IAMOT March 2012

MC R

Service Economy 3.0

Ian Miles

(University of Manchester, and HSE, Moscow) Ian.Miles@mbs.ac.uk Manchester Institute of

Innovation Research Manchester Centre for Service Research

Laboratory for Economics of Innovation

MIIR

O

Service Innovation in the Post-Industrialized Society:

Overview

Understanding Services and Service Understanding Service Innovation Service Innovation and Technological Innovation Emerging Perspectives and Hot Topics, Implications

C21st

Service Innovation, and Innovation in Services, is NOW (almost) mainstream We accept that: Technology is Vital for Services and Service Innovation Services are Vital for Technology and Technological Innovation People are crucial as designers, producers and users (coproducers) of technology and services

The Time has Come for Service Innovation

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Service Innovation

Innovation in Services

Publish or Perish data www.harzing.com March 12th 2012

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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).

Ambiguity –source of misunder-standing

Industrial Specialisation Any industry can produce things that others specialise in. Service industries specialise in doing things, not making things. Some service industries produce physical products (usually the value lies in the professional skill, the particularisation and information content rather than the materials) – printed reports, dental fillings, assemblages...) Primary and secondary industries often produce services – aftersales and much more – “servicisation” foregrounds this.

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. But is it more complicated?

Product and process entangled User involvement in coproduction; role of service relationships; organisational innovation

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: perhaps especially in personal services E.g. CBT 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 Sensations

Behaviour

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 Genomics...

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

What Things are Services doing? Transformations

physical, chemical, biological, psychological, informational

Of Entities Material artefacts (goods, buildings, etc.) Living entities (mainly and especially human beings) Signals and Symbols

to achieve Effects Condition, Location, Accessibility (Maintenance, Movement, Matching)... Problem-solving, Experience-engineering

Varieties of Service Transformation

Some human corporeal transformation is of low complexity – personal services like cosmetic and hairdressing – these 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, education . Application of new IT.

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

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 very heavy from them. Barras, R. (1986) "Towards a theory of innovation in

services" Research Policy vol.15 no.4 pp.161-173

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

Mark Weiser at http://www.ubiq.com/hypertext/weiser/UbiHome.html

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

Service Economy

1.0

Service Economy

2.0

Service Economy

3.0

Evolving Views of Service Economy (and Service Innovation)

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

Manufacturing vs Services -1

Factory

Goods

Goods Consumer

Service Producer

Services

Service Consumer

versus

Separation Closeness, Coproduction

Service production

was typically seen as

either low-skill (and thus not

economic to

automate) or very

high skill and too

complex to automate

Traditional view of service innovation

Dismissal

(with very few exceptions) Service industries play little

role in (technological) innovation

And thus be innovation policy and MoT need only focus on technology transfer

It became 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

Thus service industries were typically seen as supplier-driven, with low productivity growth: the challenges for policy and MoT were thus those of improving technology transfer

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. Innovation IN services – but also new service delivery, new e-services. Information Society, Knowledge Economy Examples: Barras, Gershuny, Sundbo

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

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 techno-logical

innovation (though some

theorists insist this

is distinctive)

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 techno-logical

innovation (though some

theorists insist this

is distinctive)

Stressed that some service industries –those concerned with knowledge and informational transformations – are particularly intensive adopters and increasingly innovators with new IT, while many other services are less so. But large firms use New IT similarly in Back Offices.

Back Office

Consumer Communities

Back Office

Manufacturing vs Services -2

Factory

Goods

Goods Consumer

Front Office

Services

Service Consumer

versus

Barras model:

efficiency in back office,

then new services in front office

Glushko, R. (2010). “Seven

Contexts for Service System

Design”, in Maglio, P. P., Kieliszewski,

C., & Spohrer, J. (eds)

Handbook of Service

Science, Springer

Back Office

Consumer Communities

Back Office

Innovation - Manufacturing vs Services -Assimilation

Factory

Goods

Goods Consumer

Front Office

Services

Service Consumer

Back office innovation –

similar trajectories of IT

use Process innovation – also widespread adoption of new IT

Process innovation – also widespread adoption of new IT

Tertiarisation, convergence

Back Office

Consumer Communities

Back Office

Innovation - Manufacturing vs Services – Beyond Assimilation

Factory

Goods

Goods Consumer

Front Office

Services

Service Consumer

Back office innovation –

similar trajectories of IT

use Process innovation – some elements very specific to particular mfg. sectors

Process innovation – some elements very specific to particular service sectors – front and back office integration and organis- -ation issues.

Tertiarisation, convergence

Demarcation Perspective

Dis-missal

Demarc-ation

Syn-thesis

Assimilat-ion

Dismissal

Services are qualitatively distinctive, especially due to 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

Back Office

Consumer Communities

Back Office

Factory

Goods

Goods Consumer

Front Office

Services

Service Consumer

Back office innovation –

similar trajectories of IT use

Process innovation – some elements very specific to particular mfg. sectors

Product innovation – new / improved goods

Innovation in goods delivery

Process innovation – some elements very specific to particular service sectors Product innovation: new services Service Relationship and Delivery innovation

Innovation related to properties

and functions of product

Innovation - Manufacturing vs Services - Demarcation

As well as Transformations, Service Processes also vary in terms of such parameters as:

Capital-intensivity Labour-intensivity T2H H2H

Standardisation Particularisation Routineness (customised) Specialisation

Manual activity Knowledge-intensive activity

Cf. review by Esa Viitamo (2007), Productivity of Business Services – Towards a New Taxonomy, Lappeenranta University of Technology, Faculty of Technology and Management, Department of Industrial Management, Research Reports, 188.

