IBM: The New Contours of Service Innovation

The importance of the global service economy continues to grow. Earlier this week, IBM and the University of Cambridge jointly released a detailed report partially based on the findings of an international symposium devoted to service innovation made up of some 100 academics and businesspeople. The report is a clarion call for increased research and development – it suggests investment be at least doubled to create a rigorous “service science” – by universities, private companies, and governments.

Though the sector is often misunderstood as a container for the soft, largely undesirable “McJobs” most vulnerable to economic malaise, the report tries to show the diversity of the sector, pointing to old-line companies such as Rolls-Royce (the aircraft engine manufacturer) and BAE Systems which have profitably transitioned their businesses from simply selling commodities to providing services. Rolls-Royce, for instance, now leases its engines to airlines rather than selling them outright.

(You can read an executive summary here; download the entire report here; and, better yet, hear a discussion with IBM’s chief service researcher about the report here.)

Of course, IBM itself is likely one of the most successful examples of a company that has made that transition. So it’s not entirely surprising that it would aggressively back this kind of effort. What’s more, issuing a report like this is a return to first principles in effect for IBM. The company was instrumental in helping establish computer science as an academic discipline in the 1950s and 1960s. Now, the company hopes to do much the same thing with the service sector, helping to establish, legitimize, and staff future ventures with a new crop of graduates and executives.

More importantly, the report convincingly makes the case that now is the time for such investment. Citing UN labor statistics, it notes that, for the first time ever, service jobs outnumbered agricultural and manufacturing jobs worldwide in 2007. In the U.S., the service sector accounts for more than 80% of GDP. However in developed economies, research and development investment in services typically accounts for just a third of R&D spending, whereas the sector accounts on average for two-thirds of GDP and employment.

So what does the report suggest? It encourages universities to offer courses in service science, management, and engineering to graduate employees that can work beyond traditional boundaries. It wholeheartedly embraces interdisciplinary approaches to academic and business research. And, it urges employers to create hiring policies and career paths that support service professionals.

Broadly, the goal is to foster the creation of “adaptive innovators,” or those sometimes referred to as the “T-shaped” people. So-called T-shaped employees have a deep proficiency in one area, engineering for instance, but are also conversant and comfortable interacting in a profitable way with other departments, marketing, industrial design, and finance for example. So goes the theory, a work environment generally filled with T-shaped workers is naturally collaborative and not excessively siloed.

All in all, it’s a worthwhile read which, while deep, is accessible enough. It will be interesting to watch forthcoming academic and research developments pegged to such reports. If IBM can make itself as vital to the development of a rich, profound service science as it did fifty years ago with computer science, it may once again prove a beacon.

(As an aside, one nice touch in the report is a rich glossary that is helpful, especially with terms that may have acquired multiple meanings with varied usage. It helps cut some of the jargon – “adaptive innovators” – and refresh the memory – “service sourcing.”)

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