“Hidden wealth: the contribution of science to service sector innovation.”

The Royal Society has recently published the findings of a major study on the role of science, technology, engineering and mathematics (STEM) in service sector innovation. The report is entitles “Hidden wealth: the contribution of science to service sector innovation.”

Below I have extracted some key points, including:

1. Measuring the Impact

2. Tipping Point

3. Transformative STEM Developments

4. University-Industry Collaboration

5. Align Education and Research through Design-focus and Grand Challenges

6.  Summary of Recommendations

1. Measuring the Impact

According to the report, STEM impacts service innovation primarily in two ways:

1. Technology (the “T” in STEM), especially Information-Communication Technology (ICT) and the internet is a major driver of service innovations.  For example, the internet enables service innovations to be customized, personalized and available 24/7.

2. People: 82% of STEM graduates are employed in the service sector.   Often STEM graduates are prized for their analytic and problem solving capabilities.   However, most employers want STEM graduates with more multidisciplinary skills, including management, economics, law, communications, system thinking, etc.

The report also notes that STEM graduates may be employed in R&D groups of service firms, but more often as employees of outside consulting organizations, members of a firm’s service supply chain, or members of external innovation networks that a service firm draws on as needed.  So many STEM affects on service innovation are via indirect or distributed mechanisms that are more “hidden” than in traditional manufacturing firms that compete through innovation.

2. Tipping Point

The report emphasizes that STEM in service innovation is at a tipping point (following bullet items from report):

• There is high potential for services to undergo a major transition, with major growth in markets for personalised yet ubiquitous services, enabled to a large degree by STEM developments and exploitation of ICT;

• Scientific advances are very likely to open up completely new service possibilities based on analysis of data from pervasive sensing and monitoring of activities;

• Increasingly, the economic value from scientific developments is likely to be realised through services;

• Service industries and supply chains are becoming increasingly globalised, representing both opportunities and challenges for UK organisations, government and policymakers;

• STEM will also play a major role in enabling, stimulating and supporting service-based responses to many of the big, intractable social and economic problems that society is facing—for example in health, energy, environmental, information and knowledge systems;

• The technological advances and the convergence of existing technologies may well result in changes to the nature of the relationship between experts, service suppliers and customers;

• One consequence of these changes is that interconnected services will come to resemble ‘complex systems’, which are inherently non-deterministic. This will require the development of new scientific approaches to understand, develop, manage and create value from the service systems of the future;

• The development and deployment of ‘innovation technology’ could enable a radically different way of innovating in services (and other sectors), providing greater opportunity for users and external partners to participate in organisations’ innovation processes;

• These profound changes could give rise to many challenges. These include: issues of managing non-deterministic systems; ensuring security, privacy and data protection; dealing with public trust and with confidence in data quality; and ensuring resilience and reliability in service delivery.

Transformative STEM Developments

The report highlighted a few scientific developments which have already precipitated major transformations, including (following bullet points from the report):

• The development of the world wide web led by Sir Tim Berners-Lee FRS, which has underpinned many fundamental changes in the way services are delivered and consumed over the past two decades;

• The technique for DNA fingerprinting invented by Sir Alec Jeffreys FRS at Leicester University with Medical Research Council support. The technique is now used widely in different service environments including health, policing, security and environmental services;

• The game theory and mathematical modelling by UCL economists, supported by ESRC, which underpinned the government’s auction of 3G radio spectrum and raised £22.5bn for the taxpayer;

• The search algorithm which was the initial basis of Google’s success;

• The development of derivative and hedging products that were built on mathematics and made possible by advances in computing.

Evolving technologies like grid computing and cloud computing seem certain to add to this list of transformational STEM developments.

Innovation in both the financial sector and the public sector benefit greatly from STEM, and so these two are highlighted in dedicated sections.  The financial sector overview concluded with observations related to the need for better modeling and analysis of risk in global networks of complex service system interacting to avoid crisis or more rapidly recovery from crises, when complex systems get near tipping points. “Modelling risk and identifying uncertainty is hugely difficult in all complex systems. To maximise the chances of success requires the application of the very best of contemporary science and social science.”