Innovation and Service Processes - Capital/Labour:

Standardised Particularised Routine (customised) Specialised

Manual activity Knowledge-intensive activity

Advanced technology,

remote processing,

scale economies

Work organisation,

division of labour,

offshoring

Capital-intensive Labour-intensive T2H H2H

Innovation and Service Processes - Standardised/Specialised:

Capital-intensive Labour-intensive T2H H2H

Standardised Particularised Routine (customised) Specialised

Manual activity Knowledge-intensive activity

Automation, scripting, service

engineering, “productisation”

Novelty versus innovation; knowledge

capture

Modularisation and

recombination

Strategy and Business Model orientation affects moves to more or less standardisation/particularisation

Innovation and Service Processes - Manual/Knowledge-Based:

Capital-intensive Labour-intensive T2H H2H

Standardised Particularised Routine (customised) Specialised

Manual activity Knowledge-intensive activity

Power technology, HR issues where much H2H

contact

Paraprofessional and decision

support systems; Technical

specialisation

Service Economy 3.0 Economy of Service(s) 2010s-

Service orientation (Service-Dominant Logic) to forefront: Synthesis viewpoint Emergent processes and practices still–will be invigorated by use of new technologies like sensors, data analytics, etc. Service innovation; metamanufacturing, product-service solutions and Grand Challenges Examples: Gallouj, Spohrer, Vargo/Lusch

Dismissal

A Synthesis?

Dis-missal

Demarc-ation

Synthesis

Assim-ilation

All sectors have diverse features, and

many “service” elements

“Servitisation” of

manufacturing

(Knowledge intensive) service

activities

Services become more technology-

intensive and “industrialised”

Exploration of Service Innovation has identified aspects of innovation that are generically important

Innovation analysis, measurement and policy – needs to account for all these aspects (or if not, to explain why some sorts of innovation are privileged)

Back Office

Consumer Communities

Back Office

Innovation - Manufacturing and Services - Synthesis

Factory

Goods

Goods Consumer

Front Office

Services

Service Consumer

Back office innovation –

similar trajectories of IT use

Process innovation – some elements very specific to particular mfg. sectors

Product innovation – new / improved goods

Innovation in marketing and e-

business, e-commerce,

aftersales, use of functionality

provided by good or service

Innovation in goods delivery

Process innovation – some elements very specific to particular service sectors Product innovation: new services Service Relationship and Delivery innovation

Servicisation Productisation

Further Convergence

Value Chain Value Chain af

fect

ing

desi

gn a

nd n

ew s

ervi

ce re

latio

ns, t

hus

wid

er “b

ack-

offic

e” fu

nctio

ns- “

front

offi

ce”

Metamanufacturing : Goods in use and beyond

Service Thinking and Design Manufacturing and Making Things remains, of course, critical; and highly reliant on specialised knowledge. But Service dimensions of production come to fore, as it is more necessary to relate products to their use in extended life cycles and challenging environments Though new Technology can be used throughout innovation processes, much complexity and need for extended design processes.

Consumer Communities

Back Office

Loci of Service Innovation

Front Office

Services

Service Consumer

• Revenue Models

Elem

ents

of B

usin

ess

Mod

el

• 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

Users

Consumer Communities

Back Office

Capabilities for Service Innovation

Front Office

Services

Service Consumer

• Revenue Models

Elem

ents

of B

usin

ess

Mod

el

• 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

Gra

sp o

f fin

anci

al

man

agem

ent &

new

mod

els

Grasp of KM & informatics

Service technology capabilities

Grasp of users, uses

Service design capabilities

SCM capabilities

Grasp of business environment, scope for collaboration and open innovation

Grasp of markets, trends, marketing, competition

Grasp of HR, team management

Another View: multiple dimensions of service innovation

Delivery (Organisation)

Customer Interaction

Delivery (Technology)

Service Concept

Value Chain/ System

Revenue Model

Partnering, M&A,

procurement

Sales, after sales

Technology HRM

Finance, strategy Marketing

P den Hertog, W van der Aa,

M W. de Jong, (2010)

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

"Capabilities for managing service

innovation: towards a conceptual framework"

Challenges for Innovation and MoT

Even servicisation has often proved challenging Requirements for wide range of new knowledge, especially about user behaviour and wider contexts Wicked problems in Grand Challenges Numerous sites of innovation, turbulence for innovation management Multi-stakeholder, problems of cognitive alignment (e.g. around platforms)

Conclusions - Policy Develop Service Innovation Policy This means looking beyond traditional R&D support for traditional recipients Many parties play role in development of capabilities for service innovation, including policymakers, HEIs, leading companies, professional bodies; Public-Private Partnerships Especially where public services and procurement are concerned SMEs may need specific support Grand challenges and complex problems – transformational innovations spanning social and technological innovation (e.g. AAL, sustainability) Social innovation involving broader stakeholders and wider user communities, for legitimacy and access to knowledge relevant to effecting lasting behaviour change.

Conclusions - MoT Consider service design capabilities and techniques - requires diverse knowledge types, and ability to combine multiple component offerings from multiple actors; application of new tools for service design and relations (open innovation?) with relevant communities. Integration of management of innovations across multiple locations (back-office, front-office, value chain, factory, product in use...), building in knowledge of H2H and H2T relations and product/service life-cycles. 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

Finally

Service innovation is important For all sectors For all economies For confronting Grand Challenges

Understanding service innovation is important

To help do it better To engage more of the potential sources of creative solutions

End of Presentation