Keynote presentation of 2012 IAMOT conference on Technology-Service Convergence.

1. Service Innovation in the
Post-Industrialized Society:
Service Economy 3.0
Ian Miles
(University of Manchester, and HSE, Moscow)
O
MIIR Manchester Institute of Laboratory for
MC R
Innovation Research
Manchester Centre for
Ian.Miles@mbs.ac.uk Economics of
Innovation
Service Research
IAMOT March 2012

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

3. 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

4. The Time has Come for
Publish or Perish data Service Innovation
IAMOT 2012
300
www.harzing.com
March 12th 2012
Chesbrough,FT,2004
250
Publications with the term in their titles
200
Service Innovation
150
100
Innovation in Services
50
0

5. 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)–source of
Ambiguity
produce services (service products). misunder-
standing

6. 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.

7. 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

8. 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 Altered
Thinking
NHS: “one of the most
effective treatments for
anxiety and depression.” Behaviour Situation Emotional
Can be via book or software Feelings
And now “web therapy”
But still usually face-to-face,
Sometimes in groups Physical
Sensations

9. 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
Opportunities influenced by state of science and development
Radiology of practical experience
Health services involve particularly complex and long-term
Surgery sequences of problem-solving, involving many professions
and bodies of knowledge in complex (public-private)
Genomics... institutionalspecific innovations. See: D.Consoli et al, 2007,
Numerous
frames
“The Process of Health Care Innovation” in J Costa-Font et al
(eds) The Economics of New Health Technology Oxford
University Press

10. 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

11. 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.

12. Three Transformational Types
Many activities, and most service industries, involve some mixture of all three
Physical Human Informational
Transformations Transformations Transformations
Examples
e.g Cleaning, e.g. Health, e.g Finance,
Features Transport Personal Services Communications
Often much manual, High presence, often high
Range of mass and
sometimes low-skill work involvement of
customised services
Challenges
Consumer/User
Environmental
sustainability, “self- Human diversity, Keeping apace of
service” Interpersonal relations platforms and users; ,IP
Technologies
Power and engine
systems; technologies Many specialised, from IT and supporting
under repair etc. very low to very high-tech systems (e.g. Batteries)
Trends
New functionality (e.g.
Business model change Changing role of public Location) and knowledge
sector (e.g. Neuro...)
Manual Activity Knowledge-intensive activity

13. 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

14. Information Technology
evolution
70s 80s 90s 00s 10s 20s?
Mainframe Micro Networks Tablet, Sensors,
Biodevice
 mini  PC & laptops smartphone Actuators
WiMax,
VANs LANs Web WiFi, 3G +++
4G,cloud
Profess- Wide Ubiquit-
Experts Public Ambient
ionals public ous
Web2.0, Internet of
“End- Semantic
Centralised Content things,
User” P2P web
locations
Text/ Commun- Enhance-
Numbers Multimedia Control
graphics ication ment
Inspired by Marc Weiser et al: - cf: I Miles (2005) “Be Here Now”, INFO Vol.
7 No. 2, pp49-71

15. Information Society
Mark Weiser at http://www.ubiq.com/hypertext/weiser/UbiHome.html
Mainframe Micro Networks Tablet, Sensors,
Biodevice?
 mini  PC & laptops smartphone Actuators
WiMax,
VANs LANs Web WiFi, 3G, +++
4G,cloud
Profess- Wide Ubiquit-
Experts Public Ambient
ionals public ous
Web2.0, Internet of
“End- Semantic
Centralised Content things,
User” P2P web
locations
One for One for a One for Each A Few for Many for Each
Text/ Commun- Enhance-
Numbers
Many Few Person/Place Multimedia
Each Control
Person/Place
graphics ication ment
People People Person/Place
70s 80s 90s 00s 10s 20s?

16. Information Technology Use is
one shaper of Service Economy
Mainframe Micro Networks Tablet, Sensors,
Biodevice?
 mini  PC & laptops smartphone Actuators
Service LANs
VANs Service
Web WiFi, 3G, Service
WiMax,
4G,cloud
+++
Economy Economy Economy
1.0 2.0 Wide Ubiquit-
Experts
Profess-
ionals
Public public
3.0
ous
Ambient
Web2.0, Internet of
“End- Semantic
Centralised Content things,
User” P2P web
locations
One for One for a One for Each A Few for Many for Each
Text/ Commun- Enhance-
Evolving Views of
Numbers
Many Few
graphics Service Economy (and Service Innovation)
Person/Place Multimedia
ication Each Control
Person/Place
ment
People People Person/Place
70s 80s 90s 00s 10s 20s?

