Ian Miles MIoIR University of Manchester [email_address] Service Economy =  Knowledge  Economy,  Information Society??
This seminar will… <ul><li>Examine “services” and “the service economy” (related to Knowledge Economy/  Information Societ...
Part 1: Two Issues <ul><li>Service Economy notions overlap with Information Society, Knowledge-Based Economy </li></ul><ul...
Service Economy as “New Thing” <ul><li>Daniel Bell (and others) 1960s, 1970s: “The Coming of Post-Industrial Society” – re...
Services Workforce Growth – a global phenomenon James Spohrer,. Michael Radnor,  “ Service Innovations for the 21st C” IBM...
  Growth in Employment   -  only slightly less pronounced for output (GDP share)
Percentage Shares of Employment The EU service economy sector ^ Service  sectors  are reported here: there are also growin...
Gender Structure and  Employment Trends Male dominated (except Japan) - Decline in all categories Male dominated - Decline...
“ The” Service Sector dominates employment…
Different Services – Different Trends 1960  1973  1984  1997 1960  1973  1984  1997 Distributive Services Personal Service...
What are Services? <ul><li>We’ve been looking at service SECTORS - </li></ul><ul><li>sectors that do not (in general) prod...
Services in NACE <ul><li>Hotels and Restaurants (HORECA)  </li></ul><ul><li>Transport, Storage  </li></ul><ul><li>Financia...
Meanings of “service” <ul><li>Service  Sectors (industries)   - firms and sectors specialised in supplying services   </li...
Service Transformations:  Terence Hill, Dorothy Riddle, and beyond... <ul><ul><ul><li>Primary sector: extract raw material...
Reading Triangular Plots Element A Element   B Element   C High A, low B and C A, B, C roughly equal Moderate A, low B, mo...
Diversity in Workforce skills Agriculture Manufacturing HORECA Trade Transport Pub. Admin. Other Sers. FIRE Education Busi...
Diversity in  inputs   (transformations) PHYSICAL SOCIAL INFORMATIONAL Trade Recreational Other Sers. HORECA Public Sers. ...
Diversity in  Markets Businesses NON-MARKET Consumers Public Sers. HORECA Recreational KIBS Extractive Construction Other ...
Services Tendencies:  <ul><li>LESS ABOUT  MATERIAL PRODUCTION OF TANGIBLE ARTEFACT </li></ul><ul><li>MORE PRODUCTION OF “S...
What lies behind services growth? <ul><li>Post-industrial argument (Bell) </li></ul><ul><li>it’s mainly consumer demand </...
<ul><li>On the whole, not shift in consumer demand (post-industrial hypothesis) </li></ul>What Drives Services Growth? <ul...
What Drives Services Growth? <ul><li>On the whole, not shift in consumer demand (post-industrial hypothesis) </li></ul>US ...
What Drives Services Growth? <ul><li>On the whole, not shift in consumer demand (post-industrial hypothesis) </li></ul><ul...
What Drives Services Growth? <ul><li>On the whole, not shift in consumer demand (post-industrial hypothesis) </li></ul><ul...
Services and IT <ul><li>Who invests most in IT? (Roach, Miles et al, Kimbel)     Services are major investors in IT equip...
IT as “industrial revolution” in services <ul><li>Richard Barras ( Research Policy  1986)Services investment in IT represe...
RPC Model Process Innovation -  efficiency Process Innovation –  improved service Product Innovation –  new service
Services Productivity <ul><li>Services take bulk of IT investment – but  display lower productivity growth.  Why? </li></u...
The Productivity Paradox Resolved? Long-term convergence in labour productivity (GDP/hour worked) between EU and US seems ...
Innovation  – services v manufacturing
A more detailed look Physical services – less innovation? Information services – more innovation?
Services Innovation Styles differ “ Which of these areas are your innovation efforts focussed on?”   Max. choice = 2) INNO...
CIS4 results Tobias Schmidt  & Christian Rammer (2006) The determinants and effects of technological and nontechnological ...
