Gaining insights into the services economy
In my keynote speeches I often ask the audience what proportion of the US economy is services. The majority of people guess far below the correct figure, which is 82%. I often point to the following chart, which illustrates the opening words to my book Developing Knowledge-Based Client Relationships:
“In 1980 the US economy was worth $4.9 trillion, producing 1.3 billion tons of goods. Fast forward 20 years to 2000, and the US economy had almost doubled in size to $9.3 trillion, yet the weight of goods produced had only edged up by a few percent to 1.37 billion tons. The economic activity that accounted for this near-doubling in size of the economy was associated with almost nothing of substance, nothing that you could see. This massive growth in the economy was driven by information, ideas, services, and knowledge—things that weighed nothing.”
I’ve long held that the future of the economy is in professional services. Almost everything will be become commoditized in a global connected economy. But deep specialist knowledge applied effectively will have rapidly increasing value, so that over the next 18-25 years as the global economy doubles in size, professional services will account for the vast bulk of economic growth.
Despite the massive predominance of services in the economy, study and research of the services sector is massively under-represented. Only recently has activity picked up in the field. One significant initiative launched a few months ago is the Services Research & Innovation Initiative, established by IBM, Oracle, Technology Professional Services Assocation, and Service and Support Professionals Assocation, which intends to increase funding to study and enhance performance in the services sector.
Jim Spohrer, the Director Services Research at IBM’s Almaden Research Center in Silicon Valley, just got in touch to let me know some of the latest in the field. Jim joined IBM a few years ago to drive IBM’s research into services, which only makes sense given the thousands of researchers it has on hardware and software, and the fact that services is over 50% of IBM’s revenue. One of Jim’s first initiatives was a Symposium on the Coevolution of Technology-Business Innovations, which he invited me to speak at. The slides for my presentation are available from the IBM website. I’ve just had another look at the paper I wrote for the symposium which explains the content covered in the slides: Towards Living Networks: Industry Leadership Through an Active Reconfiguration of Economic Flows – I think it provides a good overview of a network perspective on services.
Some of the very interesting resources Jim pointed me to include:
Service is Front Stage, a new book by James Teboul of INSEAD
Richard Normann prize for research on the services economy
A Service Science, Management, and Engineering studies program at IBM
Frontiers in Service Innovation conference
Service Systems Engineering undergraduate program
It’s great to see all these initiatives. It is very much a legacy mentality that has meant that services are so under-represented in study and research. Those who can uncover insights into how to deliver services more effectively will be able to add massive value. Personally I will be focusing on applying network perspectives to services delivery. More coming on this front.