Knowledge Intensive Business Services

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Presentation to MOSTI MSc module on Service Innovation, focusing on KIBS

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Knowledge Intensive Business Services

  1. 1. Knowledge Intensive Business Services - KIBS Ian Miles [email_address] MOSTI service innovation seminar 7
  2. 2. Sets of Services Whole Economy Services Business-related Services KIBS Business Services
  3. 3. KIBS – classic definition (1995) <ul><li>As a first approach to a definition, we understand KIBS to be services that: </li></ul><ul><li>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. </li></ul><ul><li>Either supply products which are themselves primarily sources of information and knowledge to their users (e.g. measurements, reports, training, consultancy); </li></ul><ul><li>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. </li></ul><ul><li>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.) </li></ul><ul><li>Miles et al (1995) </li></ul>
  4. 4. KIBS – EMCC (2005) <ul><li>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. </li></ul><ul><li>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. </li></ul>
  5. 5. KIBS Graduate-Intensity ??? CIS3 data, UK “ technology-based KIBS” &quot;professional KIBS&quot;
  6. 6. What services are KIBs? <ul><li>Starting point: Business Service sectors: Most of NACE 72-74 </li></ul><ul><li>• Architectural activities • Engineering activities </li></ul><ul><li>Technical testing and analysis </li></ul>Technical 74 74.2,.3 <ul><li>Secretarial and translation activities • Photography </li></ul><ul><li>Packing activities • Fairs & exhibitions </li></ul>Other 74.81-84 <ul><li>Security activities • Industrial cleaning </li></ul>Operational 74.6, 74.7 <ul><li>Labour recruitment and provision of personnel </li></ul>Labour recruitment 74.5 • Market research • Advertising Marketing 74.13, 74.4 <ul><li>• Legal activities • Accounting & tax consultancy </li></ul><ul><li>Management consulting </li></ul>Professional 74.11- .12, 74.14 • Research and experimental development on natural sciences and engineering • … on social sciences and humanities R&D 73 73.1, .2 <ul><li>• Hardware consultancy • Software consultancy </li></ul><ul><li>Data processing • Database activities </li></ul>Computer 72 72.1 – 6 <ul><li>Renting of transport, construction equipment, office machinery </li></ul>Leasing & renting 71 71.1, .2 Most important activities Business Services NACE Classn
  7. 7. There are (a few) KIBS elsewhere <ul><li>Services to specific sectors </li></ul><ul><li>Some parts of section M (training), N (veterinary), and O (Other community, social and personal service activities): Nace Rev 1 </li></ul><ul><ul><li>91.1 Activities of business, employers’ and professional organizations </li></ul></ul><ul><ul><li>92.1 Motion picture and video activities 921x </li></ul></ul><ul><ul><li>92.11 Motion picture and video production 9211x </li></ul></ul><ul><ul><li>92.12 Motion picture and video distribution 9211x </li></ul></ul><ul><ul><li>92.13 Motion picture projection 9212 </li></ul></ul><ul><ul><li>92.2 Radio and television activities 921x </li></ul></ul><ul><ul><li>92.20 Radio and television activities </li></ul></ul><ul><ul><li>92.31 Artistic and literary creation and interpretation (includes Technical Writing!) </li></ul></ul><ul><ul><li>92.40 News agency activities </li></ul></ul><ul><ul><li>92.51 Library and archives activities </li></ul></ul>
  8. 8. KIBS are often particularly innovative - UK CIS4 data Manufactured product Service Product (good) (service) UK CIS4 data: “ Understanding Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA Product Innovation
  9. 9. KIBS are often particularly innovative 2 - UK CIS4 data UK CIS4 data: “ Understanding Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA Process Innovation
  10. 10. KIBS are often particularly innovative 4 - UK CIS4 data UK CIS4 data: “ Understanding Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA NOVEL Innovation: new to market or industry
  11. 11. KIBS are often particularly innovative 5 - UK CIS4 data UK CIS4 data: “ Understanding Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA Innovation Expenditure per employee
  12. 12. Structure of Innovation Spend in Services UK CIS4 data: “ Understanding Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA Innovation Expenditure
  13. 13. Business Services UK CIS4 data: “ Understanding Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA Innovation Expenditure