Part 2 - KIBS <ul><li>We’ve seen that a major source of services growth is for business services </li></ul><ul><li>Among t...
Business services – recent growth Shares of value-added: manufacturing and BS
Business Services sectors    Renting of transport and construction equipment    Renting of office machinery incl. comput...
An indicator of knowledge-intensity – graduate employment % Firms employing graduates % of graduate staff among employers ...
Types of Knowledge processed by KIBS <ul><li>Technology </li></ul><ul><li>Design and Research </li></ul><ul><li>Market Rel...
How is   Knowledge Used? KIBS Role with clients Informative Diagnostic Advisory Facilitative Turnkey Managerial environmen...
Implications for Client Innovation <ul><li>Apart from freeing up resources, and being dispensable… </li></ul><ul><li>KIBS ...
But can be problematic <ul><li>Client needs absorption capacity… </li></ul><ul><li>Timing issues </li></ul><ul><li>Loss of...
Services Innovation… <ul><ul><ul><ul><ul><li>Service firms are   </li></ul></ul></ul></ul></ul><ul><ul><li>Less likely to ...
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Keis04 Services 2008

  1. 1. Ian Miles MIoIR University of Manchester [email_address] Service Economy = Knowledge Economy, Information Society??
  2. 2. This seminar will… <ul><li>Examine “services” and “the service economy” (related to Knowledge Economy/ Information Society) </li></ul><ul><li>Consider implications of Information Technology (IT) and Knowledge-Intensity for services firms, sectors, activities </li></ul><ul><li>Explore the phenomenon of KIBS. </li></ul><ul><li>… in two main parts </li></ul>
  3. 3. Part 1: Two Issues <ul><li>Service Economy notions overlap with Information Society, Knowledge-Based Economy </li></ul><ul><li>(Richard Barras): IT as an industrial revolution in services </li></ul>
  4. 4. Service Economy as “New Thing” <ul><li>Daniel Bell (and others) 1960s, 1970s: “The Coming of Post-Industrial Society” – relative growth of services sectors </li></ul><ul><li>Bell also stressed increasing role of knowledge – industries based on new knowledge, workers requiring more knowledge as compared to deskilling trend in Taylorism/Fordism </li></ul><ul><li>In late C20th, rise of knowledge-intensive services – esp. KIBS – seen as key to Knowledge-Based Economy </li></ul>Part 1 Part 2
  5. 5. Services Workforce Growth – a global phenomenon James Spohrer,. Michael Radnor, “ Service Innovations for the 21st C” IBM Research Service Innovations Workshop, November 2004, http://www.almaden.ibm.com/asr/events/ serviceinnovation/contacts. Top Ten countries in terms of Labour Force – these constitute more than 50% of world employment! A=agriculture, G= goods/manufacturing, S=services
  6. 6. Growth in Employment - only slightly less pronounced for output (GDP share)
  7. 7. Percentage Shares of Employment The EU service economy sector ^ Service sectors are reported here: there are also growing shares of service activities within firms in other sectors
  8. 8. Gender Structure and Employment Trends Male dominated (except Japan) - Decline in all categories Male dominated - Decline in all categories Female dominated –growth 1980 ? 1998? 1980  1998  1980  1998  Agriculture “Industry” Services Proportion of workforce
  9. 9. “ The” Service Sector dominates employment…
  10. 10. Different Services – Different Trends 1960 1973 1984 1997 1960 1973 1984 1997 Distributive Services Personal Services Producer Services Social Services
  11. 11. What are Services? <ul><li>We’ve been looking at service SECTORS - </li></ul><ul><li>sectors that do not (in general) produce goods or other artefacts (raw materials, buildings, water and power…) </li></ul><ul><li>They undertake other sorts of transformations: </li></ul><ul><li>Transformations of goods and other physical objects e.g. repair, storage, transport (some analogies in treatment of people). </li></ul><ul><li>Transformations of people e.g. health and personal services </li></ul><ul><li>Transformations of information e.g. communications, transactional services; and of knowledge e.g. consultancy </li></ul>
