RINASCIMENTO Emerging Industries: a New Engine for Growth

1. Service innovation
– a key ingredient in emerging industries
Kimmo Halme, Ramboll Management Consulting Oy
Presentation on 14 November 2014 at the
European Emerging Industries Conference 2014, Milano
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission

2. Three messages:
1. Service innovation as a driver of industrial
transformation
2. European Service Innovation Centre (ESIC)
- piloting systemic policy approach to boost
industrial transformation
3. Key lessons and takeaways
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 2

3. Service innovation as a driver of
industrial transformation
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 3

4. Importance of services
Services are instrumental for the European economy
- Services accounted for 93% of value added growth between 1990 and 2006, and for
82% of total value added in 2006; services constituted 83% of total jobs in 2006;
and wage growth and skill levels are as high and higher in services than in
manufacturing (McKinsey Global Institute)
- Success of manufacturing depends on innovative services like design, marketing and
logistics as well as on product related after-sales services and vice versa.
- Utilisation of service innovation calls for improvement in supply-side drivers (skills,
financing), demand-side drivers (public demand, customer proximity) as well as enablers
(regulation, standardisation)
Services are a driver for industrial transformation
- Services disrupt traditional channels to market, business processes and models, and
enhance significantly customer experience in a way which impacts upon the value chain
as a whole.
- Service innovation is shaping emerging sectors, industries and markets and contributes
to structural change and industrial modernisation (The Smart Guide to Service
Innovation)
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 4

5. Services transform markets and feed economic
growth
2.0
1.5
1.0
0.5
Changing ratio of investments in intangible and tangible capital shaping
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 5
1,64 1.60
1,23 1,20
0,89 0,89 0,86
0,71
0,65
0,46
0,40
0,30
0,23
0.0
United Kingdom
United States
Sweden
Finland
Denmark
France
Germany
Canada*
Japan*
Portugal*
Austria
Spain
Australia
Czech Republic
Italy
Slovak Republic
Innovation Leaders
Innovation Followers
Moderate Innovators
• The share of investments future economic growth
in particular intangible
asset categories is a good
indicator of the structure of
the economy
• Service innovations build
on intangible assets
directly and through the
role of complementarities
• Services go further than
manufacturing by offering,
and building in, more
intangibles such as
expertise, feedback from
experience, advice or
relevant training and
different thinking

6. European Service Innovation Centre (ESIC)
- piloting systemic policy approach
to boost industrial transformation
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 6

7. What and how?
• ESIC demonstrates the structural impact of
service innovation in practice
• EC supported service that helps regions to:
1. Define a service-driven strategy for industrial transformation
2. Capture, measure and assess the impact of service innovation
3. Test, update and improve regional strategies
4. Design and implement better systemic policies
5. Mobilise a versatile network of service innovation intelligence
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 7

8. Key activities
1) Demonstrating the structural impact of service
innovation in practice -> European Service Innovation
Scoreboard (ESIS)
2) Helping six selected model demonstrator regions to test,
update and improve their policies
3) Gathering and disseminating information & lessons on
service innovation
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 8

9. European Service Innovation Scoreboard
• 59 indicators, grouped into 5 dimensions
- 1. wider framework conditions, 2. service innovation-input, 3.
throughput, 4. output and 5. outcomes
- Sources: Eurostat, Community Innovation Survey, Labour Force
Survey, European Values Survey
• Displays data on national and regional levels
- Covers 27 Member States and 270 regions
- Update 2015 will cover all 28 member states
• The online tool allows comparisons between
member states and regions
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 9

10. Service innovation - Input • The highest scores are
observed in regions in Austria,
Belgium, Denmark, Finland,
Germany, Sweden and UK
• The lowest scores are found in
regions in Bulgaria, Greece,
Italy, Poland, Romania and
Slovakia
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 10

11. ESIS: Lombardia – Socio-economic situation
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 11

12. ESIS: Lombardia – Systemic function
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 12

13. ESIS: Lombardia – Transformative power
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 13

14. Six Model Demonstrator Regions in ESIC
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission 20/11/2014 • 14
Stepping away from
technological R&D
Re-organisation of
healthcare sector
Modernisation
of tourism
industry
Maintaining
competitiveness of
manufacturing sector
Supporting
transformation by
combining smart services
to manufacturing
Low productivity and
degree of
internationalisation of
service sector

15. Regional Consultation process
Rationale & strategy
for change
Appropriate policy
framework
Effective instruments
& practices
Engagement of all
stakeholders
Collaboration and
implementation
Application for LSD
Structural analysis & BM of
the region
Regional assessments
(Scoreboard,
Self-Assessment Tool)
Policy peer-review
ESIC policy advice
Roadmap for implementation
FEEDBACK &
LESSONS
ACCUMULATION & LEARNING
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission 20/11/2014 • 15

16. Regional profiles
Share of self-employed people
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
Employment share in 2 and 3 star
Specialisation in service-oriented
clusters
Share of innovators collaborating
with others (in %)
Business expenditure on R&D
Total expenditure on R&D (GERD)
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 16
0
Labour productivity growth
Share of employees with a higher
education degree (in %)
Share of researchers among
employees
EPO high-tech patent applications
Companies with service
innovations (in %)
Employment share in medium-high-
tech and high-tech
manufacturing
Employment share in service
innovation intensive industries
Gross Fixed Capital Formation (%
of GDP)
(% GDP)
clusters
Canary Islands
Emilia-Romagna
Limburg
Luxembourg
Northern Ireland
Upper Austria
Best score
EU27 average
C
E = Entrepreneurship
K = Knowledge development and transfer
I = Innovation and
business model development
F = Financing innovation
E
K
F I

17. Differences in policy approaches
Entrepreneurship
5
4.5
4
3.5
3
2.5
2
Collaboration & networking Limburg
1.5
1
0.5
0
Knowledge development
and transfer
Innovation and business
model generation
Financing innovation
Upper Austria
Emilia Romagna
Canary Islands
Northern Ireland
Luxemburg
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission 20/11/2014 • 17

18. Service innovation policy (Lux)
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 18
Focus on entrepreneurial activities
and knowledge development and
transfer;
Approach to service innovation
between assimilation and
embedded

19. Key lessons and takeaways
from ESIC
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
20/11/2014 • 19

20. Lessons
1. Service innovation has an instrumental role in industrial
transformation and renewal - but this is difficult to grasp.
2. Holistic, systemic analyses are needed – ESIC has launched
and piloted new tools for this. A good start:
- Evidence on current standing & regional benchmarking
- Lessons on the design of systemic policies (LSD)
- Ensuring policies make impact on structures (transformation)
- Specific policies for service innovation
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission
11/20/2014 • 20

21. Thank you for your attention!
http://ec.europa.eu/enterprise/initiatives/esic/index_en.htm
This work is a part of a service contract for the Enterprise and Industry Directorate-General of the European Commission 20/11/2014 • 21