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Thursday, November 05, 2009

Services, Innovation & Competitiveness

Just came across the report from Royal Society, - the UK's national academy of science, - Hidden Wealth: the contribution of science to service sector innovation.
Innovation to services and its linkage to hard sciences happens to be one of the core focus area of this report. This excellent report presents the findings of a major study on the role of science, technology, engineering and mathematics (STEM) to innovation in the services sector. One of the pioneering and comprehensive investigations of the impact assessment of services innovation in the current age . Why is service sector economy so important? Let’s look at the significance of this : Over 2/3rd of the global economy (GDP)is centered around services with developed countries seeing a greater percentage of service sector contribution to their national economies. By far the single largest employing sector in the developed world, the significance of service industry cant be overlooked. It goes without saying that the competitiveness of service sector along with government policies and implementation efficiency would to a great extent determine the competitiveness of the nation.
The study revealed that STEM is omnipresent in the service sector, but, unlike the case in the industrial sector, its impact is rarely recognized. The Hidden Wealth study, points out that despite the great significance of services to global economy, their nature remains somewhat undefined and is invisible under a majority of circumstances !
Employment and economic vibrancy in developed countries hinges on service sector and hence this is an important body of study and the findings very relevant and useful to developed nations in large measures and by extension to global economy.

The report reinforces the traditionally held view about service sector :"Our main conclusion, . . . is that services are very like to remain central to the new economy, not least because we are at or near a tipping point: innovations now underway seem likely to change dramatically the way we live and to generate many services (though few can be predicted in detail at present). . . ."

"Scientific and technological developments have triggered and brought about major transformations in services industries and public services, with the advent of the internet and world-wide-web . However, the full extent of STEM's current contribution is hidden from view - it is not easily visible to those outside the process and is consequently under-appreciated by the service sector, policymakers and the academic research community. This blind spot threatens to hinder the development of effective innovation policies and the development of new business models and practices in the UK."

Services rely significantly on external STEM capabilities to support or stimulate innovation - indeed they tend to innovate in more external and interdependent ways than manufacturing firms. This can take the form of bought-in expertise or technology and collaborations with suppliers, service users, consultants or the public science base. Through these ‘open innovation’ models, service organisations respond to the knowledge, science, and technology that they see being developed elsewhere (eg in other companies or universities), and use collaboration to solve their problems in innovative and competitive ways.”
The Hidden Wealth report eloquently makes the case that most of the economic value of breakthroughs in science and technology will likely be realized through services, and thus, this is the area around which most new, high paying jobs will be created. In conclusion:
“The main message of this study is that the contribution of STEM to service innovation is not an historic legacy, nor simply a matter of the provision of ‘human capital - important as the latter may be. STEM provides invaluable perspectives and tools that will help to nurture emergent service models and define future generations of services for the benefit of businesses, government, and citizens.”

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