GLOBAL SERVICESLesson 3: Innovation in the Service Sector

INNOVATION DEFINED

Innovation: the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations. Oslo Manual (OECD, 2005: 46)

DRIVERS OF INNOVATION

1. Individual: One that actually gets things done

2. Team: Often individuals work together – each bringing different skill sets

3. The Enterprise: gets people working together toward common goal

4. Processes: individual or group – i.e. brainstorming

5. Offerings: Innovation is more than a product -> includes services. Ipod is innovative because one can easily purchase and load music.

DRIVERS OF INNOVATION

6. Psychological climate: worldview matters -> shapes what individual/group creates7.Physical Environment: space where individuals/groups meet 8.Organizational culture9.Economic climate/market conditions10. Geopolitical culture: each culture has its owns values, fears, norms, perceptions of the world, etc.11. Consumer needs

ROLE OF TECHNOLOGY

Establish the base for innovation. It is an enabler. It connects people – helps with the formation of networks.

Social networking/blogs – helps with exchange of ideas across boundaries, within companies, etc.

HOW CAN GOVERNMENT POLICY HELP SPUR INNOVATION? Create climate open to legislation

and regulations. Laws do not justbenefit the status-quo. Regulations encourage collaboration.

Fund research and development, incubators – the space were innovation is given the opportunity to arise

Support education – gives students the skills to contribute to innovation processes

Provides financial support for building of infrastructure – physical and technological (i.e. broadband)

Can you think of other ways governments can encourage innovation?

INNOVATION AND THE SERVICE SECTOR (ACCORDING TO THE OECD) Value is gained from enhancing the capabilities of

the tasks that one organization performs for another

Service-sector innovation derives less from investments in formal R&D and draws more extensively on acquisition of knowledge from outside sources. How does one acquire knowledge?

Human resource development is especially important to service firms,given their high reliance on highlyskilled and highly educated workers.

Entrepreneurship is a key driver of service innovation.

Software and business method patents have implications for innovation in services. How?

WHAT IS SOCIAL INNOVATION Social entrepreneurs develop innovative answers

to a social problems (i.e. poverty) Idea gaining traction in last couple years as the

cost of public services soars. Often done through public-private partnerships Measuring success and accountability has been

challenging. The UK developed the social-impact bond. The

bond is tied to the performance of the NGO in tackling the social problem. Government pays investors in the bond a return of 7.5 -13% or nothing depending on the outcome of the NGO. The NGO can then focus energy on the solving the social problem rather than on fundraising. It is not clear the bonds will attract enough investors.