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The Challenges of Implementing Services Innovation at a Regional level – Some Practical Examples

Written by Meirion Thomas and Dr Dylan Henderson

Reviewed by David Walburn


The concept

Step in the RIS process

What can be expected?

How to implement it?

A quote


Expert's comments


The concept

Innovation has traditionally been associated with concepts such as R&D, products, patents, and ultimately, technological innovation. This reflects a "goods dominant logic", where innovation is seen as a process leading to tangible goods. Such concepts are of particular relevance to the manufacturing sector where innovation activity is focused on tangible products and processes.

In recent years, services innovation has begun to be explored by policy makers, innovation specialists and academics, in part driven by the growth of the services sector, but also by the growing move towards service provision in all sectors of the economy, notably in manufacturing where the process - known in some circles - as the ‘servitisation’ of revenues generated by manufacturing firms has taken hold.

As defined by the European Commission, Services innovation relates to: "…new or significantly improved service concepts and offerings as such, irrespective of whether they are introduced by service companies or manufacturing companies, as well as innovation in the service process, service infrastructure, customer processing, business models, commercialisation (sales, marketing, delivery), service productivity and hybrid forms of innovation serving several user groups in different ways simultaneously" [1].


Step in the RIS process

The "EU Smart Guide" highlights the important role that service innovation can play with respect to the RIS3 process, indicating that "regional stakeholders and policy makers should be aware of the potential that lies within the transformative power of service innovation when designing new or improved ‘smart’ regional policies".

Services innovation is potentially an important consideration for all steps in the RIS3 design process, and may, for example, form part of an overall future vision (Step 3), priorities (Step 4), roadmaps and action plans (Step 5).


What can be expected?

Research by the OECD suggests that services innovation is growing in importance, driven in part by firm-level trends such as "servitisation" – the application of services to manufacturing products and processes[2], as well as wider "mega trends" in areas such as such as globalisation, the shifting of wealth, ageing population and environmental challenges[3].

These are some of the key market drivers that are encouraging businesses to innovate in services, service products and their delivery.

By focussing on the promotion and support for services innovation, regions may add to the "toolbox" available to transform regional economies giving greater potential to strengthen their existing industrial base by facilitating the development of new sectors and industries.

Key characteristics of the services innovation process are summarised below:

To respond to the challenge and opportunity of Services innovation, regions are likely to face a number of barriers, including, most prominently, the dominant position in policy, strategies and support instruments of technological and product-oriented concepts of innovation. Technological innovation and science-based research, development and innovation (RD&I) support measures are well developed and well understood by regional actors. Services innovation, however, is a relatively new topic within economic development policy, which requires awareness raising and high level of policy acceptance in order to obtain "equal treatment" alongside traditional, technological innovation policy and supports. 


How to implement Services innovation policy and support?

A number of lessons can be identified from current approaches to the implementation of services innovation in both policy and practice:

  • Providing a supportive environment for services innovation is a key challenge for member states and regional authorities. Achieving this is likely to require services innovation to be identified as a priority in key policy documents, tangible support from stakeholders and a strong alignment to existing RD&I measures.
  • Promoting awareness and understanding of services innovation is necessary and important. As a relatively new concept raising awareness of services innovation is important to accompany the implementation of practical service innovation supports. This can help to communicate both the importance of services innovation to innovation researchers and businesses and also to meet the requirements for funding agencies.
  • Encouraging multidisciplinary approaches to RD&I projects by involving services innovation is an important theme. This involves drawing together researchers and businesses while maximising knowledge transfer and learning from different sectors and research areas (e.g. humanities and behavioural science) and engaging both technological and non-technological expertise.
  • A strong focus on the end-user in developing the supports for services innovation is a central challenge and is vital.
  • A mix of traditional and less traditional metrics is needed in order to monitor services innovation support performance effectively.

Innovation in services and any new supports should be placed in the context of existing mechanisms where possible.  Hosting a services innovation strand within an existing RD&I programme or aligning support to the needs of a sector or "grand challenge" are possible ways forward.

Services innovation support and policy in practice can be found in the following examples:


These examples also suggest that, as a starting point, regions need to review their existing RD&I supports to assess their "fit" with service innovation and then engage with service innovators – in SMEs, large companies and public services - to identify needs and opportunities (i.e. Stage 1 of the RIS3 process).


