Knowledge Intensive Business Services: Post-Pandemic New Normal
So today, Professor Ian Miles from Alliance Management Business School and Professor David Doloreux from HEC Montreal will discuss their views on post-pandemic new normal of knowledge intensive business services. Well as we all have experienced, the pandemic has pushed organizations to be dependent upon remote working. Well while some sectors have easily adjusted to such changes, some sectors such as knowledge intensive business services, that had heavy reliance on in-person interactions with clients, must have faced greater challenges, so as we are now seeing the light at the end of the tunnel (fingers crossed) uh it is timely to discuss how this sector would capitalize on their pushed remote working experience for post-pandemic engagements. So it is likely that this sector may adopt a hybrid model of working, but we know very little about how this model would look like and its impact on organizational innovation and sustainability as well as on organizational interactions with clients and wider ecosystem. So today's debate will address these points. So with this opening remark, now I would like to invite Professor David Doloreux to discuss his views on post-pandemic new normal for knowledge intensive business services.
He will offer a broader view of the sector, followed up with some general predictions on the post-pandemic new normal. Okay, over to you David. Thank you very much and thank you very much for the invitation. I will just share my PowerPoint, oh let's see if it's working. Perfect, it's working, David. It's working? So okay I just have two computers just let me sure
if I'm not - okay good so thank you very much for the invitation, so today what I would like to do or share it's to share my view about as I say in the title some speculative reflection because as uh not like unlike Ian I haven't started to do any empirical work on the possible consequences application of of COVID-19, we just launched a survey on R&D capabilites in Montreal that we start to address some of the question about pandemic actually and the application of uh COVID-19 under uh the the their new business strategy, so so today I would like to just raise some of the biggest reflection based on my own interpretation of of the crisis, so let me, so what I would like to do today with you uh it's to go briefly to set up this scene so to go to to to briefly introduce you what we what we know, what we mean by knowledge intensive business services and what are their role and identity. Uh then I will present some of the preliminary results that uh that we that I have on the rate on latest paper that we conduct a systematic review of the literature on on innovation related topic uh on on KIBS innovation and I will conclude and discuss some of the issue relate to to what extent COVID-19 will impact on KIBS innovation research. So first what are KIBS? So let's start with a very very simple question, but since the seminal work of Miles in 1995 this question is still debate so what are KIBS? KIBS are very specific services or uh that involve economic activity which are intended to result in the creation accumulation and destination of knowledge. KIBS sector constitute a service sector and include
establishment and firm whose primary activity depend on human capital knowledge and KIBS so KIBS has very specific specific characteristic, first knowledge is the most essential asset of KIBS, KIBS almost exclusively consists on transferring knowledge and skill to client or user organization. KIBS will combine different type of highly specialized knowledge which will be both codify and tacit in order to protect to develop problems specific solution. Another characteristic of KIBS like the production of knowledge intensive services will require frequent interaction and close collaboration between KIBS and their clients or KIBS and their other organization and finally kids act as an intermediary between the client knowledge base, especially the client tacit knowledge base, and the pool of codified knowledge through increasing the exchange of otherwise disconnect pool of knowledge. In the literature again so in the seminal work of Miles there's several scholar who has tried to classify different type of KIBS so we can identify three broad classes of KIBS: the first one that are dealing with social and professional services which can be which are called professional uh KIBS, those dealing with science and technology are are those that that are called technological KIBS and those dealing with creative continents are creative KIBS and you can see on the over here the different type of services belonging to these different type of KIBS. KIBS also supply different type of business services and technological related services to clients and users.
These services comprise as identify on the overhead different services relate to research and development, management consulting, information, communication services, human resource, employment, legal services, accounting, financing and marketing and so on. So let's move now on the role and identity of KIBS I think and it's maybe I'm biased here or not because I I'm biased but I don't want to make any favor to you but I think this is the best code that you can find to identify the role and identity of KIBS. Miles stress that KIBS are doing what KIBS are doing is locating, developing, combining and applying various type of generic knowledge about technology and applications to the local and specific problem issue and context of their client, so basically what that what this mean is that KIBS by the nature of their equity are interactive, they are located at the centre of interacting learning system involving knowledge creation, knowledge sharing and knowledge diffusion with their client and other organization.
