ServiceInnovationYearbook 2009-2010

ISBN 978-92-79-12926-1
European Commission
I nfor mati on S oc i et y and M edi a
KK-78-09-928-EN-C
Yearbook
2009-2010
Service Innovation
European Commission
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
Foreword
Dear reader,
I welcome this first edition of the Service Innovation Yearbook.
ICT is the cornerstone of future EU growth and is a key element in generating tangible
improvements in the areas like health, education, public administration, business, acces-
sibility and social inclusion.
It is very important to highlight the importance of services, comprising now more than
70 of the European GDP. More important is however to see that flourishing service
industry is also the critical enabler for sustainable societal development, the well being of
citizens, and at the time ensuring sustainable economical growth at the economy, too.
The Service Innovation Yearbook focuses on new ICT enabled innovation paradigms
for services, notably on knowledge intense services in various fields.
User-centricity in service innovation means new type of playing field in the services
landscape. Innovation is faster and more multidisciplinary than ever before. How do Florin Lupescu
we capture the potential of all stakeholders to contribute? How do we ensure that the Director
services developed are fast taken up, and scalable into different contexts, be it on indi- ICT Addressing Societal
vidual, cultural or geographical level? Challenges
DG Information Society
The Open Service Innovation can be one of the keys to engage the users and all the and Media
stakeholders in a PPPP; public-private-people partnership, which is necessary to fully
capture also the societal capital for services development. Those companies who can
build their innovation on win-win relationship with stakeholders will also capture the
societal change for benefit to their own development but also to the citizens’ best.
The public sector is undoubtedly one of the drivers to the service society. Using large scale pilots
and precommercial procurement the innovation can be brought to the real world environments,
thus highlighting the co-creative nature of the service society, and also the empowerment of the
users to configure the preferential services themselves, in a secure environment.
The trend to compose services along the lifeline of the individuals, having services integrated
around events citizens encounter (birth, death, marriage, moving residence, schooling etc) lead
to the need of new kind of thinking also in the public sector. The composition of these integrated
services will be that complex that we really need interoperability and common architectures. The
open innovation platforms can be one of the keys to achieve that.
We are facing the challenges of sustainable society and our duty is to turn that into possibilities
for the citizens, public services and business ecosystems. I hope that this yearbook will give a
strong stimulus for that development, and can bring us forward both in thinking and action
towards a healthy citizen-centric society, enabled by the next generation of ICT solutions and
knowledge intense services.
1 •••
LEGAL NOTICE
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Luxembourg: Office for Official Publications of the European Communities, 2010

ISBN 978-92-79-12926-1
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
Table of contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Many New Faces of Innovation .................................................................................. 5
CHAPTER I  VIEWS OF OPEN SERVICE INNOVATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

1.1 Open Innovation as Critical Enabler for Knowledge Intense Service Industry in Europe . . . . 7
1.2 Service in Perspective in Knowledge Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.3 Hidden Wealth: the Contribution of Science to Service Sector Innovation . . . . . . . . . . . . . . . . . . . . 22
1.4 An Open Innovation Approach as an Enabler for new Business Models in Telecomms. . . . . . 25
CHAPTER II  COUNTRY REPORTS OF OPEN INNOVATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

2.1 United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.2 Open Innovation in The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.3 Openness as the Way Forward to Competitiveness and Wellbeing in Finland. . . . . . . . . . . . . . . . . 54
2.4 Guerilla Innovation, or Why Your Ecosystem is Your Best Innovation Driver? . . . . . . . . . . . . . . . .59
2.5 Innovative Cross-border eRegion Development, Focus on Slovenia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
CHAPTER III  SUCCESFUL EXAMPLES OF OPEN SERVICE INNOVATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

3.1 BT’s Approach to Open Innovation: Leveraging our Research Investment. . . . . . . . . . . . . . . . . . . . . 69
3.2 Open innovation at HP Laboratories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
3.3 Open Innovation is Good for Us All . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
3.4 The New Club of Paris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
ANNEX: OISPG  OPEN INNOVATION STRATEGY AND POLICY GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
3 •••
S E R V I C E I N N O VAT I O N Y E A R B O O K
Acknowledgements
The report is the result of collective effort of the OISPG (Open Innovation Strategy and Policy
Group) – members, national contributors and experts in area of Open Service Innovation.
Their time and effort are gratefully acknowledged.
Name Organisation Email

Aarts, Emile Philips emile.aarts@phillips.com
Davies, Wayne HP Labs Strategy and Innovation Office wayne.davies@hp.com
stephane.distinguin@
Distinguin, Stéphane faberNovel
faberNovel.com
Lund University & The Hong Kong
Edvisson, Leif leif.edvinsson@unic.net
Polytechnic University,
Gelissen, Jean Philips jean.gelissen@philips.com
Gričar, Jože University of Maribor, Slovenia Gricar@FOV.Uni-Mb.si
Haaker, Timber Novay timber.haaker@novay.nl
European Commission,Information
Honka, Anni Society and Media Directorate-General, anni.honka@ext.ec.europa.eu
ICT addressing Societal Challenges
Janssen, Wil Novay wil.janssen@novay.nl
Kulkki, Seija Helsinki School of Economics (HSE) seija.kulkki@hse.fi
European Commission, Information
Lupescu, Florin Society and Media Directorate-General, florin.lupescu@ec.europa.eu
Lyons, Michael BT Innovate and Design michael.h.lyons@bt.com
Department for Business, Innovation
Mayo, Allan allan.mayo@bis.gsi.gov.uk
and Skills
McBride, Tony The Royal Society tony.mcbride@royalsociety.org
Meijer, Geleyn Logica geleyn.meijer@logica.com
Minerva, Roberto Telecom Italia Future Centre roberto.minerva@telecomitalia.it
Rhind, David The Royal Society dwrhind@googlemail.com
IBM Research, Business Development
Ruetsche, Erich http://www.zurich.ibm.com/
& Relations
European Commission, Information
Salmelin, Bror Society and Media Directorate-General, bror.salmelin@ec.europa.eu
Sargsyan, Gohar Logica gohar.sargsyan@logica.com
Ministry of Economic Affairs/
Schaap, Wilbert w.schaap@senternovem.nl
SenterNovem
Chair of the Open Innovation Strategy
Straub, Richard straub@fr.ibm.com
and Policy Group, IBM
Turkama, Petra Helsinki School of Economics (HSE) petra.turkama@hse.fi
van Buuren, Rene Novay rene.vanBuuren@novay.nl
Wickramasighe, rochana.wickramasinghe@
The Royal Society
Rochana royalsociety.org
••• 4

Author
Dr. Richard Straub
Chair of the Open Innovation
Strategy and Policy Group
President of the Peter Drucker
Society, Vienna
The Many New Faces of

straubr@fr.ibm.com
Innovation
C
raig Berrett, Intel’s former CEO is reported to have ideas. This can happen through “Crowd-sourcing” as with
said: You can’t save your way out of a recession, open innovation marketplaces such as InnoCentive, con-
you have to invest your way out. In a crisis ridden ceived in 1998 by three scientists from Eli Lilly. However,
environment, where most companies see cost cutting as it can be directed to employees of companies, its busi-
the panacea, this is something to think about. The clear ness partners and their family members as practiced by
message is – if we want to have a future we need ever IBM in their famous innovation Jams which had more
more value creation and innovation and we need to be than 100 000 people participating during a 72 hours Jam
ever smarter in how we do it. period.
In the post-World War economic boom research and However, it also may be an opening up to those to whom
development have been regarded as critical to a company’s the value should be provided – i.e. to the users. Eric von
success and thus have been kept tightly integrated as pro- Hippel and his world-wide research community have pro-
tected as part of its “core capabilities”. In the last 20 years vided deep insights into these new “user driven innovation”
this has started to change. With accelerating globalization models. The European Network of Living Labs (ENoLL),
and exacerbating competition the locus of innovation has announced under the Finnish presidency in 2006 has ben-
increasingly moved beyond the companies own bounda- efited from Von Hippel’s seminal work.
ries. Procter & Gamble was a pioneer in this field and
moved its credo from in-house R&D to a new enterprise While openness is “in” it should not be considered the
mantra – “connect and develop”. answer for all situations and markets. The German export
boom during the years 2000 to 2008, when exports basi-
By tapping the idea and creativity pool outside a company cally tripled was fuelled by companies who are relying on
it can widen its development foot-print while reducing cost rather closed innovation approaches. Hermann Simon has
at the same time. Increasingly, companies are discovering described those in his book “Hidden Champions of the
the advantages of collaborating with a range of external 21st Century”. These mid-sized companies have established
entities for novel ideas – from suppliers to universities themselves as world leaders in highly specialized products
to business partners and customers. In some instances, and solutions for specific industries. Their names are not
they rely upon these external entities to autonomously known by a broader public but they created enormous
produce innovation and in others they actively collaborate value and jobs around the globe. In his deep research on
with them. this phenomenon Hermann Simon uncovered that usually
these companies are very secretive and protective about
However, it would be wrong to claim a wholesale change their R & D. They outspend corporation in their relative
of innovation in general – it is rather the addition of new R&D investment and they outperform them in patent
innovation models which oftentimes are being blended ratios by a factor of five per employee. Yet, another char-
with the traditional ones. There is no one-size-fits all acteristic of these companies is a customer knowledge and
model, it all depends… Information and Communication intimacy far beyond the average corporation. Their deep
Technologies have provided new capabilities that enable knowledge about potential customer value is held by “lead
new models beyond the borders of companies, countries users” as described by Eric von Hippel as key drivers for
and continents. This portfolio of innovation approaches user-centric approaches. However they sit in the provider
and methods has literally exploded during the last decades. organization and come up with solutions that the average
Inherent to these new models is a high degree of complex- end-user has not been dreaming about.
ity, which requires fundamentally different management
skills and competencies that the old well guarded model, Whatever the way may be how innovation happens, it is not
where everything was “under control” of the company. a function of technology. Endowing technology assets with
value is the key to innovation. It is first and foremost a func-
Open innovation has emerged as a new mantra. Yet it may tion of management. As the academics Michael Mol and
mean different things to different people. On the one hand Julian Birkinshaw point out in their new book Giant Steps in
it is about looking outside the company for innovation Management, the most important innovations in the busi-
5 •••
ness world concern how we think about and do management, “open” by definition. What is finally needed is a new focus on
how we organise, solve problems, make strategy and lead the locus of value creation i.e. the management of innovation.
people. With choices between closed and open innovation Innovation funding needs to be directed to the management
approaches and the need to adapt models according to the discipline itself. To use a Clintonesque proposition – “it is
situation, the complexity of managing innovation is sharply management, stupid”… maybe we’ll finally innovate the way
increasing. Hence we must become better in the way how how we are looking at research in Europe.
we manage innovation. Innovation in management itself is
Reference
Birkinshaw, J. & Mol, M. (2007) Giant
Steps in Management. Innovations
that change the way you work. 224 p.
Prentice Hall.
••• 6
CHAPTER
Views of Open
I Service Innovation
1.1 Open Innovation as Critical Enabler for Knowledge
Intense Service Industry in Europe
This chapter deals with policy and research papers focusing on open innovation. We hope that these contributions
lead to intense discussion and action fostering innovation in services.
T
he understanding of critical innovation factors in the innovation back to the creative commons, increasing
knowledge based society and economy is in change. the success rate but also improving the conditions for new
The industrial paradigm changing towards the innovative actions in the creativity context.
intangible economy, the control moving to incentives and
leadership, and the shift from vendor centricity to user Finally I will shortly address the need for sustainable soci-
centricity is obvious just by looking at the newest services etal and economical development, simultaneously. How
and platforms on the Internet. will open, participative innovation be the base for the new
European innovation ecosystem for services?
Important is to notice that the societal change, some could
even say revolution, is enabled by the strong networking It is important to notice, that already in the Lisbon treaty
and web technologies development, enabling our actions the political consensus was based on the vision of knowl-
to be parallel in time and in space – for the first time in the edge being the key for sustainable economical and societal
history of the mankind. development, and that growth and environmental sustain-
ability are not excluding each others.
This fundamental change will affect all areas of life. Work,
private life, and roles in the society. All will be affected. In knowledge industries and services this is even in higher
grade true. Competitiveness is based on a win-win game,
We are now shaping the future society we are all living in, aggregating knowledge to value.
and what we know so far is that the change will be more
profound than we ever can imagine. This article is inspired by discussions and actions from the
context of Living Labs and Open Innovation in my work
Societal innovation changes the power structures, intercon- and represents my personal views on the “real European
nections, and also empowers much stronger value com- challenge” for the future, for our sustainable society both
munities to be established, live their lives and die. All this in economical and societal terms.
affects fundamental as well the policy making, where the
big challenge is to achieve societal robustness at the same The article tackles the changed networked society, and the
time as the bottom-up process is reinforced. The same possibilities empowering citizens to innovate bring, but
applies of course for the societal and economical dimen- also addressing the challenge for the businesses to take
sions of life, too. advantage of the new ecosystems for innovative user-cen-
tric service society. Future is not what we extrapolate from
This paper looks at these changes in the merging societal the past; future is what we create, all, together now.
and technical innovation ecosystems, and highlights the
importance of open innovation as the possibility to create When setting the various elements together we can imme-
the user-centricity and at the same time the innovations diately see that the window of opportunity is now, in the
needed for a flourishing value-based knowledge society. middle of the crisis to shape something essential for the
future. The European opportunity can be based on par-
In the text I will call for wide consensus on the directions ticipative innovation for service convergence. The challenge
we want to go together, but also how to build the infor- of Europe is to catalyse the Single Market for knowledge
mation society for us all; with full participation right of intense services in Europe to be a reality in the fastest pace
everyone, in his/her all roles, whether private, professional, possible.
whatever!
Open innovation at its best can build not only on the col-
laboration, but also on the creative commons, societal capi-
tal there is available, and catalysing the spill-over effects of
7 •••
The Technical Revolution – Affecting The importance of developing participative innovation

Industries and Society environments is well discussed e.g. by von Hippel in his
book Democratizing Innovation, Surowiecki in his book
I draw your attention to the very interesting graph from C. Wisdom of Crowds as well as in the A.W Page report on
Perez. She has, like many others set the technology revolu- Democratizing Channels of Communication.
tions, industrial revolutions and societal revolutions in time
perspective. What is interesting to see is the cyclic nature of Authoritarian Individual Freedom
revolutions, and seeing that all of them have been following Top Down Bottom up
the trace from technology, industrial structures and finally
Central Planning Participation
throughout society. C. Perez however highlighted the colli-
sion between the innovation and deployment phase which Command & Collaboration,
Control Self Organization
we all can well also observe in the current crisis.
Bureaucratic Common Sense
The current age of telecommunications needs to be seen Rigid Flexible /Adaptable

as even more radical than the previous ones, as we are Monopolist Competition + Innovation
overcoming the distance and time barriers – the society
is moving from a sequential and local society to a paral- The technology change will bring even more radical fea-
lel and glocal society, with new structures and behavioural tures to the nature of connectivity. Today the Internet is
models. Due to this radical change we can not have any mainly used for mail-type communication and informa-
smooth transition to the new (like we did not have in the tion retrieval. However when looking at the next generation
previous revolutions either) but it is likely that the clash will Internet we will have an Internet which is inherently truly
be unprecedentedly hard. broadband, mobile, actively interactive and personalised.
This communications and interactivity revolution changes This “future Internet” creates tremendous opportunities for
the world towards an open world. The trends are clearly innovation, but also for new service ecosystems comprising
visible throughout the society. The new dichotomy reflects of all actors in the services developing open service plat-
the philosophy of openness, and is affecting the societal atti- forms on pan-European basis, and even beyond. The big
tudes, but moreover also the service innovation and business strategic question is if a new service industry ecosystem
ecosystems behaviour in a radically new way.
Installation Crash Deployment
Irruption Frenzy Synergy Maturity
Panic
Formation of Mfg. industry
1 The industrial Revolution 1771 1797 1829
Repeal of Corn Laws opening trade
Panic Standards on gauge, time

2 Age of Steam and Railways 1829 1847 Catalog sales companies 1873
Economies of scale
Age of Steel, Electricity and Depression

3 Heavy Engineering
1875 1893
Urban development
Support for interventionism
1920
Crash
Age of Oil, Automobiles Build-out of interstate highways 1974
4 and Mass Production
1908 1929 IMF, World Bank, BIS
Dot.com
Age of Information and Period of Innovation
5 Telecommunications 1971 collapse
2000 and Prosperity
Source: Perez C., “Technological Revolutions and Financial Capital”, 2002

••• 8
C H A P T E R I  V I E W S O F O P E N S E R V I C E I N N O VAT I O N
can be built by the various stakeholders working together, The public sector has a driving role for services develop-
co-creating and building value. ment as it by nature is responsible for providing/guarantee-
ing services of public interest, but also as it is responsible
for the legal and policy framework and is a key player
Societal and Behavioural Change
in functionalities needed across all services, like identity
First time in mankind we are moving to strong parallel- management. Moreover the public sector is a significant
ism in time and space; breaking the traditional constraints. procurer of infrastructure and services, inclusive technol-
Value aggregation based on intangibles and extended prod- ogy. The concept of pre-commercial public procurement
ucts and services will be increasingly based on glocal think- is one of the powerful tools boosting the service economy,
ing, on crowd sourcing, and building on societal capital, if it is used to bridge the innovation gap, i.e. to shorten the
creative commons. time from innovation to take-up.
What is important to notice the increasing power of value The risk of failure can be reduced by having the user com-
communities, and their potential to be an integrated part munities strongly involved in the service development,
of the technical, societal and market innovation? People going far beyond the digitalisation of services as we have
will be connected locally and globally, in various contexts seen now. The whole service process including the back-
driven by their personal interests and competencies. office functions have to be redesigned to take the full advan-
tage of the new partnerships.
Those companies capturing this potential of crowds will
be the winners, as both the dynamics and complexity of The public sector has also a significant role in designing
the competence spectrum needed for breakthrough inno- from its part the modern open service infrastructures, and
vations is increasing rapidly. Following MIT studies it is driving in the procurement processes modern solutions,
evident that the heterogeneity of the research groups cor- like Ipv6 throughout. No new legislation for procurement
relate directly with the innovation probability. If the group is needed, only new ideas in implementing the procurement
is too monolithic, there is a likelihood of progress, but not in collaboration with the users and industry.
innovative breakthroughs.
As when the new industrial sector of mobile telecom-
Thus it is imperative for the public sector to catalyse inter- munications was created the private sector and the public
disciplinary interaction, but also strong interaction between needs to come together to specify the common service
all stakeholders in the knowledge society. Too often the platforms, enabling modular and interoperable service
people component, the societal innovation component is functions beyond the technical interoperability. The right
undervalued in the service innovation process. time to build these partnerships is now, when we are mov-
ing the Internet to the next generation enriching us with
New management challenges for enterprises mean leader- widely more opportunities to interact, communicate and
ship, preparedness to try, and make corrections is highly build competence and interest communities, both profes-
dynamic environments. One tool for this is in the 2006 sional and private.
created European Network of Living Labs concept where
innovation is brought from laboratories out to the real
European Network of Living Labs,
world, to happen in the real society, with real people.
ENoLL
At the moment the network has expanded to approximately Now few words about the Living Labs, and their role as
150 sites all over Europe (and even beyond) covering practi- innovation environments:
cally all the regions in Europe.
Helsinki Manifesto from 2006 says: “The European Net-
work of Living Labs establishes a European platform for
How to Turn the Societal Capital to
collaborative and co-creative innovation, where the users
Wide Asset for People and Business? are involved in and contribute to the innovation process.
Open innovation for services calls for entirely new types This approach should ensure that common methodologies
of partnerships. The usual PPP collaboration doesn’t take and tools are developed across Europe that support, stimu-
into account the crowd-sourcing or societal capital prop- late and accelerate the innovation process. The European
erly. Hence we need to add on the people component to the Network of Living Labs has a strong regional growth and
partnership, bringing it to public-private-people partner- development impact by facilitating and fostering regional
ship PPPP. 9 •••
innovation as interlinked with a European Innovation Sys- of ideas and solutions, where different technologies, in their
tem with a global reach.” different maturity levels meet, very much focused around
the user; whether the user is a citizen or organisation.
The ENoLL network has developed from the original 20
sites to wide 150+ sites covering well all regions of Europe This cross-fertilization to be effective has to be supported
and even beyond. by the right framework, environment and tools enabling the
value added to be aggregated both in the business ecosystem
The ENoLL network creates a common innovation infra- and the society as societal innovation. The latter is extremely
structure, on which it is possible to drive the user-centric important to drive the participation and co-creation proc-
and open service platforms, provided that the various Living esses built on creative commons and openness.
Labs can agree on common areas for collaboration, beyond
usual benchmarking and information exchange. What Open user-centric innovation in collaborative setting has
would be very important is to agree on common functionali- the potential to speed up the service innovation by develop-
ties in selected service sectors, creating together interoper- ing the market simultaneously with technology. The process
able and reusable modules on common open infrastructure. nature increases as well the probability for innovation suc-
This is extremely important when we see the opportunity cess, as it is easier to adjust the development throughout the
(and also necessity) to create a single market for services in participative process. Thus one can say that open collabora-
Europe, using fully the technology developed beyond the tive innovation leads to many small corrections avoiding the
current applications. fundamental mistake in the development.
The role of users empowering them in the innovation proc-

Open Innovation
ess highlights their multiple role, also being the creators
The new user-centric view highlights the need to capture the for the future. We simply can not afford to loose the valu-
creativity of users in a participative way to the innovation able and instantaneous contributions from the users in the
process. This participative and co-creative innovation builds innovation process.
on simultaneous technological and societal innovation cre-
ating a parallel mash-up of ideas, development and deploy- When speaking about innovation in real world, like those
ment. The innovation moves towards a continuous process in Living Labs it is however very important to notice that
The connectivity and Internet has changed the world. More than 2 B people are connected in the Internet, leading to new groups, communities, connectivity throughout the world
••• 10
the “real-world” innovation is not linked to deployment This user-centric approach creates also a new business
phase only. The ideation and development stages are equally opportunity for the whole service sector. Service conver-
important in the holistic understanding of participative and gence around the user leads to the need of building the
co-creative innovation we now speak about. service infrastructure and offering on open interoperable
and modular architecture, where instead of the traditional
technical approach the functionalities the user meets in all
Interlinking Innovation for Action
the applications is the starting point.
The same need for understanding the nature of change
and the difficulty to adapt to it has also been highlighted in We need to analyse the services more carefully from proc-
European high-level strategic documents, like the Hampton ess perspective, to identify the modular reusable elements
Court report where the need of demand-side innovation as common to multiple services, use them on an open platform
well as the Lead Market initiative is presented to bridge the and integrate them to services.
gap between technology and full scale take-up.
I take the analogy of LEGO building blocks: By the reference
The same was also highlighted in the Helsinki Manifesto architecture we define in an open way the principles of the
from 2006, jointly elaborated with the Finnish EU Presi- building blocks as well as the dimensions. Then, based on
dency and the Commission. this software companies and service providers construct the
actual building blocks following these principles. The blocks
It highlights the user-centric collaborative innovation as key are interoperable, all fulfilling certain module of function-
for European growth, supporting the ideas presented by ality. When combining these modules together we end up
the IST research programme Advisory group ISTAG in its to the full service. Like in LEGO community, the builder
report in 2004, where EAR (Experimentation and Applica- (user) her/himself can use pre-designed configurations of
tion Research) concept was presented, to have the innova- the modules, use experts/consultants or if he wants build the
tion happening in the real world. personalised configuration of the service her/himself.
Very much similar thinking has been used in manufactur-

European Drivers for Growth
ing industries, where the business process engineering led
The technical and media convergence we have seen in recent to interoperable approaches and later software offerings in
years has brought to us a set of various devices to store and manufacturing enterprises. Also the RosettaNet approach
handle information, to provide communication and also to can be used as a model for establishing a functional archi-
acct as personalised devices providing rich media content, tecture and thus creating a widely used open approach to
entertainment and services. As example these devices can be manufacturing process management.
the new generation multifunctional PDAs, mobile phones,
portable computers etc. This together with the rapidly devel- In the context of services we can see the direct link between
oping broadband infrastructure has led to the ICT world functional reference architectures and service process engi-
we now see around us. neering.
However the development has happened very much from The service process engineering approach could be tackled
the technological and vendor perspective. e.g. very much in the same way as was the industrial process
approach in the RosettaNet approach: The manufacturing
Thus it is important to realise that user-centricity in serv- industry processes were decomposed to generic sub proc-
ice development will be critical to develop the user-side esses, and standardised based on their functionalities. Where
demand for the next generation broadband and technical applicable, industrial international and de facto standards
devices. The user has to have similar experience using the were used, but where no such standards were available, the
whole set of services, whether public or private. It is impor- RosettaNet consortium developed best (common) practise
tant to see that in the near future the user will either her/ sub processes to cover the whole process chain.
himself not only use the services, but also make the com-
position of the services he will use. Based on the time and To illustrate the user-centric functionality thinking and the
ability of the user she/he will configure the service portfolio decomposition to sub processes e.g. the following function-
by her/himself or by using agents, virtual or real, to do the alities can be seen in most of the services.
task on her/his behalf.
11 •••
Identity management is related to every service process sector, first procuring the Nordic NMT network. As it was
usually both from the user and vendor side. Likewise the based on open specifications it fostered the creation of the
trust building process between the parties is crucial, as e.g. industry worldwide, based on European approach. Further-
service personalisation is very often related to the trust more when the analog technology was to be digital (GSM)
between the actors. Financial transactions are present in we by close PPP developed a worldwide standard position-
most of the services, and especially now when we have the ing the European development well in the global scale. This
Single European Payment Area SEPA pan-European finan- would never have happened if the chosen approach would
cial transactions are easier. Mobility is related to most of have been a closed one.
the services, too. We want to have the service irrespective of
our location, e.g. in health related services this is essential. It is sad to see that despite our strength in communications
Thus mobility and natural interactivity become some of and mobile technologies we in Europe have no strong global
the essential user-near functionalities, too. players on Web-based services! Why? One reason might,
again, be the quite fragmented market. It is straightforward
Service roaming across different equipment is needed to to develop a service in one of the Member States, but when
provide the services in a context sensitive way, but also the up scaling the service to larger markets we in Europe face
context management is important when we move towards 27 separate markets. The closest single market for up scaling
per in services. is the US market, so many of the best services are moving
over there, being bought by US companies, and then sold
All this requires also the right competitive framework to back to Europe. We are becoming instead of inventors and
emerge in Europe. The EU Service Directive is a step toward business developers in to high extent only a market area for
the right direction, but still we are quite far from the Single advanced products.
Market for Services in Europe. Pan-European legislation
needs also to better grasp the opportunities the present
Single Market for Services in Europe?
technological change is offering for businesses.
As stated before the Single Market for Services is an impor-
Too often we do not see that by having a catalysing legal tant goal for the European sustainable development.
and policy framework we can boost the innovation and
create favourable conditions for sustainable economical and It creates open platforms for service providers to come with
societal development. their offerings, and empowers the users to combine the best
one for them. At its best this approach creates a new serv-
The new “future Internet” is an opportunity for Europe to ice ecosystem where we see a clear role for larger compa-
become a leader in service economy. Industry has already nies providing the platforms and also integrated solutions,
come with a PPP on the topic, which proposal is now been where smaller companies provide special offerings, and their
elaborated together with the Commission. This industrial expertise, often on more local basis.
action needs to be combined with the new approach of user-
centricity and Single Market for Services, as these all are The development of the Single Market requires close col-
together needed to create the service industry in Europe. laboration between the Member States and the Commission
to see beyond the current paradigms of service provision.
The new “beyond i2010” strategy as well as the new ICT The societal challenges we face e.g. due to the demographic
research is taking shape. In these actions the future tech- development suggests new ways of service provision, which
nology development for next generation Internet and web can be solved only by increased open collaboration across
based applications are addressed very strongly. The develop- all actors, setting the individual in focus.
ment programmes need at the same time also supporting
actions more on the policy side, as well as on the legisla- There is a clear win-win game in this:
tion side. Here I take the example of the GSM story again,
where the general framework of mobile communications The advantage for the citizens is to receive affordable serv-
were developed at the same time as the technology. Both ice provision borderless, and with high grade of person-
the public and private sector worked very closely together alisation. The new industrial and service cluster boosts the
to create the mobile industry and services. European growth after the recession. The public sector can
rely on open platforms and modular solutions, not locking
It is also not to be forgotten that the initiative to develop them in to any single vendor, and making the changes in
mobile communications networks came form the public the service processes easier and faster. Moreover having this
••• 12
pan-European approach enables effective joint development entrepreneurship flourish in the service ecosystems. But,
and exchange of best practise experience making services all this needs to be an action stemming from the ideas of
more affordable and inclusive for all. user-centricity and pan-European actions working together,
towards a true Single European Market for Services.
The common platforms together with the broadband infra-
structure makes the market interesting also for large global The foundation for the Single European market is well set in
companies to invest in Europe, and to build solution based e.g. Single European Payment Area, the emerging telecom-
on our reference approach. munications legislation, developments towards eIdentity etc,
but so far the common drive towards user-centric common
functional reference architecture is missing.
Conclusions
The time to react is now, if we want to create a strong user- Shouldn’t we now bring our act together to shape the Sin-
centric business ecosystem in Europe – the ecosystem which gle Market, in having technology and societal innovation
is contributing to the sustainable growth both economically meeting in real-world environments, having true PPPP. We
and societally in Europe. can have a new success industry in Europe, if we just join
our forces.
We need to react now, as the crisis we are now facing is
reflecting the fundamental changes in the societal and eco- Public sector can be a valuable driver like it was in creating
nomical structures and behaviour, but also suggests us to the mobile industry, the industrial players by agreeing on
move towards a more open innovation environment, lead- global open platforms and the people by adding the societal
ing us to service society for us all and with us all. Inclusive- capital and innovation to the development of the services.
ness means not only services for us, but also full partici- The legal and policy framework creating a single European
pation right in the creation of the future. No good idea is market for services is a prerequisite for the boost as well.
lost, but this requires also a very deep understanding of the Can the success story of the GSM and mobile communi-
interaction processes in the development of our knowledge cations sector be replicated by bringing the actors widely
society. together?
Open innovation which is based on creativity in the society The window is open for us, for open innovation platforms
and societal capital and experience captures value better for for the user-centric knowledge intense service industry.
new business and service development, enabling all sizes of
Contact
➜ Open innovation captures creativity of users for Bror Salmelin
Policy Adviser to the Director
business and better services
European Commission,
➜ Open innovation increases the social and DG Information Society
intellectual capital
and Media
➜ Open innovation enables scalable services and fast bror.salmelin@ec.europa.eu
innovation cycle, even continuous innovation
process
➜ Open innovation sites (e.g. Living Labs) foster
creative commons capital
➜ European Network of innovation environments
enables development of functional
interoperability of eServices
➜ eServices „best suited“ for open innovation
environments in real world settings:
• Need for high dynamics, multidisciplinarity
• Different maturity levels of technology and
society merging
• New co-creation processes of eServices;
user- drive configurations
13 •••
1.2 Service in Perspective in Knowledge Society
The service logic has been refined during the last 30 - 40 years. Today we see more and more of the impact of this
service evolution in terms of the Knowledge Economy. But still we are suffering from the industrial paradigm and its
taxonomy. Is it that service is an Invisible exchange and we lack the refined taxonomy and metrics to describe and
capture the emerging “soft” value economics of Knowledge and Service? Many new tools are however emerging,
among others related to capturing the Intellectual Capital value. The next challenging step will be in the area of
Service Science and Innovation. Therefore this article ends with some tentative questions for that agenda.
Notice or to See the Service different sectors. To say that the service sector is growing
Just look, think and consider when you listen to the song is too narrow. Current terminology, metrics and statistics
”Dancing Queen” or “Money, Money” . are mainly production and supplier centric, with an input/
output perspective.
It is from the song group ABBA. And as such it is a part of
the Entertainment Service Sector. But it is more to it… Customers, suppliers and others co-create service. So the
roles of supplier and customer have to be redefined. For
There is the music, the lyric, the CD&DVD, the Global example, the service of a dishwasher only exists if the cus-
Shows, the infrastructure, the Mama Mia Show, the Mama tomer takes action uses it, says Gummesson. The customer
Mia Film, and soon to come an ABBA Museum in Stock- is as much a resource as the supplier is. The supplier has
holm, Sweden. So from the music service has evolved a a value proposition; the customer is responsible for value
whole list of packaged services, as well as trade on the serv- actualization. This will call for an extended way, of looking
ice, based on the packages and repackages as well as the at our economy and value creation, both regarding roles
evolving Intellectual Property Rights. and stakeholders as well as over time.
Today this might be called the evolution of Knowledge The value logic is both in the interdependent vertical
Economy, just to differentiate it from the industrial era. dimensions, but most of all in the lateral dimensions. This
But it is a deeper dimension to this evolution, related to is very much illustrated by the ongoing transformation of
the interaction logic between the actors. enterprises like Ericsson, from once being a mechanical
industrial producer, to become a network service provider
So what is it in the Service perspective that makes it so on a global scale. Today it is said that 75 of the value
different? Is there some kind of Black box or Mystics in added of Ericsson is in the space of customer interaction,
it? In Universe less than 5 is said to be visible materia. and not in the factory. This transformation has taken place
Is it that service is an Invisible exchange and we lack the in less than 10 years. And today a major proportion of the
refined taxonomy and metrics to describe and capture the 64 000 employees are very qualified knowledge workers
emerging “soft” value economics of Service? or researchers.
Service Logic Evolution

