G LOBAL S ERVICES Lesson 3: Innovation in the Service Sector

I NNOVATION D EFINED 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)

D RIVERS OF I NNOVATION 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.

D RIVERS OF I NNOVATION 6. Psychological climate: worldview matters -> shapes what individual/group creates 7.Physical Environment: space where individuals/groups meet 8.Organizational culture 9.Economic climate/ market conditions 10. Geopolitical culture: each culture has its owns values, fears, norms, perceptions of the world, etc. 11. Consumer needs

R OLE 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.

H OW CAN GOVERNMENT POLICY HELP SPUR INNOVATION ? Create climate open to legislation and regulations. Laws do not just benefit 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?

I NNOVATION AND THE S ERVICE S ECTOR (A CCORDING 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 highly skilled and highly educated workers. Entrepreneurship is a key driver of service innovation. Software and business method patents have implications for innovation in services. How?

W HAT 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 % 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.