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The Scope for Service Innovation Policy KNOWINNO First Expert Meeting on R&D and Innovation in Services, 27 September 2011, OECD, Paris

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The Scope for Service Innovation Policy KNOWINNO First Expert Meeting on R&D and Innovation in Services, 27 September 2011, OECD, Paris The scope for service innovation policy KNOWINNO first expert meeting on R&D and innovation in services, 27 September 2011, OECD, Paris Pim den Hertog Amsterdam Centre for Service Innovation (AMSI), University of Amsterdam & Dialogic Innovation and Interaction 1 Background: two hats! Pim den Hertog Director Dialogic Innovation & Interaction, Utrecht [email protected] Tel: +31 30 215 0585 Mob: +31 651 53 17 96 [email protected] Research Co-ordinator Amsterdam Centre for Services Innovation (AMSI), Amsterdam Business School, University of Amsterdam [email protected] http://dare.uva.nl/record/352467 Tel: +31 20 525 8620 2 Introducing service innovation (1) Sample of service innovations TomTom Live Services Sustainable mobility plan Design your own life (personal navigation) (leasing) (retailing) 3 Sellaband Shoe Box service by Supperclub (music & related industries) Insinger de Beaufort (hospitality3 industry) (banking) Introducing service innovation (2) Some specificities of service innovation • Shared or co-produced processes Sellaband: bands, fans and service provider jointly create community (and new business model in music industry) • Highly combinatory/architectural Rabobank SMS payment services (conceptual, new client interface, new delivery organisation, new technology) • Conceptual Insinger de Beaufort: shoe box service to label highly customized, hassle free personal administration services • Functionally defined Athlon carlease offering a package of environmental friendly sustainable mobility solutions 4 Introducing service innovation (3) 6 dimensional model of service innovation 5 Introducing service innovation (4) Definition of service innovation A service innovation is a new service experience or service solution that consists of one or several of the following dimensions: new service concept, new customer interaction, new value system/business partners, new revenue model, new organizational or technological service delivery system (den Hertog, van der Aa & de Jong, 2010). • New service, a new service portfolio and/or a new service process that individually or in combination defines a new service or value proposition to a client. • Majority are co-created by the client and the provider • Degree of novelty: new to the firm, industry, country, world • Intentional effort? 6 Introducing service innovation (5) Managing the service innovation process • Centralized R&D vs. distributed innovation • SI process (though distributed) can be managed more deliberately & systematically • 6 dynamic SI capabilities (organizational routines) framework • Successful service innovators create mixes of SI organizational routines that are: – firm specific – difficult to imitate/copy (and constantly adapted) – aligned with firm strategy – not necessarily all owned by the firm 7 Introducing service innovation (6) Measuring (open) service innovation in the Greater Amsterdam – Utrecht Region • Large scale survey among service & manufacturing firms with 10 or more employees • Approx. 130 items (existing & some new scales) • Mostly 7 point likert scales • Two waves, net response in two waves at least 500 • First results Q4 2011 8 Introducing service innovation (7) Topics covered • Role of services in organization (Schmenner like typologies) • Role of innovation (exploration/exploitation) • Specific type of service innovations (using 6D model) • Service innovation management (using 6 organizational routines) • Formalization of service innovation management • OI practices & innovation cooperation & barriers • Market environment (turbulence) • Management team & vision on management • Innovation performance & firm performance 9 Service innovation policy (1) Innovation Active Firms in Reciept of Public Support for Innovation amongst 60% Line of equality, where Services = Manufacturing 50% Finland Greece 40% Red squares = Business Services Austria Spain Italy 30% Belgium . France Finland Sweden Norway Italy Neth. Greece Austria Germany 20% France Denmark Sweden Portugal --- Spain Netherlands Norway . UK Belgium Portugal Germany Blue dots = All Services 10% Proportion of IA Service IA of Receiving Firms Proportion Support UK Denmark 0% 0% 10% 20% 30% 40% 50% 60% Proportion of IA Manufacturing Firms Receiving Support 10 Service innovation policy (2) Three approaches to service innovation (policy) Assimilation approach No