KIBS - Knowledge Intensive Business Services - role in innovation systems

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Presentation to NECTEC, Thailand, August 2013.

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KIBS - Knowledge Intensive Business Services - role in innovation systems

  1. 1. MIIR O Presentation for NECTEC, Bangkok, August 2013 Knowledge Intensive Business Services – distinctive innovation, distinctive roles in innovation systems Ian Miles (a) Manchester Institute of Innovation Research Manchester Business School (b) Laboratory for the Economics of Innovation, Higher School of Economics, Moscow Ian.Miles@mbs.ac.uk
  2. 2. MIIR O Presentation for NECTEC, Bangkok, August 2013 Outline What KIBS are What they do How they do it How they contribute to innovation
  3. 3. MIIR O Presentation for NECTEC, Bangkok, August 2013 Consumer Services • Private Individuals • Households Business- Related Services • Consumers • Businesses • Public Sector Business Services • Public Sector; • Private Sector Manufacturing; • Private Sector Services Service Industries in the Economy SERVICE INDUSTRIES: Public Services Private Services •Personal Sers •Entertainment •Etc. •Professional, Scientific, Technical Sers •Administrative & Operational Sers •Etc. •Finance •Telecoms •Trade •Etc. Supplying sectors Customer sectors Examples
  4. 4. MIIR O Presentation for NECTEC, Bangkok, August 2013 Consumer Services • Private Individuals • Households Business- Related Services • Consumers • Businesses • Public Sector Business Services • Public Sector; • Private Sector Manufacturing; • Private Sector Services Business Services Sector SERVICE INDUSTRIES: Public Services Private Services •Personal Services •Entertainment •Etc. •Finance •Telecoms •Trade •Etc. These are services that support BUSINESS PROCESSES, not just business organisations There are public sector organisations that perform similar functions, e.g. RTOs, HEIs... Supplying sectors Customer sectors Examples •Professional, Scientific, Technical Sers •Administrative & Operational Sers •Etc.
  5. 5. MIIR O Presentation for NECTEC, Bangkok, August 2013 KIBS – initial definition (1995) Service businesses 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) at http://www.academia.edu/4122950/Knowledge- Intensive_Business_Services_Users_Carriers_and_Sources_of_Innovation.pdf
  6. 6. MIIR O Presentation for NECTEC, Bangkok, August 2013 Defining KIBS – EMCC (2005) KIBS are mainly concerned with providing knowledge- intensive inputs to the business processes of other organizations. These.... include public sector clients – KIBS do not only provide services to businesses. NACE 1 – most of divisions 72-75 are KIBS, plus a few others Knowledge-intensity is not easy to measure... 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. http://www.eurofound.europa.eu/emcc/publications/2005/ef0559en.pdf
  7. 7. MIIR O Presentation for NECTEC, Bangkok, August 2013 KIBS: rapid growth in share of economy 0 2 4 6 8 10 12 14 16 0 2 4 6 8 10 12 14 Share of Value Added in Economy (%) ShareofEmploymentinEconomy(%) Japan 1975-2007 EU15 1975-2007 USA 1985-2007 From European Competitiveness Report, 2011
  8. 8. MIIR O Presentation for NECTEC, Bangkok, August 2013 How important are these services? Share of EU economy Eurostat, 2007, European Business 14.5% EU VA 15.5% EU business sector employment
  9. 9. MIIR O Presentation for NECTEC, Bangkok, August 2013 Statistical Classification - Business Services Sector – NACE1 72 73 74
