KIBS and Innovation

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Knowledge Intensive
Business Services –
KIBS - and Innovation
Ian Miles
Manchester Institute of Innovation Research
Manchester Business School
(and the Laboratory for the Economics of Innovation, HSE Moscow)
Ian.Miles@mbs.ac.uk

Video Conference between MBS Manchester and UNAM Mexico, Oct. 2012

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Services in the Economy
•Personal
• Private
Consumer Services
Individuals
Services •Entertainment
• Households •Etc.

SERVICE
INDUSTRIES: • Consumers •Finance
Public Business- • Businesses •Telecoms
Related •Trade
Services Services • Public
Private Sector •Etc.
Services
•Professional
• Public Sector; Services
• Private Sector •Administrative
Business
Services Manufacturing; & Operational
• Private Sector Services
Services •Etc.

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Business Services
There are public sector •Personal
organisations that perform
• Private
Consumer Services
Individuals
similar functions, e.g. Services •Entertainment
RTOs, HEIs... • Households •Etc.

SERVICE
INDUSTRIES: • Consumers •Finance
Public Business- • Businesses •Telecoms
Related •Trade
Services Services • Public
Private Sector •Etc.
Services
•Professional
• Public Sector; Services
These are services that • Private Sector •Administrative
Business
support BUSINESS Services Manufacturing; & Operational
PROCESSES, not just • Private Sector Services
business organisations Services •Etc.

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Business Services in Statistics


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Professional, Scientific and
Technical Services (M)
LEGAL
ACCOUNTANCY
CONSULTANCY

ARCHITECTURE
ENGINEERING
R&D

ADVERTISING
MARKET RESEARCH & POLLING

DESIGN
PHOTOGRAPHY
TRANSLATION
OTHERS
VETERINARY


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Administrative and Support
Services (N)
RENTING, LEASING

EMPLOYMENT SERVICES

TRAVEL SERVICES

SECURITY SERVICES

Catering
FACILITIES SERVICES would
CLEANING have been
here too

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KIBS – classic definition (1995)
As a first approach to a definition, we understand KIBS to be services that:
Rely heavily upon professional knowledge. Thus, their employment
structures are heavily weighted towards scientists, engineers, experts of
all types. Many are practitioners of technology and technical change,
Whatever their technological or professional specialism, they will also tend
to be leading users of Information Technology to support their activities.
Either supply products which are themselves primarily sources of
information and knowledge to their users (e.g. measurements, reports,
training, consultancy);
Or use their knowledge to produce services which are intermediate inputs
to their clients' own knowledge generating and information processing
activities (e.g. communication and computer services). These client
activities may be for internal use or supplied to yet other users in turn.
Have as their main clients other businesses (including public services and
the self-employed). Indeed, knowledge-intensive activities will frequently
tend to be business-related, since as labour-intensive activities they will
be relatively costly. (Educational and medical services demonstrate that
delivery to final consumers often has to be mediated through collective
service organisation.)
Miles et al (1995) at
http://research.mbs.ac.uk/INNOVATION/Portals/0/docs/KIBSEIMS1995shortreport.pdf

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KIBS – EMCC (2005)
As business services, KIBS are mainly concerned with
providing knowledge-intensive inputs to the business
processes of other organizations. These other
organizations can, and often do, include public sector
clients – KIBS do not only provide services to businesses.
Knowledge-intensity is not easy to measure, but one
convenient indicator is the shares of graduates in an
industrial workforce. By this measure, KIBS are
unusually high in terms of graduate-intensity. The
graduates have been trained in different areas of
knowledge: some specialize more in scientific and
technological knowledge, others more in administrative,
managerial or sociolegal affairs.
http://www.eurofound.europa.eu/emcc/publications/2005/ef0559en.pdf

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What services are KIBs?
Starting point: Business Service sectors: Most of NACE(1) 72-74
NACE Classn Business Services Most important activities

Leasing & renting • Renting of transport, construction equipment, office machinery
71 71.1, .2
Computer • Hardware consultancy • Software consultancy
72 72.1 – 6
Data processing • Database activities