  12. 12. Services in NACE <ul><li>Hotels and Restaurants (HORECA) </li></ul><ul><li>Transport, Storage </li></ul><ul><li>Financial Intermediation (FI... </li></ul><ul><li>Real estate, Renting (…RE), Business Activities </li></ul><ul><li>Wholesale & Retail Trade; Repair of Motor Vehicles, Motorcycles and Personal & Household Goods </li></ul><ul><li>Public Administration and Defence; Compulsory Social Security </li></ul><ul><li>Education </li></ul><ul><li>Health and Social Work </li></ul><ul><li>Other Community, Social and Personal Service Activities </li></ul>Includes KIBS effects on Material Artefacts PERSONAL care & Material Comforts Both people and things Mainly informational Informational, material, plus diverse BUSINESS services inc KIBS PUBLIC (inc knowledge activities) and PERSONAL
  13. 13. Meanings of “service” <ul><li>Service Sectors (industries) - firms and sectors specialised in supplying services </li></ul><ul><li>S ervice activities (functions) - particular “intangible” transformations that may be produced in these specialised service firms, in other firms (e.g. “product services”) or by other means . </li></ul><ul><li>Service occupations - employees in all sectors involved in “service” functions within their firms </li></ul>( career of the word “industry”: from work to manufacturing to sectors) ( Classically - domestic service, servants . Can services be provided by goods as well as by people? Self-services? ) (white collars, transport, SCC, etc – “nonproduction workers”)   
  14. 14. Service Transformations: Terence Hill, Dorothy Riddle, and beyond... <ul><ul><ul><li>Primary sector: extract raw materials from environment </li></ul></ul></ul><ul><ul><ul><li>Secondary sector: transform these raw materials into material artefacts (goods, buildings, etc). </li></ul></ul></ul><ul><ul><ul><li>Tertiary sector: effect changes in state of: </li></ul></ul></ul><ul><ul><ul><ul><li>environments - waste disposal, pollution clean-up, park-keeping; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>artefacts produced by the secondary sector - repair and maintenance, goods transport, building services, wholesale and retail trade; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>people - health and education services, hospitality and consumer services such as hairdressing, public transport; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>symbols (information) - entertainment; communication; consultancy; professional services; finance </li></ul></ul></ul></ul>
  15. 15. Reading Triangular Plots Element A Element B Element C High A, low B and C A, B, C roughly equal Moderate A, low B, moderate C Fairly high B, fairly low A and low C Can be used where three elements add up to 100% We can often capture features of services in terms of three dimensions: so we can use triangular plots to capture and explore diversity
  16. 16. Diversity in Workforce skills Agriculture Manufacturing HORECA Trade Transport Pub. Admin. Other Sers. FIRE Education Business Sers._ Health & Soc. Sers. HIGH SKILL LOW SKILL MEDIUM SKILL The highest skilled parts of the economy – also highest growth! EU, 2000
  17. 17. Diversity in inputs (transformations) PHYSICAL SOCIAL INFORMATIONAL Trade Recreational Other Sers. HORECA Public Sers. FIRE Comms. KIBS Other Bus. Sers. Transport Construction Manufacturing Agr. Fish. Forestry Utilities Services undertake a HUGE range of transformations – as previous graphic indicated, some are more knowledge-intensive than others
  18. 18. Diversity in Markets Businesses NON-MARKET Consumers Public Sers. HORECA Recreational KIBS Extractive Construction Other Bus. Sers. Other Sers. Trade FIRE Manufacturing Agr. Fish. Forestry Transport Comms. Utilities