  10. 10. MIIR O Presentation for NECTEC, Bangkok, August 2013 71 71.1, .2 Leasing & renting • Renting of transport, construction equipment, office machinery 72 72.1 – 6 Computer • Hardware consultancy • Software consultancy  Data processing • Database activities 73 73.1 - 2 R&D • Research and experimental development •…on natural sciences and engineering •…on social sciences and humanities 74 74.2 - 3 Technical • Architectural activities • Engineering activities  Technical testing and analysis 74.11- 12, 74.14 Professional • Legal activities • Accounting & tax consultancy  Management consulting 74.13, 74.4 Marketing • Market research • Advertising 74.5 Labour recruitment • Labour recruitment and provision of personnel 74.6 - 7 Operational • Security activities • Industrial cleaning 74.81 - 84 Other • Secretarial and translation activities •Photography •Packing activities •Fairs & exhibitions Statistical Classification - Business Services Sector – NACE1 71 72 73 74
  11. 11. MIIR O Presentation for NECTEC, Bangkok, August 2013 Statistical Classification - Business Services Sector – NACE2
  12. 12. MIIR O Presentation for NECTEC, Bangkok, August 2013 Professional, Scientific and Technical Services (M) LEGAL ACCOUNTANCY CONSULTANCY ARCHITECTURE ENGINEERING R&D ADVERTISING MARKET RESEARCH, POLLING DESIGN TRANSLATION PHOTOGRAPHY VETERINARY OTHERS Computer and IT services moved to section J 61-telecomms 62-computers 63- info. services
  13. 13. MIIR O Presentation for NECTEC, Bangkok, August 2013 Administrative and Support Services (N) RENTING, LEASING EMPLOYMENT SERVICES TRAVEL SERVICES SECURITY SERVICES FACILITIES SERVICES CLEANING Catering could have been here LANDSCAPING
  14. 14. MIIR O Presentation for NECTEC, Bangkok, August 2013 Relative Scale of various BS in the UK, 2000 Architecture & engineering Industrial Cleaning Misc. Security & investigation Advertising R&D Telecommunications Labour recruitment Legal, accountancy, management computer services 0 100 200 300 400 500 600 700 800 900 0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00 Value-added (million euros) Employees(thousands) 0 10 20 30 40 50 60 70 VALUE ADDED bn euros
  15. 15. MIIR O Presentation for NECTEC, Bangkok, August 2013 Examples: Computer Services
  16. 16. MIIR O Presentation for NECTEC, Bangkok, August 2013 Manche ster Institute of Innovati on Researc h R&D services
  17. 17. MIIR O Presentation for NECTEC, Bangkok, August 2013 Testing Services
  18. 18. MIIR O Presentation for NECTEC, Bangkok, August 2013 Accounting/ Consultancy, Design
  19. 19. MIIR O Presentation for NECTEC, Bangkok, August 2013 Compliance. We have 50 years expertise in ensuring that television advertising complies with BCAP codes. Advertising processes. We are uniquely positioned to streamline the advertising copy chain to the benefit of everyone that advertises on TV and wider audiovisual media. Metadata. We hold a range of metadata related to commercials ranging from artists and music featured to advertising restrictions. Marketing/ consultancy
  20. 20. MIIR O Presentation for NECTEC, Bangkok, August 2013 A small legal service firm
  21. 21. MIIR O Presentation for NECTEC, Bangkok, August 2013 KIBS are spatially concentrated: KIBS (+FI) regional employment At http://www.clusterobservatory.eu/index.html
  22. 22. MIIR O Presentation for NECTEC, Bangkok, August 2013 European Cluster Observatory: relations between regional KIBS, Growth and Innovation At http://www.clusterobservatory.eu/index.html
  23. 23. MIIR O Presentation for NECTEC, Bangkok, August 2013 Questions about KIBS What types of knowledge? What application of knowledge? What knowledge exchanges with clients? What roles in innovation? What functions in innovation systems?
  24. 24. MIIR O Presentation for NECTEC, Bangkok, August 2013 3 Types of Knowledge Technology/Technical Knowledge Professional/ Administrative KnowledgeCreativity/ Cultural Knowledge Architecture Advertising Industrial Product Design Industrial Process Design R&D Technical Testing Computer Services Engineering Services Accountancy Legal Services Management Consultancy Business Media Graphic Design.. Market research Impressionistic, but some scope for validating e.g. by graduate share of employment Knowledge may be of internal business processes and/ or of external environments (customers, regulators, suppliers, competitors, etc.