This Service logic as described by among others Gummess- Already in the late 1800 there were National Accounting
son [1], Spohrer and Maglio [2]: essentially says the fol- problems in UK. They experienced a deficit in the Foreign
lowing: Service or value is the expected outcome of all eco- Trade reporting. To solve this they called it the Trade of
nomic activity. There is not a manufacturing, an agricultural Invisibles. A special Committee on Invisibles Export was
and a service sector. even formed. It still is in existence and produce valuable
statistics for the UK.
Companies offer service propositions which can be com-
posed in many ways, according to Gummesson. Customers In the early 1980’s this phenomena was observed in Japan.
of a restaurant do not meet the service sector; they meet all They therefore had a debacle on the statistical data to
sectors: goods (forks and knives), agriculture (food), and describe the emerging new economics. So as a consequence
••• 14 service (a waiter). Customers see all this as service, not as Ministry of Finance together with major Financial Service
House formed a think tank called Softnomics Centre to edged counterpart to the Swedish Government to shape
address the need for a better mapping of the Soft Econom- the suitable Policies for the Service Sector. It attracted a
ics and the growing importance of the Service Sector, as lot of enterprises, such as Securitas in security services,
well as basis for Policy making. EF in education services, as well as SAS in flight services.
It also took initiatives to shape among others research on
At the same time in the USA the major financial enter- the Service Sector, which led to shaping CTF-Center for
prises formed the Coalition of Service Industries. The Service Research, Karlstad University. The Swedish Coali-
administrative office was located to Washington DC, but tion of Service Industries also created knowledge sharing
the chairmanship was with the big insurance group AIG, in alliances with other countries, the European Commission
New York, and Mr Greenburg. Among the members were as well as its fore runner CSI in the USA, for among others
IBM, VISA and several other large global enterprises with the regulation, and regulation and policy making for the
growing service content. global trade of service. Similar bodies were consequently
shaped in many countries.
In Sweden the Foreign Ministry of Trade saw the same,
and called for a new mapping approach in 1982, in which Today we see the impact of the evolution. A major pro-
I was very much involved, as special advisor. This initiative portion of large economies are in the services sector. The
resulted in several outcomes. First an official report was Federal Reserve in the USA together with the Maryland
published labeled, Trade in Service [3]. This highlighted University presented the investment map as of below.
among others that the Swedish economy since long had However many neglected and still neglect this major shift
already shifted from Industrial to Service orientation. The in the economics, or value creation.
foreign trade at that time was however still dominated
by the industrial sector. The statistics did not capture the
Metrics
evolution and thereby did not give the relevant mapping
platform for policy making by the Government. In the USA the major investment growth areas are in edu-
cation, software and advertising or in other words Intan-
Then in its extension a special grouping of service enter- gibles or Service. The amount of this annual investment
prises was shaped 1984, called Tjansteforbundet, or The only in the USA is in the magnitude of more than 1000
Swedish Coalition of Services industries. The founders billion USD or around or beyond 10 of GDP.
were SEB- Skandinaviska Enskilda Banken, Skandia Insur-
ance, Enator Computer Services and Consultus Manage- For the evolution of investment into intangibles in the USA
ment Consulting Services. This became a much acknowl- during the last 50 years look at the curves below [4].
Investment: in the US, Intangibles are as important as Tangibles
14 % — Tangible Business Fixed

Investment
— Intangible Business Investment
12%
10%
8%
6%
4%
2%
0%
1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Source: Nakamura, Intangible assets and national income accounting 2008
15 •••
In most countries the official investment data do not governmental and intergovernmental organisations, in
capture the growing soft investment. So the figure would several countries (USA, France, United Kingdom, India).
be some 50 higher if including all the soft investment, Rapporteurs and secretariat are provided by the French
besides education, software development, and customer national statistical institute (Insee), OFCE, and OECD.
relations development. The service sector today represent
in major economies beyond 60-90 of the economy , as The first report has just emerged, in September 2009 [5].
major employment areas, as well as growing trade sectors. They are arguing for a shift in perspective of metrics from
One of the largest cross sectors areas is Tourism. Just for industrial output factors to more of indicators of Social
Sweden the export of services is reported to be grown Progress, and well-being such as Quality of Life factors.
annually with 9 since 1995, and now representing 16 of Perhaps it should be a perspective of competences, knowl-
GDP. Without a good map of these intangibles the Policy edge or Intellectual Capital? Anyhow it is a shift towards
making is often based on distorted data. more and more intangibles and service.
So we need to go beyond the traditional distinctions of

Drivers or Value Dynamics
goods and services, as well as look for the new indicators.
Therefore president Sarkozy of France recently appointed However the core understanding of service might be in
a special committee to look into this. To the committee a different value dynamics. Late professor Richard Nor-
he appointed the well acknowledge Noble Laureates pro- mann started early to write on Service Management [6].
fessors Joseph Stiglitz, and Amartya Sen plus Professor The value delivered is often intangible, and the in the eyes
Jean-Paul Fitoussi. of the holder. So this is really a soft economy. And the value
chain is broken into pieces, and replaced by what might be
The Commission on the measurement of economic per- called a value constellation. Furthermore the power shift
formance and social progress was created at the beginning is from the producer to the user, calling for among others
of 2008 on French government’s initiative. an inverted value chain perspective [7].
Increasing concerns have been raised since a long time In the terms of Knowledge Economy one of the key pio-
about the adequacy of current measures of economic neers has been professor K-E Sveiby. He already in the late
performance, in particular those based on GDP figures. 1980’s wrote about another type of Knowledge Enterprise
Moreover, there are broader concerns about the relevance [8] highlighting that the value is in the intangible Knowl-
of these figures as measures of societal well-being, as well edge dimensions. He also defined then Knowledge as the
as measures of economic, environmental, and social sus- capacity to act.
tainability.
Already in the 1970’s one of the founding partners of Consul-
Reflecting these concerns, President Sarkozy has decided tus, B. Molin, a colleague of mine, also started to see this and
to create this Commission, to look at the entire range of developed a concepts and approaches for Service Business
issues. Its aim is to identify the limits of GDP as an indica- Development, later on also summarized into the New Bottom
tor of economic performance and social progress, to con- Line (see www.bottomline.se). It is based on a perspective of
sider additional information required for the production hidden values beneath the traditional balance sheet. It is about
of a more relevant picture, to discuss how to present this nourishing the values and the culture for a sustainable value
information in the most appropriate way, and to check the creation. And it is about a co-creating leadership based on
feasibility of measurement tools proposed by the Commis- images. Or as the present CEO of Ericsson, Mr. CH Svanberg
sion. Commission’s work is not focused on France, nor on says, the leadership challenge is to hedge the service culture
developed countries. The output of the Commission will of the organization of tomorrow.
be made public, providing a template for every interested
country or group of countries. The hidden values are also today referred to as the Intel-
lectual Capital [9], which are the hidden values for future
The Commission is chaired by Professor Joseph E. Stiglitz, earnings capabilities or the roots for the fruits. Those are
Columbia University. Professor Amartya Sen, Harvard often provided as interactive services. The value creation
University, is Chair Adviser. Professor Jean-Paul Fitoussi, is then in the dynamics of the interaction. This value
Institut d’Etudes Politiques de Paris, President of the dimension can be viewed in another perspective than
Observatoire Français des Conjonctures Economiques input/output. It might be better understood as a systems
(OFCE), is Coordinator of the Commission. Members of dynamics perspective, as developed and described already
••• 16 the Commission are renowned experts from universities, in the 1970’s by Professor Jay Forrester, MIT, USA. This
A process view: Generators and Time Flow
27.
Financial
results
1.
Product 0,25Y-1Y
0,25Y-1Y process
10.
Product
innovation >2Y
0,25Y-1Y
12.
Customer 1Y-2Y
relations 28.
1Y-2Y image/
brand
8.
Co-operation/
knowledge 1Y-2Y
transfer 5. Strong impact
employee
0,25Y-1Y
motivation Very Strong impact
leadership
Generator
Y = Year
Source: © InCaS Consortium
holistic view of interdependencies of different drivers for others, IC or Wissensbilanz Process – Some German Expe-
the aggregated value creation can then be visualized by riences [10].
looking at the 3 major intangible dimensions of Human
Capital-people inside, Relational Capital-people outside As a follow up on these was launched 2007 the EU project
and then the Organizational Capital-the bridge between called InCas-Intellectual Capital Statements made in
people inside and people outside. Europe, to which I was appointed senior advisor. It is
focused on expanding the learning from the German
A special European Commission project that finished Wissensbilanz project and expands it to 5 countries with
in 2006 was called RICARDIS- Reporting on Intellec- a target for 50,000 EU SME’s to be using InCaS knowledge
tual Capital to Augment Research, Development and tools and techniques by the end of the project dissemina-
Innovation in SME’s. this was very much the basis for an tion phase . In this project is also now a “Wiki”, or special
extended process transparency project, from EU, called InCapedia emerging since Spring 2008, being developed
InCas, described more in detail below. at LSE – London School of Economics, within the InCaS
project. It provides an emerging interactive encyclopae-
In Germany started a special now very successful project dia about everything to do with Intellectual Capital and
in 2004 called Wissensbilanz Made in Germany, under Intellectual Capital Statements. See www.incas-europe.org
the leadership of BMWA - BundesMinisterium fur Wirt- where it might look like above for enterprise service value
schaft unt Arbeit. It has now evolved to incorporate small creation over time.
as well as large German enterprises, both public and Pri-
vate Service enterprises. It has resulted in open software It is a systems dynamics approach for the driver of the
to download on www.akwissensbilanz.org, today done by outcome and impact over time. This is also a kind of Lon-
more than 20.000 enterprises in Germany. gitude value, or a third dimension. See www.corportelon-
gitude.com and the book by Edvinsson [11].
This work is a pioneering work, close to systems science
perspectives, as Wissensbilanz is going from reporting of InCaS is now being followed by another European Com-
IC as a position to a process view of the non hierarchi- mission project called CADIC – Cross Organizational
cal interaction and interdependencies between the IC Assessment and Development of IC, with a strong focus
components to shape value. It has a lot of benefits from on IC Flows.
Leadership viewpoint. This systems dynamics approach
is also described in articles and research papers, among
17 •••
Professor Paul Romer, Stanford, as well as professor Brian donnant. And in Scandinavia we talk about give and be
Arthur, Santa Fe Institute early observed some of these given. These transactions of trust honor the mutual benefit
interactive dimensions. They called it the Law of Increas- and are a very intangible but important bridging dimen-
ing Marginal Utlity. This is fundamentally different to the sion for the economics of Service.
traditional economics Law of decreasing marginal util-
ity, on which most return on investment calculations are The delivery organizations of Mc Donalds and Ikea are
based. however very pedagogical illustrations that this space in
between can be systematized, organized and leveraged on
IC is not a zero sum system, but rather an exponential a global scale, as successful Service Enterprises. This co-
growth systems, or in simplified terms 1+1=11. This is due creation of trust based services can be illustrated by for
to the Relational Capital multiplier effect. Practically we example Micro credit services of Grameen Bank and its
see this new value dynamics in the explosion and growth Nobel Prize awarded founder, Dr Muhammed Yunis.
of internet based service such as Wikipedia, Google, as well
as Spotify, as so called Social Media services. Furthermore this organizational design can be speeded up.
Like in Formula 1 the transaction of shift of tires can be
The core of this systems dynamics approach is to see and systematized and optimized, to be done in a few seconds.
understand the interdependencies, as a kind of eco sys- How do we speed up or transaction processes of Health
tem, for benefit of the stakeholders to grow sustainable Service, Educational Service or even Science services?
value creation. The powerful value resides in these hid- Some work is in progress on this, but much more will
den dimensions, to be extracted, visualized, cultivated and emerge. In the industrial paradigm it was the rationaliza-
leveraged by service innovations. This calls for a special tion of goods production. But in the Service Economy
Intellectual Capital Leadership Agenda and also design of we need a much more holistic perspective of different
new brain friendly spaces for the service interactivity. stakeholder’s views as well as perceptions for the – and
new service innovations.
Service Organization
A deeper and more intangible eco system dimension of
For the interplay in this systems dynamics over time, the Knowledge Era is presented by culture and values. Is
between the acting parities there can be different kind culture and values the soil or context for value creating
of organizational systems. Those are usually given by the activities as well as standard of living? What culture or
purpose. For example is it to produce a book, deliver a context will then shape future well being and sustainable
lecture or to share ideas? Depending on the purpose it will wealth? What would be a link to systems science on these
be a product, a service or a common good. intangible drivers?
This interplay is very critical for the value creation. Profes-

City as Service Organization
sor E. Gummesson has since long been researching this,
and seen that there are much more than the traditional Development of our knowledge cities is a complex task – it
famous 4 P:s as proposed by professor Kotler. The critical is more than developing a plot of land. We have to adopt
dimension is the space in between the parties, and how the spirit of a learning service organization to respond to
to organize for that to shape value. Professor Gummesson the signals and demands of many different groups and
refers to this as Relation Marketing [12]. manage the allocation of resources between different
claims. To grow the City and its urban capital means to
This space can in the taxonomy of Intellectual Capital be handle the people, processes and property in a coordinated
called Relational Capital. This focus is interesting to com- way to achieve maximum impact value and sustainable
pare with our cultural values. In the Western perspective ecological value creation.
by tradition we are focused on input-output, often as an
object. This incarnation of services can be illustrated by From the work of Knowledge Cities we can learn about
looking upon knowledge delivery, as a book, i.e. object, or the importance of the context for the knowledge worker.
lecture, i.e. service or interaction e.g. Wiki. A relevant and attractive City service will give Quality of
Life for the Talents and so called Creative Class. It has been
In Asia there is much more focus on the relationship and described by research of R. Florida and C. Melander [14]
long term impact. They have a special word for this called as well as described in Monocle on the Most liveable Cit-
Guanzi. And the value creation emerges in this relation- ies. This urban planning of the context for the knowledge
••• 18 ship [13]. In France they talk about a culture of donner- worker is a tremendously important service function for
people, as the creative and innovative power embedded

Urban Capital in human talent.
This is also a starting to shape another understanding and

Human Relational consciousness of the spaces and its services of also Knowl-
Capital Capital edge intensive Nations, Regions as well as Cities. The old
paradigm was that the City was a place for exchange of
goods, and trade. Today it is becoming more and more a
place and space for exchange of contacts and interactivity.
This is also referred to as Knowledge cities. See more on
Social Structural www.worldcapitalinstitute.org In November 2009 there
Capital Capital was a 2nd Global Knowledge City Summit organized in
Shenzhen. See www.kcsummit.com to address many of
these issues.
We can today see the emergence of Mega Regions and

Intelligent Regions, such as Öresund as the Borderline Zone
between Sweden and Denmark, as well as the new Innova-
Cities, Regions and Nations. This is often Pubic Service tion Region between Hong Kong and Shenzhen. Such an
space and responsibility. It is also a kind of platform for the Urban Capital space is characterized by Societal Renewal
organization of interactivity between citizens. We see this based on Social Innovation, Futurizing and engagements
among the rapid innovation growth of Social Media. But of Volunteers and Global Digital Commons. Special Eco-
how about the Innovation thrust for City Services? nomic Zones are being upgraded by Knowledge Innova-
tion Zones. See www.inthekzone.com
Whom and How do we shape this service of Urban Space
for the optimal value creation? It is a long way beyond the In those a key role is emerging for Societal Entrepreneur-
physical architecture. In a work of the City of Helsingborg, ship and their innovation of services. It might have started
Sweden, this has been called MINDZONE [15]. A MIND- in UK with initiatives from among others the government
ZONE is a special concept for is both a way of thinking of Tony Blair. This resulted in among others the shaping
and knowing and a way of supportive design/gestalt for the of NESTA with the aim to transform the UK’s capacity for
interactivity to reach quality of living through quality of the Innovating of Public Services, see www.nesta.org.uk .
place and space. It is the space in between in the larger con- A similar set up was done in Denmark with the very suc-
cept URBAN CAPITAL, and its interacting components cessful MindLab for the innovation of public services, see
Human Capital, Relational Capital, Structural Capital and more on www.mind-lab.dk. Now the Swedish Governmen-
Social Capital. tal Knowledge Foundation has since 2008 a special program
on Societal Entrepreneurship. See www.kks.se.
The purpose of MINDZONE is to support and cultivate the
Urban Capital of the city. It is a holistic service approach
Service Science Research
to urban development and renewal, based on a perspec-
tive of Intellectual Capital and specially the dynamics of In its beginning Service Science was, according to pro-
intangible assets. Regardless of scale, MINDZONE takes fessor Gummesson, as expressed at IBM seminar 2008
in consideration the local culture of a place or a city and technologically-focused. It was first called Services Science
strive at renewal of itself and its surroundings. The aim of based on the idea that there is an identifiable service sector
MINDZONE concept is to create an urban service man- which grows. After further research and gained insights
agement and design that can contribute to more reward- the s in services was dropped.
ing and well remunerated knowledge workers and faster
growth in community income and wealth. This can only be This is also one of several outcomes of IBM’s research to
achieved by collaborative efforts, sometimes called Triple new knowledge of service science. Today the evolution
Helix or even Penta Helix. of robot systems for services, such as bank systems like
ATM, or stock exchange software, or cleaning robots, will
The MINDZONE concept focus on developing and trans- be interesting challenges. There is a desire to innovate
forming urban settings and services to support, nurture efficient service systems and to reduce the gap between
and value knowledge development and sharing between theory and practice through multidisciplinary coopera- 19 •••
tion, by engaging academy, the public sector and busi- for music downloading from internet. New legal innova-
ness. This IBM initiated global service project has been tion platforms also emerge such as Creative Commons.
in progress since 2007, under leadership of J. Spohrer [16].
The project is both revisiting as well as forward looking Then we have the very soft dimensions of the Brain proc-
and might offer important contribution to business and esses to learn about. Professor Kawashima at Tokyo Uni-
several service related management disciplines in the cur- versity is now researching on how to build brain training
rent and future economic reality. services both for students as well as seniors in collabora-
tion with Nintendo games.
One pioneering researcher on service marketing is Profes-
sor Christian Grönroos, Swedish School of Economics, To elaborate service innovation and prototype the inter-
Helsinki. He has been very active in publishing and was actions among different stakeholders, Skandia Insurance
launching his PhD work on this already in 1980 [17]. Very Company pioneered development of shaping a Future
much of the early taxonomy on Service Marketing was Center, 1996, under my Leadership. The core of a Future
shaped by Grönroos and Gummesson, and together we Center is the experiential knowledge exploration, by rapid
formed the Nordic School of Services Marketing in the prototyping. In other words it is about shaping an organi-
early 1980’s. zational approach to reduce the space of unknown as well
as reduce the fear of the unknown. It is about innovation
The very first Professorship on Services was shaped in capital building. Today this has resulted in a whole variety
Sweden, 1985, as well as a special research unit – called of such different labs for the development and innovations
CTF – Center for Service Research, 1986, at University of of both private as well as public services. See www.future-
Karlstad, on initiative by the Swedish Coalition of Serv- centers.eu. Look at for example www.thedialogueshouse.nl
ices. The very first professor was Dr. Evert Gummesson, initiated by ABN Amro Bank, with its service development
then followed by the CTF pioneering professor Dr. Bo incubators. Look at forthcoming Innovation Nest at the
Edvardsson. Hong Science Technology Park www.hkstp.org.
CTF- Service Research Center (CTF – Centrum för Tjän- Another similar successful track has been the develop-
steforskning) at Karlstad University, Sweden, is one of the ment of a European Network of Living Labs. Living Lab
world’s leading research centers focusing on service manage- is a concept for R&D and innovation to boost the Lisbon
ment and value creation through service. CTF now has 50 strategy for jobs and growth in Europe. The approach is a
researchers and research students who are variously involved human-centric involvement and its potential for develop-
in business administration, working life science, sociology ment of new ICT-based services and products. It is all done
and psychology. And one of the very early research reports by bringing different stakeholders together in a co-creative
on Service Intenraitonalalization was published in 1991 [18]. way, mainly by the technology platforms for service devel-
See more on www.ctf.kau.se opments. See more on www.openlivinglabs.eu.
AMA – American Marketing Association with many of However the big area for service innovation might be
its pioneering researchers were also early on to Service in the organizational systems for public service, such as
development in the early 1980’s. Health and School service. This sector represents a big
part of the Economy in Europe and many other areas of
Professor H. Chesborough from University of Califor- the world.
nia, Berkeley has also recently looked into the Service
Management, mainly related to his pioneering research Service design will also be a challenging area, of how to
on Open Source Innovation. This revisiting might how- design the intangible experiential perception by tangible
ever still carry much of the perspectives of input/output as well as intangible interactions. This will call for more
economics. cross disciplinary work for example by antroplogists as
well as network systems simulation models such as pro-
Service Science has still a lot of challenges to address. That vided by IBM.
is among others related to the paradigms of services, and
so called Innovation Capital opportunities. Examples of Furthermore important and growing attention of the
new paradigms are among others related to Social Media, Research and Development sector, called the Lisbon
and Service Innovation. The innovation exploitation is Agenda, is in itself a very qualified service area for Service
related to Intellectual Property dimensions, as well as the Science Innovations.
••• 20 shaping of delivery processes such as for example Spotify
Outlook Quizzics What is in the value creating process of services that can be
operated by computers and robots?
At Lund University we have a special approach called Quiz- How does an Annual Report look like for the transparency
zics, emerging from late professor Stefan Dedijer. He is among of interactive services?
others famous for the work on Social Intelligence, as a basis for How can Science (R&D) be speeded up for a more rapid
Social Innovation. Quizzics stands for the art and science of value creation, or reduced opportunity cost, e.g. Health
questioning. In our case of Service Science it might mean the Service Innovations
phrasing of some questions on Future Service, such as: What new Public and Societal Service Organizations can
be prototyped already, without conflicting with traditional
What are the major differences in the future outlook for political institutions?
service design between the USA, Europe and Asia? What usage and benefit will there be by Talented services
What will be the cultural impact of values perspective on from old brains and Seniors?
future value creation of services? What can Neuroscience add to the enjoyment design of
How can important service activities be industrialized or services?
robotized, but still keep the customized human perspec-
tives?
References
[1] Gummesson, E. (2007) “Exit services [7] Normann, R. (2001) Reframing [13] Edvinsson, L & Ai Yu. (2008). Some
marketing – enter service marketing”, business; When the Map changes the IC perspectives from a Chinese
Journal of Customer Behaviour, Landscape, J. Wiley & sons, London point of view, KMAP, Hong Kong
Vol. 6 (Summer), pp. 113-141. [8] Sveiby, K-E. (1989) The New [14] Florida, R., Gulden, T. & Melander,
[2] Maglio, P.P. & Spohrer, J.,(2008) Organizational Wealth, Berrett- C. (2008) The Rise of the Mega-
”Fundamentals of service science”, Koehler, Publishing, www.sveiby.com Region. Journal of Regions,
Journal of the Academy of [9] Edvinsson, L. & Malone, M. (1997) Economy and Society
Marketing Science, Vol. 36 No.1 Intellectual Capital-Realizing your [15] Edvinsson, L.& Olsson J. (2009)
[3] SOU 1984_33, Trade in Service, company’s true value by finding its Mind Zone, forthcoming article in
Swedish governmental Research hidden brain power, Harper International Journal of Knowledge
[4] Nakamura, L. (2008) Intangible [10] Edvinsson, L. & Kivikas, M. (2007) Based Development.
Assets and National Accounting. IC or Wissensbilanz Process – [16] Spohrer, J. (2008) The Service System
Federal Bank of Philadelphia. Some German Experiences, Journal is the Basic Abstraction of Service
[5] Stiglitz, J., Sen, A. & Fitoussi, J-P. of Intellectual Capital 2007, Vol 8, Science.
(2009). Report of the Commission and No 3. [17] Grönroos, C. (2006) Adopting
on the Measurement of Economic [11] Edvinsson, L. (2002) Corporate a service logic for marketing,
Performance and Social Progress, Longitude – Navigating the Knowledge Marketing Theory, Vol. 6 No. 3,
(Sept 2009) See also www.stiglitz- Economy, Bookhouse & Pearson pp. 317-333.
sen-fitoussi.fr [12] Gummesson, E. (2002) Total [18] Edvardssson, B., Edvinsson,
[6] Normann, R. (1983) Service Relationship Marketing, Butterworth L. & Nystrom, H.(1991)
Management, Liber, Stockholm, Heinemann, Internationalization of Service
Sweden Enterprises; (1991) CTF 1991:3.
Contact Professor Edvinsson is a key pioneering contributor to both the theory and practice of
Professor Leif Edvinsson Intellectual Capital. As the world’s first director of IC in 1991 he initiated the creation
The World’s First Professor on of the world’s first public corporate Intellectual Capital Annual Report 1994, and
Intellectual Capital, Lund University, inspired the development ever since on IC metrics. He was parallel to that prototyping
The Hong Kong Polytechnic
the Skandia Future Center as a Lab for Organizational design, one of the very first
University, and Chairman and co
founder for the New Club of Paris in the World in 1996, and inspired many to be followed. In 1998 he was awarded the
leif.edvinsson@unic.net prestigious award Brain of the Year from the Brain Trust in UK. He is since 1999
Honorary chairman for the Henley Management College KM Forum, UK. He was in
2001 appointed Adj. Professor at Lund University as well as Visiting chair Professor in
2007 at the Hong Kong Polytechnic University and in 2009 at the Jiatong University in
Xian, China.
21 •••
1.3 Hidden Wealth: the Contribution of Science

to Service Sector Innovation
T
he Royal Society, the UK’s national academy of sciences, mathematical modelling by UCL economists which under-
recently published the findings of a major policy study pinned the UK government’s auction of 3G radio spectrum
on the role of science in service sector innovation. and raised £22.5bn for the taxpayer; and the search algorithm
Entitled Hidden Wealth: the contribution of science to service that was the initial basis of Google’s success.
sector innovation, the report highlights the contribution of
science, technology, engineering, and mathematics (STEM) The report shows that STEM will also be essential to future
to the services sector, now and in the future, and identifies waves of service innovation. Many services are on the cusp
ways in which this can be strengthened. of a transition to more personalised and interconnected
systems, which will require significant advances in STEM.
Services are extremely important for the UK economy, Recent advances in the physical and life sciences will open up
accounting for around three quarters of UK Gross Value completely new service possibilities (e.g. reduced cost of gene
Added (GVA), and 81 of all jobs. The rise of services in sequencing allows for personalised genomics). The advent of
the past 30 years has mirrored a corresponding decline in ever more personalised and ubiquitous services, the increas-
manufacturing. However, the UK economy is in flux. The ingly globalised nature of service industries and supply chains
financial turmoil of recent years, and the resulting recession, and the development of service-based responses to many of
has injected fresh urgency to debates about the structural the major social, economic and environment challenges facing
mix of the economy and future sources of wealth creation. society represent both opportunities and challenges for UK
Yet services will certainly continue to dominate economic organisations, government and policymakers.
activity for the foreseeable future.
One result of these developments is that the economic value
Innovation plays an important role in these sectors yet it of STEM will increasingly be realised through services – a
is widely accepted that traditional innovation models and change which will require researchers, innovators and poli-
policies tend to focus on a narrow conception of innovation, cymakers to fundamentally re-consider the relationship
mainly the support of R&D in manufacturing industries. between science and wealth creation.
Though the distinction between services and manufactur-
ing is blurred, and becoming ever more so, other approaches An important question then is ‘how well prepared are we for
are required to support innovation in services. all this? Our work revealed a number of issues which, if not
addressed, will undermine the ability of firms based in the UK
The Society’s work shows that STEM is deeply embedded to develop and maintain leading positions in highly competi-
within the UK service sectors and that its impact on service tive and globalised service industries.
innovation processes is extensive and widely diffused. For
example, STEM capabilities are often internalised within Firstly, the full extent of STEM’s current contribution to
service organisations – mainly in terms of ‘human capital’ or services sector innovation is often hidden from view and is
embedded technology, which underpins high levels of innova- not easily visible to those outside the process. Consequently,
tion. STEM is also integral to the infrastructure that enables the contribution of STEM to service sector innovation is
and supports innovative services. Computing, communica- under-appreciated by the service sector, policymakers and
tions, IT, the internet, massive databases and the mining of the academic research community. This ‘blind spot’ threatens
them, and large-scale computer modelling and visualisation to hinder the development of effective innovation policies
underpin many areas of service innovation. Services also and the development of new business models and practices
rely significantly on external STEM capabilities to support in the UK.
or stimulate innovation.
Critically, service innovation (and especially the role of STEM
Many scientific and technological developments with origins in these processes) is poorly understood by policymakers,
in the science base have precipitated major transformations researchers, and funders. For example, there is a relative
in services industries and public services. Examples include dearth of academic research, case study, and statistical infor-
the technique for DNA fingerprinting, invented by Sir Alec mation available for analysis.
Jeffreys FRS, which is now widely used in health, policing,
security, and environmental services; the game theory and
••• 22
An issue of great importance is skills. Though STEM-trained 3. Increase the scale of knowledge exchange
personnel are highly valued by services firms in many dif- Service companies are, on the whole, not well connected with
ferent sub-sectors some employers are dissatisfied with the the academic STEM community in the UK and the results
quality and quantity of STEM skills available to them. We of two major surveys, strongly suggests that barriers to col-
were particularly struck by the importance attached to multi- laboration are actually increasing.
disciplinary skills and by the strength of criticisms of a ‘silo
mentality’ in UK universities. This is of concern given antici- There is much potential for improvement here: various
pated developments in services and the role that STEM is organisations made clear to us their desire for closer work-
expected to play in creating value from increasingly complex ing relationships and many others demonstrated the benefits
service systems. This will require teams of people who com- that flow from such collaborations. We recommend that the
bine deep knowledge of particular STEM subjects with abili- Technology Strategy Board reviews the Knowledge Transfer
ties gained from disciplines such as economics, social sciences, Partnerships (KTP) programme for its accessibility to services
management, or law. The ability to take account of the ‘human and to KTP associates with STEM backgrounds. Universities
dimensions’ in complex systems will be critical. and funding bodies should support the exchange of senior
academic and research staff into services and vice versa, via
To address these issues, we make several policy recommen- Fellowship schemes or other means.
dations.
4. Improve understanding of services and service
1. Build research agendas and communities innovation models supported by STEM
At present, the academic services community is fragmented Underpinning all of the above is a need for a better under-
and engagement with services firms is patchy. Greater con- standing of services and service innovation models, which
vergence is required in order to: remain poorly understood by policymakers, researchers,
Establish international research communities in services and funders. Unless policymakers develop an improved
innovation understanding of increasingly distributed ‘open’ innovation
Develop collaborative international research agendas in processes in services it is unlikely that innovation policy will
services-related fields be able to support innovation practice. This knowledge gap
Ensure that opportunities to exploit STEM in services are needs to be addressed as a matter of urgency. We urge research
properly recognised funders to develop the body of academic research into serv-
Align research and market opportunities ices innovation. The findings from this research should be
Ensure parity of esteem between services-related research promoted to knowledge exchange professionals whose role
and other forms of academic research it is to facilitate industry–university links.
The UK’s Technology Strategy Board and Research Councils Given the economic importance of the banking and pub-
should initiate services-related Grand Challenges, using the lic sectors in the UK and the significance of innovation in
established framework of Innovation Platforms and cross- these settings, we also looked in detail at the distinctive role
Council themes or develop new mechanisms if appropriate. of STEM in these domains.
2. Develop multi-disciplinary capabilities

