2010 Ser Inn BMAN62052 Seminar 10 Policy

Manchester
Institute
O of
MIIR
Innovation
Research
Service Innovation Policy

(and Strategy)
Ian Miles
Ian.Miles@mbs.ac.uk
IME service innovation seminar
10
IME - Service Innovation - 2010 BMAN62052
Contents
Manchester
Institute
O of
MIIR
Innovation
Research
Lobbying Policymakers and Educators

SSME, SRII, etc
Why?
Why Services Policy?
Why Innovation Policy?
Why innovation policy for services?
What?
What policy instruments?
Who can design and implement these? What do
we know? Who is doing what?

Major Industry “Buzz!
Manchester
Institute
O of
MIIR
Innovation
Research
Especially IT industry promoting

notion of service science
Other important action around
service quality and service marketing
– rise of SDL
http://www.sdlogic.net/

Manchester and Service Engineering
Institute
O of
MIIR
Innovation
Research

Manchester
Institute
O of
MIIR
Innovation
Research
IBM -
SSME
At:; http://www-
304.ibm.com/jct0
1005c/university/
scholars/skills/ss
me/index.html

Manchester
Institute
O
MIIR
of
Service Research and
Innovation Initiative
Innovation
Research
IME - Service Innovation - 2010 BMAN62052 At:; http://forums.thesrii.org/srii

Manchester
Institute
O
MIIR
of
Industry impacts on
policy
Innovation
Research
Policymakers respond to industrial

concerns
Plus, much of public sector is about
services, and in these sectors there are
many innovation initiatives (though
these may be labelled efficiency,
modernisation, or otherwise)

Manchester
Example – NHS
Institute
O
MIIR
Innovation
Research
of
innovation
http://www.institute.nhs.uk/
Service (industrial)
Policy?
Manchester
Institute
O of
MIIR
Innovation
Research
MckInsey 2010
Industrial Policy
Manchester
Institute
O of
MIIR
Innovation
Research
Sector-neutral?
Prioritise manufacturing?
Prioritise high-tech (innovative?
Value-added?)
Other key sectors?
Critique of 1970s industrial policy –

picking winners, protectionism…
Innovation policy - precompetitive
Manchester
Institute
O of
General arguments for
innovation policy
MIIR
Innovation
Research
Should apply to services, if these are

not discounted as non-innovative
(which does seem to have been the
case historically)
Market failure, system failure
Important for competitiveness, both
directly and as business services
supporting business in general
Important for QOL, esp. non-market
services
Manchester
Institute
O
MIIR
of
Specific service
innovation policy?
Innovation
Research
We know that some features of

service innovation are distinctive –
e.g. R&D less common
Are services worse integrated into
innovation systems?
Are services overlooked in policy
programme formulation and
implementation?

Manchester
Institute
O
MIIR
of
Some reviews and
explication of arguments:
Innovation
Research
EC Expert group Fostering Innovation

in Services and various commentaries
Louis Rubalcaba papers, eg “Which
policy for innovation in services?” Science
and Public Policy 2006
RISE project

Policy Rationales
Manchester
Institute
O of
MIIR
Innovation
Research

Manchester
Institute
O
MIIR
of
Policy Areas (Kuusisto,
2008)
Innovation
Research
Supply-side, demand-side, bridging policies; source:

http://www.servicesaustralia.org.au/pdfFilesResearch/TowardsHighPePolicy.pdf
R&D and services
Manchester
Institute
O of
MIIR
Innovation
Research
Smaller firms: generally do less R&D.

Even accounting for this, most
services report lower R&D than most
equivalent manufacturers
Most R&D programmes not service-
targeted
But still, incentives via tax credits for
R&D. etc.?

