Slide 1: Manchester Institute of Innovation Research
Knowledge Intensive Business Services - KIBS
Ian Miles Ian.Miles@mbs.ac.uk MOSTI service innovation seminar 7
MOSTI - Service Innovation 2009
Slide 2: Manchester Institute of Innovation Research
Sets of Services
Whole Economy Services
Business-related Services Business Services KIBS
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Slide 3: Manchester Institute of Innovation Research
KIBS – classic definition (1995)
As a first approach to a definition, we understand KIBS to be services that: • Rely heavily upon professional knowledge. Thus, their employment structures are heavily weighted towards scientists, engineers, experts of all types. Many are practitioners of technology and technical change, Whatever their technological or professional specialism, they will also tend to be leading users of Information Technology to support their activities. • Either supply products which are themselves primarily sources of information and knowledge to their users (e.g. measurements, reports, training, consultancy); • Or use their knowledge to produce services which are intermediate inputs to their clients' own knowledge generating and information processing activities (e.g. communication and computer services). These client activities may be for internal use or supplied to yet other users in turn. • Have as their main clients other businesses (including public services and the self-employed). Indeed, knowledge-intensive activities will frequently tend to be business-related, since as labour-intensive activities they will be relatively costly. (Educational and medical services demonstrate that delivery to final consumers often has to be mediated through collective service organisation.) Miles et al (1995) MOSTI - Service Innovation 2009
Slide 4: Manchester Institute of Innovation Research
KIBS – EMCC (2005)
• As business services, KIBS are mainly concerned with providing knowledge-intensive inputs to the business processes of other organizations. These other organizations can, and often do, include public sector clients – KIBS do not only provide services to businesses. • Knowledge-intensity is not easy to measure, but one convenient indicator is the shares of graduates in an industrial workforce. By this measure, KIBS are unusually high in terms of graduate-intensity. The graduates have been trained in different areas of knowledge: some specialize more in scientific and technological knowledge, others more in administrative, managerial or sociolegal affairs.
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Slide 5: CIS3 data, UK
10%
20%
30%
40%
50%
70%
Manchester Institute of 60% Innovation Research
0%
Low Tech Manufacturing Passenger Transport Freight Transport Construction Other Transport Medium High Tech Manufacturing Extraction, Utilities, Recycling Wholesale Renting and Leasing High Tech Manufacturing
Mean % Other Graduates Mean % S&E Graduates
KIBS Graduate-Intensity
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Medium Low Tech Manufacturing
"professional KIBS"
???
Banking, Insurance, Property Trading Telecoms & other IT services Legal / Accounting Publish, Trav/Est Ag, Mkt Res Managerial / Organisational Servs Architecture & Engineering R&D and Technical Testing Computer Services
“technologybased KIBS”
Slide 6: Manchester Institute of Innovation Research
What services are KIBs?
• Starting point: Business Service sectors: Most of NACE 72-74
Most important activities
•Renting of transport, construction equipment, office machinery
NACE Classn
Business Services
Leasing & renting
71 71.1, .2 72
72.1 – 6
Computer • Hardware consultancy • Software consultancy
• Data processing • Database activities
73 73.1, .2 74
74.2,.3
R&D • Research and experimental development on natural
sciences and engineering • …on social sciences and humanities • Technical testing and analysis • Management consulting
Technical • Architectural activities • Engineering activities Professional • Legal activities • Accounting & tax consultancy Marketing • Market research
Labour recruitment Operational Other •Security activities
74.11- .12, 74.14 74.13, 74.4
74.5 74.6, 74.7 74.81-84
• Advertising
• Industrial cleaning
•Labour recruitment and provision of personnel
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•Secretarial and translation activities • Photography • 2009Packing activities • Fairs & exhibitions
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• Services to specific sectors • Some parts of section M (training), N (veterinary), and O (Other community, social and personal service activities): Nace Rev 1
– 91.1 Activities of business, employers’ and professional organizations – 92.1 Motion picture and video activities 921x – 92.11 Motion picture and video production 9211x – 92.12 Motion picture and video distribution 9211x – 92.13 Motion picture projection 9212 – 92.2 Radio and television activities 921x – 92.20 Radio and television activities – 92.31 Artistic and literary creation and interpretation (includes Technical Writing!) – 92.40 News agency activities – 92.51 Library and archives activities
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There are (a few) KIBS elsewhere
Slide 8: Manchester Institute of Innovation Research
KIBS are often particularly innovative - UK CIS4 UK CIS4 data: “Understanding data
Wholesale Trade and Repair Retail Trade Hotels and Restaurants Transport and Communication Financial Intermediation Real Estate and Renting of Mach. Computer and Related Research and Development Business Services Manufacturing
Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA
Wholesale Trade and Repair Retail Trade Hotels and Restaurants Transport and Communication Financial Intermediation Real Estate and Renting of Mach. Computer and Related Research and Development Business Services Manufacturing 0 10 20 30
40
Manufactured product
50 0
60 10
20
(good)
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Service Product (service)
30
40
50
Product Innovation
Slide 9: Manchester Institute of Innovation Research
KIBS are often particularly innovative 2 - UK CIS4 UK CIS4 data: “Understanding data
Wholesale Trade and Repair Retail Trade Hotels and Restaurants Transport and Communication Financial Intermediation Real Estate and Renting of Mach. Computer and Related Research and Development Business Services Manufacturing 0 10 20 30 40 50
Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA
60
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Process Innovation
Slide 10: Manchester Institute of Innovation Research
KIBS are often particularly innovative 4 - UK CIS4 UK CIS4 data: “Understanding data
Wholesale Trade and Repair Retail Trade Hotels and Restaurants Transport and Communication Financial Intermediation Real Estate and Renting of Mach. Computer and Related Research and Development Business Services Manufacturing 0 5 10 15 20 25 30 35 40 45
Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA
50
Novel Process Innovation
Novel Product Innovation
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NOVEL Innovation: new to market or industry
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KIBS are often particularly innovative 5 - UK CIS4 UK CIS4 data: “Understanding data
Hotels and Restaurants Transport and Communication Financial Intermediation Real Estate and Renting of Mach. Computer and Related Research and Development Business Services Manufacturing 0 5,000 10,000 15,000 20,000
Hidden Innovation: Services in the UK “ Programme on Wholesale Trade and Repair Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA Retail Trade
25,000
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Intramural R&D Expenditure p.e. Extramural R&D Expenditure p.e. Machinery, Equip. and Soft. Exp. p.e. Expenditure on External Knowledge p.e. Training Expenditure p.e. Design Expenditure p.e. Marketing Expenditure p.e. Innovation Expenditure per employee
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Structure of Innovation Spend in Services
Wholesale Trade and Repair Retail Trade Hotels and Restaurants Transport and Communication Financial Intermediation
UK CIS4 data: “Understanding Hidden Innovation: Services in the UK “ Programme on
Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA
Real Estate and Renting of Mach. Computer and Related Research and Development Business Services
Innovation Expenditure
Manufacturing 0 10 20 30 40 50 60 70 80 90 100
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Intramural R&D Expenditure Expenditure on External Knowledge Marketing Expenditure
Extramural R&D Expenditure Training Expenditure
Machinery, Equip. and Soft. Exp. Design Expenditure
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Busine ss Service UK CIS4 data: “Understanding s
Wholesale Trade and Repair Retail Trade Hotels and Restaurants Transport and Communication Financial Intermediation Real Estate and Renting of Mach. Computer and Related Research and Development Business Services
Legal, Accounting and Management Architectural and Engineering Technical Testing and Analysis Advertising Labour Recruitment
Investigation and Security Hidden Innovation: Services in the UK “ Programme on Industrial Cleaning Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA Miscellaneous 0 10 20 30 40 50 60 70 80 90 100
Intramural R&D Expenditure Expenditure on External Knowledge Marketing Expenditure
Extramural R&D Expenditure Training Expenditure
Machinery, Equip. and Soft. Exp. Design Expenditure
Innovation Expenditure
Manufacturing 0 10 20 30 40 50 60 70 80 90 100
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Intramural R&D Expenditure Expenditure on External Knowledge Marketing Expenditure
Extramural R&D Expenditure Training Expenditure
Machinery, Equip. and Soft. Exp. Design Expenditure
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How important are these services?
Eurostat, 2007, European Business 15.5% EU employment; 14.5% VA
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Relative Scale of various BS in the UK, 2000
Rapid growth, across industrial world
0 10 20 30 40 50 VALUE ADDED bn euros 60 70
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So, what do KIBS do?
• They provide, or use, knowledge that clients lack (in sufficient quantity) • But what sorts of knowledge and what sorts of uses? • Answer – practically everything!
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Slide 17: Manchester Institute of Innovation Research
Knowledge of internal characteristics and external environments –
Clients, Suppliers
Process Technology Product Technology & Design Management Techniques Health and Safety Human Resources
Markets Natural & Physical Env
Collaborators Competitors
Social & Institutional Env
Organisational Structure/ Design
Routines
Regulators
Financiers
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Knowledge of internal characteristics and external environments –
Knowledge applied to Problem solving: • Support for self-diagnosis • Diagnosis • Prescription • Configuration • Implementation of Solutions
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What’s the background? What’s the problem? What’s the solution? How to effect it? Putting it into practice
Slide 19: Universities Laboratories Governments Other KIBS Clients Intelligence Suppliers etc.