Banking
We recommend a large-scale exploration of STEM skill needs
in service sectors to be undertaken by Sector Skills Coun- The UK has enjoyed a huge competitive advantage in financial
cils. Research Councils, Higher Education funding bodies services over an extended period, bringing substantial advan-
and universities should also consider ways to make existing tages to the UK economy. Developments in ICT and financial
courses more relevant to the service sectors. It is crucial to modelling have fostered particularly rapid innovation, ena-
retain a mix of approaches to higher education provision, in bled by STEM-trained staff, notably computer scientists and
which there is a role both for specific STEM degrees and more mathematicians.
multi-disciplinary courses.
However, vast imbalances in capital funds between countries,
Grand Challenges should include provision to develop and the mispricing of risk, and the collapse of the US sub-prime
align cross-cutting theoretical and intellectual competences in mortgage market, triggered a global banking crisis in Autumn
areas such as managing uncertainty in modelling and simula- 2007 that led to a sudden, massive, and ongoing reduction in
tion, service design, quantitative data analysis, data security, credit availability with dire consequences for governments,
standardisation or validation of data sets and dynamics in taxpayers, consumers, companies, and banks world-wide. This
human-systems interaction. 23 •••
financial crisis led, in turn, to a near-global recession in ‘the and other relevant bodies the scope for freeing commercial
real economy’. data for academic and other research.
There are a wide range of opinions on the causes of the crisis, In Conclusion
but some commentators have attributed at least some blame Innovation policies have tended to focus on the support of
to the inappropriate use of mathematical tools whose proper- R&D in manufacturing industries. But it is now recognised
ties and consequences were not properly understood by those that other approaches are required to support innovation
responsible for managing their exploitation. It is clear that in services. Many of the findings of this study are, however,
many and various flaws in the banking sector culminated, also applicable to aspects of manufacturing. As the bounda-
ultimately, in systemic failure. Aside from a cavalier approach ries between manufacturing and services continue to blur,
to risk, these flaws included the reliance on apparently com- we expect to see greater convergence of innovation mod-
plex (but, in some cases, actually simplistic) tools and financial els, particularly around ‘high value manufacturing’ and the
products, low levels of understanding and oversight by senior ‘servicisation’ of products. Traditional forms of innovation
management, and the inappropriate regulatory and geopoliti- and R&D policy for manufacturing may become rapidly
cal framework that underpinned global financial systems. outmoded and there may be as many lessons here for that
sector as for services.
We make several recommendations for enhancing the role
that STEM might play in ensuring greater stability of the The main message of this study is that the contribution of
financial systems of the future including the creation of world- STEM to service innovation is not an historic legacy, nor sim-
leading centres of modelling and risk assessment relevant to ply a matter of the provision of ‘human capital’ — important
and engaged with financial services institutions like banks. as the latter may be. STEM provides invaluable perspectives
In addition, the Research Councils, the Bank of England and and tools that will help to nurture emergent service models
the UK Financial Services Authority should explore ways for and define future generations of services for the benefit of
the science base to contribute to more effective modelling of businesses, government, and citizens.
systemic risk in financial services.
The success of the UK Government’s innovation strategy
Public Sector Innovation will rely on a broadening of its perspectives. The Govern-
Some UK public agencies have recognised the role of STEM in ment must develop a more sophisticated approach to study-
delivering high-quality public services and have successfully ing the relationship between knowledge creation and eco-
engaged the STEM supply chain in their innovation proc- nomic impact, and give greater coverage to those parts of the
esses. But these examples are the exception to the rule – ini- economy that have thus far been relatively neglected, namely
tiatives to foster innovation within Government have mostly services and much of the public sector. But ongoing attention
ignored STEM. In view of the importance of the public sector to the supply of knowledge and skills — and particularly the
to national prosperity, we recommend the establishment of role of science — must be central to the innovation agenda
a team, drawn from central and local government in the UK if success is to be assured.
and from the science base, to undertake detailed work on
how STEM can be exploited more successfully to foster public Hidden Wealth: the contribution of science to service sector
sector innovation. We urge funders to emulate the success of innovation can be downloaded from:http://royalsociety.org/
the schemes which support business-university collaborations Hidden-wealth-The-contribution-of-science-to-service-sector-
with partners from the public services and the science base. innovation/
We were made aware of problems arising from public sector

competition with the private sector in regard to the exploita-
tion of the government’s information holdings. We urge the Contact
Government to move towards a situation where there is one Dr Rochana Professor David Rhind
model for the supply of government information, thereby Wickramasinghe FRS
simplifying matters for commercial organisations and facili- Policy Adviser Chair of the Working Group
rochana.wickramasinghe@ for the Hidden Wealth study
tating innovation.
royalsociety.org dwrhind@googlemail.com
We also recommend to the UK Research Councils that they Tony McBride Science Policy Centre
should explore with the Confederation of British Industry Head of Strategy The Royal Society
tony.mcbride@ 6-9 Carlton House Terrace
royalsociety.org London SW1Y 5AG
••• 24
1.4 An Open Innovation Approach as an Enabler

for New Business Models in Telecomms
The consolidated market of many network operators is under turmoil, on one side the Internet technologies
are challenging the way operators create and deploy services, on the other side new Internet business models
are eroding the margins of the telecoms market. This situation creates a deep uncertainty and a set of network
paradoxes that the operators have to cope with. As a strategy to exit from this paradoxical situation and aiming
at compensate the losses, many operators are seeking to enter into adjacent markets. This strategy is not easy to
implement. The paper suggest that operators should use an Open Innovation approach by creating OpenLabs that
leverage the telecom assets and could be used to bring innovation into new targeted markets.
Introduction
140 character messages). Consequently services are built
The world of ICT is constantly innovating and transform- around the communications needs of groups of users.
ing. It is changing so fast that “Internet speed” indicates
how rapidly services and technologies appear, are used The success of social networks has given importance and
and consolidate. This fast pace transformation is bringing value to large communities. Networks do have a value that
to users and companies a lot of innovation and, often, the directly relates to the number of participating users, the
disruption of consolidated beliefs, modes of operations famous Metcalfe’s law [1]. Many providers of Social Net-
and business models. An example of the mutation of the works are striving to find a way to monetize this value. In
status quo is the case of the telecomms industry. In the doing so, they sometimes touch and trespass acceptable
past, before the advent of the “mass Internet”, new tech- (from regulatory and/or users perspective) limits of pri-
nologies were introduced after a long process of stand- vacy and security [2]. The phenomenon of Social Networks
ardization, testing and deployment. Today there is not too comes with the need to understand the social implications
much time for a long and structured approach and also the and effects and how to provide services that are effective
most traditionalist network operators have to speed up in to users and that generate revenue for the providers. There
order to catch up with users and the market requests. This are technical and profound social challenges that require
is more evident if the service realm is considered. Here the special attention in order to grasp the evolutions trends
competition is so strong and it is using so many different of community services and how people hang together.
business models that even the more powerful users are The simple one to one communication (the phone call)
puzzled off by the rich offering of services and the pos- has been substituted by a more complex communication
sibility to get many of those almost for free. Operators in environment: there is a whole universe behind it made of
this area have to compete with more and more “fast” (i.e., human relations, habits and affective links. Studies about
they work at the speed of Internet) Service providers. The communities have focused on the social aspects of com-
offering of applications is so overwhelming for the users munications figuring out that, on the average, a satisfactory
that a new problem arises: how to choose the best and relationship between a user and its community friends
right one? How can a user decide which application is the is 1 to 150, i.e., a user can maintain rich, individual and
best one for him when there are more than 50 thousands satisfactory relationships with up to 150 people. This is
applications to pick from (e.g., Apple Applications Store called the Dunbar number [3]. Exceeding that limit the
or the Facebook repository of applications). Operators are quality of the relationship decreases to a more formal one
used to manage large repository of services, but they are or the user is not able to catch up with its correspondents.
mainly standardized services and the number of them is Consequences of this sturdy transformation are still to be
in the order of hundreds and not thousands. understood and governed in order to smoothly move from
the current market and value chains to more advanced
Internet is not anymore focusing on the single customer. In forms of market and relationships between stakeholders.
fact, applications are usually chosen with a sort of “social Network operators and service providers have to focus on
afflatus”: they allow the user to easily interact within a these social issues if they want to monetize the value of
social network and so the community itself usually deter- personalized communications.
mines the communications means (e.g. Twitter and the
25 •••
To a certain extent, the concept of community is also appli- by means of an open innovation approach. The analysis
cable to relationships among companies operating in the carried out is devoted to a precise environment (ICT and
market. In fact, more and more the value of open and large specifically the communications environment) and a sin-
ecosystems is emerging as an engine of transformation. An gle market (mainly the Italian one), nevertheless it is pos-
example is the success of Google Maps: it started out as sible to derive general consequences and insights valid for
a sort of experiment aiming at introducing in the Inter- other technological domains and markets.
net geographical information and it ended up creating a
totally new market (the one of geo-referenced informa-
A world in Transformation:
tion) and it has still to show all its potential. Many services
and companies have exploited Application Programming Network Paradoxes
Interfaces (APIs) and the Google infrastructure in order Many operators are facing the problem of the obsoles-
to create new services and applications (spanning from cence of their network infrastructure. This problem rises
simple games for kids to more complex services). This has in a new context dominated by the possibility of substi-
created an entire new ecosystem of relationships and links tuting a consolidated technology (the circuit switching)
that loosely couple new companies to Google. with a new one completely based on the IP connectivity
(packet switching). The so called All-IP Networks (AINs)
Another well know example of ecosystem is the one cre- allow for lower infrastructural and management costs and
ated by Apple with the iPod products and their derivates. promise to be the basis for building a seamless service
It has grown so much that there are now thousands of platform able: a) to provide a myriad of new services for
products devoted to Apple devices that Apple itself does the fixed and the mobile environment; and B) to intercept
not even know and control. In addition the iPod ecosys- the Internet evolution and its increasing market. However
tems has brought important disruption into the music’s this transition to an All-IP infrastructure has inside the
market (with iTune) and into the mobile world (with seeds for an important transformation: the consolidated
the Application Store). From a technical perspective the way of providing communications services is going to be
ecosystems revolution in ICT have been possible because fundamentally challenged. This is due to technical, market,
of two major openings into the traditional approach of and social reasons that do create a new situation that can
technology providers: open data and open APIs. These two be described by a set of network paradoxes.
features have nurtured the mashup world. The availability
of information and the possibility to compose it in order One of the foundation of the IP communication (and con-
to create different personalized services has also enabled sequently of the Internet) is the “end to end argument”
different business models: from the pay per use of difficult [4], which dictates that “mechanisms should not be enforced
to find information (the so called “long-tail” model) to the in the network if they can be deployed at end nodes, and that
explosion of the advertising over the Internet. Richness in the core of the network should provide general services, not
the business models yields sometimes to the disruption of those tailored to specific applications”. This principle has
existing and consolidated ones. This seems to be the case been well expressed and stressed out by the “stupid net-
for the long-standing business models behind the telecom- work” [5] paradox. It juxtaposes a slim, simple and cheap
munications. Many operators are striving in order to keep IP core network (dominated by abundance of connectivity
the revenue from voice calls to the current levels, but calls capacity) to the centralized and expensive infrastructure
are cheaper and cheaper and users can also “switch” to the of the Intelligent Network.
Internet or their preferred Social Network for free or low
cost communications services. Over the years, the Intelligent Network has been the
means for operators to provide added value services to
In the next section of the paper, the transformations and their customers. A large array of solutions, infrastructures
disruptions brought in by the adoption of IP technologies and equipment devices has been deployed according to
and new Internet business models are briefly analyzed with the principle of a centralization of intelligent functions
respect to the consolidated telecoms environment; then within the network under the control and management
the need for the ICT world (and especially the telecomms of the operator. In this context, terminals and end points
one) to enter into contiguous markets is analyzed with heavily relay on functions and services provided by the
special attention paid on how a disrupted environment network. Terminals are generally simple and scaled down
can bring innovations and enable new value chains into in terms of functionalities. This is in sharp contrast with
adjacent markets; finally some ideas are presented on how the current trend of moving all the intelligence at the edge
to promote and consolidate innovation into new markets of the (IP) network. This move is mainly exerted by means
••• 26
of two major computing paradigms: the client-server one Service Delivery: services cannot be anymore deployed
and the more recent peer to peer approach. They mainly in long cycles (sometimes up to 18 months); they have
diverge in the distribution of “power” at the end-points. to be much shorter in order to find a potential market
In the first paradigm there are, generally speaking, two and to compete with the WebCo offering;
different classes of end-points: the simple, ubiquitous, and Interworking: services offered by operators have to be
numerous clients and the few and powerful servers; while readily interoperable and run on different networks.
in the second one all the end points have, in principle, Long standardization periods for new solutions have
equal power, functions and capabilities. The champions of to be dramatically cut down in order to come out with
the client server paradigm in the IP communications are simpler and quicker deployable solutions;
giant companies like Google, Yahoo, Microsoft and others. Vendor relationships: Vendor lock-in has to be lim-
They are capable of deploying at the edge of the network ited; operators have to be able to really integrate differ-
huge data centers made out of hundreds of thousands of ent solutions. In addition operators should be able to
general-purpose computing nodes organized into com- enlarge their ecosystem of vendors sometime favouring
plex datacenters infrastructures [6]. These operators of the the entrance in the telecoms markets of new vendors
Web (WebCos) are able to use these massive platforms in form emerging countries;
order to rapidly creating new services (the famous Web Equipment costs: the foreseen huge investments in new
2.0 trend) that make use of the intelligence in terminals networks and services require a contraction in costs of
and in the powerful servers. As a distinctive approach equipment. Costs cannot be anymore those of the past
of Web 2.0, WebCos are less concerned (with respect to but they have to be aligned to Internet prices.
network operators) of the deployment of stable and well
consolidated services in favour of a fast deployment of All the disruption introduced by the “end to end argu-
new functions (this approach is well characterized by the ment” has a heavy impact in strategies and deployments
concept and usage of beta releases). Services are released of operators. But there is even more: “the best network
to the public even when they have not completely and paradox” [8], in its concise definition states that “The best
deeply tested. People are both users of the services and network just moves bits and the best network is the hardest
testers of them, providing insights, suggestions and crit- one to make money running”. If the network is stupid then
ics in order to tune the services according to the users it provides simple services that make it a commodity. It is
needs. The advantages and the disruption of this move of therefore difficult to make money from network services
intelligence are appalling for the operators: the rich and and the only viable possibility is to reduce investments on
costly deployed network functions and services are not it providing just the essential functionalities.
anymore appreciated by customers that do value services
and applications offered by servers at the edge. In this way Alternative networking capabilities are becoming highly
the network is progressively emptied of functions and all available (from community networks, to municipal net-
the value moves to the edge. On the long run, operators works, from WiFi to Wimax and the like). They could pro-
could be forced to play a less significant role, the one of vide connectivity at a much cheaper price than traditional
Bit Pipe Carrier and not the desired role of service pro- operators offering. Emerging networking techniques (e.g.,
vider. And this could happen in spite of the significant mesh networking, peer to peer, opportunistic networking
investments in existing and new service infrastructures and the like) are able to adapt, optimize, and share net-
(like the IP Multimedia Subsystem, IMS [7]) intended work resources within communities and they can scale up to
to position operators as services and platform providers many users (in the case of P2P even millions). An example
also for the Internet market. This has disruptive impacts of this adaptation and sharing capabilities is given by FON
on the telecoms industry: the rich market of value added [9]; the idea is to share the connectivity that a user pays to a
communication services is not anymore under a strong provider also for allowing other peers (members of the FON
influence of operators; the existing and the scheduled community) to access freely or for a low fee to the residual
service infrastructures are rapidly aging or are not fitted bandwidth of the hosting user. Other examples are given by
for competing with new solutions based on emerging hotels, bars, coffee shops that provide connectivity for free
Internet technologies; the telecoms service equipment in as a competitive means to attract more customers to their
market is radically changed yielding to a strong reduc- premises. In the long run connectivity could be provided for
tion of investments in the area of service platforms. This free by many different providers in exchange for the “atten-
course of action has far-reaching effects on the service tion” of the customers. This is the phenomenon of decrease
delivery telecom market as a whole: of the “value” of the bandwidth. This gives way to another
important fact, the pervasive communication paradox:
27 •••
it states that “the more the communication is available and connectivity (the replacement of the copper with fiber, for
cheap, the more it is pervasive”. This is another way for saying fixed network; and the Long Term Evolution [10] mobile
that communication is becoming a commodity. Many users broadband). In this paradoxical situation it is hard to make
will take the availability of a cheap network for granted. The decisions and planning for the future.
rich availability of connectivity, the cheapness of networking
devices for home networks and the always decreasing price Peer to peer networks (and in general fast downloading
of public network connectivity will allow a great availability technologies such as youTube and the like) pose another
of cheap and ubiquitous bandwidth that will be used by set of paradoxes. The first one can be termed the band-
pervasive applications that will be “always best connected” width paradox: “the cheaper the content, the greater the
both in term of maximum bandwidth and of price. bandwidth request”. This takes into account the trend of
many users (especially those that are heavy users of peer
This bears to the most important inconsistency, the revenue to peer applications) that tend to subscribe to flat rate
paradox: “the more the network is used, the less it produces offerings of operators in order to have high bandwidth
revenue”. Currently, users can take advantage of very inter- without limitation all day round to use for downloading
esting bundles of service offerings. Many operators are multimedia content (sometimes infringing copyrights).
providing bundles in the shape of “all you can eat”. This The P2P or download heavy users are also named “band-
means that users pay upfront a fixed amount of money and width hogs” because (even if they count for less than 10
they can make unlimited national (but for certain plans of the total number of users) they are the bigger consumers
also international) calls. Also for the data connectivity of bandwidth (they are responsible for much more than
there is a trend towards flat rates, and in this case too the 60 of all the data traffic). In other terms it could be said
price of megabit per second is declining very rapidly. Any that people tend to invest into bandwidth as a means to
investment in the network is going to provide little “ROI” collect a lot of content, more that invest directly on the
(return in investment) because users do not perceive too content. A corollary of this paradox is the storage paradox:
much value on any network improvement. An example is it states that “the cheaper the content (e.g., because of file
the continuous increase in the bandwidth provided to users sharing), the greater the mass storage request”. Simply put,
by xDSL. Any further increase in bandwidth can require this paradox states that users will not invest anymore on
huge investments in the network in order to augment its the content (that is cheap and can be downloaded in big
capabilities (i.e., moving from xDSL solutions to the fiber “quantity” from the network) but on the means to store
to the home one), but for the end users there is no reason it. Even considering the more convenient offers from the
for paying more the additional capacity (even if the band- “legal” market there is a considerable gap between the
width doubles). In other words users are not going to pay value proposition of the offerings and the reality. Nowa-
proportionally any increase in bandwidth and the price for days there are portable media player devices or hard disks
any megabit transported is going to progressively decrease with huge memory capacity (up to 80 Gbyte for mobile
(while keeping the ARPU stable or even decreasing). Figure devices and in the order of Tbytes for the HDs). If a user
1 depicts this situation. would fill the memory up of legally downloaded and paid
for content, those devices would store in their massive
In this context many operators are called to invest on new memories items whose global value (e.g., for portable
(and expensive) access networks for providing broadband devices 40 thousands songs or even more at one euro per
Figure 1: the Revenue Paradox
$ Voice Usage
Voice
AR PU
Broadband
Mbyte price
Wireless Broadband Not in scale
0 Now t 0 Now t
••• 28
song) would be much greater then the one needed to buy the real universal reachability of the Internet: the www.
a luxury car (and usually users do prefer luxury cars!). example.com company can be reached almost univer-
sally and its services used from all over the world. Any
These two paradoxes are specializations of a more gen- startup has the world as a potential market; there is not
eral content paradox: “the value moves from the content an equivalent for the consolidated operators.
to means to deal with it”. The Standardization Paradox: it states that: “opera-
tors use standards for guaranteeing the operation and
The availability of huge communication capabilities was the interworking of their networks and services, while
favorable for the rise of new global service providers. They WebCo use standard as a means to impose to the market
have focused on data and useful functions related to those their technical solutions and services”. Since any WebCo
data (e.g., Google with search functions wants to be able to is potentially able to reach all the market, it does not
index all the information in the world). These Web Service need to worry about standardization of services or their
providers (WebCos) do use the end to end argument to interoperability with other providers. Instead they use
their advantage, but in doing so they introduce new net- the technology to differentiate from other providers.
work paradoxes to take care of: Even the mashup phenomenon is largely dominated
by open but proprietary interfaces. This situation is a
the Business Model paradox: it states that “what is a consequence of the previous paradox. WebCos can try
valuable (and billable) service for an operator, is a serv- to enforce de facto standards and do not need to spend
ice given for free by WebCos”. Many service providers time, resources and people working towards stand-
are earning their revenue from advertising; actually ardization and interoperability. This makes possible a
the major business model of the Internet is advertising. “winner takes it all” strategy (think to the dominance of
In order to make this business model the most effec- Microsoft in the Operating System market or the Goog-
tive they need to do two things: attract the users with le’s one in the rich search and advertising markets). This
interesting functions and services, and to get as much approach is not possible in a market highly regulated
information as possible about the users. For these rea- and fragmented as the Telecoms one. Here standardiza-
sons they provide free services by means of subscription and interoperability are a must. In addition national
tions. Example of these free services span from voice, regulators try to provide a fair competition environment
IM, to free access to networks. Those same services are (again locally) to all the stakeholders. Costs for guar-
instead offered for a price by the operators. There is a antee interoperability of services between operators are
strong impact on the consolidated operators business huge and in addition the interworking issues slow down
model. Operators are seen as “old-fashion” and greedy, a lot the deployment process of services because of the
so users swarm towards the WebCos that are perceived need to converge towards an acceptable level agreed
“no evil”. But the real price for these services is a more by all the involved parties (vendors and operators) and
deep and profound customer knowledge: WebCos store because of the extensive need of testing.
and use a massive amount of data related to users’ pref-
erences and habits. One of the major differences is that These paradoxes lead to a situation in the telecom world
users that do not pay for a service are less demanding in which the major business (voice calls) is still relevant
about the functions of the service itself and in addi- (it counts for 80 of the total revenue of many established
tion they could even help the provider to tune up and operators), but it is constantly and perhaps irreversibly
improve the service. This approach lessens the burden decreasing. However it is decreasing so slowly that it is
of providing well formed and tested services and the quite difficult for operators to decide when to give up with
WebCos take advantage of it. the traditional business model and jump on other new
The Span of the Business paradox: it states that “the ones (and maybe this could be another paradox).
services provided by an operator are locally universal,
but regional at a global level”. This wording means that Looking for new Business Models
regionally operators do (have obligation to) offer a uni-
versal service, but even the biggest network operators do During the years, the Internet has extended the number
not have a worldwide coverage of the communication and types of business models that can be applied and
market. The major mobile operators [11] are based on a exploited. According to [12] some viable Business Models
single large market: China. Even the most global mobile for the Internet fall in the following categories:
operators are not operating services all over the world.
On the contrary any small Internet startup can exploit
29 •••
Brokerage Model, in which a broker puts together buy- user and its links and relationship within a community
ers and sellers providing some guarantees on the cor- (this is quite important and informative). However there
rectness of the transactions; is a regulatory framework that hampers operators to take
Advertising Model, in which the provider offers for free this approach to the full consequences, while leave WebCo
or at lower price services sponsored (and paid for) by freer to pursue such a strategy. These approaches refer to
advertising; the “customer ownership” and have to be carefully studied
Infomediary Model, in which a provider collects infor- and applied in order not to impact on the privacy and
mation about users or about producers and their goods the security of users. Actually the provider that is playing
and then monetize this information (through a fee or extensively the role of broker (and it is doing so by mone-
other) by linking end users and other providers; tizing its knowledge of customers by means of advertising)
Merchant Model, in which a provider is wholesaling is Google [13]. Google is the broker of many data avail-
goods, products, services, information and/or data; able in the Internet and it has been so good in promoting
Manufacturer Model, in which a producer directly a strong and positive company image that its prevalent
reaches the customers cutting through all the inter- business model is enforced also by a Community Model
mediary chains; (users are loyal and attracted by the brand). Recently Face-
Affiliate Model, in which a providers exploits its rela- book [14] has announced to be willing to monetize its
tionship with producers or other service providers knowledge about users (causing some strong reactions by
offering discounts to final users and bringing in many customers), it is however evident that they tend to apply
customers (and so earning a percentage from the final a business model that can be considered a combination
providers of goods); of the Infomediary and Community Models. The recent
Community Model, in which users and customers are agreement between Amazon and some operators about
strongly related to a brand or its sites that they contrib- the free surfing of Kindle customers on Amazon web sites
ute to them providing content or even money (e.g., open leads to a business model for the operator not too far from
source products); the affiliate one, in which the operators earn money if the
Subscription Model, in which user do periodically pay provider sells goods to the final customers.
a bill for using a service;
Utility Model, in which users pay the services on actual In recent times, the Telco 2.0 initiative [15] has proposed
usage of the service itself (metering usage). the “two sided business model” in which operators do not
sell connectivity and services only to final customers, but
The traditional business models adopted by operators instead leverage their capabilities making them available to
generally fall into the two latter classes: the subscription intermediate providers and “resellers”. The proponents of
model (with its variants like the pre-paid model) and the this initiative think that this approach can be very promis-
utility model. It is difficult for operators (because of the ing and could be a means to increase the revenues. It should
factual state of things or because of consolidated think- be noted, however, that operators are already operating in a
ing and practice) to move to different business models. similar fashion since years. Free-phone and Virtual Private
Some of them could be precluded (e.g., the Manufacturer Network services are examples of successful applications of
Model) or difficult to apply (e.g., Merchant or Community this “two-sided” business model. The two mentioned serv-
models) because of the regulatory framework or because ices are the “killer applications” of the Intelligent Network.
of the assets and internal organization and processes. From Unfortunately, even in the more traditional business market,
the operators perspective there is an increasing interest in there are not too many other successful examples of services
those business models that exploit the knowledge of the adopting the two sided business model approach. Moreover,
customer base, e.g., the Broker Model. In principle this it is not certain that they will show up in the future. Even
would leverage the rich set of information the operators approaches like the one proposed with Amazon’s Kindle
hold about their customers (the user profile). Actually could be framed into this two-sided business model strategy.
operators could know even more about their customers It is questionable if it will be so good to revert the negative
if they were using a holistic approach: the triple and quad- trend of the voice and communications market.
ruple play offerings could for instance provide a whole
set of valuable information about preferences, habits, and The operators can also opt for a business model (between
choices of the customer. The analysis of the “phone social the broker and the community ones) that leverages the
graph” (the set of relationship created by a specific user operator knowledge of the user in favor of the user himself.
and its phone and messaging correspondents) could pro- In the future years the problem of privacy, security and
vide a great deal of profile information about the specific profiling will become more and more relevant and users
••• 30
will look for companies to trust for dealing with Internet situation (in distressed market under a strong disruption).
intricacies. The operators have already in place reliable Unfortunately, for the telecom market there are multiple
relationships with customers (the billing and the subscrip- trends going on simultaneously, the degree of turmoil
tion). They should exploit them in order to provide to users of the communications market differs from country to
Identity Management Services encompassing personalized country. Operators doing business in different markets are
security, privacy and billing services. The users should be facing different situations sometimes contradicting each
enabled to personalize the network experience according other. As a simplification it could be stated that there are
to the level of security and privacy they feel appropriate different “waves of turbulence” depending on the con-
and according to their willingness to pay for privacy and solidation of the market. Developing countries still show
security functions. Also in this case, it is difficult that this very favorable growth (especially in the mobile market)
approach could alone compensate the losses in the residen- while in OECD countries the trend is toward consolida-
tial voice market, while it could be a valuable add-on in the tion and decline. A global operator has to understand and
more traditional business market. Likely a combination of cope with these different waves exploiting the emergent
business models could be applied in order to compensate markets in order to compensate for the mature ones. It is
for the current losses, but such a mixed strategy requires not possible to determine a single and stable strategy to
a lot of effort and a clear vision by the operators. cope with these “waves of turmoil”, but, reasonably, for
each individual market a possible vision on its future has
Residential and the business markets are profoundly dif- to be elaborated, and a related strategy applied. In any case,
ferent: on one side the former one is less concerned with the global tendency is clear and it poses a big dilemma to
the concept of “Quality of Service” and therefore it is more operators: “if, when and how to move to different busi-
prone to use free services even if they require to give up a ness models”?
considerable amount of privacy and information; the lat-
ter one is more concerned (upfront to a clear economical Operators running businesses in mature markets are
convenience for the service) about Quality of Services and forced before of others to rethink their business models
is seeking a continuous contact with the service provider. for slowing down the losses of the traditional market. A
The relationship is instrumental to a progressive improve- predominant idea is to try to enter into adjacent markets in
ment of the QoS, to solving problems, and to the tailoring order to maintain or even to increase the level of revenue
of services to actual customer needs. For these reasons it is and profits. The assets to leverage are the communica-
important to consider the impacts of a new business model tions capabilities that can reshape or transform these tar-
on the residential and on the business markets. It should get markets. Figure 2 graphically summarizes the problem
be clear that something that works for the mass residential domain.
market not necessarily is going to work for the business
market and vice versa. Entering into consolidated markets is difficult and it
requires good strategies in terms of pricing models and
Innovation, Disruption and Vertical technological capabilities. The TV market can be used as
a good example of several applicable approaches. Many
Business Models
As seen in previous chapters, the global situation for Figure 2: Leveraging communications capabilities
for entering into adjacent markets
the telecoms market is quite complex and dominated by
uncertainty. One thing is evident so far: nearly 80  of Others Communication
the revenues of operators still comes from the traditional Access
Future Businesses
market. This introduces even a more complex element to sizes compensate
the awareness of the situation. The current business is too and exceed the loss Current
Business size is
big to consider it marginal, but still it is not easy to prevent decreasing!!!
the declining of it and reverse the trend. Health
In the literature, there have been attempts to define meth- Communication VAS
odology to understand future market trends, to discrimi-