Manchester
Institute
O of
MIIR
Innovation
Research
The
Officia
l UK
R&D
Surve
y

Manchester
Institute
O
MIIR
Innovation
of Small print
Research
Definition of Research and Development
R&D is a difficult concept to measure. We have attempted below to provide
some basic guidelines to follow. In some cases you may need to apply an
element of judgement when compiling your figures. We accept
approximations. R&D is defined as “Creative work undertaken on a
systematic basis in order to increase the stock of knowledge,
including the knowledge of man, culture and society, and the use of
this stock of knowledge to devise new applications”.
The guiding line to distinguish research and development activity (R&D)
from non-research activity is the presence or absence of an appreciable
element of novelty or innovation. If the activity departs from routine and
breaks new ground it should be included; if it follows an established pattern
it should be excluded.
The guidance in this note is based on the internationally agreed standard
established by the OECD and published in what is known as the
“Frascati” manual. A summary of the latest edition is available from the
ONS.
.
Other steers in definitions of employment: prof S&T,

technicians…
Manchester
Institute
O
MIIR
Innovation
of Small print continued..
Research Definition of Research and Development
…
Exclude such activities as:
a.Routine testing and analysis of all kinds, whether for control of materials,
components or products, and whether for control of quantity or quality.
(Testing and analysis as part of an R&D programme should be included.)
b. Market research, operational research, work study, cost analysis,
management science, surveying, “trouble-shooting”.
c. Royalties payments for the use of the results of research and
development unless required as an essential part of the research and
development programme within the unit.
d. Trial production runs where the primary objective is not further
improvement of the product.
e. Design costs to meet changes of fashion and artistic design work.
f. Legal and administrative work in connection with patent applications,
records and litigation; work involved in the sale of patents and licensing
arrangements; experimental work performed solely for the purpose of patent
litigation.
Other steers in definitions of employment: prof S&T,

technicians…
Knowing How,
Manchester
Institute
O
MIIR
Innovation
of Knowing Whom: A
Study of the Links
Research
between the
Knowledge Intensive
Services Sector and
The Science Base
IoIR
report to Council for Science and
Technology
http://www.cst.gov.uk/cst/reports/files/knowledge-intensive-services/services-study.pdf
June 2003
Sources of Information
Manchester
Institute
O of
MIIR
Innovation
Research
90% Many services more prone to use private

sources of inf – esp consultants.
80%
70%
60%
50%
Most services less prone to use
Universities, government
40%
30%
20%
10%
0%
)
)
)
)
)
)
)
)
)
)
Manchester
Institute
O
MIIR
Innovation
Research
of
Collaboration
• Collaboration with
Universities uncommon -
throughout industry;
•most contact with
manufacturing in general;
•5% services, 9%
manufacturers;
• But evidence that dynamic
innovators collaborate more.
Technical services -
high levels of
collaboration

Interviews with KIS Firms
Manchester
Institute
O of
MIIR
Innovation
Research
Environmental Services
Business Continuity Services
Long-term Personal Insurance
Market Research / Marketing
- Innovation important, rarely formalised
- Different sorts of knowledge required for
business practice and innovation
- Huge differences small/large firms

Human Resources
Manchester
Institute
O of
MIIR
Innovation
Research
Much variation, but most frequent

account is that graduates are valued
as source of general skills, specialist
skills are sometimes but not often
sought
Large firms more likely to be strategic
in recruitment
Some KIS have elaborate
professional development systems
Manchester
Institute
O
MIIR
of
Information, Expertise
and Collaboration
Innovation
Research
Small firms have few links in general

Linkages often ad hoc
Search for right sort of people
Collaboration rare, some prominent exceptions
Little awareness of support for collaborative
research
Important sectoral differences in assessment of
knowledge base

Supply Side
Manchester
Institute
O of
MIIR
Innovation
Research
Rarely any specific strategies for KIS, some

are recognised as having high potential.
Scope for more development.
Variations across Universities and KIS
Important role of Centres and Programmes
Some apparent linkages are not used for
knowledge transfer

Overall
Manchester
Institute
O of
MIIR
Innovation
Research
Lack of “absorptive capacity” on both

sides
Centres of excellence and other
intermediaries provide compass
points, accumulated knowledge,
know-who, “translation” capabilities

Policy
Manchester
Institute
O of
MIIR
Innovation
Research
Better measurement (sampling, surveys) - not

to reach targets faster but to inform policy
Better targeting of “mainstream” R&D and
innovation programmes to engage services
beyond the usual suspects
some re-engineering of innovation systems
awareness and promotion (incl. some
benchmarking with service examples, etc.)

Policy
Manchester
Institute
O of
MIIR
Innovation
Research
Better measurement - not to reach targets faster but

to inform policy
Better targeting of “mainstream” R&D and innovation
programmes to engage services
Services-oriented R&D and innovation programmes
from science and industrial policy angles (draw on examples of good
practice)
relate to ongoing initiatives where useful
support for new generations of innovation management
...

