2013 International Forum on Service Sector Advancement: Services as a New Engine of Growth, Through Creativity and Innovation Seoul, November 7, 2013
Service Innovation for Economic Growth, Job Creation and the Improvement of Quality of Life
Hervé Mathe Professor and Dean, ESSEC Asia Pacific, Singapore President of the Institute for Strategic Innovation & Services, Paris
Services touch the Lives of every Person every Day
Services lie at the very hub of activity in any society
ankingEducationWholesaleHealthCareRetailTradePublicTransportationRtaurant
InsuranceCulturalEntertainementRepairInformationSystemsLawyers MatchmakingRealEstateCommunicationEquipmentRentingDesignAdvertising
SocialWelfareHospitalityEngineeringEventBankingEducationWholesale ealthCareInsuranceCulturalEntertainementRepairInformationSystemsP
ice RetailTradePublicTransportationRestaurantLawOfficeMatchmaking
RealEstateCommunicationEquipmentRentingSocialWelfareHotels AdvertisingInvestmentBankingEducationWholesaleHealthCare
RetailTradePublicTransportationRestaurantInsuranceCultural EntertainementRepairInformationSystemsLawOfficeEventMatchmaking
EquipmentRentingSocialWelfareHospitalityRealEstateCommunicationDefense
Services represent approximately 80 percent of the U.S. GDP and over 75 percent of the GDPs of most OECD countries. There is increasingly evidence that services dominate global economies and drive growth. The expansion of services certainly stands as the most spectacular business trend of the past three decades. Western economies in particular continuously add positions in services but shed jobs in manufacturing After a long period of stagnation due to the predominance of manufacturing, international trade in services is also dramatically taking of. Wealth is finally created in the service economy, thanks to the “capitalization of innovation”. Leading brands emerge in services; and many prove strong enough to carry astonishing value
Service Innovation is central to improving Economic Performance
Service Innovation varies by country, sector and organization size
Service Innovation relates to new service solutions – concept, process, business model- introduced by manufacturing companies, service firms, or government agencies which impact recipient-provider interactions and strengthen service experience, while creating value with stakeholders. Service Innovation may ‘disrupt traditional channels to market (…) to enhance significantly customer experience in a way which impacts upon the value chain as a whole. In this way, it is shaping emerging sectors, industries and markets and contributes to structural change and industrial modernization’.
‘To achieve sustainable growth and jobs across Europe, a broad concept of innovation will need to be followed (…) Service innovation has an important role to play in such strategies. This should in particular contribute to providing small and medium-sized enterprises with favorable regional eco-systems and helping them to be competitive in global value chains. Service innovation should be seen in a strategic and integrated manner in order to shape new industries and restructure old ones’. Antonio Tajani Johannes Hahn Vice-President of the European Commission Member of the European Commission Responsible for Industry and Entrepreneurship Responsible for Regional Policy
The Smart Guide to Service Innovation, European Commission, 2013
Understanding the Key Drivers of Service Innovation
Services solve real customer problems that keep revenue streams flowing
Leveraging Powerful Engines for Successful Services Development
Web-based services perfectly fit in the paradigm of service innovation
Rethinking Processes to Co-Create Services with Users and Improve Productivity
Breaking out of the old ‘manufacturing and product-centric’ development mold
Ideation
Service Design Thinking Co-creating user-centered service interfaces that prove efficient and desirable. Tools include: Customer Experience Mapping Service Safari, Living Labs Staging Customer Surprise
Scalability and Customization Managing the tension between service efficiency - scale economy on volume- and service attractiveness - scope economy and one-stop shopping. Deciding for an appropriate Industrialization strategy
Open Service Innovation All stakeholders openly interact to define knowledge intense service and enable the creation of commons and societal capital for a continuous sustainable economical development
Design
Delivery
12
Simple Process Complex Process
Customized Service
Standardized Service
Captive offshoring I-house automation
Selective outsourcing globalization
Automation Self-service
End-to-end service Captive offshoring
Selective offshoring
Offshoring, outsourcing Globalization
One-stop shop End-to-end service
Insourcing Onshoring
Desintegration selective automation Selective outsourcing