In other words, KIBS are provider of technological and professional knowledge to other industrial sector and are of course supporting knowledge base upon which knowledge and all other firm and industry are built. If we move on also on the role of identity of KIBS, we can see over the last 15 years that KIBS industry and and the different KIBS sub-sector are among the most dynamic segments of the service sector in the OECD country since the mid-80s and is one of the most rapidly growing sector in the north American economy. This expansion of course has completely increased the importance of service and innovation for a long-term economy-driven transformation of regional and national economy. Business services and in particularly knowledge intensive ones are crucial in both trends and consequently interest in the research of knowledge intensive business have recently become very important subject of study. You can see here as an example when we look about this table about the KIBS and employment growth the importance of employment growth in KIBS and the different region of Quebec. What we can see is over the last 10 years
the grow is is the grow is is is significant when you we observe that 34 the the the employment in KIBS at grow of 34 34.6 percent in the entire province of Quebec over the last ten years. What is even more interesting from a geographical perspective is that even if Montreal concentrate more than 25 percent of the total employment of KIBS, the highest grow, the highest grow the highest grow region in terms of KIBS and employment are those region outside the metropolitan area and but located within one hour from Montreal and we can just see the uh the grow over the last 10 years of the the s3 region which is about one hour from Montreal which you see the number 76.7 you see the region of Montreal, Monterrey sorry which is the growth 42.7 and Capital National 49.8. We also noticed also another a new trend over the last 10 years of the importance of grow is the importance of employment growth of KIBS in peripheral and reward region. You can see here the number the percentage of grow over the last ten years in in the in the small peripheral and rural region of Basel around and also now and now oh I can go quickly over that so so when we look specifically about the role and identity of KIBS, uh particular interest has been shown to what they're also of three specific role. The first one is KIBS defined as a knowledge facilitator and vector,
okay KIBS as I just uh I just described perform multiple services activity, however one of their main contributions will be to provide to their client with innovation support in that context. KIBS will act as a facilitator of innovation, KIBS also is a very interactive player which means that KIBS will be engaged in collaboration and and uh and firm will use KIBS as knowledge as knowledge shows to help them for their innovation activities so KIBS are also defined as carrier of innovation and finally KIBS can be described as as a source of service innovation as innovator in their own right just like manufacturing, KIBS can be internally innovative and introduce innovative strategy uh kids and the firm itself asked will introduce they will make sure that they have the right condition and element that will help to develop the capacity to introduce or significantly improve new services, new organizational practice or new marketing method or already existing one. So if we move on to the third part of my presentation, uh we conduct a systematic review of the literature. When we conduct this about KIBS and innovation, when we conduct this this systematic review, the data we use for this review did not really reflect on the COVID crisis because the article include in the review were those published between 2001 and two thousand and 2019, so this review allowed us to systematic to systematically analyze uh the different study and the different team tackle on their under the generic uh the under under the uh the work of innovation and and and KIBS. So here the figure
just show actually the the review the flow diagram about how uh we identified the different uh article and we the the review is based on the analysis of 90 uh article that deals directly with innovation and KIBS. Let's move on, so based on the review and coding machine we develop a coding machine that we code a different article along different different dimensions, we distinguish six different research stream of KIBS innovation research. The first research stream is about the specific factor that influence innovation, so in this specific research stream we can find four categories of study: those dealing specifically with innovation output, those dealing with innovation strategy, so trying to understand the mode of innovation characterizing KIBS, a third category of this study concerned the the different internal factor that will impact or that will have an effect on innovation that include especially especially sorry R&D and human capital and a fourth group of study under the specific factor in firms innovation are the external factors so there are studies that look specifically on intellectual property right and cooperative behaviour. The second uh research stream consists of study that try to understand how knowledge is managed which in KIBS turn and how managed strategies are adopted and developed by KIBS. The third research stream concerned work on open innovation and in this specific research stream most of the work focus on two things: one is to understand the cooperative pattern of KIBS and their impact on innovation and the second group of work concerned the scope and depth of knowledge shows that they try to apply a causal and Larson breadth and depth of knowledge source in order to understand how does this impact of KIBS innovation. The fourth research stream concerned the use of KIBS in the innovation
process, so these study deal with three different topics: the first one is the contribution of KIBS and user innovation activity, so basically this study tried to understand how the use of KIBS impact on the innovation of innovation activity of KIBS user. The second category group of study concerned the mechanisms that govern interaction between KIBS and their user. Here the study focused more focus on specifically the role of trust, the role of proximity and in the role of face to face in delivering these different delivering different services to KIBS user. And the third group of study concerns the role of geographical proximity uh sorry concern yeah the role of geographical proximity location of KIBS use. Here this kind of study mainly done by
myself and Richard Shermer we tried to understand the geography of the use of KIBS services. The fifth the sorry the fifth research stream concerns the geography of KIBS innovation. In this study, we find two type of study, the first one we tried to understand the location determinant of KIBS in different regional and national contexts and on the other the second group of study concerned the impact of agglomeration economy of KIBS innovation. And the last one, the last research stream concern internationalization. This research stream has the less has the less number of article dealing with this specific topic, essentially the uh the the the article dealing with internationalization and KIBS innovation try to understand the driver and determinant of KIBS internationalisation and export activity. Surprisingly among all these study review there are very few that has been dealing
with digital service production and delivery and its its in its implication for innovation, the division of labor innovation and KIBS organizational and sustainability, so the the the the webinar today deal with a very very important and under-researched topic in KIBS research at least in KIBS in the uh at least in KIBS innovation research. So if we move on now to the core of the uh the the the presentation and the the webinar, so the key question now that arose from uh from the researchers how COVID-19 will affect the macro picture let alone the micro level in other words how KIBS innovate and what new challenges and changing pattern in their business model and environment will be affected by both post COVID - sorry there's a mistake - world. Of course there's the lazy answer to that question and the lazy answer will be that finally there's no answer to this question because we don't know yet what would be the post pandemic situation because we're still dealing with the situation at the moment and we're not even, though we see the light at the end of the tunnel, we're still not managing the end of we're still into this crisis and so we don't know how it will affect innovation and business model. However, as academic we have to sometime to figure out about how to to not to speculate but to try to provide some tentative answer based on previous research and even if we don't know, we can certainly pretend that we know something that will may be different in the possible implication of this new reality but we don't know specifically specifically which one because there's up today to my uh to my knowledge there's with the exception of uh Ian's study who will present some preliminary data in his presentation, there's no study that have dealt specifically with the application of COVID-19 on business innovation model in in KIBS industry. So I would like to share with you some five observations based on my understanding of the possible implication of covid on KIBS innovation. So the first and f uh the first my first observation concern the uh you know innovation in KIBS we can see or we can observe that covid will have we can have some positive implications for KIBS.