Manchester
Institute
O
MIIR
of
Interventions may
promote change:
Innovation
Research
Generally services neglected in innovation and

R&D policy - but there is now some R&D policy
for services and R&D-relevant initiatives
Initiatives like IBM’s “service science”, NSF
“service engineering”

Some overviews
Manchester
Institute
O of
MIIR
Innovation
Research
SIID, and more recently IPPS

Many countries active:
Manchester
Institute
O of
MIIR
Innovation
Research
Some have established service innovation (Finland), R&D

(Germany, Canada), engineering (USA) programmes
U.S. Congress - National Innovation Act - add “Fostering the
Field of Service Science” to studies conducted by the National
Science Foundation
Some countries have instigated projects to explore prospects
(UK, Eire)
Also international bodies (EC) – the EU has identified service
and non-technological innovation as one of nine strategic
priorities of its innovation strategy; funding programs to create
a policy framework and establish knowledge platforms
Japan’s “New Economic Growth Strategy” - six key service
areas for service policy initiatives – funding for advanced
business models in health and welfare, childcare, tourism,
business support services and distribution services.
Much interest – action very patchy
Some more detail…

Finland - TEKES
Manchester
Institute
O of
MIIR
Innovation euro100m over 5y;’ TEKES pays 50%
Research
Mainly B2B
IME - Service Innovation - 2010 BMAN62052IPPS funded from this to explore policies
Manchester
Institute
O
R&D Policy Initiatives – e.g.
of
BMBF
MIIR
Innovation
Research

Manchester
German Initiatives -
BMBF
Institute
O of
MIIR
Innovation
Research

Manchester
Institute
O of
German Initiatives -
BMBF
MIIR
Innovation
Research

Manchester
Institute
O of
MIIR
Innovation
Research
German
Initiativ
es -
BMBF

Manchester
Institute
O
MIIR
of
Changing Innovation
Policy?
Innovation
Research
Kuusisto 2008
Manchester
Institute
O of
MIIR
Innovation
Research
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Manchester

Service Innovation Policy

Lobbying Policymakers and Educators

IME - Service Innovation - 2010 BMAN62052

Especially IT industry promoting

IME - Service Innovation - 2010 BMAN62052

IME - Service Innovation - 2010 BMAN62052

IME - Service Innovation - 2010 BMAN62052

IME - Service Innovation - 2010 BMAN62052 At:; http://forums.thesrii.org/srii

Policymakers respond to industrial

IME - Service Innovation - 2010 BMAN62052

Critique of 1970s industrial policy –

Should apply to services, if these are

We know that some features of

IME - Service Innovation - 2010 BMAN62052

EC Expert group Fostering Innovation

IME - Service Innovation - 2010 BMAN62052

IME - Service Innovation - 2010 BMAN62052

Supply-side, demand-side, bridging policies; source:

Smaller firms: generally do less R&D.

IME - Service Innovation - 2010 BMAN62052

IME - Service Innovation - 2010 BMAN62052

Other steers in definitions of employment: prof S&T,

Other steers in definitions of employment: prof S&T,

90% Many services more prone to use private

IME - Service Innovation - 2010 BMAN62052

IME - Service Innovation - 2010 BMAN62052

Much variation, but most frequent

Small firms have few links in general

IME - Service Innovation - 2010 BMAN62052

Rarely any specific strategies for KIS, some

IME - Service Innovation - 2010 BMAN62052

Lack of “absorptive capacity” on both

IME - Service Innovation - 2010 BMAN62052

Better measurement (sampling, surveys) - not

IME - Service Innovation - 2010 BMAN62052

Better measurement - not to reach targets faster but

IME - Service Innovation - 2010 BMAN62052

Generally services neglected in innovation and

IME - Service Innovation - 2010 BMAN62052

SIID, and more recently IPPS

IME - Service Innovation - 2010 BMAN62052

Some have established service innovation (Finland), R&D

IME - Service Innovation - 2010 BMAN62052

IME - Service Innovation - 2010 BMAN62052

IME - Service Innovation - 2010 BMAN62052

IME - Service Innovation - 2010 BMAN62052

IME - Service Innovation - 2010 BMAN62052

IME - Service Innovation - 2010 BMAN62052

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