knowledge intensive business services and innovation
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PresentatioTRANSCRIPT
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Knowledge Intensive Business Services –
KIBS - and Innovation
Ian MilesManchester Institute of Innovation Research
Manchester Business School(and the Laboratory for the Economics of Innovation, HSE Moscow)
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Consumer Services
• Private Individuals
• Households
Business-Related Services
• Consumers• Businesses• Public
Sector
Business Services
• Public Sector;• Private Sector
Manufacturing;• Private Sector
Services
Services in the Economy
SERVICE INDUSTRIES:
Public ServicesPrivate
Services
• Personal Services
• Entertainment
• Etc.
• Professional Services
• Administrative & Operational Services
• Etc.
• Finance• Telecoms• Trade• Etc.
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Consumer Services
• Private Individuals
• Households
Business-Related Services
• Consumers• Businesses• Public
Sector
Business Services
• Public Sector;• Private Sector
Manufacturing;• Private Sector
Services
Business Services
SERVICE INDUSTRIES:
Public ServicesPrivate
Services
• Personal Services
• Entertainment
• Etc.
• Professional Services
• Administrative & Operational Services
• Etc.
• Finance• Telecoms• Trade• Etc.
These are services that support BUSINESS
PROCESSES, not just business organisations
There are public sector organisations that perform similar functions, e.g. RTOs, HEIs...
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Business Services in StatisticsNACE Rev 2
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Professional, Scientific and Technical Services (M)
LEGALACCOUNTANCY
CONSULTANCY
ARCHITECTURE
ENGINEERING
R&D
ADVERTISING
MARKET RESEARCH & POLLING
DESIGN
TRANSLATIONPHOTOGRAPHY
VETERINARYOTHERS
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Administrative and Support Services (N)
RENTING, LEASING
EMPLOYMENT SERVICES
TRAVEL SERVICES
SECURITY SERVICES
FACILITIES SERVICESCLEANING
Catering would 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
71 71.1, .2Leasing & renting • Renting of transport, construction equipment, office machinery
72 72.1 – 6 Computer • Hardware consultancy • Software consultancy Data processing • Database activities
73 73.1, .2 R&D • Research and experimental development on natural sciences and engineering • …on social sciences and humanities
74 74.2,.3 Technical • Architectural activities • Engineering activities Technical testing and analysis
74.11- .12,
74.14
Professional • Legal activities • Accounting & tax consultancy 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 Packing activities • Fairs & exhibitions
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Viitamo’s Framework (2007)
Knowledge Services
Manual Services
High capital intensity
High labour intensity
Low information intensive
Low tech intensive
High information intensive
High tech intensive
Tailored managerial
problem solvingInformation-
intensive repetitive processing
Standardised
Customised
Labour-intensive tailored
processingLabour-intensive
repetitive processing
Standardised
Customised
Tailored technical problem solving
Scale-intensive networked processing
Standardised
Customised
Capital-intensive tailored
productionCapital intensive
networked production
Standardised
Customised
Esa Viitamo, 2007, Productivity of Business
Services - Towards A New Taxonomy
LAPPEENRANTA UNIVERSITY OF TECHNOLOGY,
TUTKIMUSRAPORTTI – RESEARCH REPORT 188
at http://doria17-kk.lib.helsinki.fi/bitstream/handle/10024/43346/isbn978952214456
0.pdf?sequence=1
Manual Services
Knowledge Services
Labour intensive
Capital intensiveStandardised
Customised
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Viitamo: Knowledge Services
Knowledge Services
High capital intensity
High labour intensity
High information intensive
High tech intensive
Tailored managerial
problem solvingInformation-
intensive repetitive processing
Standardised
Customised
Tailored technical problem solving
Scale-intensive networked processing
Standardised
Customised
General or focused management consultancy, Training, Accounting,Business- based health care
Customized management & legal consultancy, Tailored marketing, Merger operations services
Tailored R&D, Tailored process engineering & design, Architecturalservices, Tailored software
“Systems services” Banking & insurance, Internet-based services, General software, Telecomms
Low volume; High complexity; High service content; Open system; Efficacy-driven
Low volume; High complexity; Low service content; Closed system; Efficiency-driven
Low volume; High complexity; Low service content; Closed system; Efficiency-driven
Low volume; High complexity; High service content; Open system; Efficacy-driven
Knowledge Services
Labour intensive
Capital intensive
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Examples: Computer Services – KIBs NACE1 but no longer PST! NACE2
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Manchester Institute of Innovation Research
R&D services
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Testing Services
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Accounting/ Consultancy, Design
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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.
