Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Marja Toivonen, Helsinki University of Technology

Marja may have done the first dissertation on Knowledge Intensive Business Services

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Everyone from the KIBS research group is here

• 4 person group, 3 working on Ph.D.s
• Tiina Tuominen
• Anssi Smedlund
• Saara Brax has mostly moved over

Work in the knowledge management institute, one of the 11 centres in Tuta

Agenda

KIBS project has been running 1.5 years, and still has one year to run

What are knowledge intensive business services?

• KIBS is used in the context of firms
  • Expert firms
  • Could be used at the product level
• They're business services, B2B, not B2C
• Knowledge intensive has 3 descriptions by researchers:
  • Knowledge intensity is both the input and output of the activity
  • KIBS have been seen as problem solvers
  • Most important, and the meaning used here is interaction between KIBS and clients creates new knowledge
  • Many other processes are learning processes, e.g. in health care, but in KIBS, the learning process is central and created by the firm and client jointl
• What kinds of industries?
  • R&D services, technical consultancy (architectural and industrial design), and non-technical (legal, financial consultancy, management consultancy, and marketing communications services).
  • KIBS-ification of industrial firms

How and why the term KIBS was adopted

• Business services was adopted as a term in the 1970s
  • The sector growing most rapidly
  • Also some pioneering researchers interested not just in growth, but the role of them
    • Impacts on productivity on other firms
• This issue came more and more in studies, and analyzed in terms of innovation
• At the end of the 1980s, more growth in the role of innovation in the economy
  • Other kinds of studies emerged, focused on the role in innovation
  • Not on all business services, but on expert roles
  • Industrial cleaning is not include
• 1995, KIBS was first defined by Ian Miles

The role of KIBS in innovation

• KIBS must have a role in innovation, because they're experts, keep at leading edge, otherwise they don't have a business
• KIBS have different attitudes:
  • They're sources of innovations, and have to be innovative themselves
  • They're facilitators of innovation processes within firms
  • If we look at the whole economy, KIBS are carriers of innovation, as the accumulate information and know more at the next client
  • As brokers, bridging intermediaries, they bring together different clients that can use each others' knowledge
  • At the broad level, they're orchestrators of innovators' networks
  • (A hard but reasonable argument), KIBS form the second knowledge infrastructure of society (with universities being the first), and as more practical
• It's important to study KIBS in innovation, and innovation in KIBS
• Processes are facilited by KIBS

Not many empirical studies on the role of KIBS

• In the Netherlands, Cox 2002 asked about the role of outsourcing
  • Some say it's must moving an activity from a manufacturing company to an external firm
  • Cox showed that when companies outsources, business doesn't remain the same, so there's service upgrading
• In Finland, Lith 2005 have centres of expertise programs, where new emerging technologies are put in various regions
  • In Helsinki, micro systems, biotech
  • Made a KIBS study, interviewed companies in these new areas, asking to what extent they used KIBS in their innovation activities.
  • One in three used a KIBS
  • Most were start up companies, lacked resources
  • Still could recognize the role of KIBS
• The role of KIBS as sources of innovation has been found in Eurostat surveys (carried out every 3 years, 2004)
  • Every time the role of KIBS as innovators has come out
  • 64% of technology-based KIBS carried out some innovation activity
  • Have also carried out on non-technology-based

What are the concrete way in which KIBS support their clients? Miles lists 6 ways

• (1) KIBS provide expert knowledge.
  • Traditional way professionals have worked for decades.
• (2) Carrying experience from one setting to another, e.g. from one sector to another
• (3) Benchmarking, identifying concrete best practices
• (4) Brokering, putting people together
• (5) Diagnosis and problem clarification, as clients can't articulate
  • Important converters of tacit knowledge to explicit, and explicit knowledge to tacit
• (6) Acting as a change agent, if the company knows what is wrong but doesn't have the power to change

KIBSINET:

• Anssi at network level
• Tiina at the level of the firm
• Saara and individual innovations and processes

Will speak to the level of individuals, and individual processes, where have the most amount of data currently available.

Three theoretical approaches to service innovation

(1) The linear NSD New Service Development process

• From idea, through development, to pilot and testing and markets
• Well-established model of New Product Development, applied for decade
  • Have developed a similar model in services
  • This has much to do with the marketing school, e.g. Garney and Hooper
• Ideal is that we have a formal innovation process with clear stages and checkpoints
• In the newer models, because clients orientation is important, and client input has been created, can't say the NSD only describes the inside of the innovating company
• Its strength is that it's the only model where the proceeding of the service development process has been studies at a detailed level.
• Weakness: service is a black box
  • Service is just something developed
• Theoretical definition of service innovation is ad hoc

(2) The Nordic school of service marketing, main representative is Edvardsson in Sweden

• Very client-oriented
• Service only exists in the presence of a client
• Diagram:  the service model framework by Edvardsson as in Tuominen 2004, including text into diagram
• Three prerequisites:
  • Service concept: includes the main idea in which the service fulfills the needs of the client, connected to market properties
  • Service system: the resources used in the service, human and technological
  • Service process: the stages of the process, as well as the role and provider
• From the prerequisites comes out the real experience: output and process, both of which have quality
• This is the best to date service model, but not sure all of the elements are the right ones
• Not many models at the detailed level, service specific as separate from goods
• Problematic: the innovation process is not discussed, or very superficially, with no linkage to innovation