Multimedia
nate relevant uncertainty factors, and to develop consist-
ent strategies. According to [16], there are four levels of IT infrastructure
IT Services
uncertainty to cope with. They span from a clear picture of
the future (e.g., in growing markets) to a very ambiguous
31 •••
operators are pushing the “IPTV” model; the idea is to from the targeted market will be marginal and not to much
provide TV services (broadcasting and video on demand) different from the one generated by a plain and traditional
leveraging IP devices and broadband connectivity. Differ- approach. How to bring innovation and disruption into
ent markets have responded and will respond in distinctive new markets is a difficult issue to deal with. As a rule of
ways to this attempt: in certain areas the net effect of a thumb, a more open approach that enables the creation
new competitor in this market is just to bring a harsher and the redistribution of value into new value chains has
price competition between existing and new actors (drop- to be enabled by new technological platforms and solu-
ping even more the market margins). In other markets tions. Operators really willing to compete in new markets
the operators offerings could be appealing and conven- should keep in mind these lessons.
ient because there are external factors that favor the IPTV
service proposition (e.g., strict rules for installing antennas
A New Approach to Telecomms: Using
on the roof). In general the IPTV proposition could bring
innovation by tying together the TV with the user gen- the Communications Platform as an
erated and possibly high definition content. Users could Enabler for the Open Innovation
leverage the IPTV infrastructure as an open platform in
order to create and manage media communities. In this So, what should the operators do in order to create new
case the operators bring in disruption in the market and opportunities, new value chains and successfully move
the service proposition could be perceived by users as to new businesses? All the major operators have in place
innovative and rewarded as useful. either research centers or big testing labs. Operators
research has usually being used for introducing innovation
Another well regarded market for operators is the health in the network by developing its own products or, mainly,
sector. In many countries health is a consistent part of the enabling the operation part of the company to become
budget at the national and regional level. ICT technologies an intelligent buyer and driving the relationship between
can be an important factor in order to lead to substantial operators and vendors to products more respondent to
savings and improvements in services offered to citizens. specific operator and market requirements. Nowadays the
But it is also true that this market is quite consolidated and research suffers the same problem that the telecom market
existing actors are reluctant to open up to new ones. This is going through. The technological vision is mainly focus-
yields to a typical situation in which an operator enters into ing on the defense of existing approaches by means of
this market offering medical equipments bundled with new technologies and platforms (e.g., IMS and in the near
connectivity packages. The real impact of this offering is future LTE-SAE) and opening up the existing service layer
marginal for the entire health market and, from the opera- functions for creating new services. This approach does
tor point of view, it is ineffectual in generating new revenue not take into account the real goal that research should
streams (operators already offer connectivity to health achieve in order to facilitate the operators to find a way
market). In order to be effective in this market, opera- through the “critical paradoxes” introduced by the All-IP
tors should introduce new approaches and new functions, Networks. Operators should have a double agenda [18]: on
for instance from mobile data it could be predicted how one side to use innovation and research to consolidate and
some diseases will spread among the population [17]. By defend as much as possible the current business; on the
leveraging these unique data, operators could differenti- other side operators should unleash their research poten-
ate their offering and create a breach in the consolidated tial in order to figure out how new technologies could be
market that can revolutionize the status quo. If those data fruitfully used to introduce genuine innovation (and dis-
are offered by means of open interfaces there is the pos- ruption) in adjacent markets leveraging the capabilities of
sibility to clearly differentiate the service proposition from communications. This double face strategy is represented
the one of consolidate health market actors and enabling in figure 3.
a totally new market proposition.
Operators should invest also in potentially interesting but
A general insight from these examples is that in order risky projects and be ready to stop them if they do not lead
to successfully entering into new markets and making a to new businesses. A “start up” approach should be used:
difference the new entrants should bring in substantial small groups of researchers and innovators should initially
disruption at the level of business models, services/func- work aiming at the creation in the medium/long term of
tions offered, and technological solutions. In other terms, new revenue streams. They should be fast and free from
the new solutions have to disrupt the market and push for the usual processes of big corporations. And they should
a new equilibrium in it. Otherwise the revenue generated give enough time to exploit and enforce their ideas: it is not
••• 32
of the operators should be involved from the inception of

Figure 3: Strategy for a change the work into these activities in order to guarantee the cor-
ENGIN. rectness of the approach to a new market, the “selling propo-
Phone business is declining sition” of the results within the company, and, even more
INNOVATION
important, the creation of a viable ecosystem able to support
Efficiency/ Investments
the technological efforts and the business innovation. It is
New Areas that promise to grow in the future not possible anymore to have an Operator be able to create
new business opportunities alone in a new market. There
INNOVATION
E.g. TEMA: mobility

is the extreme need of cooperation and openness between
× different stakeholders willing to “make the cake bigger” (and
not in finding new way for splitting it).
Out of the Box/ New paths
This approach to new business propositions and research

Networking/Strategic Impact should follow the dictates of the open innovation [19] [20]:
t different stakeholders should strongly cooperate and share
Today Long Term Research
knowledge and intermediate results that even others can
use and bring to the market. The innovations will find an
ideal terrain to grow if the operators and the other coop-
realistic to identify from the launch of a specific research erating stakeholders are able to offer robust technological
activity a multi-millionaire business. More pragmatically networked platforms that internal and external developers
research and innovations should aim at enabling small but can use for creating new services and business. Operators
enduring increases in new markets that have a high business (especially for new target markets) cannot think to fully
potential for the future (for example the Internet of things). “control” the entire value chain, they instead have to well
Entering very early in new markets offers the possibility to position themselves into the strategic business and techno-
be a major player and drive the business model. However logical knots of the enabling platform and environment.
this should not be a classical methodology, technological
research and innovation has to be backed up from the start Figure 4 depicts the global picture for a strategic research
by a marketing analysis. People from the market divisions into new businesses.
Figure 4: an Open Innovation Approach for new ICT opportunities
Research & Development

Long-tearm research Ultrabroadband Metadata .........
Appl Mkg Ecos
New Biz Social & Technology/Platform

gy
Models Psycological
Location Manufacturing/Robottic
Manufacturing/Robotics MME Ultrabroadband U/I Multimodal
Universities Search Ambient intelligence
.......
E-commerce
Portable / Wearable Identityy
Terminals Elastic Computing
MM Distribution WSN Geni User Profilingg
Platforms
Operators
Other actors
Distributed Web technologies
HIV Communication Computed Security Multimedia Cognitive
Nano BIO
ICT
Basic Technologies
Open Labs
Operators Universities Communities Other

Companies Clients
Vendors
33 •••
From a technological perspective, this organization privi- of the platform capabilities and implications and the
leges the development and innovation at the platform and creation of a viable exploitation plan of the platform.
service levels in which the operators research can con- The activities integrate technical and marketing people
tribute the most. These levels are also the most promis- plus people able to create an ecosystem involving all
ing ones from a business perspective and mastering the the relevant parties. This should ensure the capture of
related technologies and solutions is a key point for any real user requirements and the development of useful
service provider [21]. Basic technologies are introduced solutions.
and monitored in order to increase the capabilities of the OpenLabs, they have probably the most difficult task:
platform, but generally speaking are out of scope of this i.e., to ensure the openness and the fruitful usage of
approach (see next chapter). From an ecosystem point of enablers and platforms made available by research and
view the approach opens up to many different stakeholders development projects. In other words they aim at mak-
either at the level of long/medium term research (fostering ing visible and usable/used the solutions developed by
a cooperative approach to it), and at the level of usage of the center creating, nurturing, and consolidating a large
intermediate and not consolidated results. The approach is community of developers and companies that extend,
very open, cooperative and holistic aiming at fully under- modify and reinforce the solutions. Users of the Open-
standing technical, sociological and market challenges of Labs are: other operators, user communities, universi-
new business models. ties, other stakeholders (e.g., international partners of
European projects). OpenLabs should be a playground
The approach leverages three major stages of innova- for operators and new ecosystems. It is also a facility
tion: for seeking cooperation between stakeholders, they can
use the OpenLabs to see the transformation introduced
Long term research, whose aim is the early identifica- by new technologies, to understand and proof it; to
tion and comprehension of technological and business improve and engage in it moving towards a real usage.
disruptions by means of a Positive Dilemma approach
(“what can be done with this technology?”, “How can it The Open Labs will be a sort of catalyst for opening up new
be used at Users advantage?”). Typical projects should initiatives and new businesses.
be “short” (6 months – 12 months) and “dense”, i.e., try-
ing to grasp the essence of a technological disruption
OpenLabs and Possible Impacts
and to understand if it opens up new ways of doing
business. Many other stakeholders should be involved on Innovation
in this phase: from leading universities to other The role of the OpenLabs is central to the success of inno-
operators, from marketers, to sociologists, to the final vations activities leading to the creation of new business
customers and communities. This ecosystem should ecosystems and the exploitation of new opportunities. An
aim at comprehending technological and business per- OpenLab requires consistent investments in terms of peo-
spective, as well as impacts and implications on busi- ple, management effort and equipment, but it could provide
ness and networks of the future. The ecosystem should a very useful return of investment in terms of insights, solu-
also identify and promote participation (of vendors, tions, products, business models and related ecosystems.
providers, operators and users) in potentially reward-
ing new ecosystems. The main results will be evalua- How to use the OpenLabs. The idea is to provide function-
tions and possibly proposals for consolidated Research alities, prototypes and even access to network deployed solu-
and Development Projects. tions for other to use and experiment. For instance, new and
Research & Development, it aims at consolidating, small vendors, university groups, or independent developers
creating and driving in the medium period the techno- with bright ideas could demonstrate the soundness of their
logical and market conditions to start and successfully products/solutions by integrating them in the OpenLabs
conduct a new business. Activities will be carried out infrastructure. Developers could readily take advantage of
as projects two or three years long that work towards these new capabilities in order to create advanced function-
prototyping, development of platform solutions in alities, services and applications; customers could help by
areas supposed of high interest, priority and potential providing feedback in order to tune up, improve or reshape
for the “new” operator. They need to have an internal the functions offered.
sponsor (a Telco’s division willing to be involved, that
foresees a successful future and promotes the new busi- Several interesting projects could find in the OpenLabs the
ness perspective). The major goal is the demonstration right environment that enables a progressive and continu-
••• 34
ous development. Some major interesting topics could be: telecommunications. It also provides a means to access to
Atoms and Bits, Digital Environments, MicroMachinery, and experiment with wider collections of new products that
Resource Aware-networks, Extended Digital Identity, Meta- small vendors could be willing to propose and let the opera-
content creation and exploitation, Virtual Computing. For tors use. The OpenLabs could be a means for researchers to
a detail of some of these activities see [22]. Each one could expose their results and for the operators to put an eye on
benefit from contributions and support from different com- new interesting ideas and results of the basic research and
munities and research groups. exploiting them since an early stage.
OpenLabs could even be used to facilitate the business (in Generally speaking the need to enter into new markets
term of acceptance and comprehension) of the operator raises the need to investigate and be able to understand
in developing countries that are of interest. The interests some emerging basic technologies. Many developments are
could be various: the operator is operating a business in that going on in the promising integrated field of NBIC (nano,
country and OpenLabs is a way for catalyzing solutions that bio, information and cognitive technologies). OpenLabs
are tailored for that specific environment; the OpenLabs could be a means to promote and acquire knowledge and
can be built in a country that has a relevant knowledge base experiences in that realm. Figure 5 shows as an example the
on specific technologies or it allows easy access to skilled span of new technologies that can have an impact on the
and low cost competences; OpenLabs could be a means to evolution of the ICT business.
prepare to enter into a specific market acquiring compe-
tences, requirements and grasping hints on the expected As said, the operators should not usually perform basic
behaviour of users. research, instead they should monitor it and readily inte-
grate it into the network platform for challenging and figure
OpenLabs could be part of international Networks of out new opportunities.
Excellence making available to national or regional mar-
kets the innovations being developed elsewhere in Europe Obviously there are costs associated to OpenLabs in terms
or in the world (and vice versa, solutions developed for a of personnel allocated to the lab, availability of a large plat-
regional market could find their way into a wider market). form providing services to research ecosystems, the man-
The operators could also learn how to nurture and exploit agement of demanding communities of skilled developers.
a community of developers and users. It is however envisaged that the benefits could rapidly pay
off the costs of the infrastructure and its management.
The potential benefits of OpenLabs for an operator. The
impact and the benefits of OpenLabs from an operator The potential impact of OpenLabs in the Italian context.
perspective are many. They are essentially in the access to The OpenLabs initiative could have a strong impact also at
a much wider portfolio of advanced solutions and innova- a national level. The Italian R&D expenditure is generally
tions that do not necessarily stem from the specific area of below the OECD and EU spending. This is usually seen as a
Figure 5: some emerging technologies in the context of ICT
35 •••
consequence of two facts: many Italian industries are coming a path towards a closer integration. SMEs can also find
peting on consolidated markets and products and there is a solutions usually available only to big corporations enabling
strong prevalence of small and family owned companies. In them to grow in size and importance. Also the public sector
addition there is a huge diversity between the north and the can be part of this environment stimulating the develop-
south part of the country. On the other side there are areas ment of specific solutions foe e-government and the health
that have developed into “industrial districts” [23] showing a sectors. In addition OpenLabs could give an impulse to the
strong interrelation between (competing) companies oper- national software industry especially in growing sectors like
ating in the same market segment. They are characterized open source.
by a clustering of similar activities plus a set of supporting
companies providing services and facilities. The proximity At a national level, the federation (maybe promoted by the
facilitates the sharing of experiences and of technologies activities of the Italian employers’ federation, Confindustria)
and approaches. These areas seem ideal for experimenting of OpenLabs made available by big players (such as opera-
new approaches to innovations and technology transfer. tors, but also power companies and the like) could create
On another side, the research at universities seems (some- an important infrastructure to be used for creating and
times) to be far from the needs of these industrial districts integrating solutions spanning several markets and really
as well as those of the big Italian corporations. There is a fostering a greater innovation and integration within the
clear need to find a common ground (i.e., ICT platforms national industrial environment.
such as OpenLabs) to be used for allowing the introduction
of innovations that do help the industrial districts and the
Acknowledgements
large part of Small and Medium Enterprises.
The Author wishes to thank Dr. Roberto Saracco for his
OpenLabs could act as bridges between the different actors insights and guidance, Katia Colucci for her support, con-
of the national research environment closing the gap tribution and comments, Antonio Manzalini and Corrado
between the humus of SMEs and the big research players. Moiso for their support, patience and technical vision.
OpenLabs could help Industrial districts to break the border
between them and share solutions and enablers and start-
References
[1] Metcalfe’Law discussion available in isn’t anymore. One telephone company [10] Long Term Evolution explanation
http://web.njit.edu/~robertso/infosci/ nerd’s odd perspective on the changing available in http://www.3gpp.org/
metcalf.html value proposition” in http://www. article/lte
[2] Mitchell, R.L. “What Google knows rageboy.com/stupidnet.html [11] A list of the major Mobile Network
about you” available in http://www. [6] Minerva, R.& Demaria, T., “Il modello operators available in http://
computerworld.com/s/article/337791/ Google ovvero ‘advertising is king’” en.wikipedia.org/wiki/List_of_
What_Google_Knows_About_You Notiziario Tecnico Telecom Italia, May mobile_network_operators
[3] Dunbar, R. I. M. (1993) “Coevolution 2006 in Italian [12] Rappa, M., “Business Models
of neocortical size, group size and [7] 3GPP (2007) ‘TS 23 228: IP Multimedia on the Web” available in http://
language in humans”. Behavioral and Subsystem (IMS); Stage 2 (Release 7)’, digitalenterprise.org/models/models.
Brain Sciences 16 (4): 681-735. More technical report, 3GPP, ETSI Mobile html
references are available in http://www. Competence Centre, Sophie Antipolis, [13] Minerva, R.& Demaria, T., “There
escapistmagazine.com/articles/view/ France a Broker in the Net … its name is
issues/issue_84/478-Dunbars-Number [8] Isenberg, D. & Weinberger, D. Google” ICIN 2007 Conference
[4] Saltzer, J., Reed, D. & Clark, D. D. “End- “The Paradox of the Best Network” October 2007 Bordeaux France
to-end arguments in system design”. available in http://netparadox.com/ [14] Metcalfe, B., “Facebook’s ‘open’ move
ACM Transactions on Computer [9] “What’s FON” available in http://www. into the data mining space” available in
Systems 2, 4 (Nov. 1984). fon.com/en/info/whatsFon http://benmetcalfe.com/blog/2009/03/
[5] Isenberg, D. “Rise of the Stupid facebooks-open-move-into-the-data-
Network - Why the Intelligent mining-space/
Network was once a good idea, but
••• 36
[15] Telco 2.0 “Two-sided markets: what are edited by Kimbler, K., Taylor, M., for Telecommunications Management,
they?” available in http://www.telco2. Moriana available in Stewards Publishing, January 2008
net/blog/2008/06/twosided_markets_ www.moriana.com [22] A description of projects of the Future
what_are_they_1.html [19] “Open Innovation: The New Imperative Centre is available in
[16] Courtney, H., Kirkland, J. & Viguerie, S., for Creating and Profiting from http://www.telecomfuturecentre.com/
“Strategy under uncertainty” available Technology”, Henry Chesbrough ecosistemi.shtml
in http://www.civ.utoronto.ca/sect/ Harvard Business School Press, (2003), [23] A definition of Industrial District
coneng/tamer/Courses/1299/Ref/ [20] Colucci, K. & Minerva R., “Nuova with special reference to the Italian
strategy20under20uncertainty.pdf Filosofia per la Ricerca: l’Open context is available in Wikipedia: http://
[17] “Mobile phones expose human habits”, Innovation in Telecom Italia”, en.wikipedia.org/wiki/Industrial_
in http://news.bbc.co.uk/2/hi/science/ Notiziario Tecnico Telecom Italia, n.ro distric
nature/7433128.stm. 1 Anno 2008, pag.37 in Italian
[18] Minerva, R. “Crossing the Web [21] Minerva, R., “On the Art of Creating
2.0 chasm: a winning strategy for Services: Do different Paradigms lead
operators” in SDP 2.0 – Service to different Services?” in Journal of
Delivery Platforms in the Web 2.0 Era,
Contact
Roberto Minerva
Manager
Telecom Italia Future Centre
roberto.minerva@telecomitalia.it
37 •••
CHAPTER
Country Reports
II of Open Innovation This chapter is focusing on service innovation trends in some key Member
States, in light of service innovation paradigms.
2.1 United Kingdom
Overview policy towards the inflow of people and firms, and the growing
The UK has one of the most dynamic knowledge intensive serv- availability of high level skills.
ice (KIS) sectors in the world today, with particular strengths in
financial services including insurance, IT services, advertising In London and the SE of England there is a concentration of
and marketing, legal, accounting and management consultancy talent across a range of service areas which offers a combination
as well as architectural and engineering/environmental serv- of design, composition, management, financial and contracting
ices. This capability and growth has been developed on the skills for projects and services, that is second to none. Impor-
back of deregulation (not least of financial services), improved tantly, this is complemented by a legal system for restitution
outsourcing of services by Government (such that outsourced which is renowned for its fairness. With easy access to transport
public sector services account for almost 6 of GDP), an open hubs this global capability has a global reach, which is reflected
in the export statistics below.
Value1 of exports of selected services (current prices), 2007

 million
Government Office Region (GOR)

North North Yorkshire East West Eastern London South South Rest of UK
East West & The Midlands Midlands East West UK
Pink Book Services Product Category Humber
Table 3.4
Communications Services * 30 10 * 80 230 2 275 1 465 55 105 4 260
Table 3.7
Computer and Information 45 130 105 55 145 525 2 645 3 115 110 205 7 080
Table 3.8
Royalties and Licence Fees (part2) * 620 65 225 75 335 1 385 2 525 * 145 6 260
Table 3.9
Other Business services (part3)
Merchanting and other trade related 25 195 40 40 50 55 2 060 320 20 95 2 900
services
Legal and accounting 20 * 35 * 50 55 3 420 180 60 125 4 420
Business management 130 205 115 50 125 275 3 395 1 035 355 320 6 005
and management consulting
Advertising and Market Research 5 45 45 10 60 60 1 775 305 25 40 2 370
Research and development 95 665 110 345 45 1 330 450 1 650 165 350 5 205
Architectural, surveying and construction4 20 75 70 80 25 70 300 460 20 255 1 375
Engineering and technical services5 180 260 75 125 45 560 1 635 1 685 215 700 5 480
Services between affiliated enterprises, n.i.e. 40 135 40 70 80 285 1 690 870 115 300 3 625
Services not Regionalised 101 665
Total UK Exports of services 150 645
1 Figures are not National Statistics and may not be accurate to the level shown. Regional data and UK totals are rounded to the nearest 5 million and are adjusted to be consistent
with Tables 3.1, 3.4, 3.7 3.8 and 3.9 in the 2009 Pink Book
2 Excluding Film and Television Royalties and License fees, see Table 3.8 in the Pink Book.
3 Excluding Other Miscellaneous Business services, see Table 3.9 in the Pink Book
4 Construction figures from Table 3.1 in the Pink Book have been combined with figures for Architectural and Surveying from Table 3.9.
5 Also includes Operational leasing and Agricultural, mining and on-site processing
* Disclosive data, not available
Source: BIS analysis of the ONS International Trade in Services (ITIS) Inquiry, adjusted to Pink Book totals
••• 38
CHAPTER II  COUNTRY REPORTS O F O P E N I N N O VAT I O N
Developments overall has increased by around 20 while manufacturing

in the Service Economy [1] jobs have reduced by a quarter. Knowledge intensive jobs
in the private sector defined as the financial, real estate,
As the Table illustrates, services have occupied a stead- renting and business services sectors increased by almost
ily growing share of GDP since the late 1950s which is one third, while in public administration, defence, educa-
similarly reflected in the employment statistics. Over the tion, health and social, the increase has been around the
more recent period, 1996-2006, employment in services overall average of 20.
Share of UK output by industry sector, UK=100 (current prices), 1948-2007

80%
70%
60%
50%
 of UK Output
40%
— A-B Agriculture & fishing — C,E Mining, energy & water supply
— D Manufacturing Investment — F Construction
30% — G-Q Services
20%
10%
0%
1948 1954 1958 1963 1970 1975 1980 1985 1990 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: GVA output data consistent with 2009 Blue Book, ONS
Growth in Workforce jobs in Service industries, 1984-2009

Per cent
1 year 5 years 10 years 25 years

Section Industry 2008-9 2004-09 1999-2009 1984-2009
A-B Agriculture & fishing -2,2 13,0 -4,3 -19,6
C, E Mining, quarrying, electricity, gas & water supply -3,5 7,9 -10,7 -27,9
D Manufacturing -8,1 -18,7 -34,2 -33,8
F Construction -4,0 5,6 17,0 16,2
G-O All Services -1,2 3,3 13,9 23,6

G-H Distribution, hotels & restaurants -3,1 -3,7 1,9 8,4
I Transport & communication -1,0 0,9 9,2 17,9
J-K Financial, real estate, renting and business activities -4,0 6,6 19,6 44,1
L-N Public administration, defence, education, health & social 2,4 7,5 22,2 24,1
O Other social & personal 0,0 3,8 15,4 30,1
A-O All Industries -2,1 1,0 6,4 12,6
Source: WFJ series, ONS
39 •••
Public Initiatives
access to knowledge based tools and an ICT infrastructure
With services accounting for such a significant proportion which can handle media rich services. To remain com-
of GDP and employment, the UK Government is con- petitive, UK firms have to be able to tap into the technol-
scious of the need to continue to develop this capability. ogy and talent which will drive the next wave of internet
Four reports are relevant. development.
Leadership and Management Skills: The development

Supporting Innovation in Services
and delivery of complex services, and the ability to respond
In 2006 it commissioned an economic analysis of Innova- to the rapid evolution of service markets, places a con-
tion in Services [2], followed up by a business led analysis siderable premium on leadership and management skills.
of the policy framework “Supporting Innovation in Serv- Leading UK service firms consider the UK to be a source
ices” [3] (SIiS). In its conclusions the report identified four of such talent but there is no room for complacency: serv-
main areas of focus for Government policy: ice firms will migrate to locations where young profession-
als have the requisite all round skills.
Openness and Flexibility of Markets: Innovation is
driven by competition to meet the needs of well informed Access to Finance: Access to finance remains difficult for
customers with a capability to engage actively in the devel- some innovative, high growth service businesses and the
opment of the offering, indeed, to co-create services. It is report identified sums below £2 million as particularly
substantially influenced by new firms bringing new ideas difficult to raise.
to the market. Government therefore has an important role
in ensuring that markets are as open and flexible as pos- The report is being implemented, in particular:
sible. Aside from promoting a liberal international trading
environment and pursuing an active competition policy, the Shareholder Executive has carried out a review of
business identified three important levers where, it felt, Trading Funds, such as Ordnance Survey, which sought
Government could focus greater effort: to improve the accessibility of public re-useable data
the regulations governing employment agencies are being
Where Government is an important actor in the mar- reviewed to ensure that they do not inhibit unduly the
ket, as procurer or regulator, strong leadership in the emergence of online services, such as Job Boards;
form of clear, consistent, objective oriented policies, a pilot programme has been developed with Regional
and a shared perspective of the policy challenge, gives Development Agencies to assist small and medium sized
business the strong market signals it needs to offer firms (SMEs) to transform their business processes,
innovative and sustainable solutions. business models and management information systems
Information is the raw material of an “Information through the innovative use of ICT.
Society” and business believes that Government has
an important duty in making data, which it collects, as Digital Britain [4]
accessible as possible. In June 2009 the Government published its Final Report
Markets also require a framework for defining and on how to develop a modern communications infrastruc-
comparing offerings, and delineating quality and per- ture based on new digital technologies, while ensuring
formance over time i.e. a standards framework which is that the legal framework enabled the creative industries to
interoperable. This is particularly important for the new capitalise on their content, that Government itself mod-
models of advanced manufacture and for PFI contracts, ernised its own services through digital procurement and
where firms are seeking to service assets over a very delivery, and that the community at large had the skills
long period. Given the global nature of value chains, and “literacy” to engage fully in a digital society.
business considers it is important to ensure that the
international standards framework provides opportuni- Report highlights included measures to strengthen and
ties for UK firms. modernise the UK’s Digital Infrastructure, including:
The Importance of ICT: Innovation in services is being Infrastructure

driven by rapid developments in ICT, specifically the abil- Universal access to today’s broadband by 2012, creating
ity to capture, store, analyse/manage and exchange massive equal access for all and a fairer digital future
quantities of data. Knowledge based services need early
••• 40
A fund for investment in the next generation of super- appropriate risk sharing
fast broadband to ensure it is available to the whole opening opportunities for innovation and
country, not just some of it flexibility
Digital Radio Upgrade by 2015
Accelerating current and next generation mobile cover- Professional Services Global Competitiveness
age and services Group Report [5]
Proposed new role for sectoral regulator Ofcom to carry The Group was formed under the co-Chairmanship of Sir
out a full assessment of the UK’s communications infra- Michael Snyder, Senior Partner at Kingston Smith LLP, and
structure every two years Lord Myners, Financial Services Secretary to HM Treas-
ury and reported to a High Level Group, Chaired by the
Digital Participation Chancellor of the Exchequer, in March 2009.
Steps to ensure that everyone can share in the benefits of
Digital Britain include: The Group was asked to consider the medium- to longer-
A three year National Plan to improve Digital Partici- term trends impacting on the competitiveness of the pro-
pation fessional services sector in the UK, taking into account
A programme of Digital Switchover in public services London and UK-based factors and the sector-specific
A new Digital Inclusion Champion: Martha Lane Fox opportunities and challenges in overseas market liberali-
A revised digital remit for Channel 4 and key role for sation and regulatory/ standards dialogue. The group was
the BBC asked to produce a practical analysis on the basis of its
Guaranteed funding for three years for targeted market- examination of these issues, and a range of considerations
ing and outreach that ought to be addressed.
Digital content Its summary conclusions set out the following consid-
Steps to make the UK one of the world’s main creative erations for both the Government and the professional
capitals include: services industry:
A robust legal and regulatory framework to combat Ensuring effective regulation without discouraging
Digital Piracy international businesses from basing operations in the
Digital Test Beds to promote innovation, experimenta- UK, by:
tion and learning around creation and monetization of – considering the impact on international competi-
digital content tiveness when drawing up regulations; and
The TV Licence Fee: a consultation on contained con- – considering new guidelines for carrying out post
testability, primarily to secure news in the nations, implementation reviews of regulation, including
regions and locally enhanced consultation with stakeholders.
A new direction for Channel 4, championing new talent
across all digital media Maintaining a well designed taxation system by:
A guidance note and clarification on the media merger – proposals to offer partnerships a more level playing
regime and an enhanced evidence role for the regulator field with corporates in terms of tax; and
in local mergers – the extension of the successful HMRC approach for
Support for Independently Funded News Consortia large businesses to smaller partnerships.
The report provides a coherent framework for further
policy development. Safeguarding the UK’s attractiveness as a major inter-
national business hub by:
The Public Services Review – encouraging small and medium sized firms to grow
by Dr DeAnne Julius in order to maintain a competitive market; and

