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Background brief for the Workshop on: Futures for Knowledge-Intensive Service Activities (authors: Barbara Jones, Ian Miles, MIoIR Manchester, August 2008) 1. Introduction This workshop (15-16 September 2008) is the first of two being organised as part of the ETEPS project SC29: “Innovation in the European Service Economy – scenarios and implications for skills and knowledge”.1 The ultimate aim of the project is to examine future skills requirements that may be required for Knowledge-Intensive Service Activities (KISA) in the period to 2020. What skills will be needed for KISA to play an effective role in building European Knowledge Economies, in helping achieve progress toward Lisbon Objective-type goals (competitiveness, innovative, sustainable, high employment, socially inclusive economies)? For this study, the focus is on KISA as contributing to the performance of private firms and other organisations in European economies. Thus we focus on services that support business processes (e.g. marketing, design, computer support) rather than those that directly improve quality of life for citizens. Typically, these services may be provided by in-house activities, or by purchasing them from Knowledge-Intensive Business Services (KIBS). This first workshop is intended to create and explicate a small set of alternative scenarios for KISA development, and take the first steps towards exploring the skill implications of these. A second workshop will focus more extensively on skill issues. 2. What do we mean by KISAs? For the present study, KISAs are being delimited to the core activities corresponding to the specialised KIBS sectors in NACE 72-74. These business services include: • IT services (Hardware consultancy, Software publishing, supply and consultancy, Data processing and Database activities, Maintenance and repair of office, accounting and computing machinery, etc.); • Architectural and engineering activities, related technical consultancy, and technical testing and analysis; • R&D services; • Advertising and market research and public opinion polling; 1 See : http://www.prest.mbs.ac.uk/kisa 1 • Professional services (such as Legal activities, Accounting, book-keeping and auditing activities; tax consultancy, Business and management consultancy activities and the Management activities of holding companies). These are all activities that can be carried out by external, specialised KIBS (Knowledge-Intensive Business Service firms) or in-house by employees of the firms using the KISA in question. They are all “knowledge-intensive” in terms of various indicators: they have extremely high levels of graduates in their employees; both KIBS sectors and professional occupations are characterised by high levels of problem-solving and complex work, with much new learning on the job (evidence from Community Innovation Survey, Working Conditions Survey, etc.). Of course, this working definition of KISA has several limitations. (If these are seen to be really important, we may need to discuss these in the workshop.) Among the limitations are: 1) There are some NACE 74 business service activities – not included in the lists above – that are not particularly knowledge-intensive (eg office cleaning). These are not always easy to exclude from statistical analysis of KIBS, though when we are looking at occupational profiles it is possible to focus on professional occupations (managerial, technical, expert positions). A related point is that not all of the employment in KIBS is necessarily KISA: a KIBS firm may well employ security and catering staff, for instance. 2) There are several activities that are debatably also KIBS in other areas of NACE – for example creative activities in NACE 92,2 and business-oriented financial services and telecommunications services; and even health and education services supplied to organisations rather than consumers. 3) We should also note that there are other options in addition to accessing the KISA from KIBS or in-house employees (again we may need to address these if they are seen to be significant for scenario development). KISA could be supplied by firms whose main activities are in other service or manufacturing sectors, but who have discovered that some of their capabilities can be sold to others – such as an automobile company that sells technical testing services from its labs, a bank that sells IT support to its clients, etc. And they could be supplied by public sector organisations, such as University staff helping with technology development, design, market research. Despite these limitations, this working definition of KIBS and KISA provides a reasonable base for statistical analysis, and hopefully is effective for scenario development and analysis 2 For a very helpful analysis of the distribution of creative professions across the whole economy, see Peter Higgs, Stuart Cunningham and Hasan Bakhshi (2008) Beyond the Creative Industries, London: NESTA, available at: http://www.nesta.org.uk/beyond-the-creative-industries/ 