Manchester Institute of Innovation Research
Intermediators
Diagnosis Prescription (Configuration) Implementation
External (generic) knowledge resources * KIBS synthesising and translating generic knowledge
Firm’s absorption of knowledge
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Slide 20: Universities Laboratories Governments Other KIBS Clients Intelligence Suppliers etc.
Manchester Institute of Innovation Research
Its an Interactive Process!
Diagnosis Prescription (Configuration) Implementation
External (generic) knowledge resources *
* including previous service encounters
Preliminary Problem Formulation Coproduction and Absorption of Solution
KIBS fusing generic and local knowledge – and creating new knowledge through R&D etc
Client’s knowledge and experienced problem
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Interactive Innovation
Intelligence Diagnosis Prescription Configuration Implementation
Knowledge of environments & technologies; scientific & engineering External (generic) principles; innovation-relevant market knowledge regulations, laws conditions,
resources Better understanding of problem, ways of measuring and monitoring
Reduced risk in defining solution; KIBS fusing introduction of new types and local generic of solution
Easier learning and application of Preliminary Problem in combining processes experience Formulation Firm’s experience Saving resources that can be applied Coproduction and of problem to core products, processes - & other Absorption of Solution goals
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knowledge
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Effecting Innovation
KIBS Innovation
Data production, processing, knowledge generation, generalisation, synthesis methods; presentation tools; specific technologies and techniques for problem area...
Client Innovation
Reduced risks, accelerated learning, new ideas, training, freer resources, focus on core problems
Coproduction of Innovation
Interactive learning about problems and potential solutions; new market opportunities
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Relations with Clients are Central
Service Firm Client
Problem formulation Agreement on shared problem definition Interaction around features of problem
Reaction to client’s formulation of problem Agreement on shared problem definition Interaction around features of problem Formulation of solution Delivery of solution Ongoing support – “afterservice” MOSTI - Service Innovation 2009
Information interchanges
Delivery of solution Implementation of solution
Slide 24: Manchester Institute of Innovation Research
• Tordoir: Jobbing, Sparring, Sales P P Tordoir, 1996, The
Relations with Clients are Central
• Gallouj: Client Roles and Strategies in Managing Relationship – esp. selecting KIBS/specifying services C Gallouj, 1997, “Asymmetry of information and the service relationship: selection and • Bettencourt: role responsibilities for clients effective coproduction
– – – – – – communication openness, shared problem solving, tolerance, accommodation, advocacy, involvement in project governance personal dedication Bettencourt et al, 2002, “Client Co-Production in Knowledge-Intensive Business
Services” California Management Review, Vol. 44, Issue 4
Professional Knowledge Economy: The Management and Integration of Professional Services in Business Organizations, Dordrecht, Kluwer Academic
evaluation of the service provider”, International Journal of Service Industry Management, Vol. 8 No. 1, 1997, pp. 42-64.
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Swedish KIBS Survey (Nählinder)
(Higher for less standardised services)
(All higher for more innovative firms)
1000 KIBS firms
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UK environmental services
Orientation to technology
100 firms, 1995
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Slide 27: Manchester Institute of Innovation Research
Hipp - German Survey
100% 90% 80% 70% 60% 50% 40% 30% 20% 10%
Other Financial Other Bus. Sers. Banking / Ins. Sci. & Tech. Transp. & Software Trade
Services vary in standardisation … some more designed for clients… especially in KIBS
Surprisingly low specialisation – may depend on question – cf Nahlinder
0%
Specialised Intermediate
Comm.
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Sers.
Sers.
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Hipp - German Survey
• Half the innovating service firms thought their innovations positively impacted client performance/productivity – 16% “very important” productivity, 13% performance. Fewer for the firms supplying standardised solutions - 1/3 • 4/5 of software firms thought this (as opposed to only 2/5 financial firms, for instance) • Service innovation>organisational innovation (but this can have MOSTI - Service Innovation 2009 an impact too)
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But what is the User’s View ?
PWC study of consultants’clients, 2006
180 clients, large range of consultancy services
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User’s View of Benefits –
PWC 2006
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Who are the Users?
sector share relative to sector output
Input Output data Various EU countries, c1995
3 2.5 2 1.5 1 0.5 0 Manufacturing
30 25 20 15 10 5 0
Major markets Intensive users
Transport and Storage
Construction
Trade and Hotels
Public Sector
Post and Telecom
Real Estate
Finance and Insurance
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Agriculture and Mining
Business Services
Utilities
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Survey of Swedish KIBS
900 800 700 600 500 400 300 200 100 0
Ranking of users
Third
First
Second
Fourth
Services S
Manufacturing M
Public P Sector
Households H
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Slide 33: Manchester Institute of Innovation Research
Who are the Users?
