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POLICY FOR SERVICE INNOVATION AND INTERNATIONALIZATION IN TAIWAN Sophia Wen-Ching Chou Agenda 2 Current State of Service Sector in Taiwan Service Innovation Policy, Instruments and Cases Internationalization of Service Sector Conclusion 3 Current State of Service Sector in Taiwan GDP Ratio of Service and Manufacturing Sectors: 1981-2010 4 80.00% 69.32% 70.00% 67.08% 60.00% Nominal Service Sector GDP Ratio has increased steadily since 80s’, however, It declined recently From 2008. 50.00% 48.81% 40.00% 30.00% 32.56% 26.27% 20.00% 10.00% 0.00% 服務業占比 Service Sector 製造業占比 Manufacturing Sector Source: Directorate General of Budget, Accounting and Statistics (DGBAS), Executive Yuan Note:1.Due to the data formation of the official database, commerce sector is comprised of wholesale and retail trade, accommodation and food services, transportation and storage. 2.Financial sector is comprised of finance , insurance and real estate. 3.Other Services: professional, scientific or technical services, support services, education, human health and social work services, arts, entertainment and recreation and other s. Service Sector Employment Ratio:2001-2010 5 Since 2001 to 2010, 3% increases in Service sector employment 千人 Thousand People 6,400 60.0% 6,200 58.87% 6,000 6,051 58.84% 6,174 5,800 58.0% 5,600 57.0% 5,400 5,200 59.0% 55.91% 5,246 56.0% 5,000 55.0% 4,800 4,600 54.0% 2001 2002 2003 2004 2005 服務業就業人數總計(千人) Service Sector Employment Total (Thousand People) Source: DGBAS 2006 2007 2008 2009 2010 Service Sector Employment Percentage 服務業占總就業人數比例(%) of Total (%) Year 年 Service Sector Real GDP Growth: 1986-2010 6 Growth Rate (%) In comparison to the double digits growth rate during 1986-1990, GDP growth rate has been closed to a stagnate status in recent years, with the growth of under 3%. 14% 12% 11.57% 10% 8.74% 8% 6.19% 6% 4% 2.88% 2.91% 2001-2005 2006-2010 2% 0% 1986-1990 1991-1995 1996-2000 年 Year Source: Directorate General of Budget, Accounting and Statistics (DGBAS), Executive Yuan Note:1.Due to the data formation of the official database, commerce sector is comprised of wholesale and retail trade, accommodation and food services, transportation and storage. 2.Financial sector is comprised of finance , insurance and real estate. 3.Other Services: professional, scientific or technical services, support services, education, human health and social work services, arts, entertainment and recreation and others. GDP Breakdown of Sub-Service Sector: 1981-2010 7 100% 90% 80% 70% 60% 4.04% 5.45% 7.46% 3.95% 5.09% 10.63% 4.05% 5.54% 4.69% 5.97% 5.51% 6.99% 12.22% 12.64% 11.54% 5.18% 6.98% 10.18% 17.76% 15.36% 14.22% 12.22% 11.58% 10.87% 10.46% 10.84% 12.85% 13.37% 12.37% 12.83% 25.27% 23.26% 22.56% 24.12% 25.25% 27.04% 1981-1985 1986-1990 1991-1995 1996-2000 2001-2005 2006-2010 50% 40% 30% • Wholesale and Retail are two largest sections in service sector. 20% 10% 0% Wholesale and Retail Trade GG批發及零售業 P Education P 教育服務業 Other Services S S其他服務業 RR藝術、娛樂及休閒服務業 Arts, Entertainment and Recreation Real Estate L L不動產業 J Information and Communication J 資訊及通訊傳播業 Professional, Scientific and Technical MM專業、科學及技術服務業 Public Administration and Defence O O公共行政及國防 H Transportation and Storage H 運輸及倉儲業 I Accommodation and Food Services I 住宿及餐飲業 Finance and Insurance K K金融及保險業 Q Human Health and Social Work Services Q 醫療保健及社會工作服務業 Support Services N N支援服務業 Services Source: DGBAS Note: Sub-service sectors do not includes import duty and VAT, which the add-up of sub-service sectors of the total proportion of GDP is less than 100% 8 Service Innovation Policy, Instruments and Cases Key Focuses of Service Innovation 9 Technological Application Cross-Industry Integration Information technology and technological application integration will help to promote and upgrade the Service sector and its innovation. Thus, to increase the global competitiveness by improving service quality, safety and speed. Cross-industry consolidation has become the new industrial development trend, such as integration of tourism and culture &creative industries; the integration of medical and tourism. The cross-industry integration will have synergistic effects and to formed new industries types, new types of work and opportunities. Internationalization International expansion to new markets can assist firms to acquire new consumer trend for diverse consumer experience and to improve operational growth. Issues and Problems of Service Innovation in Taiwan (1/3) 10 Issues and Problems Impacts Firms are lack of capacity for innovation Difficult to obtain “information” needed for service innovation; Decision makers have not yet recognized the importance of innovation Firms are weak in “innovative culture and mechanism”; Few angle investors, venture capital investors who can provide “funds and consulting assistance”; Limited to the local market, firms are not motivated to invest in R&D and innovation. Lack of information and other infrastructure support for innovation: to form a multiple and creative service is difficult Insufficient funds and ability for continued business expansion:to achieve large-scale internationalization process is difficult for firms Source: CDRi Issues and Problems of Service Innovation in Taiwan (2/3) 11 Issues and Problems Impacts Innovation is hard to protect and preserve Innovations in Service sector are mainly evolved through “incremental process” Service innovation is through personal experience or accumulated “business know-how”, it is a challenge for a firm to retain such knowledge. Service innovations are likely to be invisible, public”, it is hard to apply