2 3. What do we mean by skills? Whereas we have taken a very limited approach to defining KISAs, the approach to skills is somewhat wider, because the standard definitions of “skill” are actually quite narrow ones. Skills are typically seen as being people’s capabilities to carry out particular tasks (and often these are portrayed as learned capabilities). But when we are examining knowledge-intensive service activities, we are liable to be thinking of whole series of interlinked tasks – despite growing division of labour and introduction of paraprofessional and assistant roles, these tasks have only been subject to limited Taylorisation and deskilling. A wider construct is competence, which refers to the individual’s capability to perform in a specific job role – not just skills in a narrow sense, but also the knowledge and behaviour/motivation required. This wider perspective is more appropriate for the current study, but we will continue to refer to skills (not least because “competences” is often used to refer to organisational rather than indivisual capacities, as in “core competences). In Deliverable D3 for this project, we have discussed the O*Net classification of skills, which provides a detailed listing of different skills under a set of major headings, and which is used in the US for examination of trends in occupations. The main categories here are Basic Skills (facilitate learning or the more rapid acquisition of knowledge); Complex Problem Solving Skills (used to solve novel, ill-defined problems in complex, real-world settings); Resource Management Skills (used to allocate resources efficiently); Social Skills (used to work with people to achieve goals); Systems Skills (used to understand, monitor, and improve socio-technical systems); Technical Skills (used to design, set-up, operate, and correct malfunctions involving application of machines or technological systems).3 3 Source: http://online.onetcenter.org/skills/ 3 4. Orientation of the Project The growth of KIBS has been a striking phenomenon throughout the industrialised world (and, indeed, in most emerging and many developing economies). Occupational statistics suggest that professional occupations (delivering KISAs) are also growing as a share of the workforce in most sectors. Most commentators anticipate that these trends will continue into the foreseeable future, though there is less unanimity as to 1) the pace of growth of these phenomena; 2) which KISAs are liable to be most important; 3) the extent to which activities may be conducted in KIBS or in-house (“outsourcing” versus “internalisation”); and 4) the extent to which offshoring might result in (various types of) KISA work being shifted overseas. Changes in the nature of professional and technical work (and occupational and career structures), and the industrial organisation of KIBS (more or less specialisation, systems integration, etc.) are less often addressed, and forecasts here are typically more tentative. The current study aims to examine these phenomena, and construct relevant and useful scenarios concerning the future development of KISAs. In order to do this, the workshop will early on examine a range of factors that are seen in the literature as important influences in KISA development. (In futures studies, these are usually known as “drivers”. We discuss key drivers outlined in the literature below.) We will explore which factors are important for which features of KISA development, and use this discussion as a platform from which we can set out some major alternative lines of KISA development to 2020, what the drivers are behind these, and what they may look like. In the first workshop we will go on to explore the skills requirements that are liable to be associated with each scenario, and outline how these factors and features might vary across different types of KISA. The workshop should result in a scenarios report, where we explicate the scenarios developed during the course of the workshop in a presentation that is easy for audiences to understand and assimilate. This will form a key input into the second workshop. The following sections of this document provide some Background Notes based on our literature reviews, concerning the various ways in which KISAs may be developing (Parameters of KISA Development), and the major Drivers that have been associated with quantitative and qualitative changes in KISAs. 