We can see that there will be an evolution of demand and KIBS can play a role in this evolution, for instance for example the health sector will certainly experience an increase in demand for example for vaccine, for new treatment and for various health protection to solve the pandemic. Second example, the lockdown of social distancing measure also leads to increased demand for digital tool for work, for instance work from own application uh works exchange in terms of virtual meetings too, research and the provision of virtual services and in such cases KIBS can play a key role. Second point is that the COVID-19 will have greater opportunity relate to the transformation of digital technology and tools, big data analytics and AI of course the um this observation is quite interesting because with the the wider uptake of the digital technology application as well as the big data and AI tool during the COVID-19 crisis may result in specific uh in any sorry in an increase for instance of in the digital innovation that will be growing demand of course for a digital application and this as I say uh will help from EL services or to virtual conferencing and different and different tool and so forth in order to uh to allow this new uh activity to operate. Uh there will be more activity and collaboration that will may be held virtually, so KIBS may provide and contribute and support the tool and the services necessary to these activities to perform and to perform this activity in an efficient way. However, these new opportunities for this evolution could be also impact by the market uncertainty and the decrease in demand. Of course the impact of covid on the supply of business innovation are primarily due to the implementation or lockdown of social distancing measure which could result in a lock productive and research facility, reduce of course the productivity, reduce the productivity of worker and also limit the opportunity for the worker to connect with others, okay.
The uh my second observation relates to open innovation or the way KIBS will interact with uh external organization, clients and uh and other organizations. First observation could first application relate to customer relationship. Uh KIBS, for instance, with their project business model will have expect to lost some of their consultant loss of their worker therefore in this time of crisis they could instead have built to have a better long-term relationship with their current client and deliver more how can I say productize project and deliver project remotely, so based on this new situation, some KIBS will even try to standardize or projectize their project knowledge their project knowledge sorry and try to shift into platform business model in order to continue to maintaining these customer relationships but also in order to delivering the project and the services remotely. The other observation about the interaction is about collaboration. Of course COVID-19 have
challenged global collaboration, demonstrate its importance, now we can with the of course with the extensive restriction of traveling and in-person and in-person interaction, of course the covid-19 has to some extent interrupt the mobility of human resource to interact, to exchange and to to explain and to see each other in order to uh to to to exchange uh knowledge and to discuss about different projects. Of course some team or some KIBS officially utilise digital tools and continue their join point despite this important con important uh important contrast, but a key question that emerged is about the geography of these and the importance of geography of KIBS collaboration interaction with client and users and the extent to which - I don't have answer now - the the answer to which digital tool can compensate for the absence of face-to-face interaction. If I move on on the impact of KIBS sectoral difference, we can also observe or we can the COVID-19 sorry crisis may result in a widening gap between P-KIBS and T-KIBS and C-KIBS, creative KIBS, why? Because these KIBS, these different KIBS do not benefit at the same level from the digital tools and some of these KIBS will have more will be more uh will be positive impact but this increase about the use of these digital tools whereas other may be more uh more more affect by this negative impact of decreases that those tries to during the pandemic. I can say for experience the creative KIBS has been severely impact, at least in the case of Quebec and in the case of Canada, I can just give you an example, my wife my wife is working in the event and advertising industry and the 13th of March 2020 everything stopped, her contract for the entire year stopping in two hours that every our customer just stopped the contract, so there was not much going on. Of course there was new activity related to promote new events online but it's of course some of these sectors have suffered uh by the COVID-19 crisis. At the same time the dynamics of some KIBS and the demand for a certain product may help sustain new innovation activity beyond the pandemic and also support the wider in ecosystem in dealing with the crisis. For instance the demand for digital services may not only offer
opportunities for digital company or T-KIBS but also for P-KIBS to offer innovative services that satisfy or that will satisfy new demand, so now our key question is to understand about his for P-KIBS we will observe post-pandemic a new shift towards digital innovation. So I don't know if I have two or three more minutes, this is the, okay this is why Muthu I see you, so I have two - that's fine. Okay give me five more minutes and then uh I will go quickly on the next quickly on the next one. So the fourth the fourth um observation is
about the geography of KIBS innovation, so we have to rethink the homology between the usual place of work and the location of economic activity of course. Uh latest work of Richard Shermer showed that actually KIBS are highly affected by this shift toward working working at home, which is constantly higher in in in services as compared to other sector, so if KIBS add up a more vibrant model that means in person or remote working then it will become clear even to casual observer that economic activity does not necessarily occur as a usual place of business is that does that mean that this it's the death of distance, so this question that's remain it's it's that is this activity removed from other occurrence other location? If this is the case, which reason, place location will benefit the most of this transition or this post COVID uh uh or this post this post COVID venture and my last observation before I go to the conclusion it's the importance of being there and this raises an important question knowing that the issue of trust is significant to understand how KIBS function, how KIBS operate and how KIBS transfer knowledge to their client, so trust with clients are very important, so now one question that remain is how trust can be developed without face-to-face interaction or frequent interaction with client. Another question that's remain open is like what dimension of trust are important and which step on the delivery process which step of the daily process trust will remain important? So to conclude my uh I still have two more slides, so they're still very open question that could be the base of research agenda in the near future. The first one of course as a geographer, I'm biased, is how to geo-localize innovation in KIBS. Do we geo localized innovation and KIBS from home, from the office, from the headquarter, from the cafe, where the highly skilled worker work, from the transport network where when he's traveling, so this is an interesting question in terms of the the geography of KIBS innovation is to understand where we should now geolocalize innovation. The second question is how do KIBS innovate without face-to-face and frequent interaction with client and ecosystem actor.