R&D • Research and experimental development on natural
73 73.1, .2 sciences and engineering
• …on social sciences and humanities

Technical • Architectural activities • Engineering activities
74 74.2,.3
Technical testing and analysis
74.11- .12,
Professional • Legal activities • Accounting & tax consultancy
74.14 Management consulting
74.13, 74.4 Marketing • Market research • Advertising
74.5 Labour recruitment • Labour recruitment and provision of personnel
74.6, 74.7 Operational • Security activities • Industrial cleaning
74.81-84 Other • Secretarial and translation activities • Photography
Video Conference between MBS Manchester• and & exhibitions
Packing activities Fairs UNAM Mexico, Oct. 2012

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Viitamo’s Framework (2007)
Labour Customised
intensive

Esa Viitamo, 2007,
Productivity of Business
Services - Towards A New
Taxonomy

Manual Knowledge
Services Services

LAPPEENRANTA
UNIVERSITY OF
TECHNOLOGY,
TUTKIMUSRAPORTTI –
RESEARCH REPORT 188
at http://doria17-
kk.lib.helsinki.fi/bitstream/handle/
Capital 10024/43346/isbn978952214456
Standardised intensive 0.pdf?sequence=1

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Viitamo: Knowledge Services
Labour Low volume; High
Customized management &
intensive complexity; High
legal consultancy, Tailored
marketing, Merger operations service content;
Open system;
services Efficacy-driven
General or focused management Low volume; High
consultancy, Training, complexity; Low
Accounting, service content;
Business- based health care Closed system;
Efficiency-driven
Knowledge Services
Low volume; High
Tailored R&D, Tailored
complexity; Low
process engineering & design, service content;
Architectural Closed system;
services, Tailored software Efficiency-driven

“Systems services” Banking & Low volume; High
insurance, Internet-based complexity; High
Capital service content;
services, General software,
intensive Open system;
Telecomms Efficacy-driven

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Examples: Computer Services –
MIIR

KIBs NACE1 but no longer PST! NACE2


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Manche
R&D services
ster
Institute
of
Innovati
on
Researc
h


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Testing Services


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Accounting/
Consultancy, Design


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Marketing/ consultancy

Compliance. We have 50 years expertise in ensuring that
television advertising complies with BCAP codes.
Advertising processes. We are uniquely positioned to streamline
the advertising copy chain to the benefit of everyone that
advertises on TV and wider audiovisual media.
Metadata. We hold a range of metadata related to commercials
ranging from artists and music featured to advertising restrictions.


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A small legal service firm


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How important are these
services? Share of EU economy

Eurostat, 2007, European Business 14.5% EU VA
15.5% EU employment

Relative Scale of various
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BS in the UK, 2000

0 10 20 30 40 50 60 70
VALUE ADDED bn euros


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KIBS: rapid growth in share of
economy 16

Share of Employment in Economy (%)
14 USA 1985-2007

12

10

Japan 1975-2007
8

6

4
EU15 1975-2007
2

From European
0
Competitiveness 0 2 4 6 8 10 12 14
Report, 2011
Share of Value Added in Economy (%)


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European Cluster Observatory:
KIBS (+FI)
regional
employment

At
http://www.clusterobservatory.eu/index.html


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European Cluster Observatory:
KIBS, Growth and Innovation

At http://www.clusterobservatory.eu/index.html


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KIBS are often particularly
innovative - UK CIS4 data
UK CIS4 data: “Understanding Hidden Innovation: Services in the UK “
Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to
NESTA
Wholesale Trade and Repair Wholesale Trade and Repair
Retail Trade Retail Trade
Hotels and Restaurants Hotels and Restaurants
Transport and Communication Transport and Communication
Financial Intermediation Financial Intermediation
Real Estate and Renting of Mach. Real Estate and Renting of Mach.
Computer and Related Computer and Related
Research and Development Research and Development
Business Services Business Services
Manufacturing Manufacturing