  25. 25. MIIR O Presentation for NECTEC, Bangkok, August 2013 0% 10% 20% 30% 40% 50% 60% 70% LowTechManufacturing PassengerTransport FreightTransport MediumLowTechManufacturing Construction OtherTransport MediumHighTechManufacturing Extraction,Utilities,Recycling Wholesale RentingandLeasing HighTechManufacturing Banking,Insurance,PropertyTrading Telecoms&otherITservices Legal/Accounting Publish,Trav/EstAg,MktRes Managerial/OrganisationalServs Architecture&Engineering R&DandTechnicalTesting ComputerServices Mean % Other Graduates Mean % S&E Graduates KIBS Graduate-Intensity CIS3 data, UK “technology- based KIBS” "professional KIBS"
  26. 26. MIIR O Presentation for NECTEC, Bangkok, August 2013 KIBS Professional Workers Evident that KIBS firms have high levels of high- qualified workers. Other data sources demonstrate that they are much more involved in problem- solving, learning, etc. than most other employees/sectors.* Raises issues of: Retention Motivation and Governance Organising Collaboration across disciplines Knowledge Exchange and Capture Cf. R. Dawson,1999, Developing Knowledge-Based Client Relationships: The Future of Professional Services, Boston: Butterworth-Heinemann * C Martinez-Fernandez, I Miles, T Weyman (eds) 2011, The Knowledge Economy at Work: Skills and Innovation in Knowledge Intensive Service Activities, Cheltenham, UK and Northampton, MA, USA: Edward Elgar
  27. 27. MIIR O Presentation for NECTEC, Bangkok, August 2013 Knowledge of what? Of business processes and their internal and external contexts – Competitors Clients, Suppliers Collaborators Regulators Financiers Markets Social & Institutional Env Natural & Physical Env Process Technology Management Organisational Structure/ Design Routines Techniques Human Resources Product Technology & Design Health and Safety
  28. 28. MIIR O Presentation for NECTEC, Bangkok, August 2013 How are these sorts of Knowledge applied? What’s the background? What’s the problem? What’s the solution? How to effect it? Putting it into practice Helping to Solve Business Problems (and find opportunities): • Support for self-diagnosis • Diagnosis • Prescription • Configuration • Implementation of Solutions
  29. 29. MIIR O Presentation for NECTEC, Bangkok, August 2013 Universities Laboratories Governments OtherKIBS Clients Suppliers etc. KIBS are often viewed as Knowledge Intermediators External (generic) knowledge resources Firm’s absorption of knowledge KIBS synthesising and translating generic knowledge Intelligence Diagnosis Prescription (Configuration) Implementation (Technology and Business Practice) Transfer Agents
  30. 30. MIIR O Presentation for NECTEC, Bangkok, August 2013 Universities Laboratories Governments OtherKIBS Clients Suppliers etc. But KIBS are more active, and the process is more interactive External (generic) knowledge resources * * including previous service encounters Client’s knowledge and experience of problem/action KIBS fusing generic and local knowledge – and creating new knowledge through R&D etc Intelligence Diagnosis Prescription (Configuration) Implementation Preliminary Problem Formulation Coproduction and ..Absorption of Solution
  31. 31. MIIR O Presentation for NECTEC, Bangkok, August 2013 Three perspectives The service product: is it standardised or customised? The service relationship: how far is it hands-off and contractual, how far interactive? The service process: is it production or coproduction? These are all liable to vary across country, sector, and time
  32. 32. MIIR O Presentation for NECTEC, Bangkok, August 2013 0 10 20 30 40 50 60 1 2 3 4 Hipp - German Survey (mid 1990s) Services vary in standardisation … some more designed for clients… especially in KIBS Surprisingly low levels of specialisation – may depend on question – cf Nahlinder All Services Banking & Insurance Other Business Services Other Financial Services Technical Services Software Wholly Largely Intermediate Specialised Standardised Standardised
  33. 33. MIIR O Presentation for NECTEC, Bangkok, August 2013 An effort to assess interaction, from KIBS’ perspective: Swedish KIBS Survey (Nählinder) 0% 20% 40% 60% 80% 100% helps clients develop products or routines no.of contacts with clients during a deal works in close cooperation with client highest level high level low level lowest level 1000 KIBS firms (Higher for less standardised services) (All higher for more innovative firms) A large majority of Swedish KIBS report close cooperation, many contacts