17. 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

18. Manufacturing vs Services -1
Service
production
Factory Service Producer was
typically
seen as
either low-
Services skill (and
Goods versus
thus not
economic
to
automate)
Goods Service Consumer or very
Consumer high skill
and too
complex to
Separation Closeness, Coproduction
automate

19. Traditional view of service innovation
It became increasingly
hard to sustain this view
as technology-based
Thus service
services become
industries were
important to innovation
typically seen as
in all sectors
supplier-driven,
with low Dismissal and as many
productivity
more traditional
growth: the
service sectors
challenges for
displayed
policy and MoT
considerable
were thus those of (with very few exceptions)
technology
improving Service industries play little adoption and
technology role in (technological) innovation
transfer
innovation
And thus be innovation policy and MoT
need only focus on technology transfer

20. 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

21. Perspectives on service innovation
A similar (not identical)
Framework developed by approach had already
R Coombs & I Miles, been developed in the
2000, “Innovation, 1990s by Gallouj – see
Measurement and recent work like F.
Services: the new Gallouj and F. Djellal
problematique” in J S (eds) (2010). The
Metcalfe & I Miles (eds) Dis-
Dismissal Handbook of
Innovation Systems in the missal Innovation and
Services, Edward
Service Economy
Dordrecht: Kluwer Elgar: Cheltenham
Syn-
thesis
Demarc Assim
-ation -ilation

22. Assimilation Perspective
Services are Service innovation
qualitatively is not distinctive;
distinctive, due to it can be studied
especially due
INTANGIBILTYto
and organised in
INTANGIBILTY,
and
ways familiar from
INTERACTIVITY,
INTERACTIVITY :
etc.  different
different forms of analysis of
forms of
innovation and Dis-
Dismissal manufacturing Tend to
focus on
innovation & missal techno-
innovation
process
logical
process
innovation
Syn- (though
some
thesis theorists
insist this
is
distinctive)
Demarc- Assim-
ation ilation

23. Assimilation Perspective
Services are Service innovation
qualitatively is not distinctive;
Stressed that some
distinctive, due to it can be studied
service industries –those to
especially due
INTANGIBILTY
concerned with and organised in
INTANGIBILTY,
and
knowledge and ways familiar from
INTERACTIVITY,
INTERACTIVITY :
informational  differentof
etc.
different forms analysis of
transformations –of and
forms are
innovation Dis-
Dismissal manufacturing Tend to
focus on
particularly innovation &
intensive missal techno-
innovation
process
adopters and increasingly logical
process
innovators with new IT, innovation
while many other Syn- (though
services are less so. some
But large firms use
thesis theorists
New IT similarly in insist this
Back Offices. is
distinctive)
Demarc- Assim-
ation ilation

24. Manufacturing vs Services -2
Barras
model:
Back Office Back Office efficiency
in back
Factory Front Office office,
then new
services in
front office
Services Glushko, R.
Goods versus (2010). “Seven
Contexts for
Service System
Design”, in
Maglio, P. P.,
Kieliszewski,
Goods Service Consumer C., & Spohrer,
Consumer J. (eds)
Handbook of
Consumer Service
Science,
Communities Springer

25. Innovation - Manufacturing vs
Services -Assimilation
Back office
innovation –
similar
Process Back Office trajectories of IT
Back Office Process
innovation
innovation – use – also
also Factory Front Office widespread
widespread adoption of
adoption of new IT
new IT Tertiarisation,
convergence
Services
Goods
Goods Service Consumer
Consumer
Consumer
Communities

26. Innovation - Manufacturing vs
Services – Beyond Assimilation
Back office
innovation –
similar Process
Process Back Office trajectories of IT
Back Office innovation
innovation – use – some
some Factory Front Office elements
elements very very
specific to specific to
particular Tertiarisation, particular
mfg. sectors service
convergence
sectors
Services – front and
Goods back office
integration
and
organis-
Goods -ation
Service Consumer issues.
Consumer
Consumer
Communities

27. Demarcation Perspective
Services are Service
qualitatively innovation is not
distinctive, distinctive; it can
especially due to
be studied and
INTANGIBILTY,
organised in
INTERACTIVITY,
etc.  different ways familiar
Extensive
forms of Dis-
Dismissal from analysis of
discussion
of service innovation & missal manufacturing
specificities innovation
(and the process
huge
diversity Syn-
across
services!) in
thesis
marketing
and
management
as well as Demarc- Assimilat-
innovation ion
studies
ation

28. Innovation - Manufacturing vs
Services - Demarcation
Back office Process
innovation – innovation –
Process
Back Office similar trajectories Back Office some
innovation – of IT use elements
some elements very
very specific Factory Front Office specific to
to particular particular
mfg. sectors service
sectors
Innovation
Product related to Product
Services
innovation – Goods properties innovation:
new / improved and functions new
goods of product services
Innovation Service
in goods Goods Service Consumer Relationship
delivery Consumer and
Delivery
Consumer innovation
Communities

29. 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.