As I say and as most of the work show, trust is important, being there is important and firm by being in certain location benefit of those aggravation economy but not having access to those agglomeration economy and externality, how do KIBS will benefit of these uh different elements? Third question is like what are the dynamic identification of hybrid model and more digital services production on KIBS innovation? As I say we know little about these specific dimension of KIBS business model, so more of course more research is required to better understand the hybrid model and to what extent this event model impact on KIBS innovation and and and KIBS performance. And the last one is of course what's the geography of this connection, can we see a a different original or special pattern of these kind of hybrid model? You know will this even model concern more than the most dynamic firm which often are concentrated and located the most dynamic region, but what happens what will happen for the other region who may have difficulty to implement these kind of hybrid model? Okay and to conclude and sorry if I take uh uh too much time, does COVID-19 has changed the rules of the game in KIBS innovation research? There's three possible scenario that needs of course to be temporarily analyzed. Of course we can see this as a revolution, uh so if we see this as a revolution so we will expect that COVID-19 has radically modified innovation and business model in KIBS, I'm not quite sure that what we're facing now are dealing with it's a revolution. We can see it as a booster, you know so COVID-19 in such case as accelerated processing and practice that were already in place, hybrid model and digital service innovation, for example, or we can see this as a weak game changer: without denying the impact of COVID-19 on KIBS innovation and business model, these change are rather incremental or minor and have a weak impact on KIBS practice and product, so to to answer the the to the question whether COVID-19 and post change certainly yes but I cannot provide specific answer to this question since more work has to be done in order to understand actually how KIBS has cope and deal with COVID-19. Thank you very much and I apologize if I have taken too much time. Thank you very much, David and and you set the scene very nicely by introducing the key characteristics of KIBS as well as linking that with the potential hybrid models to ask very specific questions. This is amazing. I think now this will offer a Professor Ian Miles
to perhaps respond to these key questions, especially because Professor Ian Miles has done specific research on KIBS in the context of COVID-19. So we are very much uh looking forward to hearing from Ian about perhaps the responses to the questions you raised and more broadly what would be the post-pandemic new normal for KIBS, so Professor Ian Miles, the floor is opened for you. Thanks very much Dr De Silva, um I'm very happy to be here um it's uh difficult to follow that uh great presentation from David uh and taking us off into realms I know very little about like the geography issues which are obviously really really interesting ones to push you further. Um okay let me try to get my content going, um so PowerPoint slideshow, here we go. Um so I I have had to look at KIBS and the crisis, the pandemic- hello my picture seems to have gone again. Um
we still share yes we hear you, we see you as well as we see your slides. Okay good, uh for some reason I can't see my slides now, they've disappeared for me, um but I what I will do is um turn um to the uh slideshow itself and then I guess I can watch that. Okay so here we go, can you still see my slides? Yes. Right, excellent well um I was engaged with Russian colleagues on a series of studies of KIBS where we've mostly been working on secondary data on published official statistics and we couldn't help but realize that the agenda was changing very much as a result of the crisis and I was also confronting this through a knowledge transfer partnership that I've been involved with, where we were looking at and assisting digitalization processes in a very innovative legal services firm um and the pandemic struck and we could see how this was affecting the innovation process that we were part of in that firm um so in order to look at this I first of all would like to suggest a very very general framework. There are three different sort of elements of what I will call the corona crisis, the pandemic: there's this sort of epidemiology, the virus, the diseases the virus causes, they're spreading the population and there and that has some impact in its own right. Um you know suddenly um people start wanting to buy uh all sorts of medicines, for example, as a result of this um there are policy responses, um government actions, especially with regard to health services but also restrictions on travel and insistence on social distancing and the like and then there are the socio-economic impacts of that firm's seizing business, being unable to pay debts, people out of work or unable to pay rents, things of this sort um and these are all these three elements of the corona crisis are shaping business conditions, um they'll be shaping the pattern of demand for goods and services, they'll be shaping the ways in which businesses can carry out their work, their production, their delivery of goods and services, their coordination of activities across the supply chain, um so it's very simple, simple framework but um I find it quite quite a helpful one and if we think about the case of KIBS then you know we can see in terms of the patterns of demand the picture is very very mixed um overall. The statistics that are currently available put put together you know all of the
uh professional technical and scientific services uh which is KIBS, not all KIBS but most KIBS um and we see uh a sudden drop of in demand for them um 2019, 2020 um a measure of recovery but a huge drop at least three times the drop that we saw during the great recession of 2009. Um uh and as David said you know sectorally, advertising were immediately very badly hit um but um the drop in demand for KIBS wasn't unusual, many sections of the economy actually experienced a far worse drop, we're very close to the in the UK the drop for KIBS is very much in line with the drop for the whole economy. Um and we know that some KIBS sectors have suddenly become winners, um they've had vastly increased demand and um where there are share prices involved share prices have been shooting up for some of these firms and more generally um KIBS are in the business of providing solutions to business problems for their clients and certainly their clients have got a heap of new business problems have emerged on them as a result of the corona crisis um so that raises um the question of well what are these new problems and how it keeps confronting them and in particular there's a question which I've only scratched the