UK 1995
UK Business Services mainly supporting other services
Computer R&D Other bus. MOSTI - Service Innovation 2009 services services services
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Who are the Users?
France 1995
Computer R&D Other bus. MOSTI - Service Innovation 2009 services services services
France Business Services mainly supporting other services, except R&D services
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Top Ten Users- R&D Services
UK
c1995
85% of output goes to top 20 - 9 are services, many public
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Implications for Innovation
• Apart from freeing up resources, & being dispensable… • KIBS are specialists - in acquiring, possessing and communicating knowledge. Alternative to labour mobility. • Able to draw on generalised knowledge from other firms and sectors. FUSION – and some creation of knowledge • Less wedded to heritage, organisational rigidities, factions • But… how far do they really help clients move in new directions? (E.g. : what role in move to cleaner technology?)
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Slide 37: practical issues and research questions • “ Absorption capacity” – what capabilities and practices Client clients need to effectively select KIBS, define problems, use side solutions?
• “Organisational amnesia” – how can they cope with loss of memory when activities outsourced? • Knowledge management (a) capture of new learning; (b) across organisational boundaries; (c) across professions? • Standard solutions vs. sensitivity to organisational culture, national circumstances, etc. • Professionalism: avoidance of “capture”, of collusion with clients and/or suppliers, of conflicts of interest • Methods for maintaining and demonstrating quality control, addressing information asymmetries KIBS• Retention and motivation of experts
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Manchester Institute of Innovation Research
Some implications –
Slide 38: Manchester Institute of Innovation Research
Centrality of KIBS Professional Workers
• • • • • Retention Motivation Collaboration Knowledge Exchange and Capture Good source: Dawson, R., 1999,
Developing Knowledge-Based Client Relationships: The Future of Professional Services, Boston: Butterworth-Heinemann
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Work
Experience
across Sectors
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Work
Experience
across Sectors
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Understanding KISA
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Slide 42: Manchester Institute of Innovation Research
What are KISAs?
Knowledge-Intensive Services Starting point: KIBS sectors Most of NACE 72-74 1995 definition:
– Rely heavily upon professional/expert knowledge. – High employment of scientists, engineers, experts of all types. Often small firms (evidence now: 95%<10emp). – Tend to be leading users of Information Technology. – Help define and solve problems in business processes of users in private and public sectors. – Products may be primarily information and knowledge resources; or intermediate inputs to clients’ knowledge generating and information processing activities. – Service often coproduced with client, highly customised or specialised – a fusion of generic and local knowledge.
• • • •
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Slide 43: Manchester Institute of Innovation Research
KIBS have grown…
• Debate about how much growth is outsourcing (and now, about scope for offshoring) • KIBS are “external” KISA, but within all sectors there are:
– Computer and technical professions – R&D professionals – “traditional” professions (lawyers, accountants) – institutional knowledge – “social” professions (marketing, advertising, etc.)
• Typically a growing share of sectoral employment • Internal services, and “Product Services”
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Slide 44: Manchester Institute of Innovation Research
What are KISAs?
Knowledge-Intensive Services
• Starting point: KIBS sectors; most of NACE 72-74
• 1995 definition:
– Rely heavily upon professional/expert knowledge. – High employment of scientists, engineers, experts of all types. Often small firms (evidence now: 95%<10emp). – Tend to be leading users of Information Technology. – Help define and solve problems in business processes of users in private and public sectors. – Products may be primarily information and knowledge resources; or intermediate inputs to clients’ knowledge generating and information processing activities. – Service often coproduced with client, highly customised or specialised – a fusion of generic and local knowledge.