  19. 19. Services Tendencies: <ul><li>LESS ABOUT MATERIAL PRODUCTION OF TANGIBLE ARTEFACT </li></ul><ul><li>MORE PRODUCTION OF “SERVICE”: SUPPLIER - CLIENT INTERACTION often very important </li></ul><ul><li>Often this interaction means exchange of information, working together to “coproduce” service – even when core service is something rather tangible (like physical health or transport) </li></ul><ul><li>and informational activities like design, transaction, booking, training surround many services </li></ul>
  20. 20. What lies behind services growth? <ul><li>Post-industrial argument (Bell) </li></ul><ul><li>it’s mainly consumer demand </li></ul><ul><li>Engel’s law: as you get richer, you spend proportionally less of your income on potatoes </li></ul><ul><li>Shift to “superior goods” (i.e. services) </li></ul><ul><li>Or is it? </li></ul>
  21. 21. <ul><li>On the whole, not shift in consumer demand (post-industrial hypothesis) </li></ul>What Drives Services Growth? <ul><li>Consumer expenditure does shift across categories – thus away from “basic needs” towards “higher needs” </li></ul><ul><li>But this does not simply equate to shift from goods to services </li></ul><ul><li>This much less clear in the data </li></ul><ul><li>Gershuny: within categories, consumer demand shifts from services to goods </li></ul>
  22. 22. What Drives Services Growth? <ul><li>On the whole, not shift in consumer demand (post-industrial hypothesis) </li></ul>US data
  23. 23. What Drives Services Growth? <ul><li>On the whole, not shift in consumer demand (post-industrial hypothesis) </li></ul><ul><li>Public sector growth (in many countries) – political drivers and limits? </li></ul><ul><li>BUSINESS SERVICES </li></ul>
  24. 24. What Drives Services Growth? <ul><li>On the whole, not shift in consumer demand (post-industrial hypothesis) </li></ul><ul><li>Public sector growth (in many countries) – political drivers and limits? </li></ul><ul><li>BUSINESS SERVICES SERVICES SERVICES </li></ul>
  25. 25. Services and IT <ul><li>Who invests most in IT? (Roach, Miles et al, Kimbel)  Services are major investors in IT equipment - c 80%. They are major users of IT labour (c 50% of software staff in UK, main destination of graduates in Nordic countries) </li></ul><ul><li>This is uneven - financial services are very IT intensive, consumer services and retail not (but large firms in all sectors usually are) </li></ul><ul><li>IT applications in process (office work, ‘front-line’ staff) , product and delivery (esp. information services and information components of services) , </li></ul>
  26. 26. IT as “industrial revolution” in services <ul><li>Richard Barras ( Research Policy 1986)Services investment in IT represents a shift from ‘plant’ to ‘equipment’ investment – analogous to the shift from factories to machinery in C19th manufacturing: thus “an industrial revolution in services? </li></ul><ul><li>Changes in work organisation, productivity, etc. </li></ul><ul><li>New IT services - software, computer services, telematics services, new media... </li></ul><ul><li>And business services supporting the “IT revolution” </li></ul>
  27. 27. RPC Model Process Innovation - efficiency Process Innovation – improved service Product Innovation – new service
  28. 28. Services Productivity <ul><li>Services take bulk of IT investment – but display lower productivity growth. Why? </li></ul><ul><li>Some services are problematic? </li></ul><ul><li>Growth underestimated? poor measures of output, quality change. Need better measures. </li></ul><ul><li>Benefits to clients appear elsewhere? </li></ul><ul><li>There’s a general “productivity paradox” maybe more acute in services - Gains from IT investment may only appear in long-term - or with organisational change? </li></ul>
  29. 29. The Productivity Paradox Resolved? Long-term convergence in labour productivity (GDP/hour worked) between EU and US seems to have reversed since 2000 40 38 36 32 30 1990 1992 1994 1996 1998 2000 2002 03 EU US
  30. 30. Innovation – services v manufacturing
  31. 31. A more detailed look Physical services – less innovation? Information services – more innovation?