surface of - if they're confronting new problems, they might need to have new competencies. How do they acquire these new competences? Suddenly in order to do this okay and then in terms of their own processes, um KIBS uh well they do face the problem that you know they actually very dependent upon expert knowledge in some of the KIBS sectors at least there are senior people around whom teams work and some of those senior people may have themselves been incapacitated by illness, more generally there's disruption of travel, some KIBS sectors are very travel intensive, consultants pride themselves on being the most highly traveled of all industries, for example, um there's disruption of face-to-face encounters, which affects how they conduct their business um both in terms of client relations and how they conduct their business internally um and for some KIBS um we don't think of this as the main um but some KIBS actually depend very much upon physical technologies, physical facilities, infrastructures and things like that like some KIBS run laboratories, for example, um how laboratories work is something um that's proved very problematic in the pandemic. Some laboratories have shut altogether, um some have already robotized quite a lot of their activities so they can continue doing that, many will have had to institute some extra hygiene measures um if they can continue working like installing screens between workers or taking in turns to use apparatus and to disinfect the apparatus between use, all of these sorts of things going on um so what I'll do very quickly is just take us through some of the different sorts of KIBS um and their activities and as David said you know we can divide kids up roughly into those based upon more technological knowledge so it's based on more social and professional knowledge and those based on more cultural and creative knowledge, P-KIBS, T-KIBS, C-KIBS, for example we can identify them with particular statistical categories um as you delve into it you find that there's been some divergence between the European NACE system and the north American NACES system and some of that divergence um creates all sorts of problems like one particular problem the information what I call the information data processing sector um in the European NACE system um that is mainly a business service but in the American data that will include a lot of services that are more consumer services and like Google, for example, um so maybe the maybe the just definitional challenges are coming back again in a big way but in general I don't think it's so difficult to identify the KIBS sectors these are almost entirely sectors dominated in the US in the United States at the least by private firms um who the bulk of whose business you know well over 70 percent of whose business share of business is directed towards other organizations, not towards final consumption. Um some of those other organizations of the public sector as well as private businesses, they're sectors of the economy where the share of the labour force which has qualifications such as academic degrees um is exceptionally high, um the only sector that I think is higher is universities, in fact, higher education education in general, medical services also have very uh very expert weighted in their workforces, other sectors of the economy much less so, next one down is telecoms and finance um you have to go a long way down. Okay so some firms experience
increasing demand um these firms may also have increa ever experienced problems but um one of the smaller sectors but one which statisticians have pulled out because policymakers are very interested in it for innovation reasons is the sector of research and development services. Um oh I've gone back, I've gone uh on the slide, yeah um research and development services and uh while there are research and development services actually active in all fields, uh where there's any interesting and commercially strategic knowledge frontier and there are two that are particularly important here and one is biotech firms, many of these are service firms, some involve a bit of manufacturing and some of the service firms want to go to manufacturing. Moderna, for example, has become a big vaccine manufacturer spun off, well not spun off, started independently of their universities by Harvard professors and so on um and we see firms like Biontech in fact uh well Biontech in particular um we all know that develops a coronavirus vaccine um Facutec is associated with Oxford and Astra Zeneca but has stepped back a bit from this particular activity. Synergen University of Southampton spinoff
developing technologies for rapid development of anti-viral agencies uh to into the human lungs, for example, there are many many firms, you'll be amazed how many firms are active uh in in in this industry at least I was amazed let me say um these firms are obviously engaged in a great deal of rapid innovation um in developing medical treatments and developing new techniques um such as techniques involving gene editing and gene modification and things like that in order to create new biotech products but there's another important industry here as well, the clinical trials industry, what is typically called contract research organizations although you know you would think that would be a wider term than that um so these this is the industry that's developed independent of the main pharma firms which also do this um to conduct clinical trials and what is happening right now of course is a huge number of clinical trials going on and that's just a few of the firms involved in this sector often big transnational firms um uh engaged in these activities um and um you know clearly very, very important players and you know when the dust is settled we will um be learning a lot more I think about the different sorts of knowledge and the operationalized and demanded by people doing different sorts of clinical trials. Um obviously some of the problems that the Astra Zeneca Oxford vaccine have encountered were due to them adopting clinical trial procedures um that didn't quite follow those which the standard pharma industry has long developed. Um these firms are ones where which encounter problems to do with physical facilities, laboratories, um or running clinical trials while maintaining social distancing, um and if you go on their websites, you will practically on all of them find some sort of statement about how they are handling these issues, how they have basically innovated their processes to deal with these issues. and then the other major winners in terms of firms have experience a great deal of demand of course are those supplying digital services and allowing uh the rest of us to undertake this transition towards doing what we're doing right now, using Team, using Skype, using Zoom and all of these other tools and techniques and there's a great upsurge in use of these techniques. Of course there's been the appearance