– promoting physical connectivity through world-
This examined ways to improve the outsourcing of govern- class infrastructure and attracting talent and busi-
ment services to the private sector, which now account for ness with a high quality built environment.
approximately 6 of GDP. Critical factors include:
clear joint objectives between the Government organisa- Nurturing and attracting the best skills by:
tion and it erstanding between the parties – increased investment in tertiary education;
developing ongoing relationship between the partners
41 •••
– professions working with academic institutions to Create a community of new researchers who under-
ensure new entrants and existing members possess stand the technology and how people use it and what
the right technical knowledge and skills; and the impact is.
– professional services firms promoting career oppor- Provide a focus for the interaction between researchers
tunities to a wider range of students. and key stakeholders.
Creating a professional services industry with a strong Programme Budget

international outlook by: Research: 46 million commitment for 2008/09
– positioning the UK as a natural base for expanding 18 million commitment for 2009/10
19 million commitment for 2010/11
into emerging markets; and
Training: 34 million commitment for 2008/09 (five-year
– building on the high standards of UK professional
commitment for centres for doctoral training
services as a platform for promoting the UK abroad.
The Technology Strategy Board [8]
The report set out specific recommendations in relation to the The Technology Strategy Board is the government body
specific professional business service sectors examined. that exists to promote business innovation in technology.
It contributed to the Digital Britain Report and has been
Research and Development assigned the role of leading the technology and innovation
Specific policy initiatives include: efforts required to ensure that Britain has a successful dig-
a strong Digital Economy research programme led by ital future. The organisation’s vision is that all participants
the Engineering and Physical Science Research Council in Britain’s digital economy should benefit fairly from the
[6] (EPSRC) creation, distribution and consumption of digital content
and services.
a new focus on services and the creative industries by
the Technology Strategy Board, and its challenge based The Board’s role is to focus on ‘next steps’; the actions
approach in areas such as Assisted Living, Network that Britain needs to take now to ensure that it takes a
Security and Intelligent Transport also has a strong sustainable and business focused approach to the chal-
service emphasis; lenge of growing the digital economy. The main objectives
outlined by the Technology Strategy Board in the report
The Digital Economy Programme are plans to:
The Digital Economy Programme is a Research Councils Create a digital test-bed online, allowing business and
UK programme, led by EPSRC and working closely ESRC, users to explore the effects of alternative network oper-
MRC, AHRC and TSB [7]. The EPSRC defines Digital ating models, business models and service platforms
Economy as the novel design or use of information and Apply a secure and holistic approach to infrastructure,
communication technologies to help transform the lives of technology and business models encouraging all par-
individuals, society or business. Research will help under- ticipants in the digital ‘value chain’ to innovate together
stand these technologies and why change is needed, what and devise profitable solutions
the impacts will be and who will benefit. The programme
brings together the underpinning technologies, with all In support of these activities, the Technology Strategy
the elements required to deliver transformation, and is Board will invest £30m.
focused on understanding the impacts of the research and
will be driven by users. Key Policy Contacts, Representative Organisations
and Centres of Excellence
In its first phase, the programme will focus on engagement
with the transport, creative industries and healthcare sec- Advanced Institute of Management (AIM) [9]
tors, but will aim to build engagement with other sectors Sponsored by the ESRC and EPSRC, AIM works with aca-
where the use of information can have a transformative demics, business, public sector and policy thinkers across
effect. more than 110 institutions in order to develop and deliver
management research of world class standard. Recently, AIM
The aims of the programme are to: appointed 6 Service Fellows who will be exploring topics such
Deliver research that is driven by a real need with the as innovation in services – the creation and pricing of new
ability to have impact.
••• 42
service business models, entrepreneurial behaviour in serv- International Digital Lab, WMG, Warwick
ices and gender and diversity in the sector. University [13]
The Digital Lab is a multi-disciplinary research centre
Centre for Service Research, combining WMG’s expertise with that in underpinning
Exeter University [10] sciences including psychology, medicine, computer science
The focus of service research is a focus on the customer, the and mathematics.
process, the people and the environment working together
towards the service experience. Over 70 of the UK GDP NESTA (National Endowment for Science,
is now contributed by services, research and development Technology and the Arts) [14]
is necessary in this area to assist UK companies in becom- NESTA’s Policy and Research Unit aims to shape innova-
ing more competitive. The centre organises the Service tion policies that will help the UK meet national inno-
Science Forum* which brings together practitioners from vation challenges of the 21st century. Specific objectives
government and organisations to address the challenges include:
a service orientation might bring, to encourage dialogue Increase the quality and quantity of research in inno-
between academics and professionals from industry to vation
share knowledge and develop an agenda for the provi- Develop outstanding innovation policy
sion of education in Service Science. Build a national network of leading thinkers in inno-
*(http://centres.exeter.ac.uk/cserv/business_linked_activi- vation
ties/service_science_forum.php)
Service Systems Initiative, Cambridge [15]
Centre for Service Research, Manchester A forum to draw together a range of research activites
Business School [11] including service system design, service information sys-
The Centre for Service Research combines the exper- tems, industrial support solution strategies and service
tise of all the service-related disciplines in Manchester organisational issues.
Business School with business partnerships in order to
develop a shared understanding of goals and opportunities SSMEnet UK (UK Service Science, Management
for research, education, and practice. The Centre focuses and Engineering Network [16]
on the key multidisciplinary research themes of service SSMEnetUK is a network of UK researchers interested in
design, service delivery, service marketing and service Service Science Management and Engineering (SSME),
innovation. the network is funded by EPSRC and actively supported
by BT, HP and IBM.
Complex Services Innovation Research Network,
University of Glasgow [12] UK Innovation Research Centre (UK~IRC) [17]
(CSIRN) examines how complex organizations can analyse Joint venture between the Centre for Business Research
current and future needs in developing, and driving, both at Judge Business School, University of Cambridge and
effective and efficient service orientated supply chains. In Imperial College Business School.
particular, the CSIRN focuses on helping organizations to
meet the following challenges: The UK Innovation Research Centre will explore the
How to identify and develop a responsive and flexible relationship between innovation and business perform-
service delivery organization for the future ance and how this affects the national economy and the
How to develop a responsive organization that can com- individual organisation. This will feed directly into both
pete in a dynamic global market innovation policy and practice, for example in helping to
How to maintain effective performance through chang- open companies up to new forms of collaboration and
ing work practices policy makers to develop new instruments and strategies
How to maintain effective performance through chang- to promote innovation and knowledge exchange.
ing labour and skills demographs
How to identify the need for, and drive performance
related knowledge creation and innovation
How to identify and manage barriers to inter/intra
organizational cooperation
43 •••
References
[1] Brook K. (2008) Developments in [6] http://www.epsrc.ac.uk/ [11] http://www.mbs.ac.uk/research/csr/

measuring the UK service industries, ResearchFunding/Programmes/DE/ index.aspx
1990 to 2006. Economic & Labour default.htm [12] http://www.gla.ac.uk/departments/
Market Review, 2(1), pp. 18-29. [7] EPSRC – Engineering and Physical csirn/
[2] DTI Occasional Paper No 9 “Innovation Sciences Research Council; ESRC – [13] http://digital.warwick.ac.uk/
in Services” June 2007 Econimc and Social Research Council;
[14] http://www.nesta.org.uk/npru/
[3] http://www.berr.gov.uk/whatwedo/ MRC – Medical Research Council;
AHRC – Arts and Humanities Research [15] http://www.servicesystems.group.cam.
sectors/innovationinservices/index.html
Council; TSB – Technology Strategy ac.uk/
[4] http://www.culture.gov.uk/what_we_
Board [16] http://www.ssmenetuk.org/
do/broadcasting/6216.aspx
[8] http://www.innovateuk.org/ [17] http://www.cbr.cam.ac.uk/news/
[5] http://www.hm-treasury.gov.uk/d/
[9] http://www.aimresearch.org/about-aim/ UK~IRC.htm
professional_services_group160309.pdf
aim-fellows/aim-services-fellows
[10] http://centres.exeter.ac.uk/cserv/
Contact
Allan Mayo Michael Lyons
Head, Services Policy Unit Chief Researcher, Services and
Department for Business, Systems Science
Innovation and Skills BT Innovate and Design
allan.mayo@bis.gsi.gov.uk michael.h.lyons@bt.com
2.2 Open Innovation in The Netherlands
Services and Innovation clear from the widely accepted definition of service innova-
tion of Den Hertog [4], i.e. “a new or considerably changed
In Western and newly developed countries the service indus- service concept, client interaction channel, service deliv-
tries contribution to GDP amounts to approximately 70 ery system or technological concept that individually, but
(OECD, 2005) [1]. European economy is highly dependent most likely in combination leads to one or more (re)new(ed)
on services innovation for their growth and employment. service functions that are new to the firm and do change
Services are becoming a driver of productivity and are then the service/good offered on the market and do require
only sector of the European Economy that has resulted in structurally new technological, human or organizational
net job creation in the last two decades. An important driver capabilities of the service organization.” Service innovation
for economic growth is, therefore, the development of new, typically involves a combination of structural changes that
innovative services. Bringing new services to market suc- together lead to new service functions. Services are found
cessfully is one of the great challenges that many companies to innovate in a different manner than manufacturing [5].
and organizations face today. Technological developments However, a sound knowledge of service innovations and
in information and communication technology act as driv- service innovation approaches is lacking. Policy makers are
ers and enablers of many service innovations. Services are considering how to stimulate service innovation, but have
more and more enabled by information and communica- limited knowledge of service innovation practices. Service
tion technology. Services that were previously considered companies are looking for new methods and approaches to
non-tradable are being increasingly codified, standardised, service design and service innovation that would make their
and suitable for delivery at a distance (EC, 2007) [2]. service innovation process more effective [6].
Service innovation is complex because it requires simulta- Service innovation joins four trends that currently shape
neous consideration of multiple interrelated changes such as the western economies: the growing importance of services,
organizational innovation, involvement of multiple actors in the need for innovation, changes in consumer and business
the process of innovation, and codification of knowledge for markets, and the advancements in information and com-
innovation [3]. This multi-dimensional complexity is also munication technology [7].
••• 44
The role of the user in services innovation is crucial. The Examples of challenges in the (international) services
individual user influences the way new services are created economy are:
and incorporated into their day-to-day routines. Service the changing roles and needs of the consumer,
innovation is to a large extent user-driven, and directed the inclusion of slow adopters of new technologies,
towards providing a specific user experience. Service the new international division of labor,
innovation is an interactive process in which multiple the creation of free traffic of services and the strengthen-
actors, including consumers, play a role. Service innova- ing of the internal European market,
tion is about co-creation, i.e. users providing feedback with upcoming legislation and changing institutional arrange-
regard to existing services and suggesting alternatives, or ments.
even developing their own services or content. Intensified
interaction with users will improve the effectiveness of In comparison to other countries the Netherlands has a
service innovation. high level of productivity. In terms of connectivity and ICT-
infrastructure, the Netherlands can be regarded as a gateway
to Europe. In the Netherlands, excellent opportunities exist
Importance of Service for
for advancing complex and intelligent ICT services. This is
The Netherlands because broadband backbone infrastructures and in many
The Netherlands is an open economy, with a long stand- situations also broadband and wireless access infrastruc-
ing tradition of international trade and services. For many tures are available as base layer on top of which to build
years the services sectors have been hardly affected by the intelligent application environments. Furthermore, public
advances of new technologies. Now Internet and ICT allow acceptance of internet is very high and people are open
us to reach quality improvements and productivity growth minded, efficiency driven and early adapters of new tech-
in many parts of the service economy, be it in health care, nology. Research in the Netherlands is highly competitive
finance or entertainment. in an international context. There is a strong tradition in
initiating and managing public-private consortia.
Challenges of the Service Economy
The Dutch services economy accounts for 70 of the total On the downside, the services industry in the Netherlands
Gross Domestic Product (GDP). Almost the entire growth is poorly connected to research and education. Moreover,
in employment during the last decade stems from devel- innovation in services requires collaboration over the bor-
opments in the service economy. Sectors such as media, ders of different sectors, bridging existing gaps in culture
finance, business services, health and service/product com- and connections. Many of our partners indicate that this is
binations are pillars of our service economy. difficult to organize without external pressure and support.
Finally, leading ICT companies traditionally pushed innova-
After agriculture and manufacturing, the services economy tion. Their role in the Netherlands is decreasing.
accounts for the third wave in GDP growth. Higher produc-
tivity as a result of development and use of new technolo- A practical definition of innovation may be formulated as
gies and knowledge was one of the main drivers for growth the creation of new value by doing something new, some-
during the earlier waves. The future growth of the service thing in a different way, or approaching the market in a
economy is enabled by new innovative services, develop- new way. This suggests that at a high level innovation is
ments in ICT (Information& Communication Technology), independent of market sectors of the type of innovation
increased productivity, the launch of start-ups and acceler- that is considered. Literature commonly surpasses the
ated growth of Small and Medium sized Enterprises (SME’s) point of specific characteristics of the topic of innovation
and new organizational arrangements. For the future wealth and remains at the level of organizations and innovation
of the Netherlands a highly competitive and fast growing approaches for individual companies. ICT is an important
services economy is crucial. enabler of innovation. The question arises whether innova-
tion with ICT is different from innovation in other sector
Although the important (future) role of the service econ- or regarding other types of innovation as e.g. the creation
omy is widely recognized we need a deeper understand- of a new combustion engine. In the following we highlight
ing of how to advance and innovate in services. Creating the specific characteristics of ICT and the possibilities this
additional customer value, improvement of productivity in presents for innovation with ICT but also where ICT may
services and mastering the consequences of technological speed up other types of innovation.
advances and internationalization are essential for future
economic growth in the Netherlands.
45 •••
The Role of the ICT in Innovation platform for all kinds of innovation. In the financial sec-
tor for example, SEPA system opens the market and based
As mentioned earlier ICT is an important enabler of inno- on generic infrastructures such as E-invoicing new parties
vation. enter the market. The process industry virtual laboratories
connect people, knowledge and other resources changing
ICT and innovation are linked together in several ways. the way of working and offering the possibility to extend the
First of all intrinsic ICT innovation takes place in dedicated service offering to customers by using external resources.
ICT sector such as telecom, consultancy and software and An example in The Netherlands is the National Pension
hardware supplier. In these sectors ICT plays a key and Registry which will be accessible in 2011 by all individuals
catalytic role in the innovation [8]. The importance of ICT to have the overview of their pension. An ICT platform is
in innovation is related to the characteristics of ICT and the being developed which will be a virtual organization for
opportunities that these present. Although these character- all Dutch pension funds.
istics in many cases have a technical nature, in combina-
tion with other innovations they lead to new products and ICT enlarges the availability and codification level of infor-
services and thus new value by [9]: mation and knowledge optimizing processes, generating new
the connection of people and systems, services and shifting roles in the value chain.
the possibility of remote access to resources, ICT supports the codification and sharing of informa-
the combination and integration of ICT with existing tion allowing a better alignment of processes within and
services, between organizations. Important examples can be found
the offering of a generic platform, in the logistic and health sectors. Codification also forms
the personalization of the services offering. the basics of services that require transparency or moni-
toring such as tracking and tracing services. We can now
These intrinsic properties of ICT influence the definition of see directly where food comes from and how long it can
services, products, processes, business relationships, busi- be stored.
ness models and even the innovation process itself.
A heavily debated example also can be found in the Elec-
ICT highly supports the involvement of end-users and sup- tronic Health Record. Registration of medical data follows
pliers in the definition and execution of services. a strict protocol, which enables a useful sharing of data
Among other things you find this involvement in the pos- between caretakers. Moreover, the EPD standard itself can
sibilities that ICT brings for so-called self-services such as be viewed as platform that enables new and yet unforeseen
Internet banking and e-government. Recent examples in new services like e.g. evidence based medicine or online
The Netherlands are the request for child support by means medical advice generation.
of the Internet Channel, or the support that ICT brings for
chronically ill people to stay, changing the control from ICT offers a high degree of refinement possibilities in the
caretaker to the patient himself. End-users can personalize service offering. Small market segments can be approached
and adapt ICT supported services according to their own in efficient way with low transaction costs.
wishes depending on their context. Interaction between
supplier and customer becomes 2-way drastically changing ICT also supports the transition form products to services,
the position of the end-user in this favour. so-called servitization. Hardware and product suppliers are
turning their business and offering services as their main
Also governments use the Internet and ICT to streamline thing. Intelligent printers are cheap and signal when ink
their public services via different electronic channels. In is low. Companies are starting to offer mobility solutions
the Netherlands submitting the yearly tax-form by Internet instead of selling a care, and so on.
has advantages for both the tax-payers as well as the tax
receiver. ICT enables this and future more personalized ICT offers always on access to services and resources.
and pre-filled tax forms will further reduce the error rate The availability, proliferation, robustness and price-level of
and missing data. fixed and mobile Internet are improving, resulting in a 24/7
economy. Customers, suppliers, underlying ICT systems
ICT enables simple and scalable composition of services and continuously connected sharing services, knowledge and
value. resources. New market parties arise that offer Web based
The whole ICT that is adopted and used by companies and applications and software as a service instead of selling
consumers offers an infrastructure that can be used as a application and software in boxes. Pay per use instead of
••• 46
Pay per ownership. The resulting flexible ICT solutions assumes that firms can and should use external ideas as
enable outsourcing in at a scale that we could not think of well as internal ideas, and internal and external paths to
before. The low distribution and transactions costs further market, as the firms look to advance their technology” [10].
speed up this process. The boundaries between a firm and its environment have
become more permeable; innovations can easily transfer
The combination of ICT platforms and the high level of inward and outward. The central idea behind open inno-
connectedness provide completely new ways of providing vation is that in a world of widely distributed knowledge,
and influencing services. Consumers share their knowledge companies cannot afford to rely entirely on their own
and together make a fist towards suppliers in social net- research, but should instead buy or license processes or
works. Crowd sourcing techniques connect companies with inventions (e.g. patents) from other companies. In addi-
professionals speeding up problems solving and thus time- tion, internal inventions not being used in a firm’s busi-
to-market of products, services and bug fixes and updates. ness should be taken outside the company (e.g., through
Flexible work process arise that enable a better balance licensing, joint-ventures, spin-offs) [11].Open Innovation is
between work and private life and that allow distributed the use of purposive inflows and outflows of knowledge to
collaboration. Further advances are expected that increase accelerate internal innovation, and to expand the markets
efficiency by aligning back-office and front-office. for external use of innovation, respectively [12].
ICT changes the innovation process itself. Logica’s Approach to Open Innovation
Next to the new service and innovation that can be realized In 2008 Logica Management consulting conducted a survey
by means of ICT, ICT also changes the innovation process and published a document on the results of the survey: ”The
itself. The promise of Open-Innovation is fulfilled by ICT. Road to successful open innovation – A little like being in
Access to knowledge and the use of third-party technolo- love” with support of ECOLEAD (European Collaborative
gies is simplified. Organisation Leadership) FP6 project (2004-2008) [13].
Selected parts from the survey is taken and shown in this
The wisdom of the crowds of crowd sourcing makes use of chapter [14].
the collective knowledge. Large companies such as Google,
P&G, IBM already use this technique in their advantage. We are now seeing the rise of the concept: ‘open innovation’;
This is only affordable because of ICT. Moreover, consumers innovation through cooperation with other parties. Not at
themselves become important competitors for companies. the final stages of innovation, during the implementation of
Nowadays open source software competes with software the idea, but right at the start and in complete openness.
offered by professional companies. Also Wiki’s are impor-
tant and easy accessible sources of information sometimes Innovation, openness and cooperation. It all sounds nice
outcompetes professional information sources. and politically correct, but what can open innovation really
offer? How open innovation actually works, and when it
Co-development, beta-versioning are ways to direct involve is successful?
customers using the expertise, eliciting their requirements
and integrating them in the core innovation process. The A great deal of scientific research has been carried out
boarders between usage and development are fading. into open innovation. In Logica’s survey, the emphasis is
on practice. Logica investigated examples of cooperation
ICT offers the possibility to simulate complex environments that give an idea of how organisations tackle innovations
in a more and more realistic way. Living Lab technologies together and what does or does not work. How people look
allow companies to follow users in their daily live. Virtual back on the cooperation and lessons learned.
reality or virtual worlds are used to test new services or
large process re-designs. In this way ICT supports decision However, nothing is as practical as a good theory. Against
making by offering advanced design, development, simula- that background, Logica’s survey starts with a number of
tion and even gaming methods and techniques. key points from academic literature about open innovation.
What is it that brings researchers out of their laboratory?
Open Innovation Why do businesses share their secrets and why does coop-
Henry Chesbrough is the guru when it comes to open eration work where internal laboratories fail?
innovation. In his book Open Innovation: The new
imperative for creating and profiting from technology For a long time, the Research and Development depart-
H. Chesbrough stated: “Open innovation is a paradigm that ments of the world’s largest corporations have been the flag
47 •••
carriers of innovation. Over the last few decades however, of circumstances. In the absence of the internal coordinat-
innovation within the confines of a single organisation, ing mechanisms of an organizational hierarchy, strategic
even the largest one, is becoming less effective. This research alignment in open innovation projects might be experi-
investigates the critical success factors of ‘Open Innovation’, enced as problematic. Our hypothesis that at the outset
innovation initiated and realized by mutually cooperating partners should directly tackle potential conflicts of inter-
organizations. Such cooperation requires more than a posi- est, as they will appear anyway, was not confirmed.
tive business case, it asks for inspiration, for a spark. This
led one of our interviewees to state that, in order to be suc- The success of some cases was achieved by avoiding such
cessful, organizations need to be ‘a little in love’ – an analogy hot issues because up until the point of the issue materi-
proving useful in formulating some of our findings. alising the partners had so much invested that they were
fully committed to see the joint innovation being realized.
In selecting their innovation partners, organizations may Strategic alignment in open innovation therefore requires
be bound to look for ‘the usual suspects’: dominant play- continuous negotiations and a wide gamut of negotiation
ers or organizations with unique resources. At the other strategies might be applicable.
side of the spectrum, organizations can coincidently find
opportunities enabling them to complement each other’s Our research shows the crucial role of an innovation direc-
assets. Value chain analysis is the rational way to source tor. Interestingly however, for the same project, various
partners with complementary skills and assets. Logica’s people identified different people as being the innovation
research indicates that whatever the approach to partner director. In our view, the role to manage, stimulate and
selection, organizations strongly prefer an organization of orchestrate the project is essential at various levels. At a
comparable size to partner with. Corporate cultures then minimum, an innovation project requires a project sponsor
tend to be similar and this greatly facilitates cooperation. at management level and a project manager at operational
However, despite all the evidence linking corporate size level. The latter is particularly relevant, also at the outset
to innovation skills and pitfalls, we think this finding can- of the project, when most project members’ involvement
not be entirely generalised. Some larger organizations go is likely to be part-time.
against the grain and take initiatives to facilitate start-ups
and benefit from their creativity and drive. A number of our research hypotheses concerned precondi-
tions for successful open innovation. We postulated suc-
Particularly when multiple partners cooperate, it makes cess would be helped by partners being equally involved,
sense to act as mutual innovators from the very start. Early by partners investing in their cooperation early on and
cooperation maximizes the chances of partners enhancing by investments being made in cash rather than in kind.
the innovation concept. At the same time, joint develop- These hypotheses were not validated. In hindsight, these
ment increases support for effectively bringing the innova- hypotheses are evidence that leaving behind the old para-
tion to the market within all cooperating organizations. digm of closed innovation with its emphasis on ‘control’, is
not easy. Control has in many respects become an illusion.
Our hypothesis that a successful open innovation project Open innovation suggests to focus much more on value
requires the organizations involved to show a strong drive creation than on control. Many of the cases we describe in
and a constant action-orientated focus did not come true. the annexes to this report illustrate the opportunities that
In many projects partners were surprised how long it took open innovation entails to create significant value.
to get started, only to state that even with hindsight they
did not recognise the opportunities to have accelerated this Finally, people are an obvious key success factor. Not sur-
process. On the one hand, effective cooperation needs time prisingly, entrepreneurial spirits can contribute greatly to
and cannot be forced; on the other hand, at some point the success of open innovation projects. Our research how-
projects must become action focused. Project managers ever indicates that it is equally likely that success depends
should consciously manage this shift from talk to action on organizational talent, individuals whose stamina can
and mark the project’s transformation. Here, timing is eve- keep innovation projects alive and eventually move them
rything. beyond the bureaucratic hurdles of their respective organi-
zations.
Strategic alignment is an important issue in open innova-
tion. Most partners will encounter potential conflicts of The Road to successful Innovation – The Survey
interest due to initial agreements being overly vague or to This survey concentrates on the practice of open innova-
changes in an organization’s strategy or simply as a matter tion. How do you ‘do’ open innovation? What does man-
••• 48
Figure 1: Open Commercialisation (Chesbrough, 2003) An innovation director/driver must be appointed.
COMMERCIALISATION Conditional parameters:

Boundery The contribution by the partners must be approximately
of the Firm
equivalent.
New Market
At the start, investments must be made in cooperation.
Current
All partners in the chain must jointly profit from the
Research Market value created by innovation.
Projects
Cooperation must not be strictly laid down in con-
tracts.
By drawing up these success factors, we specifically aimed

Research Development
to assess the idea that by preparing your work well at the
start, the eventual result will be achieved far more quickly.
aging an innovation project outside the hierarchy of the After all, everyone knows that a good start is essential, since
business structure actually mean? What have companies repair costs increase exponentially over time. According
learned in their open innovation projects? In particular, we to our hypothesis, therefore, success demands a logical
will consider the phase whereby innovations are placed on selection of partners, the laying down of a clear course,
the market: the commercialisation phase. As consultants, guarantees of involvement, decisiveness and good overall
we are most involved in this phase. That is why we have control during the project.
most experience in this field.
Although we have no academic pretensions, we do consider
The analysis of ten cases of open innovation forms the objectivity important. The starting point for the survey was
basis for this survey. The table provides a brief description that in the collaborative ventures, the partners at all times
of these examples. retain their own perspective. With that in mind, for each
case in the survey, a number of different interviews were
The survey is exploratory and qualitative in nature. Cases held. In as much as we ourselves played a role in the cases,
were selected on the basis of the insight they seemed to be as a partner in the cooperation, as innovation director
able to provide at first glance. Not all cases have been suc- or as consultant, the survey was not carried out by any-
cessful. Some have not yet succeeded. A number of cases one directly involved. Our intention was to analyse these
have become bogged down. In line with the nature of the projects as objectively as possible.
survey, we have made no attempt to quantify the (potential)
success of the cases. The fact that this survey is not merely All the interview results were submitted to the interviewees
a brightly-lit showcase of success stories in our opinion for verification. Responsibility for the conclusions drawn
makes the analysis even more valuable. and the description of the cases, however, lies exclusively
with the survey team.
In advance, a number of statements were formulated in the
form of success factors. Survey Conclusions
The era of control is coming to its end. Innovation is
Partner selection: increasingly calling for cooperation with others, and con-
Potential partners must be explicitly selected. tinuously looking over the boundaries of your own busi-
ness. We observed ten examples of open innovation, and
Start: drew the following conclusions:
Partners must be involved in the innovation process at
an early stage. The power of opposites
Businesses have a clear preference for working together
Project implementation: with similar businesses, comparable in terms of size and
The approach must be highly focused on action / culture. They have the greatest likelihood of rapidly under-
doing. standing one another. Large organisations rarely manage
Innovation parties must specifically harmonise their to quickly commercialise innovations. If a cooperation
own motivation and objectives and continue to do so between widely-varying organisations is wellmanaged, it
during the process. provides a special boost to larger organisations.
49 •••
Project Partners Concept Project

Launch
Biblioservicebus Zeeland library, Rabobank, Logica, Raaf, Province of Additional services in the mobile library, 2006
Zeeland, various municipalities in Zeeland, and service including services from TNT Post, a (wireless)
providers including NS railways and TNT Post. ATM from Rabobank, sale of train and theatre
tickets and information services.
Cell Broadcast Government (Ministry of Interior and Kingdom Simultaneous information/ alarm call to 2004
Relations and Economic Affairs), KPN, Vodafone Telfort everyone within a specified area via mobile
(until takeover), SPMM, Logica. telephone.
Cooljuice Provalor, TNO, one raw material supplier, two Producing vitamin-enriched juice from 2003
appliance builders. residual flows from the food industry.
DAG PCM and KPN. Combining Internet, television, mobile and 2006
newspaper.
Funda NVM and Wegener. Online marketplace for real estate. 1999
Guardian Angel The Dutch Red Cross, Achmea/EuroCross, Vodafone. Emergency service for care recipients; 2007
combines voluntary and professional
assistance.
NFC/Mobile payments Schuitema, KPN, Rabobank, NXP, RFID Platform Investigation into uses of RFID technology, 2004
Nederland, Logica. resulting in trial with mobile payments in
supermarket.
New Combinations KPN, De Telegraaf, Sara Lee, Ericsson, Randstad. Structured innovation programme for (large) 2001
businesses.
Notabox TNT Post and Rabobank. Platform for digital payment giros that 2002
integrates mailbox for invoices in electronic
payment.
PICNIC Municipality of Amsterdam, Ministry of Economic Conference offering possibility for 2004
Affairs, Media Republic, Waag Society and various experiencing new multimedia; facilitates
others including Sanoma, Rabobank, KLM, Postcode interaction between speakers and visitors.
lottery.
Joint development improves the innovation concept the best negotiation strategy. Whatever the case, do not
and creates support begrudge the other parties their victories.
Jointly elaborating ideas still in their earliest stages not only
improves the ideas but also creates support for implementa- A director at every level
tion. For partnerships with large numbers of parties, this The way in which it is directed can make or break open an
takes much longer, but it is an essential element in creating innovation project. The same applies for the startup phase.
involvement. Within our projects, various different people were identi-
fied as the director. The role of director at least calls for
Timing is everything (do not push, but work faster) an active administrative sponsor and a project manager
Starting cooperation always takes time. As a result, in the who, whenever necessary, will push and pull the project
majority of projects there is a major discrepancy between forwards.
the nature of the start-up phase and the implementation
phase. We identified seven factors that have a major influ- Look at value creation and let go of control
ence on the amount of time it takes to establish cooperation. The control perspective proved difficult to leave behind.
Timing is strategy. The right timing is above all determined However, formal measures aimed at guaranteeing involve-
by people and power. There is no blueprint. Nonetheless, ment – equal contribution, money, contracts – have little
there are useful tips for moving forward without forcing the effect. What does work is the desire to achieve something
starting process. It is useful to create a point that symboli- positive – idealistic or commercial – combined with the
cally marks the end of the start-up phase. space and obligation to achieve. Value creation inspires,
the rest is symbolism.
Negotiation replaces hierarchy
Partners can have very different objectives and a very var- Cooperation is a human work
ied contribution, and yet still be fully in line and effective. Undoubtedly the most important conclusion. But it was
However, it is often difficult to set a harmonious course, one you already knew.
and it may demand constant negotiation. A strict focus
on action is often but clearly not always the most effec-
tive approach. The nature of the partnership determines
••• 50
Novay’s Approach to Open Innovation By bringing together specialists from different fields,
user and suppliers networked innovation realizes impact
The Networked Innovation principle across different market sectors and provides grip on ICT
ICT offers a lot of possibilities but also introduces a lot of design. Through partnerships across sectors and connect-
interdependencies. This requires a strong cooperation in ing resources possibilities for new services and new value
the innovation process across companies. Innovation capa- offerings arise. The Networked Innovation approach is ide-
bilities, ways of thinking, technologies and processes have ally suited to join parties with complementary products
to be aligned in order to effectively innovate together. and services and achieve mutual benefits and collaborate
towards markets or standardization fora.
Innovation with ICT offers specific possibilities for innova-
tion but also poses certain challenges as outlined in the pre- Typical results that can be achieved with Networked Inno-
vious chapter. The nature of ICT invites for collaboration vation are the development of models and tools for ICT
on the development of platforms, composing services, or design, optimizing processes, business roadmaps and new
connecting people and resources. This is unique for innova- ways of working. However, working together and sharing
tion with ICT compared other innovations. Therefore we risk is not easy. From an extensive case study we derived
introduce a new way of open-innovation specific for inno- some guidelines for implementing Networked Innovation
vation with ICT based on collaboration called Networked in a successful manner.
Innovation. Networked innovation is defined as: There has to be a need and willingness for open and
transparent collaboration,
Innovation with ICT by connecting organizations, knowledge Availability of multi-disciplinary teams and knowl-
en resources in well-defined collaboration and consortia edge,
A strong leading and monitoring party responsible for
Many business sectors face similar challenges regarding the the realization of a joint project proposal and execution
design of services, ICT systems and required similar solu- hereof.
tions of infrastructures. By means of collaboration knowl- ICT forms an important part of the innovation or inno-
edge can be shared, risk can be mitigated and investments vation process.
minimized. Specialists from different sectors can develop
together new and accepted design tools. Collaboration within a Networked innovation context
doesn’t come easy. It requires specific competencies of
involved parties and in most cases requires
an innovation mediator. In knowledge
Figure 2: Novay Networked Innovation
intensive collaboration the intermediary
must possess a thorough knowledge level
of ICT as well. Continuously new sources
of knowledge have to be found and inspi-
ration from other market sectors outside
the collaboration circle has to be included.
This is the responsibility of the intermedi-
ary. Moreover as the spider in the web he
is responsible for managing and organizing
the innovation network. From this extensive
network the intermediary initiates new and
concrete collaborations. Managing the col-
laboration and the IPR has proven to be of
the utmost importance for the success of
these types of collaboration projects.
The Novay implementation of the