MOSTI - Service Innovation 2009
Slide 45: Manchester Institute of Innovation Research
Missing and Problem KISAs
• “Creative services” – much design, graphics, media support • Finance • Communications • Management - may not map onto consultancy More work needed, but we can see:
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Slide 46: Manchester Institute of Innovation Research Orientation
ISCO categories that seem to correspond to KISA employees, in particular: 1: legislators, senior officials and managers; 2: professionals (in 1 Physical, mathematical and engineering science; Life science and health; Teaching; and Others); 3: technicians and associate professionals (as in group 2), [4: clericals]
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Slide 47: Manchester Institute of Innovation Research
Three KISA Occupations
CEDEFOP data, ISCO categories
Non-marketed services Business and other services Distribution and transport Construction Manufacturing Primary sector and utilities 0% 10% 20% 30% ISCO 1 (Legislators, etc) ISCO 2 (Professionals) ISCO 3 (Technicians etc) 40% 50% 60% 70%
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DISTRIBUTION OF THE PERSONNEL OF SOME EXPERT PROFESSIONS BETWEEN KIBS INDUSTRIES AND OTHER INDUSTRIES IN FINLAND 1995
Architects & engineers Technicians Physicists, chemists, biologists etc. Computing professionals Industrial designers Legal professionals Accountants Book-keepers Marketing professionals Advertising copywriters in KIBS industries in other industries
More detailed KISA occupations – in KIBS and elsewhere
Economic & social science professionals Administrative professionals Personnel & recruitment professionals
Training directors, training planners, trainers
0
10,000 20,000 30,000 40,000 50,000 60,000 70,000
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Source: Marja Toivonen
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Likewise for “Creatives” in UK
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Slide 50: Manchester Institute of Innovation Research
isco9 isco8 isco7 isco6 isco5 isco4 isco3 isco2 isco1 0 10
Features of work – by occupation
Using internet / email for work Working with computers
Solving unforeseen problems
isco9 isco8 isco7 isco6 isco5 isco4
20 30 40 50 60 70 80 90
Have to interrupt a task in order to take on an unforeseen task
isco3 isco2
9: ELEMENTARY OCCUPATIONS isco1 8: PLANT & MACHINE OPERATORS & ASSEMBLERS 7: CRAFT & RELATED TRADES WORKERS 0 6: SKILLED AGRICULTURAL & FISHERY WORKERS 5: SERVICE WORKERS & SHOP & MARKET SALES WORKERS 4: CLERKS 3: TECHNICIANS & ASSOCIATE PROFESSIONALS 2: PROFESSIONALS 1: LEGISLATORS, SENIOR OFFICIALS & MANAGERS
10
20
30
40
50
60
70
80
90
100
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Slide 51: Manchester Institute of Innovation Research
What drives change:
Top Ten Drivers from the Manchester Workshop All seen as fairly uncertain
1. 2. 3. 1. 2. 3. 4. 5. 1. 2.
Public policy and regulation (regulatory frameworks) Technological development Demand side: challenge of environmental and other global issues creates market for new enterprises (architecture, engineering and design) Shocks to the economic cycle like oil and banking crises Increased competition. Increasing complexity and need for innovation requires application of tacit knowledge … accrued through close proximity. Availability of trained professionals prepared to take risks & change the way they work Desire for increased flexibility on behalf of firms but also workers. Increasing possibility of remote working because of development of I.T. Policy impacts – regulation; Market transparency
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procurement; public sector; competition (cartels); cluster policy; training; etc.
Slide 52: Manchester Institute of • Extent Innovation to which KISA (whether in-house or KIBS) become more or less: Research – sourced from external KIBS firms, as opposed to being supplied in-house
Uncertainties about directions of Change in KISA and KIBS
by employees
in the user firms, – acquired by offshoring service production to locations outside of the EU, – mainly produced (within the EU), in a few core regions and localities, – supported by information technology systems that provide decision support and advanced tools for tackling complex problems, – subject to automation by application of information technology to perform large parts of more standardised services, – codified and documented in precise rules, routines, and standards, so they can be more easily learned, diffused within organisations, and quality controlled, – performed to a large extent by “paraprofessionals” or “technicians”, (whose work is designed, coordinated and integrated by senior professionals), – customised in many details to meet individual client requirements, – composed of reproducible modules (that can be recombined in various ways), • Extent to which KISA organised in KIBS become more or less: – organised in virtual networks, with professionals associating to carry out specific projects, – conducted within larger KIBS firms, – organised within industrial “cartels”, with long-term relationships among groups of firms (including KIBS and their users), – supporting innovation processes in clients, – engaged in clients’ strategy formulation and decisions – supporting smaller as well as larger business clients.
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Slide 53: Manchester Institute of Innovation Research
Important Features of KISA with high uncertainty
• (Overall growth rates) • Organisational location (KIBS vs other approaches) • Geographical location (extent of reallocation in EU/offshoring) • Nature of professional work • Division of labour among specialised firms • Strategic role of external KIBS
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KIBS’ importance recognised
• Important innovators • Important sources and “intermediaries” of knowledge • Growing (still?) • Limited knowledge about how different KIBS interact with clients and each other (in projects), about conditions and criteria for successful collaboration – what sorts of impact and innovation? What management lessons? What policy issues?
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End of Presentation
MOSTI - Service Innovation 2009