System Design and Management

The MIT Master's Program in Engineering and Management

Technology and Innovation in the Service Economy


Irving Wladawsky-Berger
Visiting Lecturer, MIT Engineering Systems Division and MIT Sloan School of Management
Adjunct Professor, Innovation and Entrepreneurship Group, Imperial College Business School
Senior Fellow, Levin Institute, State University of New York

Over the past century, science and technology have been successfully applied to innovation in the industrial sector of the economy, leading to very high productivity and quality, as well as to the development of highly sophisticated and complex objects such as airplanes, skyscrapers, and microprocessors.

The services sector comprises between 70 percent and 80 percent of gross domestic product and jobs in advanced economies around the world. Services are ubiquitous across many sectors of the economy, e.g., finance, health care, retail, creative industries, business support, education, and transportation and logistics. Advances in information technologies have enabled us to bring significant innovation to services and services industries; examples include ATMs, reservation systems, and supply chain management.

We nevertheless have a long way to go in improving the productivity and quality of services, especially given their large and growing role in advanced, as well as emerging economies. Unfortunately, services are not easily visible and their nature is not well understood, which makes companies, policymakers, and universities less willing to support the kind of research and innovation programs in the services sector that have worked so well in the industrial sector.

Moreover, because innovation in services is relatively recent (compared to the Industrial Revolution), its success is highly dependent on the kind of effective leadership that can get the organization to radically rethink its processes, business models, and work styles.

This presentation will explore the differences between “classic” industrial sector innovation and innovation in the services economy. In particular, the talk will focus on the multidisciplinary and collaborative nature of services innovation, and on the new organizations and leadership structures it requires.

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  • Sloan School of Management
  • School of Engineering
  • Engineering Systems Division

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