4 5. Parameters of KISA Development From other scenario studies we reviewed in Deliverable D3 for this project, we see a number of approaches to exploring the future of KISA.4 Of course, there are different rates of employment growth anticipated in economic forecasting studies by CEDEFOP and others. CEDEFOP (2008) considered the growth of professional occupations as well as business services sectors in scenarios of more or less rapid economic growth overall, assuming sectoral relationships remained much as they now are.5 Kox (2002) considered alternative futures business service sectors: they might perform well domestically and internationally, with rates of growth continuing to draw ahead of most other market sectors, or they might move towards more average rates of growth.6 Zaring (2001), examining eco-efficient services, pointed out that European KIBS might be larger or smaller, and more or less active in world or regional markets, relating this to efforts to standardise services and/or customise them or produce unique services to meet specific customer needs.7 But there are more qualitative changes discussed too: Geographical Location of KISA Activities: EMCC (2006a) focused on issues to do with European offshoring activities for the KIBS sector (with little attention here to in-house KISA offshoring, though it might be expected to follow similar trends), exploring scenarios with greater offshoring or a reversal of offshoring activities (related to, for instance, problems with cost-effectiveness, productivity or customer relations).8 This study also developed a scenario based on the possibility of a worldwide narrowing of the skills gap, resulting from emerging economies continuing to grow rapidly and invest heavily in education - increasing both supply of and demand for KIBS around the world. A further set of features of KISA were associated with further developments in terms of technology, 4 B Jones and I Miles (2008) Services, innovation and skills: scoping and definitions report, Deliverable D3, MIoIR This will shortly be on the project website at http://prest.mbs.ac.uk/kisa 5 CEDEFOP (2008) Future Skills Needs in Europe http://www.trainingvillage.gr/etv/Projects_Networks/Skillsnet/Work/pubwork.asp 6 Kox, H. (2002) Growth challenges for the Dutch business services industry: international comparison and policy issues The Hague, CPB Netherlands Bureau for Economic Policy Analysis 7 Zaring, O. et al (2001) Creating Eco-efficient Producer Services Göteborg: Gothenburg Research Institute available at http://www.suspronet.org/download.asp?File=documents\creatingefserv1.pdf&Name=creatingefs erv1.pdf 8 EMCC, 2006a, Trends and drivers of change in the knowledge-intensive business services sector: Four scenarios, Dublin: EMCC at European Foundation for the Improvement of Living and Working Conditions, EF/06/79/EN available at http://www.emcc.eurofound.eu.int 5 intellectual assets and network capital, which could also influence employment and skill levels, methods of service delivery, and competitiveness of KIBS sector. Change in the nature of professional work. RAND-Europe (2006) noted that professionals across many sectors are facing increasing amounts of data, new tools for their work which demand new knowledge, and confronting more turbulent environments.9 A sense of future developments is required, and a wide spectrum of knowledge, to inform strategic decisions. Though this may lead to less specialisation, new sorts of specialist knowledge are also required as new technologies and techniques are introduced. The scenarios considered alternatives in terms of high versus low user-friendliness of advancing technologies; and of increased/decreased centralisation (sharing of responsibilities and delegation to other practitioners in the organization versus tighter control on workflows and centralized responsibility). Organisation of KIBS’ “Industrial Ecology”: Toivonen (2004) considered scenarios for the future role of KIBS: (1) how far there is a marked differentiation grows between KIBS specialising in highly specific types of problem, technology, etc., and KIBS who are coordinating and integrating these inputs. (2) How far KIBS deepen their client relationships, and become more important for client strategies (over and above providing inputs to individual problems and business decisions). (3) Whether KISA provided by non-KIBS become more serious competitors to KIBS in the marketplace, as large firms sell their own KISA to other parties, competing with specialised KIBS firms.10 An EMCC study (2005) built on this, with scenarios differentiated in terms of the importance of KIBS sectors to the whole economy (with growth in demand fuelled by developments in technology, security, regulatory and policy affairs, efforts to “downsize”, management focus on core competences, and the ability to recruit and retain skilled employees), the strategic roles of KIBS (in client decisions, and in orchestrating clusters of firms and projects); the importance of in-house KISA, in contrast (perhaps fostered by needs to retain organisational memory and enhance flexibility, by the availability of relatively easy-to-use technological “self- service” KISA solutions, ability to offshore internal KISA work, etc.); differentiation between lead supplier KIBS firms (operating as, subcontracting specific inputs to 9 RAND-Europe, 2006, Changing professions in 2015 and beyond, Luxembourg, European Commission, European S&T Foresight Knowledge Sharing Platform, EUR 21966, ISBN 92-79- 02664-X, available at http://ec.europa.eu/research/conferences/2004/foresight/index_en.html 10 Toivonen, M. (2004) Expertise as Business: Long-term development and future prospects of knowledge-intensive