Networked Innovation paradigm
In the picture below we present the Novay
Model of Networked Innovation. Collabo-
ration and open innovation form the hart of
51 •••
Networked Innovation and thus has it has a central place the public spaces, which has become apparent from the
in the model. Starting from a sound knowledge base and a many business models that have been developed. So, as one
joint vision, inspired by other companies and market sec- of the launching departments, you may want to consider
tors, breakthrough results with ICT are achieved by means to incorporate an evaluation and update of the vision of
of an open and constructive collaboration. Ambient Intelligence in the yearbook. The subject would
be very timely.
Novay realizes that the openess in collaboration depends
strongly on the fact whether the innovation at hand is core The notion of service innovation is not very inspiring to
to the service offering of a company. Networked innova- a broader audience. Many ICT practitioners would love
tion therefore focuses on innovation where parties need to have a new paradigm, taking away the attention from
each other. Typical examples are the development of joint the technology-push supporting service innovation to the
infrastructures (EPD, E-Invoicing, Context management user benefit-pull substantiating service innovation needs.
platforms, etc.) on which at a later stage each company In this respect many of us are inspired by the concept of the
develops it’s own distinghuising service, or the creation of Creative Industries, and especially for the major urbanized
new services that require a certain composition of inte- European regions (the Blue Banana) this is e very com-
gratin in the value chain. This is empowerd by the specific pelling topic. Consequently, you may want to consider to
characteristics of ICT. include a major section on this topic in the yearbook cover-
ing the recent developments in this domain together with
Bringing parties together and creating collaboration in con- some of the corresponding challenges.
sortia with clear agreements is a core part of the service
offering of Novay to realize impact. From years of experi- Open Innovation and the Future
ence Novay learned that for succesful innovation with ICT of Philips Research
looking at technology is not enough. Business aspects as While there is a clear trend in manufacturing companies
well as sociological and people aspects have to be taken to focus increasingly on their core activities and rely on
into account as well. This cannot be done without the use partnerships to secure their non-core needs, innovation is
of multi-disciplenairy teams. Therefore Novay employes something that many continue to do in splendid isolation.
over 70 experts from different research fields Fearful as they are of giving away their best ideas too early,
eager to gain a head start on others, to own value chains
As an intermediary, Novay manages a large and active open or build strong patent positions. Moreover, they are often
network consisting of companies and knowledge institutes driven by the belief that the smartest people work for them,
in area of ICT and innovation with the goal to learn from and are usually reluctant to cooperate with others at an
each other, get new ideas and form new collaboration part- early stage in the innovation cycle.
nerships.
The concept of Open Innovation is a radical departure
Typical products that arise from these types of collabora- from the traditional model of closed, in-house innovation.
tions are presented in the outer parts of the model and Open Innovation embraces the idea that there are a lot of
among other things are: business roadmaps for future serv- clever people doing clever stuff outside your own com-
ice and technologie development, business models for new pany, and tapping into that increases the effectiveness of
services, prototypes of new services and technologies, new innovation efforts by allowing the company or individuals
service concepts, customer validation and the design and to concentrate on the things they excel at, while opening
implementation of optimized processes. new outlets for R&D efforts alongside the company’s own
business goals. Open Innovation helps in setting widely
accepted standards and preparing the ‘landing ground’ for
Philips’s Approach
new technologies in the market.
to Open Innovation
Some ten years ago the vision of Ambient Intelligence was At Philips, we have adopted Open Innovation as our method
coined to deal with the user side of services and ambient of working six years ago. With our focus on Healthcare,
devices (which are the terminals in the Future Internet). Lifestyle and Technology, we team up with academic and
Over a period of more than ten years we have learned a lot industrial partners who have competencies and interests
and the vision still stands strong but has changed markedly complementary to our own, join forces with industry peers
because of the many insights gained. For instance, the first on standardization and create momentum in the future
application domains will not be the homes of people but directions of technology we jointly aspire to, and are active
••• 52
in establishing strong local networks of leading industries channels in which we allow our technology to become the
and research institutes that help top technology regions basis of new business ventures - taking more risks to bring
to grow. As part of this policy, Philips has opened up its innovations to the market faster. Furthermore, we are also
High Tech Campus in Eindhoven to external companies, on the lookout for emerging markets that require specific
offering them a highly innovative infrastructure, as well solutions, carefully targeted at the needs of consumers.
as active engineering support. MiPlaza, for example, offers
world-class facilities and services in the field of microsys- Increasingly, Research is becoming an ecosystem that nur-
tems, nano-technology and electronic systems, and the Life tures the organic growth to drive Philips forward. And
Sciences Facilities house multi-disciplinary research for with our labs in Europe, North America and Asia, we are
molecular diagnostics, imaging and therapy. ideally positioned to expand our innovation ecosystems
on a global scale. Open Innovation is an inspiring and
We are stimulating entrepreneurship with an increasing rewarding way to go for modern research.
number of lab ventures and incubators - new commercial
References
[1] OECD (2005) Growth in Services – [6] Spohrer, J. & Riecken, D. (eds.) Technology. Boston: Harvard
Fostering Employment, Productivity (2006) Special Issue Service Science, Business Press.
and Innovation, OECD, Paris. Communications of the ACM, [11] Chesbrough, H. & Spohrer, J. (2006)
[2] European Commission (2007) Volume 49, Issue 7, pp. 30-87. A research manifesto for services
Towards a European strategy in [7] Bouwman, H. & Fielt, E. (2008) science, Communications of the
support of innovation in services: Service Innovation and business ACM, Volume 49, Issue 7, pp. 35-40.
Challenges and key issues for future models. In: Bouwman, H., De Vos, [12] De Jong J., Vanhaverbeke W., Kalvet
actions, SEC(2007) 1059, Brussels, H. & Haaker, T. (eds) (2008) Mobile T., Chesbrough H. 2008 Policies
Belgium. service innovation and business of Open Innovation – Theory
[3] Forfás (2006) Services Innovation models, Springer, 2008. Framework and Cases.
in Ireland – Options for innovation [8] Reneser (2006) Research and [13] ECOLEAD - European Collaborative
policy, Dublin. Development Needs of Business Organisation Leadership FP6 –
[4] Den Hertog, P. (2000) Knowledge- Related Service Firms. Utrecht: Framework Programme 7 project
Intensive Business Services as Dialogic. (2004-2008) http://ecolead.vtt.fi/ .
Co-Producers of Innovation, [9] Buuren, R. van, Haaker, T., Janssen, [14] Logica Management Consulting
International Journal of Innovation W. (2009) Networked Innovation, Survey (forward message by Meijer
Management, 4 (4), 491 – 528. Novay, Enschede, The Netherlands. G, Wendt W.) The Road to Successful
[5] Miles, I. (2008) Patterns of [10] Chesbrough, H (2003) Open Open Innovation – A little like being
innovation in service industries, IBM Innovation: the New Imperative in love (2008).
Systems Journal, vol. 47, no 1, 2008. for Creating and Profiting from
Contributors
Dr Geleyn Meijer Dr Timber Haaker Wilbert Schaap

Director Strategy Senior Researcher Programme Coordinator
Logica Novay Service Innovation
geleyn.meijer@logica.com timber.haaker@novay.nl Ministry of Economic
Dr Gohar Sargsyan Prof. Emile Aarts Affairs/SenterNovem
Senior Consultant Director Research w.schaap@senternovem.nl
Logica Philips
gohar.sargsyan@logica. emile.aarts@phillips.com
comWil Janssen Jean Gelissen
Director Business Senior Director Strategic
Development Partnership
Novay Philips
wil.janssen@novay.nl Contact
jean.gelissen@philips.com
Dr Rene van Buuren Dr Gohar Sargsyan
Principal Project Manager Senior Consultant
Novay Logica Management Consulting
rene.vanbuuren@novay.nl gohar.sargsyan@logica.com
53 •••
2.3 Openness as the Way Forward to Competitiveness

and Wellbeing in Finland
“In open societies, government is responsive and tolerant, and political mechanisms are transparent and flexible.
The state keeps no secrets from itself in the public sense; it is a non-authoritarian society in which all are trusted
with the knowledge of all. Political freedoms and human rights are the foundation of an open society.” [1]
Open Society private sectors alike and mobilizes people to participate in

co-creation and co-innovation.
Open society with high level of public participation con-
tributes to modernizing the practice of representative Based on open society development, people expect new
democracy within established consti- levels of transparency and openness in pub-
tutional frameworks. In a democracy, lic sector leadership and governance, and are
public participation has intrinsic value willing to actively contribute to the devel-
by increasing accountability, broaden- opment of new structures and collaborative
ing the sphere in which citizens can processes for open governments [3].
make or influence decisions and build- China has not only met
ing civic capacity. It further offers also but exceeded its targets. The business sector can have an important
instrumental value by strengthening the and instrumental role in this development.
evidence base for policy making, reduc- In the US, President It has widely acknowledged this paradigm
ing the implementation costs and tapping Obama – who promised shift recognizing that the autonomous activi-
greater reservoirs of experience and crea- to run the most open, ties of single organizations cannot produce
tivity in the design and delivery of public honest and transparent the much needed radical, cross-disciplinary
services [2]. administration to date – and architectural innovations required for
is using his charisma to structural changes [4]. A more collaborative,
Open society promotes collaboration open and human-centric approach to devel-
change the country.
of people, firms and public agencies for opment is needed for.
creativity and innovation that contribute
to wellbeing and quality of life of people, Public sector should find a more proactive
communities and the nature. This incor- and dynamic role in promoting this devel-
porates collaboration in creation of solu- opment.
tions for climate change, energy efficiency,
environment, public governance and eDemocracy, social Engagement of People as Citizens
and participative media, sustainable construction, smart of Open Society
and sustainable urban and rural development as well as While the US and China are taking interesting steps in
renewal of social and economic structures and processes. their renewal process, the European Union (EU), which
in 2000 ambitiously announced that it would “become the
This implies also a renewal of production and consump- most competitive, knowledge-based economy in the world
tion patterns based on ongoing societal and economic by 2010,” has not managed to implement necessary reforms
trends such as globalization, sustainable development, and to reach that target. However, there is an urgent need to
aging population. This may lead to new service, business develop new solutions for creativity and innovation based
and market creation. This includes new socio-economic renewal of public and private sectors and their value crea-
activities, social entrepreneurship and even new industry tion dynamism. That may be done through collaborative
creation. knowledge creation and innovation that benefits also from
the wide usage of modern ICT.
These developments challenge our fundamental assump-
tions regarding welfare state and quality of life. However, EU’s i2010 policy (2005) boosts single and lead market
the open society development provides new opportunities development through research and innovation in ICT
for collaborative problem solving that involves public and towards more inclusive society where people do participate
••• 54
in new service, media, business and technology develop- require maximizing synergies between the various stake-
ment that provides easy access to information, communi- holders in explorative cross-border collaboration in the
cation and related services for everybody at any time from development and provision of the next generation citizen-
any place. The i2010 policy has emphasized new waves of centric services as well as related development platforms
innovation in networks and Internet as well as more com- for improved competitiveness, openness and well-being.
prehensive user involvement in innovation [5]. However,
the implementation of this policy has been very slow.
Case Finland
The US and China are engaging citizens with different Introduction to National Challenges
strategies. Top-down strategies are supported by bottom- In Finland, the open society development is prioritized.
up participation. In China the emancipation of the minds The Finnish Knowledge Society Policy [8] emphasizes
– principle releases people’s energy and strengthens their human-centric approach to the societal development; this
self-esteem. In the USA, Obama has used the internet as a includes also open innovation, public-private collabora-
successful vehicle for increasing participation in the elec- tion and engagement of citizens in co-creation and co-
tion process. In both cases people will stand on their own innovation. The Finnish National Innovation Strategy [9]
feet to contribute to the process of transforming the coun- consists of demand and user-driven innovation in parallel
try. Also the governance system engages both the leader- with technology-driven innovations (supply-side). This
ship and citizens in creating interplay between top-down Finnish innovation policy is recently discussed in Evalu-
principles and bottom-up demands – they seem to work ation of the Finnish National Innovation System [10].
together to strengthen the whole.
The policies reflect the major challenge: what is Finland’s
Europe has made good strategic initiatives but lacking in competitive future in global economy as an open, human-
implementation. Europe may loose the opportunity to take centric welfare society? There is a concern of both struc-
the forerunner position in this race for the most open tural renewal of public sector for productivity gains and
society, revitalizing democracy with cultural diversity and structural renewal of private sector in order to renew the
democratic heritage. eroding industrial base. The Finnish innovation strategy
aims to tackle both of these renewal processes through
Enabling ICT Technologies open RDI activities that also involve citizens. This devel-
Open society needs open innovation and communica- opment may bring about major socio-techno-economic
tion technologies (ICT), since democracy requires access structural transformation that benefit of public-private
to information and dialogue [6]. Increased use of ICT in collaboration.
democratic processes is expected to increase transpar-
ency and pluralism, and thus to contribute to the overall The role of ICT may be instrumental in public and private
democratization of societies. Developed information and structural transformation
communication technologies have enabled users to dem-
onstrate increased power and influence over the content Public Sector Innovation
of products and services [7]. Finland has some important building blocks in place to
face the major challenges of structural renewal of public
ICT enables more transparent and efficient society with services and administration. However, implementing this
increasing digital social capital and participation. How- ‘strategic intent’ may require much more.
ever, the first generation of e-government tools focused
on administrative-burden reduction within the existing The core problem of our current service provisioning system
governmental processes and structures rather than struc- is that it consists of two separate ‘top-down verticals’; one
tural reforms, and innovative engagement processes and providing public sector services and the other providing
management models. private sector services – without collaborations with each
other or citizens nor 3rd party involvement. Furthermore,
By exploiting the potential of advanced ICT technologies the public sector services are developed and delivered in
and community based social production by self organized various national and local ‘silos’ without any transparency
social communities Europe can transform public policy – and with huge duplication of resources.
making and service creation environment to democratic
citizen-driven, open innovation. This, however, would
55 •••
Innovative solutions: Focus on the customer produced and delivered. It brings about major efficiency
centricity and systemic efficiency and productivity gains – however it seems also to inspire
The only way out of this ‘systemic inefficiency’ is to put new of service innovations and structural renewal; i.e. the
human beings – or customers – at the center – and start systemic innovation is in place.
developing solutions together. This may mean even that
the service is designed and the delivery system organ- There is a need for courage to mobilize large-scale dia-
ized around people or citizens. The service system logue, experimentation, piloting and risk-taking across the
needs to be reliable and efficient – not only from “system”; i.e. there is a need for conscious systemic change
the viewpoint of provider – but also from the in RDI that involves all the relevant player’s needed for
viewpoint of receiver: a citizen. This arises many public services and administration renewal.
issues of personification, user-centric service pro-
Finland is already quite filing, identity management, trust, security and Some cases indicate that the structural challenges have
transparent and for us confidentiality. It also brings about the question: already grown to require moving from piloting phase to
to move citizen-centric who owns the information? This, again, calls for large scale implementations.
architectures with a ‘new deal,’ or governance innovation, among the
open data principles public, private and third sectors – together with Industrial Reform
and collaborative the citizens. Finland has traditionally been reliant of export-oriented,
applications is quite a raw material and resource-intensive industrial produc-
challenge, but doable According to Finnish law, the public sector is tion. With globalization, the paradigm shift towards more
with our technology- responsible for arranging basic public services – knowledge and less labor-intensive sectors have become
but it doesn’t need to develop and run all of them. inevitable.
savvy population. In
Instead, the public sector should first and fore-
order to accomplish
most concentrate on providing the basic architec- The Finnish innovation policy promotes major industrial
this, parties, public,
tural standards, guidelines and quality controls for reforms trough parallel demand and supply-driven inno-
private and education
the private and 3rd sector service provision - in vation strategies. The idea is that the new market crea-
sectors must evolve addition to providing those public services not tion – even new industry creation – may benefit of open,
their roles and start to economically viable for private sector. demand and user-centric, ecosystem-based dynamism that
build up a sustainable brings together all the relevant players for future serv-
human-centred world. By enforcing open interfaces and by allowing ices and manufacturing. The underlying assumption is
Finland’s success will easy access to public data, the public sector could that the innovation cycle of new services, businesses and
surely continue to rely speed up and improve the quality of new serv- technologies - even markets and industries - can become
on its age-tested cultural ice creation enormously. Besides improving the “compressed” and short if the RDI collaboration involves
values of self-honesty, well-being of citizens and productivity of the all the necessary partners of the emerging “value constel-
common sense and a public sector, these new principles would open lation”. This is needed especially now in order to meet the
deep appreciation for up a whole new market for innovative busi- challenges of climate change, energy and environment,
rational, considerate and nesses. democracy, wellbeing, participative social media and
steadfast civilization eDemocracy etc. While the challenges are “burning” and
that thrives in intimate We already have many excellent examples of new systemic; they call for efficient collaboration modes for
relationship with nature. internet and social media based services – for systemic innovation. This implies participation of relevant
instance for the elderly people – developed by players, even citizens. This may also lead to new forms
private sector, 3rd sector and citizens together. of social entrepreneurship that “kicks out” new types of
start-ups and spin-offs.
Finnish Innovation Fund (Sitra) develops, with
around 20 Finnish cities and their service provid- As a small, well-educated, tech-savvy and collaborative
ers and citizens, shared ICT-services for public country, Finland could take a leading role in addressing
administration and services. This implies changes some of the ‘wicked problems’ facing of the world, and
in operational processes of cities, including shared archi- create lead markets for new types of sustainable networked
tectural solutions and standards and even shared ICT- innovations and development platforms.
capacity. Traditionally, all the cities and communes in
Finland have had their own ICT policies, solutions, capaci- Based on the initiative of the Finnish Science and Technol-
ties, services and processes. The joint operation is a major ogy Policy Council (2006) the Finnish government intro-
transformation in the ways of how the public services are duced a new collaborative funding instrument (Strategic
••• 56
Centre for Science, Technology and Innovation, SHOK) to redesign our society from a human-centered point of
put the new innovation strategy into practice. This implies view. In order to succeed in the huge paradigm change
that industry and academia, with public and private co- needed, we need more diversity, distributed production
funding, establish consortiums for strategic RDI collabo- and interaction efficiency to apply the wisdom of crowds
ration around the future challenges such as energy and more effectively.
environment, wellbeing, sustainable construction, renewal
of forest industry and machine construction. The SHOKs By now it should be clear to all of us that the governance
are run by the Finnish Funding Agency for Technology structures and steering mechanisms developed for the 19th
and Innovation (Tekes). The ICT-SHOK (Tivit, estab- and 20th century organizations and societies do not suf-
lished 2008) is for open, user-driven services and tech- fice anymore in our world of increasingly fast change and
nology development. It challenges the structures of web complexity. We know that traditional hierarchies cannot
of services. The flexible services are developed along the cope well with the complexity and fast change of our time,
mobile cloud, ubiquitous environment with consequent thus we need to adopt new organizations. But what else
machine-to-machine interoperability and Future Internet. do we need?
ICT-SHOK benefits of user-driven open innovation and
horizontal approach to the development of underlying We certainly need more strategic agility at the societal
technologies that support the service systems. level both in Finland and globally – if and when we want
to cope with the forthcoming challenges. The other reor-
As an instrument, ICT-SHOK reminds of the European ganizational alternatives cannot meet the challenge for
Technology Platforms or Joint Technology Initiatives; how- following reasons:
ever the Finnish ICT-SHOK has an emphasis on parallel
demand (pre-market service business development) and The model of continuous improvement/operational
supply-side innovation (technology development). excellence only works well with a slow-changing, sim-
ple environment
Consequently, promising new approaches are being Conventional strategic planning can deal with com-
experimented in private, public and civic sectors. These plexity in stable conditions but not in today’s dynamic
include the increasing participation of users and citizens environment, and
in product and service development, the use of foresight ‘Bringing Silicon Valley inside the company’-alternative
in strategy and policy making processes, internet-based works fine in a dynamic environment without interde-
open innovation and problem solving “jams”, participa- pendences and synergy opportunities.
tory development of shared visions, strategies and values,
cross-sector cooperative networks, Private–Public–People- Strategic agility is not only a challenge for countries and
Partnerships, etc. However, these new solutions cannot organizations but also a major opportunity for a smart, quick
be fully deployed until the old governance structures and and committed actor – such as Finland as a country.
institutions give in [11].
With newly modified, more integrated, and open govern-
Governance structures and new leadership ance principles we could simultaneously improve our
Finland has the strength of consensus driven top-down public sector productivity and create new growth areas
policy making. That is based on wide informal dialogue for business.
through horizontal networks across the sectors and insti-
tutional boundaries. In rapidly rising global challenges this Do we need a new settlement between individuals, com-
is a good asset that needs further improvement. Finland as munities and government – new ways for people to get
a small country should and can be mobilized – even with involved in determining their lives in a meaningful way?
the help of ICT and new forms of interactive social media This could support a human centric systemic change
– to, live up with the open society principles in solving the enabling people to flourish and bring their dreams alive.
problems for the future development in Finland – and Leaders could become involved in this dialogue through
even for the world. social media for openness sake and to gain an under-
standing of how to develop in a way that enhances our
However, our thinking used to be institution based. The competitiveness. Openness gives the opportunity to col-
welfare state established many institutions. But current lect partially-formed notions which would never be com-
cost structures, efficiency and the agility to respond to monly accepted as formal ideas. For a business of this type
individual needs cause challenges. Therefore, we should customer collaboration is vital. Social media has proven
57 •••
a fantastic way of creating openness between customers use of leadership, but not the egocentric, heroic king that
and companies. Citizens and their governments could reap has become so prevalent in the business world. We make a
the same benefits. great fuss these days about the evils of micromanagement
but far more serious is ‘macro-leading’: the exercise of top
But implementing this ‘new vision and governance model’ down authority by ‘out of touch’ leaders. Community-ship
requires also new leadership approach. Henry Mintzberg requires a more modest form of leadership that might be
[12] proposed that we should replace the concepts of lead- called engaged or distributed management. A community
ership and management with something he calls ‘commu- leader is personally engaged in order to engage others, so
nity-ship’. In his words, “community-ship” certainly makes that anyone and everyone can exercise initiative”.
References
[1] Wikipedia. http://www.wikipedia.org/ Innovation Management, Vol. 24, pp. [9] Ministry of Employment and the
[2] Bourgon J. (2007) “Responsive, 230-241. Economy, Finland (2008) “Government’s
responsible and respected government: [5] Commission of the European Communication on Finland’s National
towards a New Public Administration Communities (2007) “i2010 – Annual Innovation Strategy to the Parliament”
Theory”, International Review of Information Society Report 2007”, [10] Ministry of Education and Ministry of
Administrative Science, vol. 73 (1):7-26 Communication from the Commission Employment and the Economy, Finland
and Bourgon J. (forthcoming) to the European Parliament, the (2009), “Evaluation of the Finnish
“Why should Governments Engage Council, the European Economic and National Innovation System: Policy
Citizens in Service Delivery and Policy Social Committee and the Committee Report”, www.evaluation.fi
Making” (unpublished manuscript). of the Regions. [11] Doz, Y., Kulkki, S., Hämäläinen,
[3] OECD (2008) “Mind the Gap: Fostering [6] OECD (2007) “Participative Web and T. & Laukkanen S. (2009) “Leadership
Open and Inclusive Policy Making”, and Governance Innovation for
User-Created Content: Web 2.0, Wikis
An Issues Paper, Third Meeting of the Transforming Economy: How to deal
Steering Group on Open and Inclusive and Social Networking”, Paris OECD.
with crisis, turbulence and growth?”,
Policy Making, 13-14 March 2008, [7] Gassmann, O. (2006) “Opening up the Abstract of the CKIR August 26-29,
OECD Paris, GOV/PGC/OPEN (2008) innovation process: Towards an agenda”, 2009 Workshop, Center for Knowledge
I, Public Governance and Territorial R&D Management, Vol. 36 No. 3, pp. and Innovation Research (CKIR),
Development Directorate, Public 223-228. Helsinki School of Economics (HSE),
Governance Committee. [8] Finnish Information Society Program, Aalto University
[4] Calanstone, R.J. & Stanko, M.A. (2007) Prime Minister’s Office, Finland (2006) [12] Financial Times (2006) “The leadership
“Drivers of Outsourced Innovation: An Finland’s National Knowledge Society debate with Henry Mintzberg:
Exploratory Study”, Journal of Product Strategy 2007–2015. Community-ship is the answer”,
(FT.com: Leadership Debate)
Contacts
Dr. Seija Kulkki
Director, Center for Knowledge
and Innovation Research (CKIR)
Helsinki School
of Economics (HSE)
seija.kulkki@hse.fi
Dr. Petra Turkama

Director of Research, Center
for Knowledge and Innovation
Research (CKIR)
Helsinki School
of Economics (HSE)
petra.turkama@hse.fi
••• 58
2.4 Guerilla Innovation, or Why Your Ecosystem

is Your Best Innovation Driver?
T
alking about innovation is a strange exercise. which used to be hermetic, that we
Being invited to do so is even more disturbing. have been proposing to you [1].
Jacques Brel’s song starts ringing in my head. “Les
Bourgeois”. As it is the case when dealing with musical The year 2003 was a particularly
tastes, for which it always seemed silly to me trying to important period for our work in del-
convince teenagers that “back in our days” the music was egated innovation. Firstly, regarding
better, dealing with innovation, and therefore its openness us, it is the year faberNovel was cre-
and its dynamic aspects, is a challenge. Especially when ated, in Paris, in France. But above all,
everything is on the move and all the interesting models it was around that time that Henry W.
are the ones that are emerging and we are yet to know Chesbrough’s book Open Innovation:
about. The new imperative for creating and
profiting from technology [2] was pub-
Stéphane Distinguin
Whereas Jacques Brel, who mocks bourgeois, eventually lished, and gave an academic support to a certain number
became a mocked notable by his younger peers, I carefully of our convictions and statecraft. Until then, we were fed
ask you, dear reader, to read and sense in the following with the idea that the large majority of recent innovations
statements the humility it requires. We have carefully seen in the field of IT (Google, Sun’s latest products…) all had
to it that we make emerge a method, our own method. in common an open innovation strategy. The latter held,
As it is pointed out in our name, it is about “making”, according to us, some intrinsic and too rare virtues in the
faber, the new. It has worked in convincing fashion, and field of IT, which are:
its presentation is justified in this context of sharing and
this emergence period that still define it – so many things, The ability to assemble, around a very simple and user
projects, remain to be achieved – and that make up for directed vision, a team that brings together “geeks” and
our cardinal values. businessmen. This vision can be sometimes simple
in terms of technology and company strategy, but it
It would be vain and presumptuous to try to talk thor- has the great advantage of providing a common lan-
oughly on my own about open innovation issues and their guage to people who often speak together without
evolution in the field of IT. Indeed, in an almost organic understanding one another. No use talking about the
manner, every single actor of this industry, past or present, encounter between Brin and Page, Google’s creators,
has contributed to it, but no one has ever mastered it in its and Andy Bechtolsheim, their first investor. However
whole. Each company holds a piece of the puzzle, of the we can tell you about the discussions held between the
story, and fades before the common work. As founder and founders of MobiVillage [3] and leaders of the public
manager of an innovation company, endowed with the transportation group Transdev [4] during the concep-
role of conductor of these open innovation operations, I tion of Mobitrans [5], the first mobile service for real-
can only grant you with our little piece of the story, and time traveler information. Some people imagined “an
our vision of some of the other pieces of this movement. XML flow transmitted by a mobile network” while, on
From faberNovel’s young childhood to today, it has been the other end of the table, some probably had in mind
as much our apprenticeship of open innovation practice as a fleet management and AVL (Automated Vehicle
the extension of this operation to companies and markets, Location) issue. However, everyone focused on only
59 •••
one topic, traveler information, with one simple ques- And, last but not least, the recent memory of the inter-
tion in mind: “How to inform passengers of possible net bubble has showed us that there wasn’t any room for
train delays”. economic fatalism in the field of IT and that one would
Give more room to doing than to thinking. Successes have to fight against this incongruous belief. Indeed, some
build themselves in parallel to their markets, by improv- companies, although recognized for their dynamism and
ing and constantly correcting the product according to considered as benchmarks in excellence, often adopt a pas-
its usage. By giving the rest of the world access to a “tech- sive posture regarding the evolution of the market. Acting
nological brick” or by looking outside for the solution like the good pupils that they are, executives have perfectly
to an inside problem, we multiply and we speed up the incorporated the rules governing their business. The growth
trial-error process that is essential to any innovation. or the stagnation of a sector, the consumer’s preferences, the
The possibility of quickly seizing opportunities, even organizations to be put in place, the assets to be acquired,
if it requires changing the initial plan. The company’s everything is determined according to some mechanisms,
actions, the launched prototypes, the opening of tech- which are well known by the professionals operating on a
nologies… are as many signals describing the state of a specific market. The latter have understood the rules of the
market or technical barriers to interpret. Appointing to game they are taking part in so well, they have incorporated
these constant market studies an ability to act quickly them in their thoughts and their behaviors so deeply, that
(partnership with a start-up, integration of a “techno- they have come to consider them as natural laws, immu-
logical brick” … therefore reducing the development table and exogenous. Strangely, managers tend to forget
process) and, above all, the right to make mistakes, gives that they are the ones who made up the settings in which
the companies a strong way of developing organically, their companies’ lives. The habit, combined with a slight
in every meaning of the word. short-sightedness of their leaders, lead the companies to
The ability to work on a low-cost basis, by allowing one- agree to some very complicated situations. The leaders
self the opportunity to add a service model to its activity. do what they can, in regards to the constraints they have
Since innovation, in essence, is not solvent in its early imposed on themselves. The technological start-ups, and
stages, for a company, it is about, proposing adjustable more generally the entrepreneurs, were, at the start of the
technologies, which are easily adaptable to other com- millennium, the proof in the eyes of big companies that
panies’ issues, and starting to generate a flow of activities the rules of this market could be broken. Implemented to
from this service business. In Europe, and particularly the concept of open innovation, this optimism results in a
in France, we have a better ability to obtain the support belief in the ability to innovate, to encourage innovation,
of B2B clients than of banks, investors and especially and more generally to profit from everyone’s progresses. A
eventual users. Whereas big companies often envy the major company cannot be content with defining itself as
dynamism and the creativity of start-ups, they still have “genetically non-innovative”, as some of our clients have
market access and control over time: two unthinkable admitted to us. Regarding open innovation, it can’t come
things for a small business. This complementary nature down to begging developers, which are far too often con-
is the basis of an eventual collaboration between start- sidered as the Dr. Goethe’s of the digital era, for ideas in a
ups and big companies. This strategy, which was used laboratory, or a garage if you’re in the Silicon Valley.
for the launch of the first internet mobile services, allows
us to develop a technology and product concepts with- Having come up with this analysis, we chose to play a part
out being hit by the too common “time to market syn- in innovation management in order to serve big companies
drome”. and start-ups and build on some of the best practices we
identified. Therefore, it seemed essential for us to redirect
In addition, our experiences as entrepreneurs, consultants innovation towards the making of things, whereas this
and venture capitalists had convinced us that innovation discipline, operated by consulting firms, is usually directed
should not be run from the top but should now be encour- towards thinking. In this respect, we still admire compa-
aged by working conditions. Furthermore, regarding IT, nies such as Ideo [6] FrogDesign [7] or Adaptive Path [8],
we had to realize several times that, from now on, only which manage to deal with innovation through its most
the marketing of an innovation can enable you to validate concrete aspects, without ever being superficial. One also
the concept, to learn as you walk ahead and to allow the needed a structure capable of operating innovative projects
product or the service to evolve at the same rhythm as through a tightened team, or maybe even turning the latter
the company. into companies. The company format appears clearly to
be the only one capable of isolating an innovation from
the constraints of a big company or a simple “in-house”
••• 60
project’s context. If the consumption of resources related than an additional service. This service would be a “nice
to administrative issues can be reduced to its minimum, to have” rather than a “must”. It is around that time that a
the teams can then solely focus on their core activity, which faberNovel intern had the idea of adapting this service to
is the evolution and development of innovation. An open show tickets, an almost oligopolistic sector in France and
and bottom-up vision of innovation also implies a re-value whose standard services remained particularly penalizing
of the teams, of the individuals in relation to the structure. for small and medium size halls. Retrieving a project which
One must be capable of luring talents showing willingness had become non strategic for faberNovel and its client, he
or an entrepreneurial experience. It will be these men and decided to go and canvass, on his own, the people who
women that will be able to produce in-house innovation, could agree to test this product during an event. After a
to find a way out for their projects or take from the best of trial during the annual Paris-Dauphine University Ball, the
what’s done elsewhere for their own purposes. The goal is company digitick [9], a faberNovel subsidiary, was born
then more to try and match the aspirations of these talents and became, in a few years time, the third biggest show
to the employer’s interest than to define a career plan for ticketing operator in France.
those high potential employees. Finally, being inspired by
the commercial success of open source companies, and Around the same time as this first achievement, some
having been close to some of the first French success of other assignments on the behalf of major companies
the communal web (Caramail in particular), we have were fulfilled, often by relying on the expertise of other
quickly become conscious of what can come out of mak- start-ups from Paris. It is precisely by keeping close to
ing projects evolve in an early adopters ecosystem. This these two worlds, and by staying a small business, that we
is not about creating artificially an ecosystem surround- became conscious of how important it is to contribute
ing a service or a product, it is about adapting the latter to the ecosystem in its whole, and not only remunerate
to a dynamic, demanding and, above all, already existing the start-ups with whom we collaborate. It is not about
environment. The logical extension of this observation is maintaining good relations between faberNovel and other
a permanent relationship, maybe even an immersion into technological companies, it is about creating a framework
these ecosystems: one cannot take profit from a universe for all the relations that can be entertained between com-
without having bathed in it. Such a thing as part-time open panies of a same, and often protean, sector. This frame-
innovation doesn’t exist. work could not have been conceived in another way than a
public property, fuelled by everyone and property of every
Considering the nature of these various elements, some- person. By taking the presidency of Silicon Sentier [10],
times contradictory and often at odds with the standards association of the start-ups from Paris, and by taking part
of their era, clearly no company wishing to be “the missing in the competitiveness pole Cap Digital, faberNovel is try-
link of innovation” should also have to innovate regarding to play the part of the engine in the French ecosystem
ing its economic and operating model. The answer to this and is trying to make it evolve favorably. Working in an
specific need had yet to be found. Lots of time and many open innovation system resides, for us, not only in feeding
quarrels will have been necessary in order to refine and “contents”, that is business, research projects, partnerships,
polish our model. subcontracting and co-development, but also by contribut-
ing to the “container”, that is the technological, juridical,
Nevertheless faberNovel had been given birth and was commercial circles, in which these relations are made. A
taking its first steps… developing potential partner, an expanding technology or
a competitor that shows us the way: these are all good news
faberNovel’s first major realization was the validation of for faberNovel. But the strength of a dynamic and united
the principles of open innovation and bottom-up manage- ecosystem resides, above all, in the ability and speed of
ment of innovation. In 2003, following up to an opportu- the deals it allows you to do and, once again, in the non-
nity study, the Transdev group decided to test a solution lethality of mistakes it enables you to make.
for dematerialized transport tickets on mobile phones.
faberNovel played the part of business project manage- This involvement in associations and the benefits we have
ment support, developed a platform prototype and tested been able to drag out from them were the confirmation of
the service in real conditions, in the station of Bourg Saint some of our intuitions regarding open innovation. As we
Maurice. The technical solution, as well as its utility in suspected it at the beginning of our adventure, it is way
the framework of public transportations, was validated. easier to adapt your projects and confront them with an
However the market settings led to believe that this ticket- already existing ecosystem (in this case, Silicon Sentier or
ing solution was not destined to become anything more the French open source community) than to try and cre-
61 •••
ate your own ecosystem ex nihilo. Only some rare heavy- innovation strategy). It is about finding brilliant peo-
weights manage to do so, and in debatable fashion: Google, ple, with an entrepreneurial vein, but also capable of
them again, was born in the Silicon valley and relied on the being “discrete heroes” and letting go to a client the
Stanford ecosystem, not the other way around… Orange innovation they carried. Our activity being somewhat
created the Livebox Lab [11] but quickly became a major specific, the management of these profiles has to adapt
partner of Silicon Sentier… Procter&Gamble launched its itself accordingly. Since the innovations we deal with
well-known open innovation program Connect&Develop are not profitable yet by nature, it is hard to propose
[12] by relying on the Innocentive platform [13]. To all the interesting remunerations, however it is still possible
big companies who could feel like getting involved in an to integrate some employees into the capital of subsidi-
open innovation approach, we can only remind you that it ary companies, to which they contributed. Internally,
is not about interacting with some “happy few” in your own inspired by the Google system, we quickly established
private space, it is about going out and working together dedicated timeslots for personal projects, along with a
in a common territory. management system for the employees’ ideas. Finally,
through the nature of our activity, we can make heav-
A few years have gone by and the faberNovel model, which yweight projects succeed through a reduced team
was born from the vision of a lack in the practice innova- (many elements of a project are carried out outside the
tion, has developed through its contacts with clients and company and/or are pooled with other projects). The
the market. Our acting up to open innovation has allowed employees therefore take part in strategic realizations
us to quickly take on many issues for our clients, and to while still remaining in a small entity. All these opera-
collaborate with a wide number of companies, in the dig- tions have allowed us to retain the majority of our first
ital field, but also in the field of power, public transports employees and to reach an internship-work contract
or media. Through these encounters, our successes and rate above average. It is of course pretty grueling to
our failures, our model has taken shape and has become recruit the first gems but after that, a good team allows
readable… for us anyway! It is indeed only after two or you to entice more and more easily new talents.
three years time that we were able to define precisely our
core activities and our competences: allow an innovation Business lines: Our practice of open innovation is com-
to arrive on the market in the best conditions possible, mercially materialized by two major activities. Firstly
on our behalf, on the behalf of big companies or on the we manage delegated innovation services for major
behalf of start-ups. accounts, by accompanying them through each step of
their innovation, from strategy defining to operational
This model revolves around three key points: management, including prototyping. Thus, the RATP
trusted us with the majority of its mobile strategy and
The team: It simply is the key resource in this kind its management (mobile website, iPhone application,
of activity (and we believe it is the case for any open design and development of guidance services for the
visually impaired in subway stations etc…) [14]. The
excubation system, as we name it internally, is another
activity that we have developed through time. We regu-
larly create companies ad hoc, as we did for digitick, to
strengthen our know-how, which is an already existing
practice. Therefore, after having worked with several
communal web services, we decided, for the execution
of the SFR Jeunes Talents service (a platform for ama-
teur artists conceived and developed on the behalf of
the mobile operator SFR), to create af83, a development
company specialized in social media. FaberNovel can
now count on a dozen participations. They each have
their own goals and strategies, but, as many as they are,
they are all favored actors that we can rally to our cause
of delegated innovation. In order to make the job easier
for all these entities, we have developed an activity for
internal services and pooled resources. This business
regularly lures in project carriers, desirous to launch
••• 62
their own structure but wanting ble of naming our profession or