Adapted from U. Karmakar, HBR 2004
Product Development in the 21st Century Service Driven Economy
Manufacturing now has to perfectly fit in with the requirement of a continuous delivery of positive
service experiences
Market Listening Qualifying the demands of the three categories of beneficiaries 1 End user/consumer 2 Resources injector 3 Specify/prescription
Design Challenge Assembling the most efficiently balanced combinations of: 1 Experience 2 Physical support 3 Relationship/Time
Value Equation Addressing the compatibility of value creation goals: 1 Investor value 2 Customer value 3 Value to Society
Translating expected service experience delivery in terms of processes, manufacturing support, and relationship management over time
Strengthening relationships Increasing brand equity Better mobilizing the creativity of the firm’s ecosystem
Combining possibly competing demands Conveying market voice all along channels Shaping sustainable business models
Shifting up the Progression of Economic Value
Over time customer relationships became IBM’s most important platform and the
main reason for its longevity
Economics offering Economy Economical function Nature of offering Key attribute Method of Supply Seller Buyer Factors of demand
Adapted from Joseph Pine & James Gilmore, 1999
Commodities Agrarian Extract Fungible Natural Stored in bulk Trader Market Characte ristics
Goods Industrial Make Tangible Standardized Inventoried after manuf. Manufacturer Customer Features
Services Service Deliver Intangible Customized Delivered on demand Provider Client Benefits
Experiences Experience Stage Memorable Personal Over a duration Stager Guest Sensations
Transformation Transformation Guide Effectual Individual Sustained through time Elicitor Aspirant Aspirations
Service Innovation at the heart of responsible and sustainable value creation
The economy is turning its focus toward a demand-driven production of utility,
connectivity, and sharing in a ‘smarter’ world.
As they face uncertainties, political instabilities in many regions, a continuous flow of emerging technologies, an evolving role of business in society, as well as new consumption patterns, governments, companies, and individuals are re-examining the source of their comparative and competitive advantages. Trends in internet collaboration and web-based services, such as open source software and software as a service and the ‘Cloud’ are driving services around business model innovation.
Key sectors have to be restructured; new strategies that stimulate innovation and encourage partnerships have to be deployed. The necessity to invest in sustainable development and to accommodate a growing world population, the scarcity of raw materials and the energy constraints leads to a reversal of the traditional logic of value creation. Service innovation, and especially the collaborative creation of contents, shapes new value propositions and creates new market. Additionally, it stands as the sole response to the current challenges that clench modern society.
Opportunities for service innovation extend well beyond the business world. Government programs require innovative solutions. Service innovation is required to improve the quality of life and help society deal with key challenges such as: cost of health care and education, ageing populations, urban density, responsible mobility, among others. Service innovation brings considerable contribution to the social welfare and augments the base of entrepreneurship for sound economical development.
As manufacturing matures in South Korea, services are upgraded and nurtured
The government has taken measures to boost a series of strategic service sectors
n Health care n Education n Green Finance n Content and software n Tourism and Events
In the mid-1980’s, the largest service sector in South Korea used to be an inefficient retail trade, now surpassed by a very active knowledge intensive business service sector The information technology sector has firmly positioned itself as a growth engine for the Korean economy along the 2000’s, with its GDP portion increasing dramatically The rate of penetration of telecommunication devices and the development of the internet service industry proves dramatically high, with a multiplication of e-commerce platforms Also, the growth of Korea’s franchising sector, which has developed rapidly over the last fifteen years, is being backed by public authority in view of propelling leaders overseas
South Korean authorities insist on the greater development potential of the service sector relative to manufacturing in terms of employment creation, market expansion, and export opportunities
ESSEC Asia-Pacific Paris – Beijing – Singapore – Tokyo
www.essec.edu/asia www.essec-serviceinnovation.com
Thank you for your attention