of new firms, there's been heavy competitive pressure on existing firms and again you can sort of follow in the industry press in magazines like Computer Weekly and the like um about how the companies active in this area are responding in terms of uh introducing new services, in terms of um trying to ensure that they're keeping up with their competitors in this area and so a big increase in demand challenges from that because they've had to scale up considerably to deal with that increased demand um uh and and tighter competitive pressures in this field and then less more under the radar um we can see a great deal of activity going on in quite a lot of other KIBS sectors in order to help their customers deal with the problems that they're confronting as a result of the crisis and and in particular design services that can help support the redesign of buildings, of hospitals, of probably of equipment and facilities as well um to support hygiene, to support social distancing, for example um being involved in the work with the legal services firm, we could see suddenly there's a lot of buzz going on about what was going to be happening in the areas of litigation around uh the pandemic, um occupational health and safety issues, insurance issues, all sorts of things of this order um are going to come into play and what we see immediately on the um web pages of these companies and one of the bits of work I did with my Russian colleagues was looking at some web major web pages um a professional clips um they're starting to uh basically um provide free information to clients about how they can deal with regulations, how they can deal with new challenges, um how they can for example um uh advise their customers about furlough schemes and things of this sort, so clearly putting marketing themselves um as experts in these areas um as part of a a strategy of confronting the new sorts of business problems that appear in this field um and then um in particular in the UK um we can see the use of this by politicians but apart from in politics we know that many uh firms are re-branding themselves or um creating messages of their own around um uh compliance with or sometimes evasion of um regulations uh about social distancing, about keeping safe, about washing hands, all sorts of things of that order um those of us living in Britain will no doubt be aware of some of the scandals that have arisen around certain political leaders' use of certain KIBS who specialize in market research and public relations to help promote their messages um and even inform their policies about dealing with the corona crisis. So that was some thinking about um issues and patterns
of demand and I think I've only touched on the surface of the new sorts of demands that will be encountered or are being encountered indeed by um customers of KIBS and that that those KIBS are um striving to deal with and striving to demonstrate their ability to deal with because these are potentially very fruitful areas for them to be working in the future. So now I'd like to just very very briefly um take up again the things that uh David discussed about some of the challenges that KIBS themselves face um in dealing with um uh the um especially the regulatory issues that have come up around the corona crisis and um let's focus just on this issue of face-to-face uh interaction, um which is in the past been extremely important uh for trust building as David said, trust building goes well beyond the sorts of things that we normally do effectively using video conferences, there's all sorts of things like meeting over lunch, meeting over a drink, watching other people's non-verbal cues and things of this sort that play an important role in trust building and - nope uh have you have I lost my my slideshow? Um no, Ian, we can see. Ah, suddenly I've lost it but maybe that's just because I've okay here we go again. There are two there are two two important issues to the disruption of face-to-face interactions, it seems to me, and one is on how KIBS conduct their work internally um because very often KIBS work in teams, they're very often they're project based organizations who work together in teams built around particular projects and the teams have to communicate and they have to share all sorts of insights about the projects they're working on and the team working is typically a very important way in which knowledge is managed in the organization and in which newer and junior staff members are brought into the organization, are socialized, are trained, learn the methods of practice, gain the expertise, um look get the know-how and the know-who within the organization um and those things can some of them can fairly readily be moved online but some of them are of course very difficult to do so because online meetings typically are under time pressure, social constraints of various sorts which face-to-face interactions aren't. There may be some advantages to this, um some sorts of
social interaction may be harder to move into the online environment and some of the more oppressive sorts of things may be harder to move online, yeah but many of the uh more informal bits of knowledge management are problematic there and we know there are famous cases of some kids that have long employed uh social media, internal sort of in-house social media as ways of um encouraging this informal knowledge interchange. And then the second issue is the interaction between KIBS and clients um and David put a lot of focus on this, KIBS as problem solvers for their clients. Interaction with the client um typically, not always, but typically takes place several times and often many times in the course of the project and when you're hearing the initial client's presentation of the problem, you're discussing what the problem actually is, you're working out possible solutions for it, you're deciding which solution to try to go with, you have a trial, you go further with that solution, you implement it fully, you do a proper evaluation of it, it can be a very lengthy process um in some sectors. Um another case in the advertising uh industry where people have broken down this process in a workbook um and they have 14 or 18 different steps uh that are involved in the course of providing the service to the client um and this can be extremely important, I think it should not necessarily be overstated although we know that KIBS are one of the most if not the most customized uh parts of the private sector of the economy. When we do survey studies, it looks like you know as I said the data in the results here we did a survey of uh American and British firms recently upon us to sell us and others and um we asked firms you know what share of your output is one-off services, partly customized, heavily customized, completely standardized services, um and only 20% of the firms said that most of their output was one-off services and as many as 50% said most of our output is standardized services.