  34. 34. MIIR O Presentation for NECTEC, Bangkok, August 2013 Doroshenko’s Russian data Overall Sectors AD MKT ADT IT REC ENG FIN LEG DVP DSGN Standard 36.1 30.5 42.0 45.2 43.8 38.7 34.8 34.5 32.9 33.5 25.4 (32.6) (30.9) (32.5) (32.9) (28.6) (30.2) (38.5) (31.2) (35.5) (35.5) (26.1) Standard “nucleus” with personalised “shell” 39.2 43.6 43.5 33.4 39.0 44.4 30.6 51.0 28.5 41.9 36.2 (31.1) (31.6) (31.2) (29.0) (26.0) (26.8) (32.5) (33.6) (30.9) (36.0) (28.0) Customised 24.5 25.3 14.4 22.5 17.6 18.2 35.0 14.6 38.2 21.6 38.2 (29.6) (28.1) (19.5) (27.6) (18.0) (19.7) (39.0) (23.6) (39.1) (27.8) (33.1) AD = Advertising; MKT = Marketing services; ADT = Audit; IT = Information technology services; REC = Recruitment services; ENG = Engineering services; FIN = Financial advice services; LEG = Legal advice services; DVP = Property development services; DSGN = Business design 0 10 20 30 40 50 60 TOTAL ADT IT MKT FIN REC DVP ENG LEG AD DSGN Standardised Standard “nucleus” + personalised “shell” Customised Sample is of leading KIBS, so picture may differ for smaller, more local firms "What share of your sales value in 2010 falls into each of these categories?" (mean shares)
  35. 35. MIIR O Presentation for NECTEC, Bangkok, August 2013 Marina Doroshenko, Ian Miles, Dmitri Vinogradov “Knowledge Intensive Business Services as Generators of Innovations” HSE Basic Research Program Working Papers STI Series no 12 http://www.hse.ru/data/2013/06/20/1286847819/12STI2013.pdf "How often do you manage to supply service innovation which you co-created with one customer, to other customers? Innovation and Replication 0 10 20 30 40 50 60 70 TOTAL ENG MKT IT ADT DSGN AD FIN REC DVP LEG Series1 Series2 Series3 Series4Sometimes Rarely NeverOften
  36. 36. MIIR O Presentation for NECTEC, Bangkok, August 2013 in E. Di Maria, R. Grandinetti, & B. Di Bernardo (eds) 2012 Exploring Knowledge-Intensive Business Services London, Palgrave Exploring Standardisation
  37. 37. MIIR O Presentation for NECTEC, Bangkok, August 2013 Doroshenko - KIBS and coproduction
  38. 38. MIIR O Presentation for NECTEC, Bangkok, August 2013 Doroshenko - Russian Survey
  39. 39. MIIR O Presentation for NECTEC, Bangkok, August 2013 What sort of business relationship is this? So the product may be more or less standardised, the interaction more or less intensive, the results more or less coproduced – but often more so than most industries. Tordoir distinguishes: jobbing, sparring (and sales) relations How far is the problem defined? What is the scope for learning and innovation? P P Tordoir, 1996, The Professional Knowledge Economy: The Management and Integration of Professional Services in Business Organizations, Dordrecht, Kluwer
  40. 40. MIIR O Presentation for NECTEC, Bangkok, August 2013 KIBS- Clients Relations Gallouj, Satzger: Client Strategies for Procurement and Managing Relationships – selecting KIBS/ specifying services Bettencourt: KIBS specifying client responsibilities for 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 C Gallouj, 1997, “Asymmetry of information and the service relationship: selection and evaluation of the service provider”, International Journal of Service Industry Management,. 8 (1) pp. 42-64. KSRI (Satzger et al), 2009, Knowledge Intensive Services Procurement Strategy, KSRI, KIT, at http://www.ksri.kit.edu/Upload/Publications/70765f4b-10cc- 4ce4-b874-04c3016ad158.pdf
  41. 41. MIIR O Presentation for NECTEC, Bangkok, August 2013 Prof. Dr. Gerhard Satzger gerhard.satzger@kit.edu Peter Schulteß peter.schultess@kit.edu Andreas Neus andreas.neus@kit.edu http://www.ksri.kit.edu/Upload/Publications/70765f4b-10cc-4ce4-b874-04c3016ad158.pdf
  42. 42. MIIR O Presentation for NECTEC, Bangkok, August 2013 KIT: Information Asymmetries
  43. 43. MIIR O Presentation for NECTEC, Bangkok, August 2013 KIT: Six Issues in Procurement
  44. 44. MIIR O Presentation for NECTEC, Bangkok, August 2013 Another Note on Asymmetry Doroshenko found that for almost all classes of KIBS, Russian KIBS users thought that a higher share of the services obtained were standardised than did the producers (55% compared to 47% overall). (IT and advertising were exceptions) More experienced users were less prone to see services are standardised, and (arguably) more willing to engage in coproduction.