to focus exclusively on their core having a clear view of our model,
line of work. faberNovel has never stopped
growing since its birth and has
The ecosystem and the territory never recorded a year with defi-
in which we are developing our- cit. Even though we do not believe
selves and are playing our part: it in fate, we refuse to acknowledge
would be extremely difficult for us these results as an accident. On
to do our work without a quality the other hand, we have faith in
ecosystem. In a similar approach apprenticeship, we have more
to the one regarding sustainable belief in acquired knowledge than
development, we take great care in innate. And, methodically, we
in not damaging the economic have pulled lessons out of every
and technological environment new experience faberNovel has
we are living in. We don’t exploit come by. One of the simplest and
it, we always try to give back what we have taken from most secure ways to do so resides in the following approach:
it and we try to help everyone grow at the same speed hypothesis – experimentation – observation – conclusion.
as us. In fact, the success and development of our eco- Internally, we refer to this process as a strategic experimen-
system is probably more important than ours. This tation. It allows the company to better understand the field
is where the value of “local” comes in: whenever an into which it is venturing itself. The methodology inher-
entrepreneur arrives somewhere, his origins and his ent to this system was developed through our numerous
ecosystem always precedes him, before any exchange encounters with academics, in particular with the Ecole
is even made. Try and guess who you would find more Nationale Des Mines De Paris [17] (Réseau d’Etude sur le
innovative between an entrepreneur from Paris and an Management de l’Innovation – REMI). This is the proof that
entrepreneur from the Silicon Valley? Silicon Sentier open innovation can also be applied to the management of
has been able to carry through new projects in Paris a company. Strategic experimentation is not about carrying
(new events, new reflection groups, new fields of inter- out a strategy whose solidity has already been proven, it is
vention), has seen its budget strongly increase and its about testing an hypothesis expressed on a topic that is new
number of employees go from none to a dozen. But in for the company. It is therefore no surprise that, during the
an even more blatant way, this association has man- experimentation, the results were somewhat different from
aged to materialize this encountering principle, which what we had expected. This disappointment is somehow
is the basis of open innovation, through a unique place. promising. Because it means that the issue the company
La Cantine, open in Paris since 2008, defines itself as a is tackling is genuinely complex and that the experience it
network collaborative workspace (“co-working space”) is gathering will be hard to match or imitate for its rivals.
[15]. The goal of this place is to enable people working in In the worst case, losing a small bet is a profitable invest-
fragmented places to meet each other in order to share ment if you manage to get the adequate lessons out of it.
means and skills between developers, entrepreneurs, So, without going into details about our methodology, in
users, artists, researchers and students. It is linked to regards to open innovation practice, we have used this
other “co-working spaces” throughout the world and approach for most of our projects, whether it concerned
represents, for us, a key extension to the open innova- our own activities (“in order to understand what we do”)
tion approach we have initiated. We were delighted to or whether it concerned our clients and partners (“in order
take part, among others, in the making of a place in to understand what others do”). Not only did this allow us
which we can find the values we have been supporting to acquire, at a low expense (a too often underestimated
since our creation, particularly when we had to put up benefit from open innovation), a ground knowledge on
with Silicon Sentier who could not yet afford to launch many sectors that contained major actors, it also allowed
La Cantine. We keep supporting these values today us internally to build up reacting and adapting behaviors
all the way to San Francisco, where we opened a new and abilities, which will come in very handy if we wish to
“co-working space”, PariSoMa [16]. keep on winning the game of open innovation.
The transition from faberNovel’s young childhood to a pre- We are now in 2009. faberNovel is already, or only, 6 years
cise definition of its activity did take quite some time. Too old. Henry Chesbrough has published two new books dedi-
much time, could say some. And yet, without being capa- cated to open innovation and has opened the Center for
63 •••
heart of our activity is making contacts, connecting ideas

with specific technologies within the context of a particular
client. Each one of our employees has to be able to under-
stand the issues the company is dealing with, the content of
the projects we are carrying and, above all, has to constantly
have those in mind. Every single member of faberNovel has
to maintain a minimum level of knowledge regarding the
technologies and the methods we, and our partners, have
access to. It is the only way ideas and technologies can
meet and we can be able to offer a relevant solution to our
customers. Unfortunately, once we will have to deal with
fifty projects and a couple hundred potential partners at
the same time, this will quickly turn out to be impossible.
We could, of course, automate these processes by going
through a dedicated information system or external plat-
forms and successive layers of middle-management. One
Open Innovation in the Berkeley University, in California possible scenario is that we lose the intimate knowledge
[18]. The practice of open innovation has massively spread of other actors that has allowed us to be seen by the other
within the big and the small businesses of almost every start-ups as partners and not as customers. The other sce-
sector. faberNovel, along with a number of companies, has nario, which consists in the addition of another filter to the
proven that a business model based on open innovation bottom-up innovation organization, might just definitely
is sustainable. However the growth imperative, proper to dry up this crucial source of ideas. In both scenarios, the
every company, obliges us to grow on some levels, to gain task force aspect, which was one of the foundations of fab-
maturity, but without ever losing our flexibility and our erNovel and which allows our teams to focus on the success
learning capacity. In other words, extending a model with- of an innovation, will disappear: we don’t want a project
out bending it or tearing it. This is the strategic challenge we to be considered by our partners only as “a” project. In
are facing today. Unfortunately, or fortunately, there is no that perspective, we are getting more and more used to the
secret recipe for succeeding in this transformation. Once idea that faberNovel should not, regarding its number of
again, all we can do is express some hypothesis, confront employees, exceed a certain limit. We will keep on growing
them to the facts and draw the required lessons quickly, according to a model based on “small and fast is beautiful”
very quickly. I call this the 300 DPI rule. One must deter- and by preferring the birth of children to a strengthening at
mine straight away the most complete level of its marketing any cost (growth of the network over the main node). These
definition and its attributes. As it is the case for a 300 DPI
image, one must aim straight away for the highest quality
image possible so that, afterwards, he can easily and quickly
stretch the image and make it grow without letting any pix-
els appear… Likewise, for an innovative project, its strategic
attributes must be conceived according to this logic.
The number of faberNovel employees has increased and

now stands around 25. According to the proportions of our
participations in the different companies that make up our
“federation”, we are about 100. We are currently discovering
the organizational and HR issues that are inherent to any
company of this size. In order to answer to these issues we
have explored many paths, have abandoned most of them
and have persevered on others. We are even starting to see
the results regarding some of them, and they could maybe
become useful for other organizations.
Firstly, we are starting to meet some difficulties concerning

the growth of our work in delegated innovation. At the
••• 64
subsidiary companies will work with and for ecosystems and then laying back on a reliable customer, as it was the
that will be related to specific issues (digital, green tech, …) case for af83 with SFR, gives these companies more hope
or specific locations (one branch has been launched in San of survival than other companies from the sector. By pool-
Francisco, and another one recently in Ho Chi Minh City). ing services and by allowing start-ups to work with us and
In addition, this will allow us to let our finest talents evolve take part in projects financed by big companies, we have
and will spare us from the “glass ceiling” syndrome so many been able to form a track record that many venture capi-
small business’ employees have been confronted with. We talists could envy: among the 11 faberNovel participations,
will not give in to the temptation of middle management launched over 6 years, not one has filed for bankruptcy.
and giant structures. We will stick to open innovation, for- However we have now come to a point where it is neces-
ever uncompromised! sary for us to stay the course in direction of open inno-
vation without drifting away towards conglomerate. The
Limiting the size of our team doesn’t necessarily mean participations must keep on growing for their own sake,
limiting our revenue. As I have already said, our activity and not in order to support faberNovel. It is important that
disposes of massive leverage in terms of production. For the various companies we have co-founded be also capa-
every faberNovel employee piloting a project for a cus- ble, independently, of blending into this open innovation
tomer, there is, through our different partners and subsidi- logic without necessarily having faberNovel at their side.
aries, the equivalent of a whole small business working and In addition, with our number of participations growing,
developing solutions. Our expansion will also reside in the our exposure will automatically increase. This will lead to
evolution of this ratio, by achieving more ambitious assign- numerous partnership opportunities between companies
ments and by letting our employees build up in strength. It from the “faberNovel galaxy”, but also with any company
will be about adding administrator qualities to the existing living in the same world as us. One will have to grasp
entrepreneurial skills of our employees. these opportunities. For all the stated-above reasons, we
must structure the excubation system in order to make this
In addition, we have noticed that one of the realizations ecosystem we have created grow. Right now we can’t be
of our open innovation policy remains undermined and completely sure of the shape this action will take: invest-
not shared enough: knowledge. Indeed, with every project ment structure, improved incubator, industrial holding…
led, a large amount of knowledge is assembled (in order whatever, as long as we manage to help these companies
to benchmark the state of the art), questioned (in order to make the transition from childhood to adolescence as fast
identify the possible innovation areas) and updated (return and efficiently as possible.
on experience). This technical and marketing knowledge
can be made available to others, in industrial fashion, with- But lastly, there is one very difficult challenge we have yet
out taking us away of our main mission. On the contrary, to face. We will have to find a way, a dynamic or a guardrail
it contributes to fuelling the ecosystem and helps us in the that will keep us from falling into the routine and into the
role of evangelist for big companies we hold on our favorite trap of “risk-free exploitation” of technologies. Our job is
issues. digitalTrends (collection of ready-to-use online slides to innovate and help others do as such. Of course, we can
about digital issues) [19] is the first of our products that, in develop supplementary activities in order to fuel our work,
industrial fashion, makes our knowledge on digital business which, by nature, doesn’t pay 90 days end of month. How-
available. Thus, leverage will be made through technology, ever, never ever must we forget that at the origin of all the
not through the size of the team. added value made by faberNovel resides an ability to build
the new. Once again, we rely on our teams and the numer-
Our excubation system consists in creating a specific sub- ous talents it contains in order to do so. Our partners will
sidiary company following a project, internally or on the also soon have the responsibility of revoking some of our
behalf of a client. It has been the natural and unexpected practices, questioning our insight on businesses, launching
extension to our work in delegated innovation. Natural, new projects… It is up to us, the leaders, to listen to them
since we quickly decided that turning projects into compa- and to hear the future of our ecosystem through them. This
nies in order to keep carrying efficiently a specific innova- system of renewal from the bottom is the only way to keep
tion was a necessity. Unexpected, in regards to the growth on exploring the opportunities offered by new technologies,
this activity has known throughout the years. digitick was and we are convinced about this. Never stop being marveled
the first, and probably the most outstanding, illustration to at everything new. Never stop believing in utopias. In open
this system. History has repeated itself many times since innovation!
and some of these spin-offs have developed way above our
expectations. Being carried for a few months by faberNovel
65 •••
References:
[1] http://www.fabernovel.com/en [5] a full pdf description is available [12] https://www.pgconnectdevelop.

[2] a google book preview is available here: http://www.transdev.eu/ com/pg-connection-portal/ctx/
here: http://books.google.fr/books Images/Upload/Publications/ noauth/0_0_1_4_83_4_3.do
?id=OeLIH89YiMcC&dq=Open+ MOBITRANS_FR_juin_2007.pdf [13] http://www.innocentive.com/
Innovation+The+new+imperative [6] http://www.ideo.com/ [14] http://www.ratp.info/touristes/
+for+creating+and+profiting+fro [7] http://www.frogdesign.com/ index.php?langue=en&rub=
m+technology&printsec=frontcov reperer&cat=iphone
[8] http://adaptivepath.com/
er&source=bl&ots=RB4GgRGNd
[9] http://www.digitick.com/qui- [15] http://coworking.pbworks.com/
8&sig=FWvQYA3OGIoGRg54hvu
lYQs0kHs&hl=en&ei=kSdnSrmjI sommes-nous-css4-digitick-pg3151. [16] http://www.parisoma.com/
seJsAa_rfnWBg&sa=X&oi=book_ html [17] http://www.ensmp.fr/Eng/index.
result&ct=result&resnum=1) [10] http://siliconsentier.org/ html
[3] http://www.mobivillage.com/index. association [18] http://openinnovation.haas.berkeley.
php4?lang=EN [11] http://www.liveboxlab.com/html/ edu/
[4] http://www.transdev.eu/Website/ modules/wiwimod/index.php?sel_ [19] http://digitaltrends.fabernovel.com/
site/fra_accueil.htm lang=english
faberNovel View on Future Innovation Technology has shortened the production cycle; every new
As any other practice, the concept of open innovation product or service can be “virtually” tested very quickly.
will spread through the benchmarks that it will set and The cost of experimentations has also become much
the mobility of its practitioners. The key will be to refine cheaper than it used to be. For instance, e-commerce has
this practice, by always keeping in mind what issues are built a strong relationship with its customers, which ena-
linked to open innovation and which ones are specific to bles them to test products at low cost and gather instan-
the company. This means also dealing with the different taneous feedback. Adding evolutions and corrections to a
forms of innovation and how they complete one another. product now costs nothing more than a market study. The
Yet, the trend of open innovation is a profound and peren- value of an innovation resides simply in its commercial
nial one. Although, by definition, there aren’t any historical success minus the amounts invested. And since the “idea
figures regarding innovative models, some profound and to market” period is decreasing, it is only logic to observe
proven trends allow us to believe that this open innovation an increase regarding the ROI of innovation.
model will soon become the reference model for every
industry. The pure player generation will be in charge of middle
management in ten years from now. And through the influ-
Information is now spreading in real-time, and the concept ence of this generation, brought up by Twitter, Youtube and
of “secret” innovation is no longer relevant. All the latest Facebook, there is a big chance this trend will keep on
innovative successes have built themselves through strong growing.
and rapid exchanges between the product, its consum-
ers and its suppliers, allowing everyone to profit from the Contact
network effects. We have entered the era of “Guerilla inno- Stéphane Distinguin
vation” and consumer-actors: the innovation model now Founder & CEO
requires considering the whole ecosystem of a product. faberNovel
stephane.distinguin@faberNovel.com
••• 66
2.5 Innovative Cross-border eRegion Development,

Focus on Slovenia
Outline
Once development strategies have been formulated, action
An emerging research question is how regional develop- is assumed to follow. However, the regional development
ment policy can respond to the challenges of a global, policies are often programmed descriptions of the current
informational and networked economy and how devel- state, through which it is not always possible to generate
opment processes are carried out in time. In an industrial innovative enough means to develop regions.
society, borders between nations, institutions, organi-
zations, regions, etc. largely determined the position of It is about creating an environment of supportive business-
regions. In a global economy, however, borders are fuzzier government-academia partnerships which are not easy and
than ever before. Now the positions of both organizations not commonly understood. Partnerships are sometimes
and regions are determined by their competencies and controversial therefore an objective analysis could lead to a
skills at learning and developing in a continuous process. better understanding of the contributions and limitations
Consequently, local initiatives and an enterprising dispo- of partnerships. They relate to the drivers of cooperation
sition are becoming increasingly important in regional among industry, government, and universities. Special
competitiveness. A regional competitiveness is defined as focus is needed with respect to the cross-border partner-
an ability to: connect the urban area and its actors to the ships and opportunities for international cooperation and
best possible networks as tightly as possible; maintain and the changing roles of government, business, universities,
develop the quality of life of local residents (services, edu- and other research organizations. Properly constructed,
cation, environment, etc.); attract new, competitive compa- operated, and evaluated partnerships can provide effec-
nies to the area; create such operational prerequisites that tive means for accelerating the progress of technology and
the existing companies of the area are able to maintain and knowledge sharing. Knowing of “best practices” may lead
develop their competitiveness. to a positive guidance for future public policy. In that sense,
innovative use of e-technologies is critical to the region
In order to be competitive in the longer term as a whole, the development, the region being considered an e-region.
regions should be able to redistribute the attracted flows
within the region to enhance wealth, social equity and the We are proposing a coordinated research and develop-
quality of life of the region as a whole. It is therefore cru- ment effort in an innovative cross-border eRegion devel-
cially important also to tie various activities, among other opment focused at selected problems as suggested by
things, to the region. Such issues as networks and learning the representatives of the eRegion. From a methodology
are thus often seen as effective ways of disseminating and perspective, a living labs approach is suggested as pro-
creating knowledge and tying different issues and activi- posed by the European Network of Living Labs – ENoLL
ties together for urban competitiveness. The question is [1]. Such an effort would be a contribution to accept-
not whether regional development is national or local, but ing the challenges of the economic crisis (A European
rather what kind of new interrelationships are emerging Economic Recovery Plan, Brussels, 26.11.2008, Measure
between different actors and what the roles of different No. 4. Reduce administrative burdens and promote entre-
organizations in different contexts may be. The question preneurship [2]).
is how the development processes can be global, national
and local at the same time. Is is about the development In Slovenia, there are several initiatives related to the cross-
capacity building by involving people at local level. border cooperation since the country is very much import-
export oriented (close to 70 of GNP) and is logistically
Adapting a more interactive and process-based but at the extremely well positioned in Central Europe. It is assumed
same time purpose-oriented way of generating regional that the cross-border cooperation may be accelerated by
development policies is not only a technical question. It an intensified use of eTechnologies allowing for an eRe-
is very much a matter of policy-making culture. Regional gion of the neighboring countries to be created: Austria,
development policies are still based on a fairly well estab- Croatia, Hungary, Italy and Slovenia. It is expected that the
lished belief in the capabilities of policy-makers to find inter-eRegions collaboration will be helpful to every region
the correct strategies for the future by rational planning. involved. For example, Alpe-Adria, Central Europe, South
67 •••
East Europe, Danube, Mediterranean eRegion. The experi- An eRegion is expected to eCollaborate with other
menting mentality and actions as provided in the Living eRegions in the EU, in the non-EU countries and globally.
Labs environment, are the components of a methodologi- An example of interest in the inter-eRegions collaboration
cal approach. A contribution to the action suggested is the has been suggested in the Nordic – Slovene Meeting on
Slovenia initiative Innovation for Life Quality - Slovenia Innovative Cross-Border eRegion Development in Ljubljana
Living Lab (July 2007) [3]. on February 3, 2009 [4]. An example of a very successful
cross-border cooperation is the case of the border towns
Haparanda, Sweden & Tornio, Finland.
References
[1] http://www.OpenLivingLabs.eu
[2] http://ec.europa.eu/commission_barroso/president/pdf/
Comm_20081126.pdf
[3] http://SloveniaLivingLab.org
[4] http://SloveniaLivingLab.org/eCollaborationNordic/
Meeting2009Feb03 Contact
Dr. Jože Gričar
Professor & eCenter Director
Faculty of Organizational Sciences,
University of Maribor, Slovenia
http://eCenter.FOV.Uni-Mb.si/Gricar
Gricar@FOV.Uni-Mb.si
Contact person, eLiving Lab,
http://eLivingLab.org
••• 68
Succesful Examples
CHAPTER
of Open Service
III Innovation
This chapter leads us to experiences of open service
innovation and assessment of success factors for the
new service innovation paradigm.
3.1 BT’s Approach to Open Innovation:

Leveraging our Research Investment
Introduction universities and industrial partners. These are followed

by the main assessment and research activities, which
BT has developed an Open Innovation Strategy to lever- exploit our global capabilities (UK, Malaysia, China, India,
age BT’s research investment. Open Innovation is key to USA and UAE) and link to major customers through the
ensuring that we gain maximum added value from a wide Engage programme. At the output the exploitation activi-
ecosystem of partners across the world by (i) scouting and ties include venturing, licensing, standards, and spin-outs,
surveying innovation opportunities across the word, (ii) as well as downstreaming into BT.
assessing and adapting these opportunities for BT own
use or BT customers, (iii) gaining benefit for BT by down- BT’s excellence at operating Open Innovation has been
streaming these innovations through a number of differ- recognised with a number of external awards, outlined
ent exploitation routes. Whilst much open innovation has in table 1
focused on how companies develop and exploit the flow
of ideas from external sources (described by Chesbrough Outside-In Open Innovation
and Garman [1], as ‘outside-in’ open innovation’) BT has
also placed high emphasis on gaining benefit from its open Innovation Scouting and Collaborative
innovation programme through various forms of external Research
engagement – letting some of its projects and intellectual Global Innovation Scouting: The Global Scouting team
assets be developed outside of the company. Chesbrough consists of a core team based in Palo Alto, California but
and Garman1 call this ‘inside-out’ open innovation and with people and resources covering Japan, Korea, China,
highlight BT’s pioneering adoption of an ‘inside-out’ Taiwan, India and Israel. Each year, the team pro-actively
approach in their paper. identifies and qualifies more than 600 innovative new
technologies, business models, market opportunities and
The Open Innovation model for external engagement can customer experience processes. The Global Scouting team
be seen as a pipeline. At the input are the innovation scout- works hand in hand with the BT Procurement Global
ing and collaborative research programmes with start-ups,
External Recognition for BT's Open Innovation Strategy
Commitment to providing customers with Malaysian Research Centre won the APICTA Merit
innovative and dynamic next-generation solutions Award for Research and Development for
backed by strong research focus (Frost and Sullivan) the IMS-based Call System project
Arts and Business East Award for Technology for National Outsourcing Award for Innovation in
work with Cambridge University Digital Studios for Outsourcing for Field Optimisation Suite designed
the New Media for a New Millennium project to manage field-force manpower and resources
Three awards at the TeleManagement Forum