Um so the more standardized you are, well perhaps the less face-to-face interaction you need to be having um it may be a matter of we are provided with the firm's um data and we process the firm's data and return it in a process form back to the firm and that can all be done digitally um and David sort of talked about the move to platforms and I think what we often see when people talk about minor degrees of customization is that they have a platform and customers are encouraged to choose elements of the service they want from that platform from a series of modules on the platform what we see- Sorry to disturb you, this is a really interesting flow of arguments and predictions but will it be possible for you to wrap up in about maybe two minutes? Yep I'll I'll just about wind up now. Thank you so much. No problem, um just two things: one piece of evidence we have is that this is the UK NACE KIBS classification, except the computer services which are here, um uh we see that this is one of the sectors which is most um during the corona crisis most went over to um uh homeworking. The information services sector was the sector that went over most heavily and when people in KIBS asked about um when people across the economy are asked about are you planning to use homeworking as a regular method in the future now um they're also among the highest sectors so over 40 percent of the KIBS firms sampled in the UK this year um were saying that uh they will plan to use a great deal more homework in their future, so just so I I anticipate that we're going to get there so just to say on the basis of the um uh study that I did with a study that I've been doing in the insurance firm in the law firm and my um understanding of uh what's going on on the basis of reviewing literature and things like that is that the immediate impact of the corona crisis has been that a lot of ongoing digitalization has been frozen um because the firms have had to put all of their effort into converting themselves to this remote working model, so digitalization of communications, digitalization of existing operations without really changing those operations, all that much has become the norm. We digitize our meetings, we have the same meetings that we used to have but we digitalize them um maybe a lot more work for people. We move a lot of things to the cloud, we use cloud services and the like um and some of the more advanced things were stalled and partly they're still because it's harder to do the innovation when you're in a social distance setting, um it's harder to roll out something new and have it evaluated and things like that but on my assumption would be that what we are likely to see in the future is both a resumption of those past efforts to create more digital um AI and data analytics and the like applications within campus processes and a process of learning about what we can do uh using online communications instead of conventional face-to-face communications um and those of you that do service research will know the Barrous model, Barrous um basically proposed that people apply new information technology to their processes and then they learn that they can do new things, they don't have to just apply to their existing processes and they can introduce new services and I think that sort of picture is something that's likely to happen very much as well um so the picture is liable to differ across different sorts of um I think we probably will see a bit of a melange of David's three scenarios as well but I would anticipate that we will see a big upsurge of innovation um in coming years as we move away from the forced rapid innovation associated with the immediate crisis and people are able to take stock and consider how far they've learned new things which should inform the way they go about digitalizing their businesses.
Okay sorry to take too long off, I'll finish at this point uh and uh um uh hopefully I haven't gone on so long there's no time for discussion. No problem, this is super interesting and really great reflective thoughts around what will be the post-pandemic new normal for KIBS and thank you so much. So I think we have overrun by three minutes but that's absolutely fine so and again we have a very rich audience comprising a people from universities, businesses, policy makers as well as intermediaries so I I I'm just wondering I whether we should first go for the word of thanks and then perhaps then we could stay here if if the audience could stay with us we could have a conversation so I've uh because some of them might have to leave as well but I I think what we have here is a very rich material for us to take home and think more broadly because this will definitely influence the decision taken by KIBS as well. So I uh with
this note, I would like to invite Professor Suma Athreye from Essex Business School to deliver the word of thanks, but we will keep the floor open so that we could actively engage in conversation uh to those who can stay with us, over to you Suma, thank you so much again Ian and David. Uh Suma you are on mute. Yeah so let me echo Muthu's words uh a lot of material um very interesting set of conjectures in about what's going to happen in the future with KIBS. I just want to thank both of you for
taking time, especially Professor Doloreux because uh David am I pronouncing the name right? I hope um because you were going to go off on holiday as well so uh thank you for taking the time out and uh speaking to us and as Muthu says, you know, we do this word of thanks but I hope that there will be a discussion now um from the audience and questions and answers so thanks very much to both of you for for coming and spending your time and sharing your thoughts thanks very much. Thank you very much. If that is okay with David and Ian we will have a little bit of a discussion, because we have very rich audience here uh with us today. Is that okay David and Ian? Okay thank you so much so, if the floor is open for any questions, suggestions, views around this amazing and very insightful information and discussion we have just had. Um can I start with something Ian?