for Intellectual Property (IP) protection; Low innovative motivations in Service sector Lack of innovation initiatives and pioneers in Service sector Source: CDRi Issues and Problems of Service Innovation in Taiwan (3/3) 12 Issues and Problems Impacts Service innovation and entrepreneurship supports from Government are inconvenient to access Lack of a single channel to access the Government’s “information and resources” regarding service innovation; Application and administrative procedures of innovation policy instruments are not fit into service firms’ operational needs. Difficult for firms to gain resources:grants, incentives, tax incentives and other policy measures from the Government and relevant government subsidies, etc. Source: CDRi Key Service Innovation Policy Instruments in Taiwan 13 Grant Technology Counseling Assistance Service Innovation Policy Instruments Award Loan Tax Deduction Source: CDRi Assist Service Sector Technology Development(ASSTD) 14 Why: Grant How: Technology Counseling Assistance Service Innovation Policy Instruments Source: CDRi The funds can be used in areas such as, adopt new service products; new business models; new marketing models or new technology innovation for business applications. Applicable types of business: Tax Deduction Up to NT$2.5m per year per project (US$83,000 @NT$30=US$1) What: Loan Award To encourage businesses to invest in developing new business models and service products. Wholesalers, Retailers, Logistics, Food, Management consultancy, International trade, Ecommerce, Exhibition, Advertising, Commercial design, Franchising and etc. Case of ASSTDIntelligent Service Innovation of Taiwantaxi 15 Needs for taking taxi Consumers ASSTD Taiwantaxi Get the order and best decisions of resources Contact with the system Consumer Value •More friendly and time-saving services •Personalized service model •Safer trip and reduce traffic time Intelligent System of Taiwantaxi Combined the Speech Recognition and Interactive Voice Response technology and provides the innovative service which is more convenient and time-saving Fast and Reliable Services Source:Taiwantaxi (2011), adapted by CDRi Assist Taiwantaxi for service innovation To apply the system and integrate the innovation service into the system Enterprise Value •High efficiency and effectiveness •Cost saving •Innovative and intelligent service model Small Business Innovation Research (SBIR) 16 Why: To raise the innovative capacity via technology or product R&D for the small and medium-sized firms. How: Grant Technology Counseling Assistance Service Innovation Policy instruments Loan Award Source: CDRi What: Tax Deduction Based on the firms’ innovative R&D technologies, products or services. A single company can apply grants for R&D of 50% maximum of the total investment. Maximum funding is NT$10m (US$0.3m @NT$30=US$1) in 2 years. Contribute to the industrial development with establishment of a knowledge creation model, value-added service platform or other core knowledge, systems and such. Applicable types of business: No specific requirements Apply through a single firm, or in a form of alliance with 3 companies or more. Case of SBIR -MissCare 17 Pregnant women SBIR Old women without menses Young women with menses Female Users Receive personalized health management service The Zi Jing Tang Corp. MissCare-The system of Women Health Management Personalized health management system and web platform for users, to provide suggestions and reminders about women health according to personal condition User Value •Personalized health management service •Save the works that users usually have to study about healthcare Other firms of service or products Provide other professional service or products about health e.g. healthcare foods Source:Miss Care (2011), adapted by CDRi Design dedicated ICT service system Enterprise Value •Provide personalized innovative healthcare service •Long-term services (from 18yr-60yr of a women) Internet Service Development in New Era Program 18 Why: Grant How: Technology Counseling Assistance Service Innovation Policy Instruments Tax Deduction Source: CDRi Provide counseling and promotion to support the internationalization of Taiwan’s innovative ISP and software firms. What: Develop successful new generation internet services model Promote international e-commerce opportunities for industries. Loan Award To set off new generation internet services, with practical applications for innovative ideas. Who: No specific requirements Any innovative entrepreneurs The case of the “Internet Service Development in New Era Program”- “Map Diary”of atlaspost 19 Internet Users Provide users the internet sharing service of photos and texts on the digital map User Value •To interact with other users for this website •Linkage between virtual and real lifestyle Source:Map Diary (2011), adapted by CDRi Internet Service Development in New Era Program Atlaspost Design the system and provide service “Map Diary”-The Platform of Map and Share The internet platform “Map Diary” combines the maps / (geographical )life cycle and the internet services such as photo album, message board, and homepage to make linkage of users’ virtual and real life Enterprise Value •Provide a free and easy platform based on the map, which makes users share their lifestyle •Acquire loyal users •Identify precise information of users and clusters, and to target the user with precise regional preferences. This would increase the value for advertisements •Service integration to smart phones 20 Internationalization of Service Sector The Relationship between Service Innovation and Internalization 21 “Innovation" and “Internationalization" are the two strategies for the industry and the Government to enhance the productivity and international expansion, thus, to create value and achieve business goals. Source: CDRi Vision and Strategy of Service Innovation and Internationalization 22 Vision To create a value-added Service Industry, with parallel effect to create jobs, improve the quality of life and act as an engine for economic growth Strategy To expand opportunities and value of Service Industry Strategic Dimension Government Support • Technology Application • Service Process Improvement • Transaction Form Innovation • Consumer Needs • Forerunner Experiments of Consumer • Cross-industry Interaction • Deregulation Source: CDRi Enterprise Reinforcement Enterprise Reinforcement • Applying Technology to Innovate Service Process • Exploring and Satisfying Potential Needs • Developing New Business Types • Entering International Markets and Integrating Enterprises with Other Industry Clusters • Developing Multinational Brands or Channels Government Support • Supporting Enterprises to Grasp Information of International Markets • Reduce Enterprises’ Barriers to Oversea Markets • Supporting Service Enterprises to Integrate and Advance Their Supply Chain Service Sector Internationalization 23 The establishment of networking resources should be emphasized in order to assist the Service sector enter international market. Internationalization development in Service sector Enter to Int’l Market Build Int’l Knowledge 食 育 Research and Seek for New Markets Source: CDRi 行 樂 衣 住 Promoting Service Sector Internationalization in Action 24 Operation Research Front Stage: Consumer Interaction Management Technology Process Middle Stage: Process Integration Management Backend Stage: Service System Management Source: CDRi Alliance Networking Platform 25 Research has found that “service networking” allowed the participated firms effectively to gain knowledge and to increase their capabilities for overseas’ development. Our goal of the “ANP” are: Customer One-Stop Solution Service Design Process Standardization Interdisciplinary service reformation Source: CDRi CDRi Networking Platform for International Service Sector Industry Research in Domestic and International Service sector Overseas Market Research Technology and Application R&D for New Service Model CDRi Innovation Research Talent Nurturing for Service sector Planning for Alliance Members and Interactive Sharing Platform 26 To provide research findings in international research; To offer overseas’ local trade data and analysis; To consolidate published market research data from public associations To supply a one-stop information service for all alliance members Organizing Alliance Networking Platform participants 27 A number of navigators is needed to assists in promoting necessary supports for the Service sector; Professional experts in the field of logistics systems, personnel training, language and culture are invited. They are here to provide solutions and comments for other immature and small businesses when entering to a new market; Current plan is to find appropriate navigators whom are familiar with the markets in China, Singapore, Malaysia and Thailand etc. Entry Mode Source: CDRi Survive Grow & Evolve Alliance Networking Platform - Participants 28 Marketing Research Firms (ACNielsen, GfK Group, Lippincott Mercer etc.) Supporting Services Providers (Management Consulting, Venture Capital, Local Experts etc.) Government and Bureaus (MoEA, MoIA etc.) Think Tanks & Associations (ITRI, III, Taiwanese Chambers of Commerce etc.) Source: CDRi Promoting International Research Alliance 29 Combined resources and collaborations from domestic and international public associations, think tanks, local marketing research firms, suppliers and service integrators, etc. for international market development. The feed back of such experiences returned for further Government policy making. CDRi, under the supervision of MoEA is keen on acting as the bridge between the Government and the Industries. This is where CDRi plays an important role in the overall ANP planning. Collaborating with International Consultancy Firms 30 International collaboration with consultancy firms and other leading research institutions is needed in order to gain any necessary knowledge for international expansion. To leverage experience through organizing regular conferences and forums in order to share the research outcome, which would reinforce the research capacity and operational knowledge. Collaborating Cross-border Service Providers 31 To gain the necessary information of overseas’ local experts and to configure a product, a business model that can be fully adopted to the local market. Example:To know the Japanese aesthetic design elements to promote a much refined service experience Holding Regular Conferences and Forums 32 To exchange ideas with international consultancy firms and industrial players. In-depth discussions on topics include: service localization; sustainable development; local laws, regulations and restrictions; taxation issues. To share practical experiences and research findings for all alliance members. 33 Conclusion Conclusion 34 Many of the innovation policy instruments should further strengthen the relations between each involved parties in order to create synergies. More non- technological supports are needed for the Service Sector innovations, especially for small & medium business. Strong encouragement for international expansion, to increase international competitiveness and to accumulate experiences for new business models and innovations. 35 Thank you!