0 10 20 30 40 50
0 60
10 20 30 40
Introduced a New Good Introduced a New Service

Video Conference between MBS Manchester andInnovation Oct. 2012
Product UNAM Mexico,

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innovative 2 - UK CIS4 data
NESTA
Wholesale Trade and Repair
Retail Trade
Hotels and Restaurants
Transport and Communication
Financial Intermediation
Real Estate and Renting of Mach.
Computer and Related
Research and Development
Business Services
Manufacturing

0 10 20 30 40 50 60
Introduced a New Process

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NESTA
Retail Trade
Business Services
Manufacturing

0 5 10 15 20 25 30 35 40 45 50

Novel Process Innovation Novel Product Innovation
NOVEL Innovation: new to market or industry

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Manche KIBS are often particularly
ster
Institute
of
Innovati
Wholesale
data: “Understanding Hidden Innovation: Services in the UK “
UK CIS4 Trade and Repair
on Retail Trade
NESTA
Researc
h
Business Services
Manufacturing

0 5,000 10,000 15,000 20,000 25,000

Intramural R&D Expenditure p.e. Extramural R&D Expenditure p.e.
Machinery, Equip. and Soft. Exp. p.e. Expenditure on External Knowledge p.e.
Training Expenditure p.e. Design Expenditure p.e.

Video Conference between MBS Manchester and UNAM Mexico, Oct. employee
Innovation Expenditure per 2012
Marketing Expenditure p.e.

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Structure of Innovation
Spend in Services
Retail Trade
Business Services
Manufacturing
Innovation
Expenditure 0 10 20 30 40 50 60 70 80 90 100

Intramural R&D Expenditure Extramural R&D Expenditure Machinery, Equip. and Soft. Exp.
Expenditure on External Knowledge Training Expenditure Design Expenditure
Marketing Expenditure


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BS Innovation Expenditure
Business Services
Legal, Accounting andManufacturing
Management

Architectural and Engineering 0 10 20 30 40 50 60 70 80 90 100

Technical Testing and Analysis
Expenditure on Advertising
External Knowledge Training Expenditure Design Expenditure
Labour Recruitment

Investigation and Security

Industrial Cleaning

Miscellaneous

Innovation 0 10 20 30 40 50 60 70 80 90 100
Expenditure
Expenditure on External Knowledge Training Expenditure Design Expenditure

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3 Types of Knowledge
Technology/Technical
Knowledge
Knowledge may Computer
be of internal Services
business Engineering
processes and/ Services R&D Impressionistic,
or of external but some
environments Industrial
Process scope for
(customers, regul validating e.g.
Design
ators, suppliers, c by graduate
Technical
ompetitors, etc. Testing share of
Architecture employment
Industrial
Business Product
Media Design Management
Accountancy
Graphic Market Consultancy Professional/
Design.. research Legal
Advertising Administrative
Services
Creativity/ Knowledge
Cultural Knowledge

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“technology-
based KIBS”

KIBS Graduate-Intensity
CIS3
data,
"professional
UK KIBS"

???


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KIBS Professional Workers

Retention
Motivation and Governance
Collaboration
Knowledge Exchange and Capture
Good source: Dawson, R., 1999, Developing
Knowledge-Based Client Relationships: The Future
of Professional Services, Boston: Butterworth-
Heinemann


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Work
Experience
across
Sectors


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Knowledge of internal characteristics
and external environments –
Clients, Suppliers
Collaborators Markets
Process Technology

Techniques
Product Natural &
Competitors Technology & Health and Safety Physical
Design
Human Resources Env
Management
Social & Routines
Institutional Organisational Regulators
Structure/ Design
Env
Financiers

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Knowledge of internal characteristics
and external environments –
Knowledge applied to Problem
solving:
What’s the
• Support for self-diagnosis background?
What’s the
• Diagnosis problem?
What’s the
• Prescription solution?

• Configuration How to effect
it?

