MBS CENTRE FOR SERVICE RESEARCH UNIVERSITY OF MANCHESTER 22 APRIL 2009 Service Innovation and Performance: What is the Role of Government? Allan Mayo Service Policy Unit BERR

Two initial hypotheses (i) Innovation intensity in services depends on Size of the market opportunity or threat Flexibility/openness of the regulatory & business framework, which incentivises innovation A network of informed suppliers and buyers Access to an advanced ICT infrastructure Rate of change of underpinning technologies Strategic, management, and workforce skills to handle change Availability of capital

Two initial hypotheses (ii) Individual Business success depends upon: Market Identification Speed of Response/Flexibility Availability/Scalability Quality/Price Credible Business/Revenue Model

Size of the market opportunity Not difficult to identify the most important areas or the ones where Government has a clear role…………

Societal challenges - Environment “Climate change is the world's greatest environmental challenge”

Societal challenges - Population

Societal challenges – “Moving people and things”

Societal challenges – the built environment

Services Sector GVA and GVA/Job, 2006

Developments in Technology, particularly ICT, a key driver of innovation

Informed consumers lie behind the explosion in innovation

Size of the market opportunity

Government creating new opportunities

The emerging global middle class Millions

But typically public services are highly complex services at the end of complex value chains………….

Disparate policy interventions Regulations Standards R&D & technology Market information Skills Develop, disseminate best practice Public procurement

The challenge Services perspective into policy IiS implementation is integrated with wider policy initaitives bringing that servcies perspective – it is part of implementation arrangements for the DIUS-led Innovation Nation White Paper and BERR’s own Enterprise Strategy. In more specific areas: Defra Ministers have told us they see it as taking forward part of the Government’s response to the CEMEP report, addressing the role that services might play in transition to a low carbon, resource efficient economy We worked with BERR colleagues on Manufacturing Strategy, now liaising with them on initial steps towards the preparation of the Low Carbon Industrial Strategy Contributing to the Shareholder Executive led assessment of Trading Funds and possible greater economic benefit data they collect could provide for the economy – rwll opportunities for new services European engagement with the Commission… [aborted Communication on a services strategy] ..Collaborative – implementation action plan engages a large range of delivery partners and stakeholders, inclnuding of course, business.. …Central Govt, DIUS, OGDs, Defra, HMT, Cab O, DfT, imporantly a reginal dimension – RDAs, Govt delivery agencies in various area, from Skills Council s=smionsregional As w

How to “pull it all together”? Develop, disseminate best practice, R&D & technology Regulations Standards Market information Skills Public procurement

Assisted Living Innovation Platform 2007 - 2012 Knowledge KNOWLEDGE TRANSFER AND STANDARDS ALIP KT (running) OBJECTIVE: Large scale New technology Demonstrator Standards? SHORT TERM R&D Home based systems & UCD (running) SCDE (running) LONG TERM R&D Business & Economic modelling Social and Behavioural studies EXTERNAL to ALIP: Whole Systems Demonstrators 2007 2008 2009 2010 2011 2012

The power of roadmapping A roadmap to where?............clear objectives Guided by whom?..........leadership/ownership Barriers to progress?......Consider Options/Innovation Priorities for action by whom?.....accountability and dependencies Key points en route…………clear milestones/timelines Who says so?.........transparency/debate PROVIDES THE BASIS FOR A CO-ORDINATED APPROACH

The power of demonstration Large Scale Demonstrators are the Laboratory of the Service Economy

Demonstrators inform Government Procurement clear joint objectives mutual understanding developing ongoing relationship appropriate risk sharing opportunities for innovation flexibility

A new “industrial activism” A strategic vision for UK economic recovery: Adapt, strengthen general competitiveness policies Influence market in new, more strategic way New approach to targeted interventions: high growth areas, major technological change http://www.berr.gov.uk/files/file51023.pdf

Conclusions If my 2 hypotheses are right, the role of Government is to: provide a high speed, reliable ICT infrastructure and ensure UK firms have access to latest technological developments/applications provide a framework which brings together the different stakeholders and facilitates a shared perspective, particularly where Government is a key actor promote better understanding of the challenges we face and potential solutions through demonstration, and then follow up with procurement ensure openness and flexibility of markets, not only through competition policy but also standards encourage development of relevant skills for an i-enabled, service oriented economy improve the availability of funding to support innovation and risk AND IF EUROPE WISHES TO REMAIN COMPETITIVE THEN WE NEED TO CONSIDER THIS ON A EUROPEAN SCALE

For further details: http://sigs.intelligus/ portal/site/sigs/?mode=0 allan.mayo@berr.gsi.gov.uk http://www.berr.gov.uk/whatwedo/sectors/innovationinservices/index.html