(3) The Lille school in France, Gallouj

• Starting point is the modelling of the service, starting from the model of the good
• In the good, have production characteristics, technical characteristics, and the benefits to the client
• Then develop something for services
• Services a final characteristics, technology characteristics, and competence characteristics
• What's different?
  • In services, the production characteristics and technical characters can't be separated
  • Generally the product and process are one and the same
  • Then tries to define service characteristics
• If everything changes, and nothing common to earlier services, call it radical innovation
• Improvement innovation means something one of these three elements has changed
• Innovation by addition: some new element introducted
• Recombinative (architectural) innovation
• Formalizatoin innovation: clarification

Gallouj also lists ad hoc innovation, meaning innovation is not planned a priori, but the service provider provides the service in practice, and gradually discover that innovation has been made a posteriori

• Gallouj provides categorization for different types of incremental innovation
  • But compared to Edvardsson, not much detail, everything is included
  • Need a model where can locate the locus of innovation
  • Services are systems
  • The point at which the innovation in services begin, changes everything around it, yet it's still important to see everything around in advance
• In addition, the categories describes many thing
  • Radical innovation doesn't belong on the list, it's a different dimension, how radical or incremental

Summary:

• NSD is the only model that provides proceeding
• Nordic school provides a good start to model
• Lille school provides categorization of types of service
• In our project, try to use them all

In our project, have found Schumpeterian definition was much broader than the approaches after him, where the linear ideas came out

• Schumpeter saw product innovaiton, process innovation, market innovation ....
• A good start
• 5 criteria:
• (1) Carried into practice
  • Carried into market, with some approval
• (2) Provides some benefit to both developers and to client
  • Can provide benefit to self, but to be sustainable, have to penetrate the client
• (3) Innovation is reproducible
  • Some say everything is innovation
  • Tailor made doesn't have to be innovation
• (4) Innovation represents a discontinous change
• (5) Innovation is a economic concept, somehow impacts in a broader context
  • Innovativeness, adoption of innovation is different from creatoin of innovation
  • Need ways to protect innovation
  • Other firms want to follow, creates issues
  • e.g. compare healthcare and banking, innovation is done in a different sector

Still one problem with innovation

• Most researchers don't specifiy whether they mean the outcome or the process
• We have selected innovation to mean the outcome, and speak to the process of innovation

A working definition for service innovation

Question: social anthropology debate, can innovation be made many times in many places, or one and then diffusion

• Context needs to be taken into account
• Then depends on concrete situation
• e.g. case companies from advertising agency and architectural and auditing
• Can't make a general rule

Difference between step by step development, and incremental innovations

• Real change could be small, but could have huge impact

Innovation is a relative concept

• Want to stop relativity by calling something only new to the firm

In KIBINET, have worked with 6 companies, have studies 11 individual services -- preliminary results

• Told them that we're looking over services, and they could also select services from their viewpoint, to find something interesting
• Based on 25 interviews (of the 70 made)
• First use Edvardsson to understand what types of services, roles of clients, resources
• Then categorize by Gallouj
• Finally, analyze processes

Results:

5 cases of an innovation, but all quite incremental, geographically within Finland and not new worldwide

• Cases were mostly in technological KIBS, 
• One in audting that wasn't expected
  • Service for purchase price acqusition in M&A, since legislation now requires the value of company be estimated much more clearly, and have to recognize immaterial parts
  • At regulatory level, haven't said how to make a service out of this
  • How can we value brand names?  How do we value partner relationships?

3 cases of tailor-made services, with the possibilty of innovaiton could be made

5 where no innovation, by step by step

Three different types of innovation:

• (1) Separate planning stage:  some preplanning, then step by step
  • Some resources devoting, some testing, some piloting
• (2) Rapid application, simultaneous planning and production
• (3) Gallouj's idea of an a posteriori recognition of an innovation

Separate planning states, related to linear NPD

• Pilot, then prototype with a different client, then offered same service package to all clients, finally tools and consultants packaged
• Discover some clients want the tool only, others want consulting only
• Now can choose why you buy

Rapid application model was most general, especially in telecommunications

• 3 reasons for generality
• (1) Don't need massive investment in advance
• (2) Only thing to do, because client doesn't know what he/she wants
• (3) Companies had already worked with the same clients, and got a new idea from their existing clients

A posteriori recognition of innovation, only one, a bit surprised, but the companies didn't present many cases

• Engineering company that had provided a service for 8 years to a client, and thought could apply to other clients.

Where we are now

• How to organize to create and innovate at the same time?
• One project had Tekes funding
• We don't know how they organize this, in practice

Concluding: have to combine different models

• We should also understand these incremental innovations, but not step by step

In auditing company, it's not only technology, but regulation can also drive innovation

Shouldn't juxtapose models, some companies still follow NSD

• But it's not enough, have to study more rapid application

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