Innovation in the service sector

Technology, Leadershipand Innovation in the Services Economy

Irving Wladawsky-Berger

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The Changing Nature of Research and Innovation

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Industrial Age Knowledge Age

The Industrial RevolutionA technology and science based revolution

Design and manufacturing of physical objects

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Innovations in the Industrial EconomyMajor improvements in productivity and quality in physically engineered systems

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Innovations in logistics and manufacturingToyota Production System

Supply chain Just-in-time production Continuous improvement . . .

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Source: Kurzweil 1999 – Moravec 1998

Accelerating Advances in Digital TechnologiesIT is to the 21st century as steam power was to the Industrial Revolution

Text

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The Internet: Industrial Knowledge Age

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FocusNatural and engineered

physical objectsInformation, people,

service systems

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Growth of Services Economy in US

Agriculture:Value from harvesting nature

Goods:Value from

making products

Services:Value from enhancing the capabilitiesof tasks that one organization beneficially performs for others

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GDP composition by sector 1.2% Agriculture 19.2% Industry 79.6% Services

Labor force – by occupation 0.6% Agriculture: Farming, forestry, fishing 22.6% Industry: Manufacturing, extraction, transp, crafts 76.8%: Services• 35.5% Managerial, professional and technical• 24.8% Sales and office• 16.5% Other services

US Economy – The CIA World Factbook

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GDP composition by sector 1.3% Agriculture 24.2% Industry 74.5% Services

Labor force – by occupation 1.4% Agriculture 18.2% Insutry 74.5% Services

UK Economy – The CIA World Factbook

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GDP composition by sector 4% Agriculture 32% Industry 64% Services

Labor force – by occupation 40% Agriculture 20% Industry 40% Services

World Economy – The CIA World Factbook

42%6433 3 1.4Germany

37%261163 2.1Bangladesh

19%201070 1.6Nigeria

45%6728 5 2.2Japan

64%692110 2.4Russia

61%661420 3.0Brazil

34%391645 3.5Indonesia

23%7623 1 5.1U.S.

35%23176014.4India

142%29224925.7China

40yr ServiceGrowth

S%

G%

A %

Labor %

Nation

World’s Large Labor ForcesA = Agriculture, G = Goods, S = Service

20092009

The largest labor force migration in human history is underway, driven by global communications,

business and technology growth, urbanization and regional variations in labor and infrastructure costs

and capabilities.

CIA Handbook, International Labor OrganizationNote: Pakistan, Vietnam, and Mexico now larger LF than Germany

US shift to service jobs

(A) Agriculture:Value from harvesting nature

(G) Goods:Value from making products

(S) Service:Value from enhancing the

capabilities of people and their ability to interconnect and co-create value

Changing nature of work in the world - away from farms and factories…

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Services is Front Stage: We are all in services . . . More or less! James Teboul - INSEAD

Every organization consists of front stage and back stage activities

Services deal with the front stage interactions

People are prominent in front stage activities, providing solutions to problems and focusing on achieving a positive customer experience in a collaboration between the providers and consumers of services

Manufacturing and production deal with back stage operations

Product excellence and competitive costs are key to back stage activities which tend to focus on specialization, standardization and automation

Pure product

Transformation

Labor & Capital

Pure service

Customer Customer

In case of a pure product, . . .

we have raw materials in and a finished product out.

we have ore in and gold out. we have steel in, cars out.

In case of a ‘pure’ service,

we have a customer in and, in the best case, the same customer out, but transformed by the experience.

Labor & Capital

ExperienceRaw

MaterialsFinishedProducts

Prof. James Teboul

THE AGE OF SERVICES

INDUSTRY SERVICES

Front Stage

(People, Tools)

Back Stage

(Design, Manufacturing)

Back stageFront stage

In industry, we focus on the back stage operations, but we still need a front stage to sell, distribute, repair, develop solutions, help and train customers

In services, we focus on the front stage experience, but we still need back stage operations to prepare products and components or process information

Any business is madeup of two parts

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service systems

Location Lab-based Market-facing

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Complex Organizational Systems

Physically Engineered Systems

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Innovations in the Industrial EconomyMajor improvements in productivity and quality in physically engineered systems

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The Internet: Industrial Knowledge Age

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Market Environment in the 21st Century Global, integrated, “system of systems” Fast changing, complex, unpredictable Focused on people, services, organizations

Key Challenge for the Knowledge AgeLeverage technology, science and innovation to make major improvements in the productivity and quality of services, organizations and the very way the world works

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Automation of standardized

back-office operations

Productivity tools for front-office

applications

Huge variety of market facing

e-services

Technology,componentsand products

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Market Facing, People, Services

Lab-based, Technology, Products

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service systems


Scope Specialized, narrowGlobal, holistic,

system of systems

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NetworkingTCP-IP

InformationWorld Wide Web

Communicationse-mail

. . .

Commercee-business

Consumer, business, government, healthcare and other Services

Cloud Computing

Internet

Evolution of the Internet

Distributed resourcesGrid Computing

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What new capabilities are enabling us to re-think how to apply technology, science and innovation to services, complex organizational systems and the very way the world works?

Huge amounts of informationBillions of mobile devices; trillions of sensors

Massive computational power and storage capacityHigh bandwidth, wireless networks

. . .