• Implementation of Solutions Putting it into
practice

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Knowledge Intermediators
Universities Laboratories Governments Other KIBS Clients
Suppliers etc. Intelligence

External (generic) Diagnosis
knowledge Prescription
resources * (Configuration)

KIBS Implementation
synthesising and
translating
generic
knowledge
Firm’s absorption
of knowledge


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Its an Interactive Process!
Universities Laboratories Governments Other KIBS Clients
Suppliers etc. Intelligence
Diagnosis
External (generic)
knowledge Prescription
resources * (Configuration)
KIBS fusing Implementation
* including generic and local
previous service knowledge – and
encounters creating new
knowledge
Preliminary Problem through R&D etc Client’s
Formulation knowledge and
Coproduction and experienced
Absorption of Solution problem

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Interactive Innovation
Knowledge of environments &
Intelligence
technologies; scientific &
engineering principles; innovation- Diagnosis
External (generic)
relevant market
Prescription
knowledge
conditions, regulations, laws
resourcesunderstanding of Configuration
Better
problem, ways of measuring and Implementation
monitoring
Reduced risk in defining fusing
KIBS solution;
introduction of new types of solution
generic and local
knowledge
Easier learning and application of
Preliminary Problemin combining processes
experience
Formulation
Firm’s experience
Coproduction and that can be applied to core products, processes - &
Saving resources
of problemother goals
Absorption of Solution

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Relations with Clients –
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Exchange and Innovation
Knowledge of-
environments &
technologies; STI
principles and
market
conditions, regulati
ons, laws
Better understanding of
problem, ways of
measuring & monitoring

Reduced risk in defining
solution; introduction of
new types of solution

Easier learning &
Fusion of generic application of
and local experience in
Video Conference between MBS Manchester and UNAM Mexico, Oct. processes
knowledge combining 2012

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What sort of business
relationship is this?
Tordoir distinguishes: jobbing, sparring
(and sales) Highly interactive Highly standardised

How far is the problem defined?
What is the scope for learning and
innovation?

P P Tordoir, 1996, The Professional
Knowledge Economy: The Management and
Integration of Professional Services in
Business Organizations, Dordrecht, Kluwer

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Relations with Clients are Central
Tordoir: Jobbing, Sparring, C Gallouj, 1997, “Asymmetry of
Sales information and the service relationship:
selection and evaluation of the service
provider”, International Journal of Service
Gallouj: Client Roles and Industry Management,. 8 (1) pp. 42-64.
Strategies in Managing KSRI (Satzger et al), 2009, Knowledge
Relationship – selecting Intensive Services Procurement
KIBS/specifying services Strategy, KSRI, KIT, at
http://www.ksri.kit.edu/Upload/Publications/70765f4b-
10cc-4ce4-b874-04c3016ad158.pdf

Bettencourt: role responsibilities
for clients effective coproduction
communication openness,
shared problem solving, Bettencourt et al, 2002, “Client Co-
tolerance, accommodation, Production in Knowledge-Intensive
advocacy, Business Services” California
involvement in project governance Management Review, Vol. 44, Issue 4
personal dedication


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Swedish KIBS Survey (Nählinder)

(Higher for less
standardised services)

(All higher for more innovative firms)

1000 KIBS
firms

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UK environmental services
Orientation to
technology

100 firms, 1995

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Hipp - German Survey
100%
90%
Services vary in 80%
standardisation 70%
… some more 60%
designed for 50%
clients… 40%
especially in 30%
KIBS 20%
10%
Surprisingly
low 0%

Sci. & Tech.
Trade

Software
Other Financial
Banking / Ins.
Transp. &

Other Bus. Sers.
Comm.

specialisation

Sers.
Sers.
– may depend Specialised
on question – Intermediate
cf Nahlinder
Standardised

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Hipp - German Survey

Half the innovating service firms thought their
innovations positively impacted client
performance/productivity – 16% “very
important” productivity, 13% performance.
Fewer for the firms supplying standardised
solutions - 1/3
4/5 of software firms thought this (as opposed
to only 2/5 financial firms, for instance)
Service innovation>organisational innovation
(but this can have an impact too)