Uh so you know I I found uh the the discussion of the various uh factors that would influence the KIBS growth quite interesting but I could not understand whether you know which do you think is going to have the greatest impact, so of the three types of KIBS sectors, which is likely to be the most adversely affected by covid and which is likely to be the most beneficially affected by government? So given that covid has implied social distancing, inability to meet face to face, people have tried to work around it but you know there are still uh there are still some constraints so which do you think is going to gain from this set of circumstances and which do you think will lose? Well an immediate thing is you know the information technology related services uh have gained - yeah and they're also hiring - yeah and yeah I think I think they will continue to gain um uh exactly what that means though in terms of the preponderance of big firms and smaller firms and things like this uh I I'm rather reluctant to say. There's a sector where there has been a a great deal of um um what was the word oligopolization um operating systems and platforms and things like that um and I I doubt that that is going to be challenged unless we get some in the past I suspected we would see a new challenger from China but um right now that doesn't seem to be geopolitically very likely um the uh however all KIBS have a very very long tail um and uh I think in in um this instance we're liable to see a fairly rapid process of um consolidation of that tail of lots of smaller actors merging or working maybe maybe doing it in more informal networks but working together because firstly demand is high but secondly demand will be challenging for them and they will need resources they don't immediately have and if you think how do you go about gaining new competencies, um well - steal somebody else's staff I think is done - yeah that's right recruiting people, um training your own people, that's not so popular, but uh it does um sending people on video courses was happening a lot uh during the pandemic um uh but also working networks you know, subcontracting to KIBS um is actually uh a way of doing this and I I would not be surprised if we remember that you people used to talk a lot about the virtual for the virtual organization the virtual firm which is basically just a network of businesses um I wouldn't be surprised if we see quite a lot of that model uh coming into play in the T-KIBS right other the other sectors um I really don't know about the C-KIBS I think they're so varied you know the design services of all sorts you know are going to have to adapt very rapidly, that's going to be really challenging for them, I think um I mean you can see a lot of noise about this going on in the architecture uh industry as well um so there you know there there will certainly be demand I mean again you know we're going to sort of futuristic speculation um but uh I don't think the the pandemic is a passing thing, I think we uh uh uh are going to have to build societies that are more resilient against pandemics because there are going to be future pandemics and even um you know it's widely believed that covid is going to be around for a long time yeah and it's not like the flu, you know 20% or so of people have long covid, 20 percent of people have long-term health damage, we have we're not going to be able to say oh we'll just let that go unlike the flu we will have to have um uh you know much more hygiene uh built into our infrastructure in the future. So um I anticipate all all of the KIBS are providing inputs to that aspect of daily life will be really working very working flat out yes to accommodate that demand, um David you you you have a partner that's in the C-KIBS so uh you probably know about that aspect of the industry but - Yeah what happened this industry but I can only talk from what I have experienced with my partner it's that it's like those who has decide to go digitally, who turn around very quickly, they they capture most of the businesses during covid but now the situation is completely the opposite, it's like those who has transferred to virtual event or or to try to to do things online are not the one who can respond now to the new uh demand because now things are moving back to normal that means that they're creating more event, they want to do an in-person event, so those who has been transferring their model towards uh virtual towards a virtual model are not competing against about what demands about the demand so this is quite interesting so this is to some extent we're back to square one, so those who has not responded has not modified their business model are the one now or more com or are more able are are are capable to respond more quickly and more efficiently to the demand so this is quite interesting to see so this is why in my scenario when I say about being a weak game changer, of course there's the COVID has some clear implication and some of the industry has been effect uh has changed radically their business model, but overall the key question is like are we uh is this will really be a big game changer or we will be back to normal, however we will need as Ian you just raised we will need to adapt to a more longer process where as covid is just one among several other pandemics that we will uh that we will uh but we will we will deal with so that could be an interesting question about this. I think now that one of the questions is that the temporal dimension of the change,
we haven't talked about this actually uh but this could be quite an interesting dimension to look at it actually about this kind of temporary about the change in the change of the business model or the adaptation of the business model. Good point and and and just one more thing you took drew the issue of trust to the fore, David and one thing that I see asserted all the time in the trade press is that uh that that is benefiting the established KIBS firms in the crisis because clients don't have the opportunity to develop trust in new services, so they go to brands they know already. I haven't seen evidence for this but I've seen it claimed very frequently frequently. Yeah I have one more question but I'll wait for others to ask first.Thank you very much, Suma,
I if you have a question you could unmute and ask the question or you could raise your hand uh yes Muhammad. Hello um thank you very much uh for nice and insightful presentation of both of uh David and uh Dr Ian um I I actually learned a lot of things from the presentation and the question is in the education sector um as David said about the trust, how can we build of trust because nowadays uh some countries they start with online exams and take home exams and other things so the basic question is how we can build trust in educational sector and how can we overcome uh this problem and what are the steps that we need to take to to build up our trust in especially the educational sector? Thank you so much for your nice presentation and thank you for the organizers. Something uh for that question itself uh when it comes to trust I was just wondering should we have to think about digital trust building mechanisms, so because we are so used to the physical trust building mechanisms, is it something called digital trust building mechanisms and is that a way in which we could still build trust digitally? There is an industry called trust services which supports the financial sector on whether creditors are trustworthy or not for example um that's a long way away from educational services of course um and also you know we know of cases of that industry being abused itself um uh and so we always you know there's no no simple solutions but um the idea that we could have uh systems that could at least provide some level of verification um it is uh is not impossible. Already there is a very wide use of plagiarism detection in educational environments, for example, that's a at university level um how do you tell that somebody uh answering uh exam questions or even taking part in a seminar discussion um is really providing their own inputs as opposed to ventriloquizing inputs that are made by someone else? I I guess you know I don't like the sound of this but you know there's there are a lot of surveillance technologies being developed you know technologies to tell whether somebody's speaking the truth uh for example um I don't like that um but I can imagine I don't know a lot of things I don't like which I see being used by educational establishments, among others, I can imagine that sort of thing being used as well um uh David and I both had the experience yesterday of being in an educational setting where the student had to show that there was no one in the room with them, we didn't look under their desk! That that's higher education and I mean I don't know if the question was specifically about higher education, things are going to be a lot harder when you're looking at other levels of education of course and I don't know what the answer is but I'm one thing I can predict is there will be a lot of innovation going on here. Yes uh thank you so much for the answer. Okay that's brilliant, thank you, any other questions?
Hi Claudia. Hi hi good afternoon, just to say thank you very much for - can you hear me? We can hear you but if you could speak a little bit louder that would be - Okay um yeah so I'm trying to find the settings but I okay do you want me to put my headphones? That's better, no no that's better, we can hear you. Fine sorry just to say thank you for your presentations which I found very very interesting and actually my my point again is about this issue of trust um I mean I'm not an expert on KIBS so I must I must admit that at the start but I wanted to