  14. 14. How important are these services? Eurostat, 2007, European Business 15.5% EU employment; 14.5% VA
  15. 15. Relative Scale of various BS in the UK, 2000 Rapid growth, across industrial world 0 10 20 30 40 50 60 70 VALUE ADDED bn euros
  16. 16. So, what do KIBS do? <ul><li>They provide, or use, knowledge that clients lack (in sufficient quantity) </li></ul><ul><li>But what sorts of knowledge and what sorts of uses? </li></ul><ul><li>Answer – practically everything! </li></ul>
  17. 17. Knowledge of internal characteristics and external environments – 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
  18. 18. Knowledge of internal characteristics and external environments – What’s the background? What’s the problem? What’s the solution? How to effect it? Putting it into practice <ul><li>Knowledge applied to Problem solving: </li></ul><ul><li>Support for self-diagnosis </li></ul><ul><li>Diagnosis </li></ul><ul><li>Prescription </li></ul><ul><li>Configuration </li></ul><ul><li>Implementation of Solutions </li></ul>
  19. 19. Intermediators Universities Laboratories Governments Other KIBS Clients Suppliers etc. External (generic) knowledge resources * Firm’s absorption of knowledge KIBS synthesising and translating generic knowledge Intelligence Diagnosis Prescription (Configuration) Implementation
  20. 20. Its an Interactive Process! Universities Laboratories Governments Other KIBS Clients Suppliers etc. External (generic) knowledge resources * * including previous service encounters Client’s knowledge and experienced problem 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
  21. 21. 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
  22. 22. Effecting Innovation 1 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
  23. 23. Relations with Clients are Central Client Problem formulation Agreement on shared problem definition Interaction around features of problem Delivery of solution Implementation of solution 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” Information interchanges Service Firm
  24. 24. Relations with Clients are Central <ul><li>Tordoir: Jobbing, Sparring, Sales P P Tordoir, 1996, The Professional Knowledge Economy: The Management and Integration of Professional Services in Business Organizations, Dordrecht, Kluwer Academic </li></ul><ul><li>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 evaluation of the service provider”, International Journal of Service Industry Management , Vol. 8 No. 1, 1997, pp. 42-64. </li></ul><ul><li>Bettencourt: role responsibilities for clients effective coproduction </li></ul><ul><ul><li>communication openness, </li></ul></ul><ul><ul><li>shared problem solving, </li></ul></ul><ul><ul><li>tolerance, accommodation, </li></ul></ul><ul><ul><li>advocacy, </li></ul></ul><ul><ul><li>involvement in project governance </li></ul></ul><ul><ul><li>personal dedication Bettencourt et al, 2002, “Client Co-Production in Knowledge-Intensive Business Services” California Management Review , Vol. 44, Issue 4 </li></ul></ul>
  25. 25. Swedish KIBS Survey (N ä hlinder) 1000 KIBS firms (Higher for less standardised services) (All higher for more innovative firms)
  26. 26. UK environmental services 100 firms, 1995 Orientation to technology
  27. 27. Hipp - German Survey Services vary in standardisation… some more designed for clients… especially in KIBS Surprisingly low specialisation – may depend on question – cf Nahlinder
  28. 28. Hipp - German Survey <ul><li>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 </li></ul><ul><li>4/5 of software firms thought this (as opposed to only 2/5 financial firms, for instance) </li></ul><ul><li>Service innovation>organisational innovation (but this can have an impact too) </li></ul>
  29. 29. But what is the User’s View ? PWC study of consultants’clients, 2006 180 clients, large range of consultancy services
  30. 30. User’s View of Benefits – PWC 2006
  31. 31. Who are the Users? Input Output data Various EU countries, c1995 Intensive users Major markets
  32. 32. Survey of Swedish KIBS Services Manufacturing Public Sector Households Ranking of users First Second Third Fourth
  33. 33. Who are the Users? UK 1995 UK - Business Services mainly supporting other services Computer R&D Other bus. services services services
  34. 34. Who are the Users? France 1995 France - Business Services mainly supporting other services, except R&D services Computer R&D Other bus. services services services
  35. 35. Top Ten Users- R&D Services UK c1995 85% of output goes to top 20 - 9 are services, many public