  32. 32. Services Innovation Styles differ “ Which of these areas are your innovation efforts focussed on?” Max. choice = 2) INNOVA survey, Howells and Tether 2002)
  33. 33. CIS4 results Tobias Schmidt & Christian Rammer (2006) The determinants and effects of technological and nontechnological innovations – Evidence from the German CIS IV
  34. 34. Part 2 - KIBS <ul><li>We’ve seen that a major source of services growth is for business services </li></ul><ul><li>Among these are the most knowledge-intensive sectors </li></ul><ul><li>Thus seen as core element of the emergent knowledge economy </li></ul>
  35. 35. Business services – recent growth Shares of value-added: manufacturing and BS
  36. 36. Business Services sectors  Renting of transport and construction equipment  Renting of office machinery incl. computers Leasing & renting 71.1, 71.21-23,  Secretarial and translation activities;  Packing activities;  Fairs and exhibitions Other 74.81-84  Security activities;  Industrial cleaning Operational 74.6, 74.7  Labour recruitment and provision of personnel Labour recruitment 74.5  Architectural activities;  Engineering activities;  Technical testing and analysis Technical 74.2, 74.3  Market research;  Advertising Marketing 74.13, 74.4  Legal activities;  Accounting and tax consultancy;  Management consulting Professional 74.11, 74.12, 74.14 Research and experimental development on:  natural sciences and engineering  … social sciences and humanities R&D 73.1, 73.2  Hardware consultancy;  Software consultancy;  Data processing;  Database activities Computer 72.1 - 6 Most important activities Services NACE Classn
  37. 37. An indicator of knowledge-intensity – graduate employment % Firms employing graduates % of graduate staff among employers Technical and IT services (except telecomms ) Professional services Manufacturing Financial services Trade and Transport 0% 40% 70% 100%
  38. 38. Types of Knowledge processed by KIBS <ul><li>Technology </li></ul><ul><li>Design and Research </li></ul><ul><li>Market Relations </li></ul><ul><li>Organisation and Management </li></ul><ul><li>Human Resources and Skills </li></ul><ul><li>… </li></ul>
  39. 39. How is Knowledge Used? KIBS Role with clients Informative Diagnostic Advisory Facilitative Turnkey Managerial environmental intelligence for client’s planning identify and evaluate solutions for the client put the solutions in place (e.g. systems integration) implement solutions for the client explicate the nature of the client’s problem help the client effect the solutions
  40. 40. Implications for Client Innovation <ul><li>Apart from freeing up resources, and being dispensable… </li></ul><ul><li>KIBS are specialists - in acquiring, possessing and communicating knowledge. Alternative to labour mobility . </li></ul><ul><li>Able to draw on generalised knowledge from other firms and sectors. FUSION </li></ul><ul><li>Less wedded to heritage, organisational rigidities, factions </li></ul><ul><li>Coproduction of innovation </li></ul>
  41. 41. But can be problematic <ul><li>Client needs absorption capacity… </li></ul><ul><li>Timing issues </li></ul><ul><li>Loss of organisational memory (though chance for new learning) </li></ul><ul><li>Insensitivity to organisational culture, even to national culture </li></ul><ul><li>Too close ties to clients and/or suppliers </li></ul><ul><li>Quality control, information asymetries </li></ul>
  42. 42. Services Innovation… <ul><ul><ul><ul><ul><li>Service firms are </li></ul></ul></ul></ul></ul><ul><ul><li>Less likely to conduct (or recognise conducting) R&D, to conduct so much R&D </li></ul></ul><ul><ul><li>Much less likely to organise R&D through conventional management structures – few R&D departments and managers </li></ul></ul><ul><ul><li>Much more likely to have project management </li></ul></ul><ul><ul><li>To stress acquisition of technology, human resources, market development </li></ul></ul><ul><ul><li>But situation always varies across diverse services. </li></ul></ul><ul><li>R&D is often NOT the major locus of knowledge generation: professional and in-service vectors are important </li></ul><ul><li>Services play a role in innovation through the economy, and managers in all sectors respond to this. </li></ul>
  43. 43. End of Presentation

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