Syn-
marketing thesis
and
management
research as
well as
innovation
studies


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Services - Beyond Manufacturing,
Not just Intangible Goods
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
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

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• Manufacturer
Involvement of Client/Customer: • Good

Blurring of Product and Process (service • Consumer
experience)
Coproduction of Service and Value • Service Firm

• Service
Innovation in Delivery and at Supplier-
-Customer Interface • Consumer


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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.

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Different Innovation Styles
(INNOVA survey)
“Which of these areas are your innovation efforts focussed on?”
PROCESS Max. choice = 2)

Product + Process

PRODUCT

Services
Manufacturing
Organisation + Product

Organisation + Process

ORGANISATION

0 5 10 15 20 25 30 35 40
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

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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
* Barras, R. (1990) „Interactive Innovation In Financial
under examination.) And Business Services: the vanguard of the service
revolution‟, Research Policy, vol.19, pp. 215-237

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Service Production
[Rob Glushko has
written extensively The Service
on front and back Business Partners
Product:
stage processes often
in service design] coproduced
[in the service
relationship]

Back Front
Office User
Office (wider user
(back (front communities)
stage) stage)

The Service
Organisation
Employees Organisation Infrastructure Infostructure


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Exploring Service Innovation
6 Dimensions from den Hertog
Value
Business Partners
Chain/
System

Revenue Customer
Model Interaction
Back Front
Office User
Office (wider user
(back (front communities)
stage) stage)
Delivery Service
(Organisation) Concept

Employees Delivery
Organisation Infrastructure Infostructure
(Technology)


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den Hertog: 6 dimensions of SI
P den Hertog, W van der
Aa, M W. de Jong, (2010) An
"Capabilities for managing Value innovation
service innovation: towards Chain/ MAY
a conceptual framework" System involve just
one
dimension
Revenue Customer
Model Interaction

But many
innovations
Delivery Service are multi-
(Organisation) Concept dimensional

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


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Capabilities for Service Innovation
Partnering, Value
M&A, procur Chain/ Marketing
ement System

Revenue Customer
Model Interaction

Sales,
Finance, after
strategy sales

Delivery Service
(Organisation) Concept

HRM Delivery Technology
(Technology)


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How service innovation takes place
R&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”.

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Features of service innovation
Information 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

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Service Design – Communities, Networks
From industrial and informatics
design, using approaches
developed in creative industries,
interaction design, etc…

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

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A Synthesis?
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)

All sectors have Dismissal
Dis- Services become
diverse features, more technology-
and many “service”
missal intensive and
elements “industrialised”

Synthesis
“Servitisation” (Knowledge
of intensive)
manufacturing service activities

Demarc- Assim-
ation ilation


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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 (1) Standardisation
• Services become “productised” (2) /mass production
Service package

• Other sectors “servicised”. includes physical
product


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Services are extremely diverse
Which is bound to lead to diverse innovation levels and trajectories

Consultancy Temporary Labour Restaurants Entertainment
Solving business problems, providing customer
experiences, supporting government functions
Pubic Services Administration
[Markets]
Transforming the state of Artefacts, of People, of
Finance Repair Transport Health
Symbols Telecommunications
[Products and Technologies]
Using the most and least knowledge-intensive
employees, in tasks from the most sophisticated to
Catering
the most routine Cleaning Engineering Design

[Skills and Work Organisation]

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Services Skill Levels vary widely
EU, 2000 Also high growth (skills
indicative of specialisation?) More routine
100 (informational
90 activities can
Low skill intensive often be
80 offshored)
70 Medium
60 skill Low skill
50 intensive share
40 Medium skill
30 share
20 The most high-skill High skill
10 intensive sectors share
transformations – require

0
mobility or presence

social services

Education

intermediation

administration
communication

Business
restaurants

and households
Hotels and

Wholesale and

services
Other services
Transport and
More physical

Health and
retail trade

Financial

Public
EU, 2000


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• Enterprises
• Government
Implications • 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)

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Some additional slides follow

END OF PRESENTATION


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UK data
CIS4 results
80

70
Computer Sers.
Telecomms

60
R&D
Financial sers.

50 Architecture

Wholesale Manufacturing
Real Estate Legal Sers.
40 Other Business Sers.
Extractive, Construction, Labour Recruitment
Vehicle trade
Utilities
30 Other Transport sers.
Retail
HORECA

20 Courier + post

Miles, I. (2008) “Patterns of innovation in service
10 industries” IBM Systems Journal Vol. 47 No. 1 pp 115-
128; available at
http://www.research.ibm.com/journal/sj/471/miles.html
0
0 10 20 30 40 50 60 70 80


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Some types of servicisation
Embedded services Software, comms,
content [e.g. Kindle]
Product services: Aftersales, software
complementary to the sales, systems
goods; aiding users; integration and
adding more value; management
support services, KIBS
Servitising goods: Pay for service, not
not rental good
Process services:
selling business Testing, production,
processes comms, marketing

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Andy Neely - services from primary
and secondary sector firms
OSIRIS
data on
>12,000
listed
companies
with >100
employees


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“Servitised” IT firms seek to set agenda
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.

At: http://forums.thesrii.org/srii &
http://www-
304.ibm.com/jct01005c/university/schola
rs/skills/ssme/index.html between MBS Manchester and UNAM Mexico, Oct. 2012
Video Conference

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Perspectives on service innovation
policies
Inspired by P den Hertog et al (2006)
Research and Development Needs of Business
Related Service Firms (RENESER Project)
Delft: Dialogic innovatie & interactie
Dis-
Contrasted the three perspectives in terms of
missal
R&D, wider innovation, and non-innovation policies

SYNTHESIS


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Service innovation policies -
Assimilation
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
Dismissal
genuinely so. Access is the issue.

• Include service firms in R&D and innovation
Synthesis
surveys and support programmes – may require
some new formulation and networking
• Develop infrastructure and innovation systems
to support service industries Dis-
Demarc-
• Support services (esp SMEs)in innovation
ation
missal develop
management and entrepreneurship,
Approaches to Services relevant training, etc.

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Service innovation policies - Demarcation
Approaches to Services 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
Dismissal
and interaction, and experience/content
issues) and its management.

Synthesis
•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.Dis-
Assim-
•New tools, techniques, communities of practice to be
ilation
missal
supported, beyond R&D. Best practice and role models.
• IP and Knowledge Management training and strategising.

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Service innovation policies - Synthesis

SYNTHESIS 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
Dismissal
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
Demarc-
Dis-
Assim-
“living labs” and demonstrators) ation
ilation
missal and
•Regulations, standards, procurement, legal
financial support (including accounting for intangibles).

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There have been many recent
overviews of policy
rationales, approaches...
Before these, SIID


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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”


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R&D Policy Initiatives – e.g. BMBF


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Finland - TEKES
Launched 2006; euro100m
over 5y;‟ TEKES pays 50%

Mainly
B2B
IPPS funded from this to explore policies

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Shifting focus?


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Service Innovation Policy or
C21st Innovation Policy?
• 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
Kuusisto
2008

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End of extra slides


Service Innovation - an overview

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