business services (KIBS) Helsinki: Helsinki University of Technology, Doctoral dissertation series 2004/2; available at: http://lib.hut.fi/Diss/2004/isbn9512273152/ 6 others, and as brokers and integrators of service provision) and other who supply more specialised services.11 From these studies, a set of uncertain but important features of future KISA emerge: • Overall growth in demand for KISA, reflecting both economic growth and developments in technology, regulations, etc. • Change in extent to which KISA are supplied through KIBS or through in- house services, reflecting relative costs, specialisation, etc.. • Change in extent to which KISA are supplied through domestic, other European, or offshored service suppliers, reflecting cost, quality and reliability of supply (among other factors). • Structure of KIBS sector: extent to which a division exists between integrators and lead suppliers, and more specialised KIBS whom they contract into projects. • Strategic role of KIBS sector: extent to which firms play role in coproducing client strategies, as opposed to more distant contractual relationship; • Extent to which KISA themselves are standardised and routinised, as opposed to requiring creative problem-solving (even when modular elements of solutions are being configured together) • Nature of professional work in KISA – extent of division of labour, type of technology support, degree to which work is autonomous or rigidly standardised, etc. This list is probably far from comprehensive, but provides a helpful starting –point for further analysis. 6. “Drivers” of KISA skills needs development One aim of this first workshop is to explore the main “drivers” of KISA development and growth, how important various and different drivers are seen as being and how much uncertainty is associated with them and what scenarios can be derived from them.12 The KISA on-line survey for this project sought to elicit information on three types of KISA: 11 EMCC, 2005, Knowledge-intensive business services: Trends and scenarios, Dublin: EMCC at European Foundation for the Improvement of Living and Working Conditions; available at http://www.emcc.eurofound.eu.int/content/source/eu05016a.html 12 “Drivers” is not a term used much in social science, where the complexity, feedback relationships, and fuzzy boundaries of most objects of studies leads to the term being seen as involving too much simplification. It is, however, widely used in futures studies and scenario 7 • Technology related (e.g., engineering, technical testing, R&D, computer services) • Professional related to social or administrative services (lawyers, market researchers. advertisers) • Financial related to fiscal processes (accountancy, banking, auditing, insurance) The key intention was to identify the factors most likely to have the highest impact (positively or negatively) on demand for KISAs in the short/medium and longer terms. The survey utilised the STEEPV framework as a way of eliciting drivers in terms of social, economic, environmental, technological, political and values-related categories.13 A useful starting point here was earlier work concerning drivers deemed potentially important for the supply and demand of e- skills. Many, if not all of these factors, may be relevant to KISA and KISA-related skills more generally.14 Among the key drivers identified are: Social drivers S1: Improved Educational Levels workshops in particular, since it provides a useful structuring framework for discussions and analysis. 13 Again, STEEPV is not a particularly social scientific framework; it is simply a rubric used in an effort to encourage people to think widely and to enable rapid grouping of ideas. The notes in the online questionnaire explicating the tool read as follows: “STEEPV is the acronym for a list of categories – referring to Social, Technological, Economic, Environmental, Political and Values factors. This is essentially an aide-memoire for classifying relevant trends or drivers, rather than a rigorous conceptual framework! The set of categories is intended to be sufficiently wide-ranging and comprehensive for users to be able to feel free to consider a wider range of topics than they would often do. … The list below provides examples of the sorts of things that can be grouped into each category. Do not feel constrained to cite only items from this list! … * Social: Ways of life (e.g. use of leisure time, family living patterns, demographics), social inclusion and cohesion issues (fragmentation of lifestyles, levels of (in)equality, educational trends). * Technological: Rates of technological progress, pace of diffusion of innovations, problems and risks associated with technology (including security problems). * Economic: Levels and distribution of economic growth, industrial structure, competition and competitiveness, markets and financial issues. * Environmental: Pressures connected with sustainability in general, or more localised environmental issues (including pollution, resource depletion, and associated biodiversity, health and safety