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By 2011, the world will be 10 times more instrumented than it was in 2006. Internet connected devices will leap from 500M to 1 Trillion

2005 2006 2007 2008 2009 2010 20110

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Exabyte

s RFID,Digital TV,

MP3 players,

Digital cameras,

Camera phones, VoIP,Medical imaging, Laptops,

smart meters, multi-player games,Satellite images, GPS, ATMs, Scanners,

Sensors, Digital radio, DLP theaters, Telematics,Peer-to-peer, Email, Instant messaging, Videoconferencing,

CAD/CAM, Toys, Industrial machines, Security systems, Appliances

10xgrowth infive years

Approximately 70% of the digital universe is created by individuals, but enterprises are responsible for 85% of the security, privacy, reliability, and compliance.

Real-time information analysisThe world's physical and digital infrastructure are converging

Our world is becoming

INSTRUMENTEDBut the sensors don’t yet communicate with each othervery well

Our world is becoming

INTERCONNECTEDBut we don’t yet speak the same “language” across these connections

Virtually all things, processes and waysof working are becoming

INTELLIGENTWe are at the infantile stage of intelligence wheresome signals are easily understood - others are just a fog

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Making the world smarter

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Some emerging “smart” applications

Smart traffic systems

Smart water management

Smart energy grids

Smart healthcare

Smart food systems

Intelligent oil field technologies

Smart regionsSmart weather

Smart countries

Smart supply chains

Smart cities

Smart retail

Smart Cities

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EDUCATION • TRANSPORTATION • SOCIAL SERVICES • UTILITIES • ENERGY • HEALTHCARE • COMMUNICATIONS

RETAIL • AUTOMOTIVE • FINANCE • MANUFACTURING • FOOD • POSTAL SERVICE • MEDIA • DEFENSE • CUSTOMS

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service systems



system of systems

Approach Siloed within disciplines Multi-disciplinary

T-Shaped Professionals Deep Expert Thinking and Broad Skills in Business, Communications, Organization

Science and Engineering

Math and Operations Research

IT and Information Systems

Complex Engineering Systems

Business and Management

Economics and Social Sciences

Business Anthropology and Design

Organizational Change & Learning

Broad

Deep

Deep in one… Broad across many…

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Overriding Educational ObjectiveDevelop or Enhance the Leadership Skills for Dealing With:

Technical Skills

Business Skills

People Skills

Complex Systems

Complex Markets

Complex Organizations

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service systems



system of systems


Culture ProprietaryOpen, distributed,

collaborative

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Collaborative InnovationSocial Networks: Bringing People and Communities into Our Systems

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Collaborative Innovation

– Creating a culture in which collaboration and interaction across silos is an essential element of innovation

–Surfacing innovative solutions to specific business challenges

–Rewarding innovators and innovative ideas in tangible, visible ways

ThinkPlace: Consistent global management system for employee-based innovation

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Collaborative InnovationInnovation Ecosystems: External Relationships and Partnerships

Venture Capitalists

ISVs BusinessPartners

UniversityRelations

Technical Thought Leaders

Corp. Community Relations

CGMs& SLEs

Investor Relations (IR) Financial Analysts Annual Report Direct IR

Legal

Media Relations

IT Analysts

AlumniPrograms

StandardsBodies

Gov’tPrograms

KeystoneCustomers

IBM Channels toConstituencies

Sustaining Enablers: Innovation Ecosystem

Engaging in strategic relationships enables an extension of our business model into the value net

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Open Standards

OGSA

Web Services

XML

Linux

Globus

WSDLSOAP

SMTP

SQLNNTP

HTTP/HTML

IRC

POP/iMAPTCP/IP

WAP

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Collaborative Innovation

Open Source communities – 10s of thousands of programmers

worldwide collaborating on– Linux, Apache Web server,

Eclipse, Open Grid Services Architecture . . .

Untold numbers worldwide contributing to/collaborating on

– Blogs, Wikis . . .

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Proprietary Innovation Income and Royalties

Collaborative Innovation Interoperability

Patent Pledges and Commons

Patent Assignments

Open Source Software

Patent Licensing

A Spectrum of Collaboration and Competition

The Changing IP Landscape For a Knowledge-Based Economy

ProprietaryProprietary OpenOpen

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Proprietary Innovation

Closed programs, intended to produce revenue and profit for the owner

Open, Collaborative Innovation

Creating, maintaining, enhancing capabilities thatare shared, free of charge

Differentiation Standardization

Leadership

21st-Century Innovation Model

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service systems




system of systems

Culture ProprietaryOpen, distributed,

collaborative

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Knowledge, Information & Services Economy

Industrial Economy

Technology, Leadershipand Innovation in the Services Economy

Irving Wladawsky-Berger

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Services is Front Stage: We are all in services . . . More or less! James Teboul - INSEAD

The distinction between industry and services sectors is, in fact, largely irrelevant. Clearly, these two sectors are evolving in symbiosis: services cannot prosper without a powerful industrial sector and industry is dependent on services

Every business and institution is involved in services to a greater or lesser extent, because its activities will involve front stage interactions as well as back stage operations

We will be even more in services in the future, as the back end shrinks with economies of scale and outsourcing and the front end develops further with more sophisticated demands from customers

Innovation in the service sector

Business

Transcript of Innovation in the service sector