Marketing/ consultancy
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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
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Relative Scale of various BS in the UK, 2000
Architecture & engineering
Industrial Cleaning
Misc.
Security & investigation
AdvertisingR&D
Telecommunications
Labour recruitmentLegal, accountancy,
management
computer services
0
100
200
300
400
500
600
700
800
900
0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00
Value-added (million euros)
Em
plo
yees (
tho
usan
ds)
0 10 20 30 40 50 60 70 VALUE ADDED bn euros
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KIBS: rapid growth in share of economy
0 2 4 6 8 10 12 140
2
4
6
8
10
12
14
16
Share of Value Added in Economy (%)
Sha
re o
f E
mpl
oym
ent
in E
cono
my
(%)
Japan 1975-2007
EU15 1975-2007
USA 1985-2007
From European Competitiveness Report, 2011
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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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0 10 20 30 40 50 60
Manufacturing
Business Services
Research and Development
Computer and Related
Real Estate and Renting of Mach.
Financial Intermediation
Transport and Communication
Hotels and Restaurants
Retail Trade
Wholesale Trade and Repair
0 10 20 30 40 50 60
Manufacturing
Business Services
Research and Development
Computer and Related
Real Estate and Renting of Mach.
Financial Intermediation
Transport and Communication
Hotels and Restaurants
Retail Trade
Wholesale Trade and Repair
Introduced a New Good Introduced a New Service
KIBS are often particularlyinnovative - UK CIS4 data
UK CIS4 data: “Understanding Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA
Product Innovation
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0 10 20 30 40 50 60
Manufacturing
Business Services
Research and Development
Computer and Related
Real Estate and Renting of Mach.
Financial Intermediation
Transport and Communication
Hotels and Restaurants
Retail Trade
Wholesale Trade and Repair
KIBS are often particularlyinnovative 2 - UK CIS4 data
UK CIS4 data: “Understanding Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA
Introduced a New Process
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0 5 10 15 20 25 30 35 40 45 50
Manufacturing
Business Services
Research and Development
Computer and Related
Real Estate and Renting of Mach.
Financial Intermediation
Transport and Communication
Hotels and Restaurants
Retail Trade
Wholesale Trade and Repair
Novel Process Innovation Novel Product Innovation
KIBS are often particularlyinnovative 4 - UK CIS4 data
UK CIS4 data: “Understanding Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA
NOVEL Innovation: new to market or industry
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Manchester Institute of Innovation ResearchUK CIS4 data: “Understanding Hidden Innovation: Services in the UK “ Programme on Regional Innovation, Cambridge-MIT Institute 2008 report to NESTA
0 5,000 10,000 15,000 20,000 25,000
Manufacturing
Business Services
Research and Development
Computer and Related
Real Estate and Renting of Mach.
Financial Intermediation
Transport and Communication
Hotels and Restaurants
Retail Trade
Wholesale Trade and Repair
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.
Marketing Expenditure p.e. Innovation Expenditure per employee
KIBS are often particularlyinnovative 5 - UK CIS4 data
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0 10 20 30 40 50 60 70 80 90 100
Manufacturing
Business Services
Research and Development
Computer and Related
Real Estate and Renting of Mach.
Financial Intermediation
Transport and Communication
Hotels and Restaurants
Retail Trade
Wholesale Trade and Repair
Intramural R&D Expenditure Extramural R&D Expenditure Machinery, Equip. and Soft. Exp.
Expenditure on External Knowledge Training Expenditure Design Expenditure
Marketing Expenditure
Structure of Innovation Spend in Services
Innovation Expenditure
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Innovation Expenditure
0 10 20 30 40 50 60 70 80 90 100
Miscellaneous
Industrial Cleaning
Investigation and Security
Labour Recruitment
Advertising
Technical Testing and Analysis
Architectural and Engineering
Legal, Accounting and Management
Intramural R&D Expenditure Extramural R&D Expenditure Machinery, Equip. and Soft. Exp.
