1. Innovation in KIBS and through the use of KIBS Regional Studies Association Research Network Seminar Series 28th March 2011, London Dr. Marja Toivonen, Research professor, VTT

2. Background Knowledge-intensive business services (KIBS) have been actively examined since the mid 1990s as core actors in the contemporary knowledge economy, because knowledge constitutes both their main input and output(Miles et al, 1995; den Hertog and Bilderbeek 2000; Gallouj 2002). Particular interest has been shown towards the role of KIBS in innovation: - as facilitators of innovation in other firms/organisations - as carriers of innovations between firms/organisations - as sources of service innovations (as innovators)

3. KIBS as facilitators of innovation The idea that KIBS may support innovation in other organisations is based on the observation that organisations rarely are able to adopt external knowledge – important for innovation – into practice as such and by themselves, but they need the assistance of experienced experts. The development of ICT has increased this need. It has facilitated handling, storing and moving of information, but made more complicated the identification of essentials. The importance of competences linked with selecting relevant information and using it in efficient ways has notably grown.

4. New challenges in facilitation Linear transfer of expert knowledge plays a diminishing role in KIBS transactions – the real issue is shared problem solving, co-learning and co-innovation. The service-dominant logic perspective (Vargo & Lusch, 2004) highlights that the value of a service is always co-created and primarily determined by the user. Value is also context-specific and to a great extent experience-based. This means that KIBS need a comprehensive understanding of the value creation process of their clients.

5. New challenges in facilitation (cont.) Until now the phenomena of co-creation and co-innovation have been mainly studied in a dyadic context: in the relationship between the service provider and the customer. In practice, there are often the customers customers and end- users, or the value chain/network can be even more complicated involving several sequential producer-customer dyads. This requires new types of service innovation models that tackle the challenge of the complexity of co-creation.

6. Co-innovation in a service value chain

7. KIBS as carriers of innovations Studies of KIBS as innovation carriers have often focused on the transfer of knowledge from scientific institutions to business and societal practice. Traditionally, these studies have applied the idea that new knowledge is created first and foremost in the scientific context. Many studies have ended with the conclusion that KIBS do not play a big role in this type of knowledge transfer, but their activity is more a bridging intermediary between practitioners. New insights about the importance of co-creation imply that the concept knowledge transfer may all in all be too linear.

8. KIBS as carriers of innovations (cont.) In addition to the concept of KIBS, the concept of KISA (knowledge-intensive service activities) is gaining ground. This concept highlights that knowledge-intensive services are not provided by specialised companies only, but also by 1) public or semi-public intermediaries 2) client organisations Particularly interesting phenomenon is the kibsification of industrial companies. They provide today – not only product- linked services – but also consultancy linked to their clients processes and even to their whole business.

9. KIBS as innovators KIBS own innovation processes show features that question the universality of the R&D focused process model and the benefits of long intra-organisational pre-planning (Toivonen 2010). Many KIBS enter the market very quickly after the emergence of a new idea and develop it hand in hand with the service practice. This kind of an approach is particularly efficient when a) environmental turbulence requires quick action b)when planning can not provide all the details needed in implementation.

10. Different processes leading to an innovation

11. Policy issues in KIBS insufficient supply: the concentration of KIBS in metropolitan regions; equalisation between regions has not taken place insufficient demand: there may be KIBS available, but clients do not use them due to the lack of awareness or the lack of resources (particularly in SMEs) qualitative problems in KIBS: the challenge of thorough understanding as regards the function of services in the innovation and value creation processes of the client purchasing problems: the lack of expertise and process management and interaction skills in the client organisation

12. KIBS policy in Finland In Finland, the most concrete and extensive policy initiatives concerning services are included in the Serve programme launched by Tekes (Finnish Funding Agency for Technology and Innovation) in 2006. The programme continues until 2013. KIBS have played a central role in this programme: both the demand and supply of KIBS have been encouraged via the research and company projects that Tekes has funded. Finland has also been active internationally in research and policy projects targeted at the development of KIBS (OECDs KISA study 2003-2006, the on-going EPISIS project)

13. Close cooperation between academia and practitioners An important characteristic of Tekes-funded research projects is fostering both academic excellence and high societal impact. Projects last 2-4 years and involve5-10 companies/ public organisations whose service activities are studied and developed. During the project companies get newest scientific knowledge in the focus area in a summarised form. Benchmarking workshops are an important tool. Results are disseminated to broader audience at the end of the project.

14. Tekes as a developer of Finnish KIBS

15. Current and future areas in service research in Finland according to Tekes Strategy Development Execution Fostering service infusion and growth Stimulate service innovation Improve well-being Optimize service networks & value chains Service experience through co-creation Branding and selling services Measure and optimize value of service Leveraging technology to Advance Service A new research need recognised by Tekes Research activities planned and some research going on A research focus in the on-going Serve programme Service design Create and maintain service culture Ostrom et al., 2010, Arizona State University (modified)

16. Anna-Maija Sunnanmark/Tekes Strategic pillars in the EPISIS project European policies and instruments to support service innovation - 1. Knowledge, capabilities and diffusion Building capacity for service innovation Ability to create and adopt novel services Training that is responsive to industry needs and lifelong learning Knowledge transfer between different actors, networking 1. Knowledge, capabilities and diffusion Building capacity for service innovation Ability to create and adopt novel services Training that is responsive to industry needs and lifelong learning Knowledge transfer between different actors, networking 3. Dynamic markets as a driver Favorable framework conditions Effective implementation of services directive Further development of innovation friendly regulation Public procurement Access to finance 3. Dynamic markets as a driver Favorable framework conditions Effective implementation of services directive Further development of innovation friendly regulation Public procurement Access to finance Service innovations 2. New types of innovation processes Pursuing a broad concept of innovation Involving new types of innovation actors Valorising social, ecological and ethical responsibility Different roles of technology in service innovation and business models 2. New types of innovation processes Pursuing a broad concept of innovation Involving new types of innovation actors Valorising social, ecological and ethical responsibility Different roles of technology in service innovation and business models

17. Thank you!