Innovation in Services - Department for Business, Innovation and Skills

Innovation in Services
from CIS survey data, that capital spending accounts for the largest single
component of innovation expenditure across all sectors (see Evangelista et al.
1998). Overall, Evangelista concludes that innovation in services shows more
similarities than differences to innovation in manufacturing, and in general this
line of research suggests that innovation in services and manufacturing are not
so very different – there may be differences in emphasis, but there are
differences of degree rather than of kind.
However, critics (e.g., Sundbo, 1997; Gallouj 2002), particularly those following
the distinction approach (see below) argue that these findings are based on an
approach that uses the conceptual and empirical tools derived from studies of
manufacturing. It is a bit like using tools developed to understand the behaviour
of mammals to explore the behaviour of reptiles or birds – similarities and
differences in behaviours that lie within the frame of reference can be
highlighted, and many similarities will be found, but those behaviours that lie
beyond the frame of reference will be neglected (e.g., using only ideas from the
study of mammals to study birds is likely to neglect the fundamental
characteristic of birds – that they can fly!). In particular, critics argue that the
received understanding of innovation takes a rather narrow, technological view
– there is, for example, little attention to interaction (for example through
delivery innovation, which is often important in services), surprisingly little
attention to skills (Tether et al., 2005), and the focus is still on the production
rather than the use of new technologies.
DISTINCTION (OR ‘AUTONOMOUS STUDIES’)
A third line of research has argued that innovation in services follows different
patterns from archetypal innovation in manufacturing. An early yet bold effort to
develop a theory of innovation in services was proposed by Richard Barras
(1986). Through research on financial services Barras observed that, contrary to
the conventional pattern of innovation through the life cycle of an industry as
observed by Abernathy and Utterback (1978), in which innovation initially
focuses on developing new products until a dominant design emerges before
the focus of innovation switches to processes, in (financial) services innovation
appeared to first focus on processes (eg. the application of information and
communication technologies (ICT) to improve the efficiency of back-office
functions), before shifting to products. This was partially through learning but
also through the increasing ability to customise offerings, again due to the
flexibility afforded by ICT.
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