Delivery model innovation category at the US-based
Applied Innovation Awards for Business Excellence, RTEC (2007) best practice report on “Establishing
for the mPowerproject Strategic Partnerships with Universities”
69 •••
Innovation Team, a virtual team with resources in the US, Collaborative research programmes: BT’s EU, Tech-
India, China, Hungary and Latin America. nology Strategy Board (ex-DTI) and other collabora-
tive research programmes provide funding support
Collaborative Research: The innovation partners land- and leverage know-how from the other consortium
scape has seen significant development over the past few partners. Consequently, our 51 active participants
years, resulting in an innovation ecosystem with R&V at benefit from the expertise of around 600 researchers
Adastral Park as a hub (see figure 1). This innovation eco- from across the industry. For example, under MUSE II,
system comprises a wide range of activities, from shorter together with Nokia-Siemens Networks, we have
term work with BT’s major suppliers for product and serv- demonstrated long reach passive optical networks at
ice development, through to longer term programmes with 10Gbit/s over 100km, influencing the future design of
universities and European partners aimed at significant access networks.
industry challenges.
Lab-to-lab collaboration with key suppliers: the indus- Main Assessment and Research Activities
try partnership programme undertakes specific joint Global Research: We have a world-class team of researchers,
research activities with targeted companies, the majority scientists and developers, including people at Adastral Park
of which are key partners in BT’s supply chain, includ- near Ipswich (England), a research team based in Malay-
ing the 21C vendors. These relationships provide access sia and a new research centre in China. We have recently
to the latest research from world leading companies, established a collaborative research and innovation centre
and also provide the opportunity to influence industry in the United Arab Emirates with the Emirates Telecom-
direction to better meet BT’s future needs. munications Corporation (Etisalat) and Khalifa University
– EBTIC (Etisalat BT Innovation Centre). We also play a
University research: We work with more than 30 uni- leading role in the India-UK Advanced Technology Centre,
versities around the world and have key partner rela- a research consortium of industry and academic partners
tionships with the University of Cambridge, University from India and the UK.
of Oxford, University College London and MIT (Mas-
sachusetts Institute of Technology). BT’s best practice We have established two global development centres in the
in establishing strategic partnerships with universities UK and India, and are currently establishing three more in
is featured in the 2007 RTEC report Establishing Stra- Europe, the US and China. These bring our global devel-
tegic Relationships with Universities.
Figure 1: BT’s Open Innovation Ecosystem
Dubai Malaysia
• 100 researchers • 50 researchers
• 100  UAE • 50  funded by
Engage government Government
• Innovating in partnership with 30 funded India
major customers • partnering with 22 Indian Universities and
• Helping our customers thrive industrial companies
• GS funding Adastral Park: • leveraging (to date) 1.5m worth of
39 nationalities research grants and ~ 50 researchers
Industrial Partners 30% PhD, 30% MsC
• 15 strategic 8 Research Centres
• 90 with active collaboration
China
• 200+ on the radar screen • 3 researchers
(of which ~ 50 are SMEs)
• seed funding
• Includes all the major 21CN vendors
University
• 3 researchers EU/DTI collaborative
• seed funding programmes
• 100 researchers
• 51 BT researchers harnessing
the efforts of ~ 600 partner
researchers
••• 70
C H A P T E R I I I  S U C C E S F U L E X A M P L E S O F O P E N S E R V I C E I N N O VAT I O N
opment teams together, and use online collaboration and Inside-out Open Innovation:
videoconferencing systems for virtual joint working. Dowstreaming and Exploitation
The Engage programme BT has established a Customer Licensing of research: BT innovations that are protected
Innovation Engagement programme for selected corporate by patents, copyright, design rights and know-how may be
customers to achieve mutually beneficial ‘win-win’ situa- commercialised through licensing to external companies.
tions: We currently maintain a total worldwide portfolio of over
7,000 patents and applications.
Customers have access to BTs research and innovation
programmes providing an opportunity to collaborate Applied Technology Centre: The ATC produces rapid
with BT prototypes, both functional and illustrative, in order to
BT seeks to augment its own innovation credentials, pro- help demonstrate new ideas to both internal employees
viding significant added value as a strategic technology and customers. As well as helping gain senior manage-
partner, and gains further insight into our customer’s ment ‘buy in’, the ATC demonstrations are often used in
business and sector challenges and opportunities customer panels and for customer experience process re-
engineering, providing a common point of understand-
BT has an extensive track record of identifying, sourcing ing, based on an explicit multimedia demonstrator, for
and successfully exploiting world-class innovation discov- all members of cross functional teams when designing
ery and research in support of, and in partnership with, new solutions.
our partners, suppliers and customers. The Customer Inno-
vation Engagement programme uses BT’s wide range of Innovation Central: Innovation Central is a UK based
global innovation capabilities around three core elements: team of managers that can be seconded into a business in
Innovation Intelligence (with teams in the US, UK and Asia), order to catalyze innovation. Armed with a set of proven
Technology Strategy and Research and Venturing (with labs processes they provide extra resource to help stimulate,
in the UK, Malaysia, China and UAE). co-ordinate and qualify new ideas. They help articulate
the new ideas in a common format and help with market
BT works closely with customers to build on our under- analysis, business case preparation and decision support.
standing of their business challenges in depth, to identify
opportunity areas where our innovation programmes can Venturing: Although taking on many forms, the ventur-
deliver a significant impact. BT has established innovation ing activities include spinning out companies. Successful
engagement programmers with a number of global custom- examples include Psytechnics (world leading voice and
ers including those in the finance, FMCG, transport and video quality measurement software) and iO (content
pharmaceutical business sectors management brokerage).
Reference
[1] Chesbrough H.W. & Garman, A.W. Web Exclusive: Contact
(2009) Use Open Innovation to http://hbr.harvardbusiness. Michael Lyons
Cope in a Downturn. www.hbr.org org/2009/06/web-exclusive-use- Chief Researcher, Services
open-innovation-to-cope-in-a- and Systems Science
downturn/ar/1 BT Innovate and Design
michael.h.lyons@bt.com
71 •••
3.2 Open Innovation at HP Laboratories
HP Labs carries out exploratory and advanced research for Hewlett-Packard (HP), tackling complex
challenges facing our customers and society, while pushing the frontiers of fundamental science.
Open Innovation [1] is a core element of HP Labs’ approach to research. Active collaboration with
universities, commercial partners, and governments brings fresh insight and amplifies the work of our
research teams around the world. HP Labs’ Open Innovation investment is focused through its Strategy
and Innovation Office (SIO) to ensure it delivers high-impact results that meet the scientific and
business objectives of HP and its partners.
The Value of Open Innovation Labs’ research portfolio, its Open Innovation program and
in HP Labs its channels to transfer research outcomes to HP business
units. Making SIO a point of focus for Open Innovation
As the world’s largest technology company, HP has long enables HP Labs to:
recognised that innovation in products and services is
critical to the company’s vitality and success. A single Create a consistent external presence, build relation-
research breakthrough can have significantly greater ships with universities, commercial organizations and
financial impact on a company than major acquisitions governments, and to identify, stimulate and engage
or cost-saving initiatives. Examples at HP include ink jet with Open Innovation opportunities.
printers and RISC based computers. Evaluate alignment between Open Innovation projects
and the core research portfolio.
HP is committed to active participation in the global Assess the potential returns to the business from part-
innovation ecosystem as an essential path to bring new nerships and to organize collaborations into a visible,
products and services to market. HP Labs is at the fore- coherent and complementary portfolio.
front of product and service development within the Engage HP Labs research teams with Open Innovation
Company and focuses on Open Innovation as a critical opportunities and support them in pursuit of successful
strategy to amplify research investments. To this end, HP outcomes.
Labs works in partnership with industry, government Adopt broad-based, systematic and disciplined efforts
and academia worldwide to engage the brightest minds, like the Innovation Research Program (see below) to
to share knowledge and ideas, and to advance a common present a single HP face to the global research com-
technology vision. munity.
Lead in the creation of demonstrators and testbeds
While creating shareholder value through innovation, HP such as Open Cirrus™ (see below), bringing multiple
is also acutely aware of the need to reinvest in the innova- corporate partners into alignment around a collabora-
tion ecosystem so it can sustain and reinforce economic tive venture.
and societal benefits for the future. HP actively participates Develop expertise and leverage in the underlying legal,
in government, academic and standards bodies, helping procurement and financial processes, freeing critical
shape the landscape and agenda for research. HP also research resources to focus on high-value research.
demonstrates an ongoing commitment to the training Systematically secure and exploit intellectual property
and development of future generations of scientists and (IP).
engineers to sustain and develop the skills that are critical
to future product and service innovation. This approach ensures alignment between strategic
research priorities and actionable research programs,
and leads to the transfer and utilization of knowledge and
An Integrated Approach
IP.
HP Labs executes its Open Innovation investment from its
Strategy and Innovation Office (SIO). SIO integrates HP
••• 72
Open Innovation in Action at HP Labs IRP projects are a route to seeding relationships; they allow
the testing and development of ideas and act as a spring-
HP Labs’ Open Innovation initiatives can be broadly cat- board to larger, higher impact programs. Based on early
egorised as University Collaborations, Commercial Part- outcomes, one the projects initiated in 2008 attracted inter-
nerships and Government-led programs. In practice Open est and successfully secured increased second year funding
Innovation initiatives often span across all three of these from the UK government. Others have opened the door
areas as they include partners from universities, businesses to creation of joint submissions to the EU Framework 7
and government agencies. The following examples illustrate program.
some of HP Labs’ key Open Innovation initiatives.
While the IRP is the main point of focus for university
Innovation Research Program [2] collaborative research, HP Labs also invests in other
SIO leads in reaching out to the academic community projects that align with its broader mission. Recent exam-
to build a strategically aligned portfolio of collaborative ples include HP Labs India’s HP Innovate 2008 and 2009
research projects with universities worldwide. The primary competitions, partnership with CERN’s OpenLab, and the
vehicle for this work is the HP Labs Innovation Research UNESCO-HP project to reduce “brain drain” in Africa
Program (IRP). Launched in 2008, the IRP is centred on through grid computing.
an annual call for research proposals in response to a pub-
lished list of topics; it is open to universities worldwide. Open Cirrus [3]
Successful projects can be funded for up to three years. HP Labs actively develops partnerships with other organ-
izations to help create the building blocks for emerging
HP Labs’ goals in creating the IRP are to: market opportunities. Cloud computing has been identified
Provide the worldwide academic community with as one of these opportunities and is a natural extension to
insight into HP Labs’ top research themes; HP Labs’ research in utility data centres, grid computing
Build a visible and coherent program of research with and software as a service. HP Labs’ approach to research in
leading universities based around complementary this area has been strongly rooted in testbed environments
research interests; and in 2008 the Open Cirrus™ cloud computing research
Create and extend relationships with leading researchers testbed was created.
worldwide; and
Actively share and leverage skills and resources to grow The founding members of Open Cirrus are HP, Intel and
and enhance research. Yahoo!, the University of Illinois at Urbana-Champaign,
Karlsruhe Institute of Technology and Singapore’s Info-
A pivotal feature of the IRP is a standard Collaborative comm Development Authority. Together, they set out to
Research Agreement (CRA) which specifies key collabora- create an open testbed to support research in the design,
tive and IP terms, with an emphasis on ensuring mutual provisioning, and management of cloud services at a glo-
freedom of operation by both HP and its university part- bal, multi-datacentre scale. The open nature of the testbed
ners. Wherever possible, the IRP aims to attract additional encourages research into all aspects of service and data-
external funding to projects to amplify their scope, includ- centre management. In addition, the partners are foster-
ing through government or commercial partnerships. ing a collaborative community around the testbed, sharing
Such additional funding is used to enhance the impact of tools, best practices, and ways to benchmark and compare
projects and extend their available resources. alternative approaches to service management at datacentre
scale.
In 2009, HP Labs’ researchers reviewed nearly 300 IRP
proposals and funded 61 projects at 47 universities in HP and its Open Cirrus partners each contribute significant
12 countries. Included in this group are leading research computing and financial resources, and have succeeded
universities such as Stanford University, the University of in attracting additional funding from the US, German
California, Berkeley, Technische Universitaet Muenchen, and Singapore governments. As of June 2009, five of six
Konstanz University, University of Saint-Petersburg, Rus- planned “centres of excellence”, each hosting a segment of
sian Academy of Sciences, Indian Institute of Technology the cloud computing infrastructure consisting of 1,000 to
Bombay, Peking University, and Imperial College Lon- 4,000 processor cores, was operational. Three new part-
don. ners have joined in 2009, and other new partners are being
recruited including universities in Canada, Japan, Korea,
Malaysia, Russia and the US. HP Labs continues to play a
73 •••
leading role in Open Cirrus’ development by hosting the Foundation (NSF), DARPA and IARPA (Defense and Intel-
Central Management Office (CMO). ligence Advanced Projects Research Agencies), and Depart-
ment of Energy (DOE). HP Labs researchers are working
with these agencies to vet new research program ideas of
Government Collaborations
interest to both the agencies and HP. In addition, HP Labs
HP Labs engages with government sponsored research is participating in programs such as ‘Energy Efficient Infor-
and innovation programs worldwide. In addition to par- mation and Communications Technology’ sponsored by
ticipating in government funded collaborative research, the Office of Energy Efficiency and Renewable Energy.
members of HP Labs regularly serve on government com-
mittees, playing a role in developing policy and shaping Investment in Capacity Building
programs. As part of its commitment to develop future generations
of technologists, HP Labs works in partnership with a
In Europe, SIO leads HP Labs’ engagement with the EU number of government-sponsored post-graduate pro-
Framework 7 Programme. In 2009, HP Labs has a pres- grams. In the UK, in 2009, HP Labs sponsored 17 PhD
ence in the Future Internet Assembly (FIA), co-chairs the candidates on Engineering and Physical Sciences Research
Trust / Security / Privacy program and contributes towards Council (EPSRC) CASE studentships. In the US, HP Labs
the overall FIA strategy. SIO also continues to represent is engaged with NSF, the American Society for Engineering
HP on the boards of the European Technology Platforms Education (ASEE) and other companies to create a post-
in Software and Services (NESSI) and Networked Elec- doctoral fellowship program to place up to 500 candidates
tronic Media (NEM), and engages with the Research annually in US industrial research labs. Programmes of this
Testbeds group in the European Commission to explore type are highly valuable to HP, as they lay foundations for
links between Open Cirrus and the EU’s Future Internet future partnerships with universities and newly qualified
research testbeds. researchers, as well as being a vital investment in the future
health of the innovation ecosystem.
In the US, HP Labs is engaged with the White House Office
of Science, Technology and Policy, the National Science
References
Contact
[1] Chesbrough, H. W. 2003. Open [3] Open Cirrus. 2009. Open Cirrus™.
Wayne Davies
Innovation: the new imperative [WWW] https://opencirrus.org/
Wayne Davies
for creating and profiting from (July 2009) Open Cirrus™ is a
EMEA Lead
technology. Boston: Harvard trademark of Yahoo! Inc. Used with
HP Labs Strategy
Business School permission.
and Innovation Office
[2] Hewlett-Packard. 2009. HP Labs wayne.davies@hp.com
Innovation Research Program
[WWW] http://www.hpl.hp.com/
open_innovation/irp/ (July 2009)
••• 74
3.3 Open innovation is Good for Us All
“Advances in the various fields of human endeavour are due, to a large extent, to the cooperation of the best brains
and best talents available everywhere.” These words were documented more than four decades ago when IBM first
opened its Zurich Research lab by none other than former IBM chairman, Thomas J. Watson Jr.
Collaboration But with this traditional definition of innovation these

organizations also operated in classic “ivory tower” mode
This insight and the availability of the great scientific tal- – highly secretive and proprietary in their approaches,
ent and economic opportunity in Europe after the war sharing little with others and, as a result, sometimes suf-
lead to the foundation of the IBM Research lab in Zurich. fering from leisurely paths to market for their best ideas.
The concept of close collaboration with leading university And there is no better example of this in practice then the
was a starting point of a path that leads us to the concepts old IBM Research.
of open innovation today that has changed the way new
opportunities are identified or created, how work is con-
From the Ivory Towers
ducted, and how value is brought to market.
to an Open Business Model
CEOs, government officials, academic and community Through the 1970s much of IBM Research was corporate
leaders around the world are all relying on “innovation” funded, it had its own research agenda and occasionally it did
to be the fundamental driver of economic opportunity, job some technology transfer, but it was not done in a very coordi-
creation, business competitiveness and advances in educa- nated manner. During this time IBM was the only company in
tion, health care and a vast range of other disciplines – now information technology and with strong profit margins many
more than ever. Investing in innovation is the surest way to IBM scientists could indulge in the kind of research and the
survive and thrive in today’s complex, connected world. kind of freedom they wanted.
In the 1980s, things started to shift and the company started

What is Innovation?
looking at how to make research more effective and tried to
The word innovation seems to be everywhere these days. influence the direction in which the developments had to go.
Within the information technology industry, innovation IBM started joint programs between research and the product
has traditionally been defined historically by the process divisions with a shared agenda that both parties, research and
of invention and discovery, and driven by investments development, had to agree upon. Collaborative teams were
in research and development. And while this is accurate, assembled to accelerate the transfer of research results, but
innovation in the 21st century is broader and it needs to again this was all being conducted within the walls of IBM.
be. To quote IBM’s innovative leader, Nick Donofrio, he
defines innovation as, “Sometimes (innovation is) not an This model was successful at its time but the dramatic changes
invention, a creation or a discovery. Sometimes it’s just in our industry in the last few decades required new models
seeing things that other people missed. It’s looking at these
Sign in front of IBM
deep intersections or interstices and seeing something that Research – Zurich in 1969
nobody else saw before, and that becomes the innovation.” (Image courtesy of IBM
Innovation is not only great technical breakthrough but Research – Zurich)
any significant improvement in a good or a process that
generates value or reduces waste.
Traditionally innovation has been viewed as starting with

the famous corporate R&D labs of the resent past. Bell
Labs, Xerox PARC and IBM Research, along with basic
research programs at the world’s leading universities,
epitomized the innovation engines of the 20th century.
75 •••
and an fundamental new approach on innovation. This shift advanced risk analytics technologies for the manufacturing,
first became evident in the 1990s, when IBM nearly collapsed. pharmaceutical, healthcare industries.
A truly dire time for IBM, where a lot of my colleagues started
asking, “Are we going to survive as research or are we going As you might expect we create a lot of technologies within
to be blown apart and get sent off to the product divisions?” Research, many of which we can transfer into the business and
The only response to ensure survival and to shorten time to some that just don’t fit. For these we need partners or suppli-
market was to become proactive and to work on real customer ers to adopt and support them as their own. While it may fall
problems. IBM in the pre-years running up to this catastrophic outside of the traditional framework, it still can contribute to
date had somewhat ignored customer needs. The concept was the intellectual property income of IBM that significantly con-
to listen to the customer and get a direct insight into their tributes to its profit figures. In fact, IBM’s intellectual property
problems. It was unheard of that a researcher would go and (IP) income is approximately $1 billion annually.
directly engage with the customer, but it created a very suc-
cessful model bringing reward to the client and the Research
The Global Innovation Outlook
organization.
Once IBM was solid again, open innovation was a strat-
Another driver for collaboration was and is the rising cost for egy that we were not only beginning to see inside, but we
technology development in the microelectronics industry. The also began to hear about on the outside. In early in 2004,
infrastructure cost and investment became a limiting factor IBM launched a unique project called the Global Innova-
for most industry players. IBM reacted to this challenge by tion Outlook (GIO) – a vastly different way of identifying
changing is R&D model for microelectronics to an alliance and acting on emerging trends, policy matters and market
model where partner where invited to joint its efforts to take opportunities, driven by input from hundreds of big think-
advantage of synergies in infrastructure, investment and talent. ers in a diverse range of disciplines around the world.
Most of the bigger European industry players joined the alli-
ance that IBM established at the University of Albany in NY. When the results where compiled we learned a great deal.
And it may seem obvious now, but perhaps the most valuable
In information technology there have been a large number of data point was the sweeping shift that became very apparent
start-ups and the competitive environment has changed a great in the way innovation is created, managed and delivered. This
deal. Opens standards are mandatory and together with open shift was driven by several factors including the dynamics of
source became a strong driver that enabled the rapid deploy- a flattening world (i.e. Internet), the march of commoditiza-
ment of new technologies and business ideas on a common tion, the rapid and global adoption of new technologies, and
often open source based platform. IBM is a strong supporter particularly the open movement.
of this movement and is contributing to many projects Linux,
Eclipse or Apache. These open platforms are an important Because of these factors innovation happens much faster today,
nurturing ground for new technologies and businesses that and it becomes much more rapidly a part of our everyday lives.
bring innovation to the market place. It no longer is the domain of a solitary genius seeking to take
the world by storm. Instead, innovation is increasingly:
A key change in the last few years was how IT innovations have
been brought to market. A business model or usage model of Global: The widespread adoptions of networked technolo-
IT innovation evolved from a software licensing to software gies and open standards have removed barriers of
as a services and cloud computing services. Research followed geography and accessibility. Billions of people, even
this trend by announcing the IBM Research Labs Experimen- in the most remote regions of the world, have ready,
tal Technology Site www.researchlabs.ibm.com/portal where affordable access to advanced wireless technologies
the latest ideas can be tested and played with. and the Internet. Hitching high-speed rides on these
platforms, ideas now circumnavigate the globe in a
Another change that takes the traditional partnership model a matter of minutes, if not seconds. As a result, almost
step further is something IBM calls a collaboratory. Just like it anyone and everyone with a good idea can now
sounds, a collaboratory is a laboratory where IBM Research- participate in the innovation economy.
ers co-locate with a university, government, or commercial
partner to share skills, assets, and resources to achieve a com- Multidisciplinary:
mon research goal. Our most recent one is with the Industrial Because the global challenges we face today are far
Development Agency of Ireland, the University College Cork, more complex, innovation now requires a diverse mix
IRCSET, Science Foundation Ireland, where we will develop of talent and expertise.
••• 76
Consider the mapping of the human genome. After The CEOs also told us that partnering – whether crossing
years of biological research in wet labs genome map- internal or external boundaries – is easy in principle, but
ping is almost a commodity. The grand challenge is very difficult in practice. This is not at all surprising.
now to understand the vast amounts of data generated
by all the biological instruments. Incredible advances Working with different groups to achieve common objec-
in information technology make it practical to model tives usually requires a change in the culture of most organi-
and process genetic information in ways never before zations, and cultural transformations may be the hardest
possible and possibly even understand it. of all. I am convinced that to truly embrace a culture of
collaboration you must accept limitations in you compe-
Collaborative and Open: tences and accept the skill and insights of others. We have
Just about every study on innovation identifies the had some success in this area with something we call Jams,
power of collaboration and communities as one of where customers, partners, employees all participate in an
the major forces driving innovation in today’s envi- giant, chat room and post ideas in an organized format. Our
ronment. most recent Innovation Jam in 2008 generated 32,000 ideas
and comments.
Our first GIO exercise, for example, identified the “power of
networks” as one of its top findings. Participants told us that, This is particularly important finding for those companies,
increasingly, their power comes largely from their ability to like IBM, who are addressing problems of systems, like traf-
tap into – and sometimes transform – a larger network of fic monitoring, healthcare and energy grids – they are very
people and ideas. sophisticated in nature and very complex.
We have learned that we cannot work on problems such as

Innovation in the Eye of the CEO
these unless we have established a very close relationship
Similarly, two years later after the GIO, IBM conducted with clients, business partners, and even other vendors who
the 2006 CEO study, which concluded that external col- might very well be competitors. This is the foundation of
laboration is indispensable for innovation. our smarter planet vision. We know we cannot instrument,
interconnect and embed intelligence in objects as diverse
800 CEOs were interviewed representing a sample across as buoys in the middle of the ocean or livestock around the
all geographic areas, a range of annual revenues, and eve- world without the help of our partners.
rything from small and medium businesses to large, global
enterprises. When asked which sources their companies
A Lab Grows in Rüschlikon
relied on for their innovative ideas, “business partners”
were right near the top of the list, just behind the general One example of open collaboration in practice can actually
employee population. “Customers” rounded out the top of be seen in the suburb of Zurich called Rüschlikon. What you
the list, which solidified in the minds of many involved can see is a massive $90 million collaborative laboratory cur-
that the most significant sources of innovative ideas are rently under construction. The lab is based on a partnership
predicated on open, collaborative approaches, including to explore nanoscience with the world-renown Swiss Federal
reaching outside the organization. In fact, CEOs said they Institute of Technology or ETH Zurich.
are getting about twice as many innovation insights from
customers as they are from their own sales and service For the first time in Switzerland, industry and academia
organizations. will create a research infrastructure for innovative coop-
eration in a joint effort. (Image courtesy of IBM Research
Perhaps most surprising and probably the only area where I – Zurich).
disagree with the participants was that “Internal R&D” was
second-to-last on the list. Now while I may be biased, as an Appropriately named, the Nanoscience Exploratory Tech-
engineer turned businessman, I would argue that those who nology Laboratory, raises the bar for collaborative research
do not see value returning from their R&D investments in nanoscience. Starting operations in 2011 the lab will pro-
are not managing their portfolios to reflect the changes vide nearly 1000 m2 of cleanroom space, the most advanced
underway in the marketplace. In other words, they still are tools, and special noise-free labs for highly sensitive experi-
not collaborating externally and working directly with their ments. IBM and ETH scientists will be staffed at the lab
customers and ecosystems. with room to grow, as IBM continues to look for additional
qualified partners.
77 •••
Nanoscale Exploratory As boundaries dissolve, as more fluid relationships form,

Technology Laboratory in as ecosystems expand and as networks get larger, the very
Rüschlikon.
nature of decision-making for individuals, businesses and
the world takes on a new shape. Local actions now have
global consequences, and the reverse is true as well.
To pursue open, collaborative innovation, enterprises sim-

ply must find ways to tap into the potential of the skill,
talent and creativity of people from different teams in dif-
ferent organizations across the globe. A company can only
be as innovative as the collective capacity of the people
who make up its ecosystem. And to attract and retain tal-
ented people, a company must enable those people to feel
respected, as individuals, as professionals and as members
Under the multi-year collaboration, IBM and ETH Zurich of a team. Collaborative innovation also depends on find-
researchers and engineers will join forces to conduct ing sustainable and agile business models in the ecosystem
research into new atomic and molecular-scale structures that allows the participants to establish survive and grow
and devices for enhancing information technologies, as even in challenging times.
well as into discovering and understanding their scientific
foundations. The economies of the combined investment At IBM we are convinced that the art of collaboration
and the shared motivation for scientific exploration will will be the most distinguishing leadership characteristic
help to address the challenges that we will discover in this of the 21st century. Universities need to teach it. Govern-
new venture. ment policies and regulations need to facilitate it. The EU
Framework programs are in many aspects a good example
for this.
Follow or Lead
Because of the shift to open innovation, the 20th-century The grand challenges in the todays markets and the envi-
business model as we know it could be history. Increasingly, ronment cannot be addressed by lone players. We are all
the motivating force that brings people together for work networked and linked. Open innovation is just recognizing
is less about business organization and more about the col- this fact and trying to take advantage of it. No individual
lective enterprise – activities driven by a common set of enterprise, no matter how large and talented, can afford
interests, goals or values. to go it alone in today’s highly competitive, globally inte-
grated marketplace.
The trend is accelerating, and it will have profound impli-
cations on how companies think about everything from If Thomas Watson Jr. could only see now, how right he
leadership to managing and motivating global talent. It will was.
change the way companies approach innovation, itself.
Contact
Dr. Erich Ruetsche
IBM Research, Business
Development & Relations
Zurich, Switzerland
http://www.zurich.ibm.com/
••• 78
3.4 The New Club of Paris
T
he New Club of Paris is the agenda developer lectual Entrepreneurs”, knowl-
for the Knowledge Economy. The Club’s main edge scientists, opinion leaders in 7KH1HZ&OXERI3DULV
objective is to create awareness on what the Knowledge Society / Economy and
knowledge society is and will be, and also support nations, high level “knowledge politicians”. The Club prominently The Knowledge
regions, cities and communities in their transformation participates in knowledge raising events around the world, Agenda Developer…
www.new-club-of-paris.org
into the Knowledge Economy. runs an annual seminar in Paris, coordinates and con-
tributes to worldwide research efforts on the knowledge
The New Club of Paris was founded in 2006. It was economy, that it publish in papers and books, and on its
emerging as a consequence of two major events: emerging website www.new-club-of-paris.org.
1. The finalization of a report called RICARDIS, (Reporting The New Club of Paris runs successfully especially so
Intellectual Capital to Augment Research, Development called Round Table (RT) projects usually based on invi-
and Innovation in SMEs) by a high level experts group, tation by Governments or Cabinets. The purpose of RTs
appointed by the European Commission. The report rec- is to provide an analyzing dialogue and an agenda setting
ommended a number of steps to the Commission for development process for a country, a region or a city to
stimulating companies in Europe and to apply Intellec- prepare the transformation towards a knowledge com-
tual Capital Reporting as a new method of knowledge munity. Thereby it initiates agenda developing projects
leadership related to the so called Lisbon agenda. The clarifying and amplifying the global movement towards
RICARDIS group itself was initiated by among others the Knowledge Society. Its work has an impact power
Professor Guenter Koch in his role as a member of the of Knowledge Navigation leading to the refinement of
European Association of leading Research and Technology national or regional Knowledge Policies.
Organizations (EARTO).
The New Club of Paris cooperates with other important
2. A major annually ongoing conference under the aus- organizations and institutes such as the Club of Rome or
pices of the World bank Institute in Paris, and initiated by the World Capital Institute. The Club has local emerging
Professor Ahmed Bounfour on the focus of “Intellectual communities worldwide in different countries which are
Capital of Nations, Regions and Communities”. This is also represented by so called “Ambassadors”, who act due to
the title of a book initiated and compiled by Professor local needs and preferences.
Ahmed Bounfour and Professor Leif Edvinsson.
The Founders
of The New Club of Paris
The founding persons and initiators of the New Club of
Paris became then Edvinsson, Bounfour and Koch. The
first two are acting as Chairman and Vice Chairman with
the latter acting as General Secretary. The Club as a set up
is an international association under Austrian law with its
seat in Vienna. The Board is now also supplemented with
representatives from Japan (T. Sumita), South America (E.
Rath-Fingerl) and Scandinavia (P. Stahle).
The “Credo” of the Club has been documented in its Man-

ifesto, initially signed by some 30 prominent Founding
Members. The Club’s membership is focused on “Intel-
Contact
Professor Leif Edvinsson
The World’s First Professor on Intellectual
Capital, Lund University, The Hong Kong
Polytechnic University, and Chairman
and co founder for the New Club of Paris
leif.edvinsson@unic.net
79 •••
ANNEX
OISPG – Open Innovation Strategy and Policy Group

To foster the open service innovation European Commission has established an industrial
group to advise on actions related to services sector and its development in Europe. The group
has senior members from industry, in order to bring the industrial perspective to the discus-
sions. The focus is clearly on the intangible economy, service economy and growth.
The OISPG group is not a technical group, even if many of its members are as well members of
technology platforms and future PPP actions. The perspective is strongly complementary, as
the fundamental paradigm shift in service innovation is enabled by technology, but requires
fundamental structural and strategic rethinking in companies as well as in the society.
The group has set the following objectives for its work:
Recognition of the new innovation paradigm : „Open user-centric
Innovation“ and get it into European Policies
Recognising the new research area of „Services Science“ in research
To get EAR (Experimentation and Application Research) methodology
widely used in research
User-centric application development
Creating environments for service innovation
Linking needed elements together to foster establishment and
development of European-based service industry
Open (functional) platforms
Reference architecture for services
Linking internationally actors around projects for service innovation
Support Lead Market Initiative in service sectors
Attached to this text is a copy of the leaflet of the OISPG group, which is welcoming
new contributors to this extremely important forum for European service industry.
Open innovation for service is the keywording of the work of the group.
Contact
Bror Salmelin
European Commission
Policy Advisor,
DG Information Society
and Media,
OISPG coordinator
bror.salmelin@ec.europa.eu
••• 80
ANNEX
81 •••
ANNEX
••• 82
European Commission
Service Innovation Yearbook 2009
Luxembourg: Office for Official Publications of the European Union
2010 — 82 pp. — 21 x 29.7 cm
ISBN 978-92-79-12926-1
doi:10.2759/12740
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Free publications:
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contact details on the Internet (http://ec.europa.eu) or by sending a fax
to +352 2929-42758.
ISBN 978-92-79-12926-1
European Commission
KK-78-09-928-EN-C
Yearbook
2009-2010
Service Innovation
European Commission

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The Many New Faces of Innovation .................................................................................. 5

CHAPTER I  VIEWS OF OPEN SERVICE INNOVATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

CHAPTER II  COUNTRY REPORTS OF OPEN INNOVATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

CHAPTER III  SUCCESFUL EXAMPLES OF OPEN SERVICE INNOVATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

ANNEX: OISPG  OPEN INNOVATION STRATEGY AND POLICY GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Name Organisation Email

The Many New Faces of

The Technical Revolution – Aﬀecting The importance of developing participative innovation

The current age of telecommunications needs to be seen Rigid Flexible /Adaptable

Installation Crash Deployment

Irruption Frenzy Synergy Maturity

Panic Standards on gauge, time

Age of Steel, Electricity and Depression

Source: Perez C., “Technological Revolutions and Financial Capital”, 2002

The role of users empowering them in the innovation proc-

Very much similar thinking has been used in manufactur-

1.2 Service in Perspective in Knowledge Society

Service Logic Evolution

Investment: in the US, Intangibles are as important as Tangibles

14 % — Tangible Business Fixed

So we need to go beyond the traditional distinctions of

A process view: Generators and Time Flow

This interplay is very critical for the value creation. Profes-

people, as the creative and innovative power embedded

This is also a starting to shape another understanding and

We can today see the emergence of Mega Regions and

1.3 Hidden Wealth: the Contribution of Science

2. Develop multi-disciplinary capabilities

We were made aware of problems arising from public sector

1.4 An Open Innovation Approach as an Enabler

Figure 1: the Revenue Paradox

odology to understand future market trends, to discrimi-

of the operators should be involved from the inception of

E.g. TEMA: mobility

This approach to new business propositions and research

Figure 4: an Open Innovation Approach for new ICT opportunities

Research & Development

Appl Mkg Ecos

New Biz Social & Technology/Platform

Operators Universities Communities Other

Figure 5: some emerging technologies in the context of ICT

2.1 United Kingdom

Value1 of exports of selected services (current prices), 2007

Government Oﬃce Region (GOR)

Developments overall has increased by around 20 while manufacturing

Share of UK output by industry sector, UK=100 (current prices), 1948-2007

Growth in Workforce jobs in Service industries, 1984-2009

1 year 5 years 10 years 25 years

G-O All Services -1,2 3,3 13,9 23,6

Source: WFJ series, ONS

Leadership and Management Skills: The development

Creating a professional services industry with a strong Programme Budget

Figure 1: Open Commercialisation (Chesbrough, 2003) An innovation director/driver must be appointed.

Dr Geleyn Meijer Dr Timber Haaker Wilbert Schaap