  45. 45. MIIR O Presentation for NECTEC, Bangkok, August 2013 KIBS and Innovation KIBS as Innovators Community Innovation Surveys show that KIBS and financial services report high levels of product, process innovation compared to other services, and T-KIBS are often higher than most manufacturing. KIBS as supporting innovation in clients – views from both sides
  46. 46. MIIR O Presentation for NECTEC, Bangkok, August 2013 UK environmental services 1 2 3 4 5 6 7 0 10 20 30 help clients choose help clients develop develop for clients 100 firms, 1995 Orientation to technology
  47. 47. MIIR O Presentation for NECTEC, Bangkok, August 2013 Hipp - German Survey Half the innovating service firms thought their innovations positively impacted client performance/productivity – 16% “very important” productivity, 13% on performance. Only 1/3 of the firms supplying standardised solutions, however. As many as 4/5 of software firms And only 2/5 of financial firms Service innovation>organisational innovation (but impact here also reported)
  48. 48. MIIR O Presentation for NECTEC, Bangkok, August 2013 Doroshenko – effects on users, as seen by both sides
  49. 49. MIIR O Presentation for NECTEC, Bangkok, August 2013 Doroshenko – User views of effects on their innovativeness 0 10 20 30 40 50 60 70 80 90 TOTAL DVP LEG ADT ENG REC FIN DSGN AD IT MKT Positive effect Negative effect No effect "Please, estimate the impact of the particular KIBS consumption on your own propensity to innovate" Of which: 1- 9.3%; 2 – 33%; 3- 57.7%
  50. 50. MIIR O Presentation for NECTEC, Bangkok, August 2013 UK User’s Views PWC study of consultants’ clients 2006 180 clients, large range of consultancy services – 36% completely satisfied, 50% partially satisfied, 14% not at all. http://www.wwyltc.com/ Ensuring-sustainable- value-from- consultants.pdf
  51. 51. MIIR O Presentation for NECTEC, Bangkok, August 2013 User’s View of Benefits – PWC 2006 Increased revenue, 6% Reduced costs, 14% Specialist know ledge/ improved management capabilities, 31% More efficient processes, 34% Improved customer service, 15%
  52. 52. MIIR O Presentation for NECTEC, Bangkok, August 2013 Interactive Innovation External (generic) knowledge resources Firm’s experience of problem KIBS fusing generic and local knowledge Preliminary Problem Formulation Coproduction and Absorption of Solution Intelligence Diagnosis Prescription Configuration Implementation Knowledge of environments & technologies; scientific & engineering principles; innovation- relevant market conditions, regulations, laws Better understanding of problem, ways of measuring and monitoring Reduced risk in defining solution; introduction of new types of solution Easier learning and application of experience in combining processes Saving resources that can be applied to core products, processes - & other goals
  53. 53. MIIR O Presentation for NECTEC, Bangkok, August 2013 Relations with Clients – Exchange and Innovation Knowledge of- environments & technologies; STI principles and market conditions, regulations, laws Better understanding of problem, ways of measuring & monitoring Reduced risk in defining solution; introduction of new types of solution Fusion of generic and local knowledge Easier learning & application of experience in combining processes
  54. 54. MIIR O Presentation for NECTEC, Bangkok, August 2013 Implications for Innovation Use of KIBS should free up resources, and enhance flexibility 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 may have their own path dependency (e,g. some may not foster move to cleaner technology?)
  55. 55. MIIR O Presentation for NECTEC, Bangkok, August 2013 KIBS in Innovation Systems Usually commentators talk of “triple helix” – government, industry, public research (Universities); some suggestions of introducing users etc to make quadruple helix. Alongside public research and research within industry, much knowledge is generated and intermediated by KIBS, through R&D and other means.
  56. 56. MIIR O Presentation for NECTEC, Bangkok, August 2013 Practical issues and research questions – often with challenges for measurement “ Absorption capacity” – what capabilities and practices clients need to effectively select KIBS, define problems, use 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 Retention and motivation of experts Client side KIBS side
  57. 57. MIIR O Presentation for NECTEC, Bangkok, August 2013 End of Presentation

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