The CBI has called for British businesses to launch innovative service offerings as the economy slows down. Launching its Excellence in service innovation report, the business organisation said the service sector has an opportunity to come up with bold business models.

“Companies face two choices, they can hunker down and hibernate, the other choice is to keep spending on new products and services,” said Richard Lambert CBI director general of the current economic slow down. “So we should see plenty of innovation over the next two years.” The CBI, in association with weapons development company Qiniteq carried out the Excellence in service innovation report to highlight the need for innovation in a sector that now dominates the British economy.

“This survey comes at a critical time for the economy,” Lambert, the former editor of the Financial Times said.

“There has been no real study on service sector innovation and we wanted to look at its importance to the UK,” said Amanda Turner, product management director at the Qiniteq who carried out the research. During the research 16 companies were studied from a wide variety of sectors, including building engineers Arup, Norwich Union, BT Wholesale, Clarks shoes, HSBC, KPMG, Fujitsu, Legal & General, Nike and Web 2.0 production company Magic Lantern.

The study broke innovation down into: technology innovations, design, board or marketing innovation; process or organisation change and business model innovation. Examples studied included how Clarks developed new technology, with Qiniteq; the design of Newcastle International airport, marketing at Nike, process changes at architects Benoy and self-service banking at HSBC as a change in business model.

“The main drivers of innovation in all of these organisations was competitive advantage,” Turner said. She divided their drivers into two categories, internal and external. Internal drivers included a growing company, strategy and growing the brand. External drivers were an evolving market, environmental and regulatory requirements and satisfying customers. Turner expected intellectual property (IP) to be the main barrier to innovation, and was surprised that it wasn’t. “The barrier was trying to get to market first and the barriers that slowed that down were regulation, skills shortages and the receptiveness of customers.”

Based on her research, Turner said the service sector needed to create an environment where staff feel free to innovate and where they “will have approval to ‘get out there and try things’”, she said. All the companies that she surveyed had a “balanced view of risk, they call it learning, not failing”.

Qinetiq was one company cited by the CBI as successfully becoming an innovator. Originally a state owned organisation where it carried out military research for the Ministry of Defence (MoD), the privatised Qiniteq now has 50 per cent of its business in services, rather than research. Graham Love, Qinetiq chief executive explained the company now operates 22 military ranges for all three military forces and as a result has increased usage and investment into the ranges. It has taken its bomb disposal robot technology into the civilian field and now operates a service for emergency services to call on to handle acetylene cylinders in fires, which are too dangerous for humans to handle. Qinetiq is also carrying out impact assessments on wind farms for the MoD, air traffic control and maritime agencies using Google Earth.

John Denham, Secretary of State for Innovation, Universities and Skills, backed the research and promised that the government recognised its own role in spurring on innovation as a major procurement body. “What government procures must be innovative and be innovative in the way we procure.” His department is launching annual innovation reports which will be guidelines to other government departments. “Over the next three years £2 billion will be spent on further education building contracts, the contractors must have training programs and the buildings be environmentally sustainable. This approach will spread across the government and build the skills in industry,” Denham cited as an example.

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