concerns). * Political: Dominant political viewpoints or parties, political (in)stability, role of governments in regulation, political pressure and lobbying by non-state actors (e.g. pressure groups). * Values: Attitudes to working life (e.g. entrepreneurialism. desire to pursue a single career, deference to authority, willingness to be mobile across jobs or countries, etc.) as well as to leisure, culture, politics, etc.” 14 This list reflects concern about skill availability and off-shoring of work, which was the focus of the earlier e-skills study: CEPIS (2006) “Thinking Ahead on e-Skills for Europe” available at http://www.cepis.org/files/cepis/docs/20071217032722_Thinking%20Ahead%20on%20e-Skills%20in%20.doc This study identified 90 drivers and discussed their implications for three types of e-skill (mainly via deskwork) 8 S2: Growing income levels in the EU S3: Population Ageing Trends S4: Efforts to attack or compromise systems give rise to growing concerns about ICT Security S5: Adoption of ICT in ways that enable new Working and Learning Practices Technological drivers T1: Major new classes of Technology / styles of use of technology / applications T2: Improved User Interfaces T3: Greater adoption of software engineering and similar approaches to systems development T4: Enhanced Telecommunications Infrastructure and Services T5: Wider diffusion of IT Infrastructure / Services Economic drivers E1: (Levels of) Economic Growth within EU E2: Levels of Global Economic activity E3: Price Trends of major classes of ICT equipment E4: Prices of alternatives to ICT-delivered services E5: Increased start-up rate for SMEs Environmental drivers N1: Acceleration of Global Warming N2: Disruption of Gulf Stream N3: Pressure/Effort to replace transport with Telecoms. N4: Emphasis on reduction of ICT and electronic waste N5: Environmental regulation and concerns lead to growth in business (ICT exploitation) opportunities Political drivers P1: Variation of skilled worker migration flow(s) into EU P2: Further Reduction of Barriers to migration of skilled workers within EU P3: Changes in Taxes on Labour P4: Pressure exerted on employers to reduce/limit off-shoring P5: Growing Geopolitical instability Ethical & Values–related drivers V1: Declining interest of young people in EU in undertaking technology related courses/qualifications V2: Demand of workforce for more satisfying jobs V3: Possible increase in “Enlightened” Management philosophies & practices V4: Resistance to surveillance/privacy invasion through ICT at work and in services V5: Growing concern about health hazards of ICT . The scenario studies discussed above (RAND 2006, EMCC 2005, Toivonnen 2004) also provide useful detailed analyses of trends and drivers influencing the 9 KIBS sector –much of which, again, will be relevant to KISAs more generally and to our scenario exercises. Broadly, from these studies, the key drivers concern: • The technologies in use for KISA, and the technologies where KISA support is required by clients; • The organisation of the KIBS sector, in terms of the roles of firms (specialisation/integration), firm size, and their own use of off-shoring to accomplish functions; • Demand for KISA on the part of clients, and client strategies (and management philosophies) in relation to internalisation of KISA versus externalisation to KIBS, to off-shoring internal KISA and/or using overseas KIBS, and in terms of possibly moving into commercial supply of KISAs to other firms. • Demand is in turn influenced by such factors as technological change, regulations, turbulence in markets and levels of economic growth, client firm internationalisation, etc. • Availability and quality of training in KISA skills, modes of provision of training (on-the job and in formal institutions, life-long learning, etc.), and possibly by professionalization in KISA work itself and the strategies of KISA users in terms of management control of professional work. These drivers have evident implications for the skills that KISA will require in different scenarios, and offer insight into a range of useful drivers that can be mobilised to focus more on developing KISA scenarios for sectors and KISAs of particular interest. More generally they indicate what might be emphasised with a focus on KISA skill requirements. Ascertaining and establishing what drivers of KISA skills needs are relevant is clearly not straightforward: a list of drivers might be rated in terms of the perceived impact on demand for a particular type of KISA, in different types of environments (where a KISA might be in-sourced or outsourced, the regulatory framework operating). There is also the element of uncertainty, in that it may be unclear whether a driver will develop in a particular way (e.g. will this demand-promoting factor [continue to] grow in significance?) and/or just what its impact will be (will this driver lead to more or less of this outcome?)15 7. Drivers and KISA skill needs Some preliminary thoughts concerning how drivers might influence one aspect of KISA – their skill requirements - can be set out, with the aim of providing stimulus to the workshop not pre-empting its discussions. Of course, this first workshop 15 Often this latter type of question reflects uncertainty about the development of different parts of a complex driver – for example climate change could evolve in very different ways, and social responses might also be quite diverse. 