1 Improving the Framework for Service Innovation and Performance A Government Perspective By Allan Mayo 17 September 2008

2 Presentation will cover: 1. Size and importance of services to the economy 2. Drivers of change 3. Focus of business innovation 4. Barriers to innovation 5. Skills to promote 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 G7 levels of service sector exports by country

9 Value of Selected Regional Exports of Services 2005

10 UK/US productivity gap

11 Methodology and coverage Sectors chosen: Retail Logistics Construction Environmental services Digital Content Services

12 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

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

14 Increasing power of consumers

15 Impact of the public sector

16 Impact of the public sector

17 Impact of the public sector

18 Impact of public sector

19 Impact of public sector

20 Impact of the public sector

21 Impact of the public sector

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

23 ICT is key technological driver

24 Globalisation of markets affecting prices of commodities

25 Sustainability

26 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

27 Potential barriers to innovation in services: transparency and openness of markets coordination and communication of government interventions awarenesss of new developments, improving uptake of technology, and promoting a culture of change in management capabilities trust in the internet as a platform for business access to finance for growing innovative businesses

28 ICT: use of software in business processes is limited

29 ICT: use of software in business processes is limited

30 ICT investment

31 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

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

33 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

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

35 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

36 Key dates in the history of innovation

37 Innovation in Services project