A quote

“The transformative power of service innovation is understood as the process when services “disrupt traditional channels to market, business processes and models, to enhance significantly customer experience in a way which impacts upon the value chain as a whole”. In this way, service innovation is shaping emerging sectors, industries and markets and contributes to structural change and industrial modernisation.” from the Report of the Expert Panel on Services innovation in the EU (2011)

The services innovation topic is growing in interest at the EU level, following the work of the EU Expert Panel on Services Innovation. This group’s work resulted in the publication of the "Smart Guide to Services Innovation" for regional structural change, and subsequent establishment of a number of "model demonstrator regions" in: the Canary Islands, Emilia-Romagna, Limburg, Luxembourg, Northern Ireland and Upper Austria.




Mr Meirion Thomas

Meirion ThomasMeirion Thomas has over 30 years experience in economic development and SMEs where his expertise covers a range of interests including innovation, knowledge transfer, social enterprise, venture capital, and sustainable development. After holding senior positions in the Welsh Development Agency and Cardiff University, Meirion also established and became a director and partner in CM International Group, a strategic innovation and management consultancy with offices in Paris, Lille and Cardiff.

Since 1990 Meirion has led a wide range of innovation and economic development assignments and projects across Europe, North America and Southern Africa and in recent years he has also acted as a Director of Finance Wales plc and Chairman of the Cardiff-based specialist advisory group, the Cultural Enterprise Service Ltd.



Expert's comments

The article gives a clear explanation of the growing importance of services innovation for businesses in various sectors, and hence its potential impact on economic growth. It therefore has an important role to play in economic development policy where commercial markets fail to disseminate ideas to the extent to which policy makers would wish to see, as in the RIS3 process.

The article concentrates on services innovation from the point of view of public policy, but it would perhaps be helpful to have some discussion of the extent to which market forces drive services innovation, and where, and why they fail to perform adequately from the point of view of economic development policy. Such an analysis is surely necessary in order to design appropriate policy programmes which have the potential to add value. The article as it stands almost seems to suggest that there would be little services innovation without the intervention of public policy.

Service innovation can not be seen as the new “grail”, it should reflect the practical realities of implementation of public support policy. This means avoiding over-ambitious claims about what interventions can achieve. Such claims can lead to disillusion when the results do not come through and the possible discrediting of what may be otherwise useful programmes. Whilst it may be true in theory that programmes to encourage services innovation offer  the “potential to transform regional economies”, it is perhaps more realistic to describe such programmes as useful additions to the regional economic development tool box.


Mr David Walburn

After a career in business David Walburn joined Greater London Enterprise in 1986 where he was responsible for venture capital and other small business support, before becoming Chief Executive of the organisation. He was the Chair of the London Business Angels Network and played a key role in the setting up of the European Business Angels Network. He has worked with the UK government and the European Commission on developing public policy initiatives to improve the financing of small and medium-sized enterprises. He was the Chair of Capital Enterprise, the umbrella body for organisations supporting micro business development in London, until 2012.

For the last ten years he has been a Visiting Professor at London South Bank University where he headed the Local Economy Policy Unit and was the managing editor of the journal Local Economy.

He has served as President of EURADA, and been a member of a number of advisory bodies of the European Commission.  He has been an active member of the International Economic Development Council in Washington DC and has a wide range of international contacts with economic development organisations.

He continues to write and lecture on small business finance and regional economic development.


[1]  European Commission (2012) "The Smart Guide to Service Innovation – How to Support SME Policy from Structural Funds". http://ec.europa.eu/enterprise/policies/sme/regional-sme-policies/documents/no.4_service_innovation_en.pdf.

[2] Bains, T. (2013) "Servitization impact study: How UK based manufacturing organisations are transforming themselves to compete through advanced services". Available from: https://connect.innovateuk.org/documents/416351/3926914/Servitization+impact+study.pdf/5b31740a-56ff-41c2-bdc8-e4289353fa66

[3] OECD (2012) "OECD policy report on service R&D and innovation", Working Party of National Experts on Science and Technology Indicators/Working Party on Innovation and Technology Policy. Presentation available from: http://www.oecd.org/sti/inno/Session1Policy_Mario.pdf