10 will be exploring other features of KISA, with skills being the focus of the second workshop. Demographic trends and employment retention and arrangements: ageing, of populations and workforces, have industry-changing impacts on the supply of labour, market demand and competition, and productivity. As growth in labour supply slows, attracting and retaining workers becomes critical. The level of job vacancies can indicate whether there are problems with worker attraction and retention. Remuneration and leave entitlements are two factors that affect attraction and retention. Employment arrangements (permanent, casual or contract employment) affect skills development, productivity, innovation and competitiveness. These arrangements may engender flexible professional development solutions specific to sectors as transferable skills and essential underpinning skills in business, problem solving, communication and technology are required. Employers may only be willing to provide training for the additional enterprise-speciﬁc skills they require and additionally employers will seek solutions to capture and share and retain the corporate knowledge built up by casual and contract staff. Labour hire companies and personnel agencies may also become increasingly responsible for the skills development of the workers they supply. Employees and employers may demand reliable, recognised generic mechanisms for recording skills, training and qualiﬁcations which have change implications for current education and training structures and arrangements. Technological change: technology and the rate of technology adoption by all types of enterprises is an important driver of training. Digital technologies, online transactions and convergence impacts on all enterprises and requires changes in skilling of workforces. New business models generated by e-business channels provide different ways of thinking about marketplaces, interacting with customers and managing staff resources. Enterprises need to consider the nature of the skills required by their workers. Workforce training is required every time a new technology (hardware, software or systems) is introduced into the workplace and ongoing training is needed to ensure that technologies are used effectively. Technology blurs the boundaries between many industries and generates the need for skills and knowledge across a number of specialist areas to exploit the integration of activities across sectors. Regulatory changes: levels of regulation, licensing requirements and the rate of regulatory change have increased in all sectors. Skills formation strategies, particularly for SMEs, have become increasing necessities in areas such as business, ﬁnance, ICT, privacy and intellectual property, often requiring recognised industry training. Regulatory compliance is particularly challenging for the large number of SMEs within the innovation and business industries and managers and supervisors need the skills to develop risk management strategies, and mechanisms to ensure the ongoing competency of their workers 11 Market pressures: globalisation has provided access to a far wider range of goods and services, often at lower prices, than would be available from domestic producers alone and has provided businesses with a larger pool of capital and greater access to overseas technologies. Small businesses and franchises need strong business and ﬁnancial management and planning skills to compete successfully. High level customer service skills are required in all industries. Employees are now required to update and broaden their product knowledge continually as the number of products and services offered increases. Customer service staff, for example, need skills to help consumers with new sales and service channels (e.g. information kiosks, online banking, self-service call centres). Skills that allow innovation, productivity improvements and cost efﬁciencies will be highly valued across all industries. 8. Moving On This note has set out background information relevant to the first KISA workshop, especially concerning the two critical elements of the scenario analysis: features of KISA, and drivers of developments of these features, that may evolve in various ways in the coming decade(s). In the workshop we will develop a set of scenarios that reflect particularly important issues emerging from our further analysis and discussion of these issues. It is intended that these scenarios will be useful for further thinking about KIBS and KISA developments in general, and that they will be a resource to inform the detailed analysis of KISA skills to be undertaken by the second workshop. 12
"Background brief for the Worksho"