Expenditure on External Knowledge Training Expenditure Design Expenditure
Marketing Expenditure
BS Innovation Expenditure
0 10 20 30 40 50 60 70 80 90 100
Manufacturing
Business Services
Research and Development
Computer and Related
Real Estate and Renting of Mach.
Financial Intermediation
Transport and Communication
Hotels and Restaurants
Retail Trade
Wholesale Trade and Repair
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3 Types of KnowledgeTechnology/Technical
Knowledge
Professional/ Administrative
KnowledgeCreativity/ Cultural Knowledge
Architecture
Advertising
Industrial Product Design
Industrial Process Design
R&D
Technical Testing
Computer Services
Engineering Services
Accountancy
Legal Services
Management Consultancy
Business Media
Graphic Design..
Market research
Impressionistic, but some scope for
validating e.g. by graduate
share of employment
Knowledge may be of internal
business processes and/ or of external environments (customers, regulators, suppliers,
competitors, etc.
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0%
10%
20%
30%
40%
50%
60%
70%
Low
Tec
h M
anuf
actu
ring
Pas
seng
er T
rans
port
Fre
ight
Tra
nspo
rt
Med
ium
Low
Tec
h M
anuf
actu
ring
Con
stru
ctio
n
Oth
er T
rans
port
Med
ium
Hig
h T
ech
Man
ufac
turin
g
Ext
ract
ion,
Util
ities
, Rec
yclin
g
Who
lesa
le
Ren
ting
and
Leas
ing
Hig
h T
ech
Man
ufac
turin
g
Ban
king
, Ins
uran
ce, P
rope
rty
Tra
ding
Tel
ecom
s &
oth
er IT
ser
vice
s
Lega
l / A
ccou
ntin
g
Pub
lish,
Tra
v/E
st A
g, M
kt R
es
Man
ager
ial /
Org
anis
atio
nal S
ervs
Arc
hite
ctur
e &
Eng
inee
ring
R&
D a
nd T
echn
ical
Tes
ting
Com
pute
r S
ervi
ces
Mean % Other Graduates
Mean % S&E Graduates
KIBS Graduate-Intensity
???
CIS3 data, UK
“technology-based KIBS”
"professional 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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Work Experience
across Sectors
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Knowledge of internal characteristics and external
environments –
Competitors
Clients, SuppliersCollaborators
Regulators
Financiers
Markets
Social & Institutional
Env
Natural & Physical
Env
Process Technology
Management
Organisational Structure/ Design
Routines
Techniques
Human Resources
Product Technology &
DesignHealth and Safety
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Knowledge of internal characteristics and external environments –
What’s the background?
What’s the problem?
What’s the solution?
How to effect it?
Putting it into practice
Knowledge applied to Problem solving:
• Support for self-diagnosis• Diagnosis
• Prescription• Configuration
• Implementation of Solutions
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Universities Laboratories Governments Other KIBS Clients Suppliers etc.
Knowledge Intermediators
External (generic) knowledge resources *
Firm’s absorption of knowledge
KIBS synthesising and
translating generic
knowledge
Intelligence
Diagnosis
Prescription
(Configuration)
Implementation
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Universities Laboratories Governments Other KIBS Clients Suppliers etc.
Its an Interactive Process!
External (generic) knowledge resources *
* including previous service encounters
Client’s knowledge and
experienced problem
KIBS fusing generic and local knowledge – and
creating new knowledge
through R&D etc
Intelligence
Diagnosis
Prescription
(Configuration)
Implementation
Preliminary Problem Formulation
Coproduction and Absorption of Solution
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Interactive Innovation
External (generic) knowledge resources
Firm’s experience of problem
KIBS fusing generic and local
knowledgePreliminary Problem Formulation
Coproduction and Absorption of Solution
Intelligence
Diagnosis
Prescription
Configuration
Implementation
Knowledge of environments & technologies; scientific &
engineering principles; innovation-relevant market conditions,
regulations, laws
Better understanding of problem, ways of measuring and monitoring
Reduced risk in defining solution; introduction of new types of solution
Easier learning and application of experience in combining processes
Saving resources that can be applied to core products, processes - & other goals
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Relations with Clients – Exchange and Innovation
Knowledge of- environments &
technologies; STI principles and
market conditions, regulations, laws
Better understanding of problem, ways of
measuring & monitoring
Reduced risk in defining solution; introduction of
new types of solution
Fusion of generic and local
knowledge
Easier learning & application of experience in
combining processes
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What sort of business relationship is this?