University-Industry Collaboration

Of particular interest was a study of  Knowledge Transfer Partnerships between universities and industry, which showed that for service firms the majority of the collaborative grants were with business schools (non-STEM 360) and computer science (STEM 330); the only significant others were engineering technology (STEM 150), other (non-STEM 140), design (non-STEM 60).  Math, statistics, and numeric methods (STEM 20) was small, perhaps surprisingly small.   “A Knowledge Transfer Partnership is a three-way project between a graduate, an organisation (eg business, public sector body or not-for-profit organisation—the ‘knowledge base partner’), and a higher or further education institution or research organisation (the ‘knowledge base’). The project is designed to draw on the expertise in the knowledge base to help solve problems relevant to the knowledge base partner, via employment of a recently graduated ‘KTP associate’ and close involvement from academics. KTPs are part-funded by a government grant and partly by the knowledge base partner (for example, an SME would be expected to cover

one third of the cost, amounting to roughly £20,000 per year on average). See http://www.ktponline.org.uk for more information.”

Align Education and Research through Design-focus and Grand Challenges

The glossary included: “SSME Service Science, Management and Engineering: a term used to describe an interdisciplinary approach to studying, designing and implementing services systems, and associated university courses.”  Unfortunately, several places in the text that expanded SSME, replaced “Management” with “Manufacturing.”  “Some employers do require graduates with an overview of a range of different subjects. In this context, we welcome the introduction of new courses such as Service Science, Manufacturing and Engineering (SSME), while noting from previous attempts in other disciplines the likely difficulties that may arise.  Perhaps more difficult is how to address the lack of T-shaped people. It should be stressed that the concept of the ‘T-shaped person’ refers not simply to the equipping of STEM graduates with ‘soft skills’—it requires the incorporation of domain knowledge and attributes from other disciplines and some ‘professional skills and tools’ such as IT competence, business awareness and generic analytical skills. It therefore requires a different response. We believe it is inevitable that the demand for these types of graduates will increase in the future.”

There was a call for more “Design” emphasis in the multidisciplinary training (emphasizing as some have that SSME should really be SSMED).  “Designing and managing these systems, and the problems they pose, will require the development of theories and tools to cope with the systems’ lack of predictability. This will involve integration of knowledge from social science, management science, economics, and STEM disciplines. Insights from studies of complex systems in other areas, such as biological ecosystems, may be particularly valuable in areas as distant as financial systems.” “Developing effective solutions to many of the major intractable social, economic and natural challenges facing society (eg low carbon futures, poverty and threats to public health) will frequently require extensive scientific research. But implementing these solutions will increasingly involve services organisations.” “In light of these challenges and opportunities, we believe it is necessary to increase the scale of cooperation between services and the academic research community (including the STEM communities) by developing common research agendas and building research communities.”

“Although the service design methodology is relatively new in the UK, its proponents claim that it is area in which the UK is as advanced as anywhere in the world in terms of new methods and implementation. In the course of our research we engaged several UK companies in this fi eld including Think Public, Live|work, Bontoft Design, and Engine Service Design. The evidence suggests that there is scope for greater interchange of ideas, methods and technologies between service designers and other parts of the STEM community, which is likely to be valuable for the future.”

“At present the academic services research community is fragmented and largely uncoordinated. Greater convergence and scale is required—the building of ‘critical mass’—to accelerate the development of service-based responses to many of the intractable problems faced by modern societies, economies and business. For example:

a) Developing low carbon energy systems.

b) Healthcare.

c) The stability of interdependent financial systems.”

“We believe that it is necessary to:

• Establish UK and international research communities in services innovation (a stronger UK research community is probably a necessary precursor);

• Develop collaborative international research agendas in service-related fields;

• Ensure that opportunities to exploit STEM in services are properly recognised;

• Align research and market opportunities;

• Ensure parity of esteem between services-related research and academic research in other areas;

• Develop multidisciplinary capabilities.”

