1. Innovation in the service sectorDr Palie Smart, Cranfield University A presentation given at Innovation Day, 19th March 2009.This presentation forms part of the Observatorys ongoingState of the Region dialogue between policy makers andresearchers on the theme of innovation.

2. Service Innovation Dr Palie Smart Senior Lecturer in Strategic Innovation Management 3. Innovation Innovation driving UK economy 2003 Innovation Review Focus on manufacturers NESTA Hidden Innovation 2003 Innovation Nation Innovating in a recession 4. Defining Innovation R B ER s, the first stepea innovation is often confused with invention - but the latter is onlyidofin a long process of bringing a good idea to widespread and effective use. onTidd et al (1997:24) invention refers to the development ta tinew idea or an act of creationwhereby, innovation refers toplo i of aexthe commercialising of the inventionulAhuja & Lampert (2001:522)sf conception + technical invention + commerciales innovation = theoreticalcc SuexploitationTrott (1998:12)innovation is one percent inspiration and ninety-nine percent perspirationNorville Barnes The Hudsucker Proxy 5. Service innovation What do we know already? Product centric innovation and manufacturing Product Service Systems (Product-servicebundles) Generic innovation management models Trends e.g. customisation Services are different 6. Multi-dimensional innovation Taxonomy Most innovation research focuses on product Continuous Discontinuous Product* Process Placement Proposition *Good or Service 7. Innovation management process Core renewalstrategy marketcreativityprocess execution productprofitcultureinter-organisational network 8. What are services? Service is a verb Primary offerings are intangibles: experience-based products that can not be touched Services are something that can be bought and sold but which you cannot drop on your foot (Gummersson, 1987) Different types of services and wide range of sectors 9. Service Characteristics Intangibility Inseparability / jointness Variability Perishability 10. Service augmentation Storey and Eastwood, 1998 Greater service provision For both product and services innovators Core good/service product Production and delivery of the service Servicescapeambient conditions, spatial layouts, symbols Role of design 11. Servitization of manufacturing Augmentation Rolls Royce Earned more revenue from services operations Power by the hour Integrated Vehicle Health Management (IVHM) Business model innovation 12. From closed to open innovation Re-thinking idea generation and channels to market Harnessing external idea, while leveraging their in-house R&D outside their current operations PROFESSOR, UC BERKELEY HAAS BUSINESS SCHOOL Closed to Open 13. Open Innovation P&G Connect & Develop (C&D) Head of External Innovation Discontinuity Boot Camp 50% of ideas for new products and technologies must come from outside the firm Communities of Practice Technology entrepreneurs 14. Open innovation In services Manufacturing: supply side, co-development Services: demand side Multiple touch points Broad scope and potential Highly experiential User labs, on and off-line Experimentation, prototyping; BBC Backstage 15. Open Innovation with Not for Profit M&S and Breakthrough Breast Cancer UK 2006 launch of a range of lingerie for thosewho have had breast cancer surgery Developed with post-operative women Scope for social innovation Social legitimacy as acting innovation capital 16. e-R&D Networks 17. e-R&D You Tube 18. User Involvement Miele Focusing on Hidden Needs Allergy market products 19. User Involvement AXA Removing barriers to innovation 20. Trends and Drivers Customisation in goods My car Customisation in services iPod Personal shopping Healthcare (self care) Fitness Personal banking / financing 21. Organisational Vigiliance SearchHorizon scanning, Foresight, DTI 22. Search for synergies What could Flymo learn from biotech sector What could Direct line Insurance learn from NHS Platform, generic technologies/know-how? LED lighting Stem cells 23. Challenges Designing services Link to science and technology base Technology Total immersion in user experience (laboratory) Social innovation Broaden scope for innovation dimensions Investing in the Innovation Nation 24. Contact detailsDr Palie Smart Senior Lecturer in Strategic Innovation Management Cranfield University E palie.smart@cranfield.ac.uk T +44 (0)1234 754757 Web www.cranfield.ac.uk Brian MacAulay Senior Intelligence Analyst West Midlands Regional Observatory Ebrian.macaulay@wmro.org T+44 (0)121 202 3247 Webwww.wmro.org Blog http://wmro.wordpress.com