  36. 36. Implications for Innovation <ul><li>Apart from freeing up resources, & 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 – and some creation of knowledge </li></ul><ul><li>Less wedded to heritage, organisational rigidities, factions </li></ul><ul><li>But… how far do they really help clients move in new directions? (E.g. : what role in move to cleaner technology?) </li></ul>
  37. 37. Some implications – practical issues and research questions <ul><li>“ Absorption capacity” – what capabilities and practices clients need to effectively select KIBS, define problems, use solutions? </li></ul><ul><li>“ Organisational amnesia” – how can they cope with loss of memory when activities outsourced? </li></ul><ul><li>Knowledge management (a) capture of new learning; (b) across organisational boundaries; (c) across professions? </li></ul><ul><li>Standard solutions vs. sensitivity to organisational culture, national circumstances, etc. </li></ul><ul><li>Professionalism: avoidance of “capture”, of collusion with clients and/or suppliers, of conflicts of interest </li></ul><ul><li>Methods for maintaining and demonstrating quality control, addressing information asymmetries </li></ul><ul><li>Retention and motivation of experts </li></ul>Client side KIBS side
  38. 38. Centrality of KIBS Professional Workers <ul><li>Retention </li></ul><ul><li>Motivation </li></ul><ul><li>Collaboration </li></ul><ul><li>Knowledge Exchange and Capture </li></ul><ul><li>Good source: Dawson, R., 1999, Developing Knowledge-Based Client Relationships: The Future of Professional Services , Boston: Butterworth-Heinemann </li></ul>
  39. 39. Work Experience across Sectors
  40. 40. Work Experience across Sectors
  41. 41. Understanding KISA
  42. 42. What are KISAs? <ul><li>Knowledge-Intensive Services </li></ul><ul><li>Starting point: KIBS sectors </li></ul><ul><li>Most of NACE 72-74 </li></ul><ul><li>1995 definition: </li></ul><ul><ul><li>Rely heavily upon professional/expert knowledge. </li></ul></ul><ul><ul><li>High employment of scientists, engineers, experts of all types. Often small firms (evidence now: 95%<10emp). </li></ul></ul><ul><ul><li>Tend to be leading users of Information Technology. </li></ul></ul><ul><ul><li>Help define and solve problems in business processes of users in private and public sectors. </li></ul></ul><ul><ul><li>Products may be primarily information and knowledge resources; or intermediate inputs to clients’ knowledge generating and information processing activities. </li></ul></ul><ul><ul><li>Service often coproduced with client, highly customised or specialised – a fusion of generic and local knowledge. </li></ul></ul>
  43. 43. KIBS have grown… <ul><li>Debate about how much growth is outsourcing (and now, about scope for offshoring) </li></ul><ul><li>KIBS are “external” KISA, but within all sectors there are: </li></ul><ul><ul><li>Computer and technical professions </li></ul></ul><ul><ul><li>R&D professionals </li></ul></ul><ul><ul><li>“ traditional” professions (lawyers, accountants) – institutional knowledge </li></ul></ul><ul><ul><li>“ social” professions (marketing, advertising, etc.) </li></ul></ul><ul><li>Typically a growing share of sectoral employment </li></ul><ul><li>Internal services, and “Product Services” </li></ul>
  44. 44. What are KISAs? <ul><li>Knowledge-Intensive Services </li></ul><ul><li>Starting point: KIBS sectors ; most of NACE 72-74 </li></ul><ul><li>1995 definition: </li></ul><ul><ul><li>Rely heavily upon professional/expert knowledge. </li></ul></ul><ul><ul><li>High employment of scientists, engineers, experts of all types. Often small firms (evidence now: 95%<10emp). </li></ul></ul><ul><ul><li>Tend to be leading users of Information Technology. </li></ul></ul><ul><ul><li>Help define and solve problems in business processes of users in private and public sectors. </li></ul></ul><ul><ul><li>Products may be primarily information and knowledge resources; or intermediate inputs to clients’ knowledge generating and information processing activities. </li></ul></ul><ul><ul><li>Service often coproduced with client, highly customised or specialised – a fusion of generic and local knowledge. </li></ul></ul>
  45. 45. Missing and Problem KISAs <ul><li>“ Creative services ” – much design, graphics, media support </li></ul><ul><li>Finance </li></ul><ul><li>Communications </li></ul><ul><li>Management - may not map onto consultancy </li></ul><ul><li>More work needed, but we can see: </li></ul>