“To succeed, service-related Grand Challenges will also require—and thereby provide a stimulus for—the development and close alignment of numerous cross-cutting theoretical and intellectual competences in areas such as:

• Analysing, quantifying and managing risk;

• Managing uncertainty in modelling and simulation;

• Grid computing;

• Quantitative data analysis, data security, standardization or validation of data sets;

• Service design;

• Queuing theories;

• Dynamics in human-systems interaction.”

“However, we have been most struck by the importance attached to multidisciplinary skills and, in particular, by the strength of criticisms from business (but also academia) of silo thinking and activity in UK universities. A virtually unanimous set of comments from the business community was that they valued high quality domain-specific skills possessed by graduates of UK universities but were often disappointed in the so-called ‘complementary skills’ they possessed. In their evidence to us, the Research Councils’ reported hearing the same message from service sector employers— that ‘T-shaped people’ are in short supply (i.e., people who have deep domain knowledge and understanding but also have a breadth of skills and knowledge outside this domain). We consider below what ‘T-shaped people’ mean in the context of the service sector.”

On the importance of multidisciplinary STEM graduates to design solutions to these grand challenges, the report concluded: “Services are intrinsically multidisciplinary, requiring the integration of many different skills (STEM and non-STEM alike). Indeed, innovation is often spurred by the coming together of individuals and knowledge at the margins and intersections of disciplines and skill sets. There is a clear requirement for a new approach to multidisciplinary education which is more focused on the characteristics of service and service systems and the need is only going to grow in the future.”

“In conclusion, there is a clear requirement for a genuinely new approach to multi disciplinary education which is more focused on the characteristics of services and service systems. This need is only going to grow in future (see Chapter 5). There is, as yet, no consensus about the set(s) of skills required, hence our recommendation of a review of the needs of employers below (see Recommendation 18) and an expectation that several different responses will be appropriate.”

Since the Royal Society report echoed many of the same concerns and recommendations, and referred several times to SSME, as well as including the term in the glossary,  it is surprising that this report did not reference the Cambridge-IBM report (IfM and IBM, 2007) – http://www.ifm.eng.cam.ac.uk/ssme/.

Summary of the Recommendations

1. Create center to model and assess risk for financial and banking sector

2. Enhance the above center, perhaps as global research collaboration

3. Establish competency levels for mathematical modelling and risk in complex systems

4. Review/improve contents of financial engineering and related courses in the UK

5. Study STEM for public sector innovation

6. Emulate Higher Education Innovation Fund for public sector innovation

7. Make Ordinance Survey data related to private and public sectors more accessible

8. Explore freeing commercial data for academic and other research

9. Improve national statistics to avoid financial crises and enhance service research

10. Lead in the development of knowledge of service innovation models

11. Undertake a large-scale review of service value chains and research base linkages

12. Undertake a large-scale review of innovation intermediaries

13. Use data and models, to move policy beyond the linear model of innovation

14. Do not repeat mistakes that have discouraged STEM applied to service innovation

15.  Expand national research portfolios to encompass new service-related Challenges

16.  Evaluate existing research programmes with respect to opportunities in services

17.  Align global experts and competencies to establish service-related Grand Challenges

18.  Modify existing STEM courses to address service sector employer needs

19.  Ensure existing STEM course providers take immediate action to prepare graduates

20.  Service sector employers should engage with STEM course providers

21.  Develop better knowledge exchange schemes for service sector stakeholders

22.  Review/improve existing Knowledge Transfer Partnerships for service sector

23.  Develop Knowledge Transfer Networks valued across sectors

24.  Enhance knowledge exchange professionals for university/service industry linkages

25.  Develop guidance for knowledge exchange professionals in universities

26.  Foster exchange of senior academic and research staff into business and vice versa

27.  Use Knowledge Exchange instead of Technology Transfer or Knowledge Transfer

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