Service Innovation in the Twenty First Century

This paper is an evaluation of service sector innovations. It reviews the development of innovations in the sector, including innovation across services and the promotion of new services, and patterns of management and service design. Until the 1990s, it was rare to find researchers and policymakers taking service innovation seriously. However, massive growth of service industries in the two last decades and interest in service innovation show the importance of renewed interest in research and policy. At present, researchers tend to lean toward one of two approaches: that service sector innovation can directly apply tools from manufacturing, or that there are distinctive features of services that require particular evaluation procedures and policies. In fact, there is often convergence between the manufacturing and service sectors. Many manufacturing firms are coming to resemble traditional kinds of service-oriented firms; and many service firms are coming to be like traditional manufacturing firms. This poses difficulties for evaluating service innovation by exclusively one approach. The author argues for adopting a synthetic approach to avoid drawing strict boundaries between the technological and the organizational, and the product and process innovations. It is naturally more elegant to have a single approach that would enable policymakers to argue for integrated training and comprehensive innovation policies. However, it is more important to follow developments among modern firms, which can be overlooked in partial analysis. The synthetic approach fosters well grounded decision- and policy-making and allows updating of future trends and prospects of service innovation. It helps account for variations within and across goods and service innovation and address the service activities of manufacturing firms and the goods-producing activities of service organizations. Ian Miles finds a synthetic approach reasonable in that it combines elements of concepts in use earlier with a recognition of the importance of services to all sectors of twenty-first century economies. This is important for understanding the industrial competitiveness of the advanced industrial countries as well as for confronting the grand challenges that our world faces in this century. These challenges require solving problems that are bound to involve mixtures of technological and service innovation, which are both complex service systems at heart. Note: Downloadable document is in Russian.