Tordoir distinguishes: jobbing, sparring (and sales)
How far is the problem defined?
What is the scope for learning and innovation?
Highly interactive ◄▬▬► Highly standardised
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, Sales
Gallouj: Client Roles and Strategies in Managing Relationship – selecting KIBS/specifying services
Bettencourt: role responsibilities for clients effective coproduction
communication openness, shared problem solving, tolerance, accommodation, advocacy, involvement in project governancepersonal dedication
Bettencourt et al, 2002, “Client Co-Production in Knowledge-Intensive
Business Services” California Management Review, Vol. 44, Issue 4
C Gallouj, 1997, “Asymmetry of information and the service relationship:
selection and evaluation of the service provider”, International Journal of Service
Industry Management,. 8 (1) pp. 42-64.
KSRI (Satzger et al), 2009, Knowledge Intensive Services Procurement Strategy, KSRI, KIT, athttp://www.ksri.kit.edu/Upload/Publications/70765f4b-10cc-4ce4-b874-04c3016ad158.pdf
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Swedish KIBS Survey (Nählinder)
0% 20% 40% 60% 80% 100%
helps clientsdevelop
products orroutines
no.of contactswith clients
during a deal
works in closecooperation with
client
highest level
high level
low level
lowest level
1000 KIBS firms
(Higher for less standardised services)
(All higher for more innovative firms)
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UK environmental services
1 2 3 4 5 6 7
0
10
20
30
help clientschoose
help clientsdevelop
develop forclients
100 firms, 1995
Orientation to technology
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Hipp - German Survey
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Tra
de
Tra
nsp
. &
Co
mm
.
Ba
nkin
g / In
s.
Oth
er
Fin
an
cia
l
Se
rs.
So
ftw
are
Sci. &
Te
ch
.
Se
rs.
Oth
er
Bu
s. S
ers
.
Specialised
Intermediate
Standardised
Services vary in standardisation… some more designed for
clients… especially in
KIBS
Surprisingly low specialisation – may depend on question – cf Nahlinder
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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 - 1/34/5 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
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In Eleonora Di Maria, Roberto Grandinetti, and Barbara Di Bernardo
(eds) 2012 Exploring Knowledge-Intensive Business Services
Knowledge Management StrategiesLondon, Palgrave
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Doroshenko - Russian Survey
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Doroshenko – effects on users
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New paper “Knowledge Intensive Business Services as Generators of Innovations “ by Marina Doroshenko, Ian Miles, Dmitri Vinogradov
- Sample is of leading KIBS, so picture may differ for smaller, more local firms
Average
Sectors
AD MKT ADT IT REC ENG FIN LEG DVP DSGN
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
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 ?
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Prof. Dr. Gerhard [email protected]
Peter Schulteß[email protected]
Andreas [email protected]
http://www.ksri.kit.edu/Upload/Publications/70765f4b-10cc-4ce4-b874-04c3016ad158.pdf
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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
180 clients, large range of consultancy
services
http://www.wwyltc.com/Ensuring-sustainable-value-from-consultants.pdf
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The User’s View ? PWC study of consultants’ clients, 2006
Partially satisfied
50%
Completely satisfied ,
36%
Not at all satisfied
14%
180 clients, large range of consultancy
services
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User’s View of Benefits – PWC 2006
Increased revenue, 6% Reduced costs,
14%
Specialist know ledge/ improved
management capabilities, 31%
More eff icient processes, 34%
Improved customer service,
15%
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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 clients need to effectively select KIBS, define problems, use 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 interestMethods for maintaining and demonstrating quality control, addressing information asymmetriesRetention and motivation of experts
Client side
KIBS side
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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