  46. 46. ISCO categories that seem to correspond to KISA employees, in particular: <ul><li>1: legislators, senior officials and managers ; </li></ul><ul><li>2: professionals (in 1 Physical, mathematical and engineering science; Life science and health; Teaching; and Others); </li></ul><ul><li>3: technicians and associate professionals (as in group 2), </li></ul><ul><li>[4: clericals] </li></ul>Orientation
  47. 47. Three KISA Occupations CEDEFOP data, ISCO categories
  48. 48. More detailed KISA occupations – in KIBS and elsewhere Source: Marja Toivonen
  49. 49. Likewise for “Creatives” in UK
  50. 50. Features of work – by occupation 9: ELEMENTARY OCCUPATIONS 8: PLANT & MACHINE OPERATORS & ASSEMBLERS 7: CRAFT & RELATED TRADES WORKERS 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
  51. 51. What drives change: Top Ten Drivers from the Manchester Workshop <ul><li>Public policy and regulation (regulatory frameworks) </li></ul><ul><li>Technological development </li></ul><ul><li>Demand side: challenge of environmental and other global issues creates market for new enterprises (architecture, engineering and design) </li></ul><ul><li>Shocks to the economic cycle like oil and banking crises </li></ul><ul><li>Increased competition. </li></ul><ul><li>Increasing complexity and need for innovation requires application of tacit knowledge … accrued through close proximity. </li></ul><ul><li>Availability of trained professionals prepared to take risks & change the way they work </li></ul><ul><li>Desire for increased flexibility on behalf of firms but also workers. </li></ul><ul><li>Increasing possibility of remote working because of development of I.T. </li></ul><ul><li>Market transparency </li></ul>All seen as fairly uncertain Policy impacts – regulation; procurement; public sector; competition (cartels); cluster policy; training; etc.
  52. 52. Uncertainties about directions of Change in KISA and KIBS <ul><li>Extent to which KISA (whether in-house or KIBS) become more or less: </li></ul><ul><ul><li>sourced from external KIBS firms, as opposed to being supplied in-house by employees in the user firms, </li></ul></ul><ul><ul><li>acquired by offshoring service production to locations outside of the EU, </li></ul></ul><ul><ul><li>mainly produced (within the EU), in a few core regions and localities, </li></ul></ul><ul><ul><li>supported by information technology systems that provide decision support and advanced tools for tackling complex problems, </li></ul></ul><ul><ul><li>subject to automation by application of information technology to perform large parts of more standardised services, </li></ul></ul><ul><ul><li>codified and documented in precise rules, routines, and standards, so they can be more easily learned, diffused within organisations, and quality controlled, </li></ul></ul><ul><ul><li>performed to a large extent by “paraprofessionals” or “technicians”, (whose work is designed, coordinated and integrated by senior professionals), </li></ul></ul><ul><ul><li>customised in many details to meet individual client requirements, </li></ul></ul><ul><ul><li>composed of reproducible modules (that can be recombined in various ways), </li></ul></ul><ul><li>Extent to which KISA organised in KIBS become more or less: </li></ul><ul><ul><li>organised in virtual networks, with professionals associating to carry out specific projects, </li></ul></ul><ul><ul><li>conducted within larger KIBS firms, </li></ul></ul><ul><ul><li>organised within industrial “cartels”, with long-term relationships among groups of firms (including KIBS and their users), </li></ul></ul><ul><ul><li>supporting innovation processes in clients, </li></ul></ul><ul><ul><li>engaged in clients’ strategy formulation and decisions </li></ul></ul><ul><ul><li>supporting smaller as well as larger business clients . </li></ul></ul>
  53. 53. Important Features of KISA with high uncertainty <ul><li>(Overall growth rates) </li></ul><ul><li>Organisational location (KIBS vs other approaches) </li></ul><ul><li>Geographical location (extent of reallocation in EU/offshoring) </li></ul><ul><li>Nature of professional work </li></ul><ul><li>Division of labour among specialised firms </li></ul><ul><li>Strategic role of external KIBS </li></ul>
  54. 54. KIBS’ importance recognised <ul><li>Important innovators </li></ul><ul><li>Important sources and “intermediaries” of knowledge </li></ul><ul><li>Growing (still?) </li></ul><ul><li>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? </li></ul>
  55. 55. End of Presentation

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