specific policy other than increasing service sensibility of existing generic R&D&I policies Demarcation approach Specific/vertical service innovation policies are lacking and much needed Systemic approach Services need to be built in into systemic innovation policies paying attention to innovation policies and ‘non-innovation’ policies 11 Service innovation policy (3) Usual storyline to pay no specific attention to services in IP • Services perform less technological R&D&I • Innovation in service firms is too close to the market • Doubt about spillover effects 12 Service innovation policy (4) Fundamental reasons to consider a services R&D&I policy 1. Innovation & economic growth driven by non-tech. innovation 2. Tech. and non-tech. R&D&I hard to separate 3. Some services (KIBS) drive innovation in client firms 4. Market failure argumentation not exclusive to tech. R&D&I 5. Systemic perspective (thus systemic failures) starting point for developing services’ R&D&I policies 13 Service innovation policy (5) Possible market failures in services according to van Dijk • Externalities: When societal returns to innovations exceed the private returns firms may innovate too little, because innovations may ‘leak’ to competitors due to imitation or employees switching jobs. • Market power: This may be the result of high sunk costs, natural monopoly, low transparency or high switching costs. • Asymmetric information: Risk adverse consumers will be reluctant to switch to new services, hampering their sales. NB: Per type of service industry a different mix – if any - exists 14 Service innovation policy (6) Systemic failures (O’Doherty & Arnold, 2003) applied to services 1. Capability failures Inadequacies in potential innovators' ability to act in their own best interests 2. Failures in institutions Failure to (re)configure institutions so that they work effectively within the innovation system 3. Network failures These relate to problems in the interactions among actors in the innovation system 4. Framework failures Effective innovation depends partly upon regulatory frameworks, health and safety rules, etc. as well as other background conditions, such as the sophistication of consumer demand, culture and social values. 15 Service innovation policy (7) Practical reasons to consider a services R&D&I policy 1. Sheer size, ubiquity and growth potential of services 2. 3% Lisbon/Barcelona target or EU 2020 goals 3. Increased competitive pressure 4. Lower than sometimes anticipated costs 16 Service innovation policy (8) 3 approaches to services R&D&I policy • ‘No regret policies’ [assimilation] • Services specific R&D&I policies [demarcation] • Systemic R&D&I policies [systemic/synthesis] My view: challenges are mostly in making nice policy mixes using all three approaches (no either/or) and moving towards systemic R&D&I policies 17 Service innovation policy (9) 3 approaches to services R&D&I policy Assimilation policies Demarcation Systemic policies Policies R&D Increase accessibility of Introduce vertical R&D Support for services policies existing R&D support programmes aimed at R&D in and through schemes service industries hybrid firms (logistics, trade, etc.) Innovation Innovation management Introduce courses on Government policies training & practices more services innovation procurement policies geared towards management supporting all types of Support role of users in innovation in all industries innovation Non- Increase coverage of Use deliberately policies Enhance high level innovation services in regular and such as trade, service capabilities e.g. policies R&D and innovation competition education & through education & statistics training policies for training policies fostering R&D and innovation in services 18 Concluding remarks (1) • Bias in current S&T policy mixes in most developed countries • Reasons for not paying attention to service innovation well established & persistent • Necessary to include systemic failures as a rationale for policy-action 19 Concluding remarks (2) • Multiple practical reasons for services R&D&I policy • Scope for using other (non-R&D, non-innovation) policies • In most cases a smart and region specific mix of assimilation, demarcation and systemic approaches are needed • Ideal world: start from framework policies (fundamental) before diving into detailed services R&D&I programmes 20 About Dialogic • Established in 1998 • 20 FTE research-based consultancy – Dialogic research – Dialogic Next Step • Specializations: – Innovation management/Innovation policy – Broadband, Telecom & Media – ICT & Education – Information strategy & data representation • Core element: how to benefit from innovation 21 .
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