30. Innovation and Service Processes
- Capital/Labour:
Capital-intensive Labour-intensive
T2H H2H
Standardised Particularised
Advanced Work
Routine technology, (customised) Specialised
organisation,
remote division of
processing, labour,
Manual activity scale offshoring
Knowledge-intensive
economies
activity

31. Innovation and Service Processes
- Standardised/Specialised:
Automation,
scripting,
Capital-intensive service Labour-intensive
Modularisation
T2H engineering, and H2H
“productisation” recombination
Standardised Particularised
Routine (customised) Specialised
Novelty versus
innovation;
Manual activity knowledge Knowledge-intensive
capture
activity
Strategy and Business Model orientation affects moves to
more or less standardisation/particularisation

32. Innovation and Service Processes
- Manual/Knowledge-Based:
Capital-intensive Labour-intensive
T2H Power Paraprofessional H2H
technology, HR and decision
issues where support
much H2H systems;
Standardised contact Technical Particularised
Routine (customised)specialisation Specialised
Manual activity Knowledge-intensive
activity

33. 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

34. A Synthesis?
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)
All sectors have Dismissal
Dis- Services become
diverse features, and missal more technology-
many “service” intensive and
elements “industrialised”
Synthesis
“Servitisation” (Knowledge
of intensive) service
manufacturing activities
Demarc- Assim-
ation ilation

35. Innovation - Manufacturing and
affecting design and new service relations, thus Services - Synthesis
Value Chain Back office
Value Chain Process
innovation – innovation –
wider “back-office” functions- “front office”
Process
innovation – Back Office similar trajectories Back Office some
of IT use elements
some elements
very
very specific Factory Front Office specific to
to particular
particular
mfg. sectors Further service
Convergence sectors
Product Productisation
Servicisation Services Product
innovation –
new / improved Goods innovation:
new
goods
services
Innovation in
Innovation marketing and e- Service
in goods Goods business, e- Service Consumer Relationship
delivery Consumer commerce, and
aftersales, use of Delivery
Metamanufacturing : functionality Consumer innovation
Goods in use and provided by good
beyond or service Communities

36. 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.

37. Loci of Service Innovation
• Position in Value Chain
Value Chain
• Management of suppliers
Back Office
Elements of Business Model
• Office systems
• Service work organisation, scripts
Front Office
• Service Value Proposition
(Concept and Content)
Services
• Service Delivery Systems
• Interface with, relation to • Revenue
consumers and their platforms Models
• Role of consumers (and Service Consumer
communities) in coproduction
Users
• Target Markets and Marketing
Consumer
Techniques Communities

38. Capabilities for Service Innovation
• Position in Value Chain Grasp of business environment, scope for collaboration and
open innovation
Value Chain
• Management of suppliers SCM capabilities
Back Office
management & new models
Elements of Business Model
• Office systems Grasp of KM & informatics
• Service work organisation, scripts
Front Office
Grasp of financial
Grasp of HR, team management
• Service Value Proposition
(Concept and Content) Service technology capabilities
Services
• Service Delivery Systems
Service design capabilities
• Interface with, relation to • Revenue
consumers and their platforms Models
• Role of consumers (and Service Consumer
communities) in coproduction Grasp of users, uses
• Target Markets and Marketing
Consumer
Grasp of markets, trends, marketing, competition
Techniques Communities

39. Another View: multiple
dimensions of service innovation
Revenue
Finance, Model
strategy Marketing
Value Chain/
System Customer
Interaction
Partnering, Sales,
M&A, after sales
procurement
Delivery
Service Concept (Organisation) P den Hertog,
W van der Aa,
M W. de
Delivery Jong, (2010)
Technology (Technology) HRM "Capabilities for
managing service
innovation: towards a
conceptual framework"
Journal of Service Management , Vol. 21 (4) pp.490–514

40. 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)

41. 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.

42. 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

43. 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

44. End of Presentation