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Doroshenko - Russian Survey of
KIBS and coproduction


O
MIIR In Eleonora Di Maria, Roberto
Grandinetti, and Barbara Di Bernardo
(eds) 2012 Exploring Knowledge-
Intensive Business Services
Knowledge Management Strategies
London, Palgrave


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Doroshenko - Russian Survey


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Doroshenko – effects on users


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Innovations “ by Marina Doroshenko, Ian Miles, Dmitri Vinogradov

- Sample is of leading KIBS, so picture may differ for smaller, more local
firms

TABLE 1. REPLICATION OF INNOVATIONS, 2011[
"How often do you manage to supply service innovation which you co-created
with one customer, to other customers ?
Sectors
AD MKT ADT IT REC ENG FIN LEG DVP DSGN
Average

Often 9.3 10.4 18.0 4.8 3.3 6.8 5.8 13.0 11.7 10.9 8.1

Sometimes 25.6 23.4 23.0 30.6 43.3 16.9 32.7 20.4 11.7 29.1 25.8

Rarely 23.6 22.1 27.9 24.2 18.3 30.5 38.5 22.2 15.0 12.7 25.8

Never 41.5 44.2 31.1 40.3 35.0 45.8 23.1 44.4 61.7 47.3 40.3

AD = Advertising; MKT = Marketing services; ADT = Audit; IT = Information technology services; REC =
Recruitment services; ENG = Engineering services; FIN = Financial advice services; LEG = Legal advice services;
DVP = Property development services; DSGN = Business design


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MIIR http://www.ksri.kit.edu/Upload/Publications/70765f4b-10cc-4ce4-b874-04c3016ad158.pdf

Prof. Dr. Gerhard Satzger
gerhard.satzger@kit.edu
Peter Schulteß
peter.schultess@kit.edu
Andreas Neus
andreas.neus@kit.edu


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Information Asymmetries


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Six Issues in Procurement


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User’s Views
PWC study of consultants’ clients 2006

http://www.wwyltc.com/
Ensuring-sustainable-
value-from-
consultants.pdf

180
clients, large
range of
consultancy
services

The User’s View ?
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PWC study of consultants’ clients, 2006

180
clients, large
range of
consultancy
services

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User’s View of Benefits –
PWC 2006


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Implications for Innovation
Apart from freeing up resources, & being dispensable…
KIBS are specialists - in acquiring, possessing and
communicating knowledge. Alternative to labour
mobility.
Able to draw on generalised knowledge from other firms
and sectors. FUSION – and some creation of knowledge
Less wedded to heritage, organisational rigidities,
factions
But… how far do they really help clients move in new
directions? (E.g. : what role in move to cleaner
technology?)

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Some implications –
practical issues and research questions
“ Absorption capacity” – what capabilities and practices
Client
clients need to effectively select KIBS, define problems, use
side solutions?
“Organisational amnesia” – how can they cope with loss of
memory when activities outsourced?
Knowledge management (a) capture of new learning; (b)
across organisational boundaries; (c) across professions?
Standard solutions vs. sensitivity to organisational culture,
national circumstances, etc.
Professionalism: avoidance of “capture”, of collusion with
clients and/or suppliers, of conflicts of interest
KIBS Methods for maintaining and demonstrating quality control,
addressing information asymmetries
side Retention and motivation of experts

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KIBS’ importance recognised
Important innovators
Important sources and “intermediaries” of
knowledge
Growing (still?)
Limited knowledge about how different KIBS
interact with clients and each other (in
projects), about conditions and criteria for
successful collaboration – what sorts of impact
and innovation? What management lessons?
What policy issues?


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End of Presentation
(some extra slides follow)


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Muller and Zenker– KIBS & SMEs

Muller E, & A Zenker (2001) "Business services as actors of knowledge transformation: the role
of KIBS in regional and national innovation systems" Research Policy vol 30 no 9 pp1501-1516.

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2010 MCA study
http://www.mca.org.uk/
value-consulting

Management
consulting


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Main conclusions on users


KIBS and Innovation

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