1 Government’s Role in Service Science and Innovation in Services Allan Mayo BERR Services Policy Unit 22 nd Service Conference and Workshop 7 November 2008

2 Presentation will cover: 1. Size and importance of services to the economy 2. Drivers of change 3. Impact of the Public Sector 4. Focus of business innovation 5. Skills to promote service innovation and business performance

3 Importance of Services Sector to the UK Economy since 1945

4 Sector GVA as a proportion of UK economy in 2006

5 UK trade in services

6 UK services sector exports

7 Exports of business services

8 UK/US productivity gap

9 Coverage: a focus on five services sectors Retail Logistics Construction Environmental services Internet delivered content services = 25% of UK output by GVA, reflect diversity of service sectors

10 Methodology and coverage Four questions examined: Drivers of change Way services sector innovation has changed and how it might be measured The barriers to innovation The scope for effective government intervention

11 What are the drivers of service sector innovation? Increasing power of consumers ICT is the key technological driver and enabler of change. Globalisation/competition Sustainability Impact of the public sector

12 Increasing power of consumers

13 ICT is key technological driver Drivers of innovation and growth in services

14 ICT Innovation comes in waves

15 Globalisation: Quarterly Trade in Services (current prices, not seasonally adjusted)

16 Sustainability

17 Impact of the public sector

18 Impact of the public sector

19 Impact of the public sector

20 Impact of public sector

21 Impact of public sector

22 Impact of the public sector

23 Impact of the public sector

24 Elements of service innovation Capture and use information: –anticipate customer needs –market and competitor trends –analyse own performance Management, people skills –respond to opportunities, threats –exceed customer expectations Quality framework: –Standards –Business planning, processes Process Business model Delivery Offering

25 Management of change Analysis suggests high level management skills are not widespread in UK business… Action needed to strengthen business engagement with learning opportunities and leading practice Develop focus on transformative application of ICT to business processes; and scope to promote this via a network of expertise

26 Business Challenges: Financial Times 2/09/08 S Korea’s KDB confirms talks with Lehman Foreign insurers face barriers to enter China Mantua maverick climbs aboard at Alitalia Babcock in deal to train engineers Chrome outshines rivals to become fastest browser Potential buyers circle for slice of Dresdner Nokia plans mobile music service in the UK Sainsbury to push own-brand goods Ferrovial It rode the construction boom at home and diversified abroad - especially into the UK, with airport operator BAA, and into the Americas, with toll roads….. Vivendi says GE will not sell stake in NBCU

27 Transforming Public Services

28 Promoting learning in Government

29 Improving public sector procurement clear joint objectives mutual understanding developing ongoing relationship appropriate risk sharing opportunities for innovation flexibility

30 Service science is not enough Commitment and capability require a framework of: Ethics Learning Networks

31 What should we aim to deliver? UK succeeds as hub for high growth, knowledge intensive services, attracting the leading global players to locate here UK closes productivity gap with US in services

32 Report URL:

33 BERR Services Policy Unit