Thank you for the invitation

• and for the opportunity to open this conference.
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• Services have an increasingly important role in our economies, and deserve increasing academic and political attention
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• Services are therefore an important focal area for industrial and innovation policy in Norway
• And therefore, there is a need for researchers, business leaders and policy-makers to gather and share knowledge and ideas.
• In other words: this conference is an important one!

The new Norwegian Government have high ambitions

We want to

• advance social justice
• strengthen the Norwegian welfare system
• and increase our wealth creation through an active industrial policy

Welfare and growth are closely connected. The two are mutually interdependent and reinforcing:

• Before we can share and use our wealth, we have to create it
• Meanwhile, fair resource distribution and a first class welfare system – such as health and education services - will stimulate productivity, growth and wealth creation
• Which in turn may finance new and improved welfare services

This is why the most well developed welfare societies are also among the most productive and prosperous.

Therefore, innovation is high on my Government’s agenda

• We want to develop and implement a comprehensive and active Norwegian innovation policy

• In my Government’s declaration, recently prepared here at Soria Moria, we state that Norway is to become among the world’s leading, most innovative, dynamic and knowledge-based economies on areas where we have competitive advantages
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• Norway shall be a good place for business activity
• And Norway shall be prosperous, with high wealth creation, employment and welfare level – even after our oil wells run dry

Norway is a society of great opportunity

• We have rich natural and human resources.
• We have long democratic traditions.
• We have high levels of human and social capital and the Norwegian population enjoy one of the best welfare systems in the world.

Our challenge is to make the most of our opportunities

• Our job is to maintain, renew and further develop this society.
• Our objective is to give all citizens the possibility to fulfil their potential and lead meaningful lives.
• And our vision is to leave more to future generations than past generations have left us.

My Government’s task is to enable the realisation of the great potential for wealth creation – in all regions of the country

This is the basis of our efforts to meet the challenges posed by increased globalisation and international competition:

• Norwegian enterprises are faced with growing demands for continuous change
• We have to be at the frontier within niches where we want to compete
• And we will have to provide our share of the inventions and innovations that drive future wealth creation.

With all respect for this task: We will make it!

Services constitute a growing share of the economy, and are an important focus of Norwegian industrial and innovation policy

Service industries are increasingly gaining economic significance

• Three out of four working Norwegians are providing services
• The service sector is growing rapidly and is getting more export-oriented

Services are all over – not only in the service sectors. Services are built into most consumer products, like cars, CDs and computers. Boundaries between manufacturing and service industries are often unclear. What is the value of a cellphone without software and connection service?

The rapid growth of services is also evident within the European Union. During the period from 1997 to 2002, 95 per cent of all new jobs were created in services. Service industries provide 70 per cent of the EU’s total Gross Domestic Product. However, their share of European trade is a mere 20 per cent.

However,

Growing shares of the service industries compete internationally

• Norwegian firms with global ambitions have great possibilities for exporting innovative services. This is, not least, within sectors where we already have advantages, such as energy production and maritime industries. In these areas, we are in a good position to remain among the lead countries.
• We also have to look for exporting potential in new and less developed services. Take the example of a radically new and unique solution for distributing music: Two creative women have established the Oslo-based company Varthom and developed Planet Noise – the world’s first platform-independent music shop. The solution enables you to access your music by any medium once you have bought it from the Planet Noise website; your PC, cellphone, mp3 player, or CDs from a record shop. Planet Noise has been developed and tested on users, and it works. Now, Varthom wants to go big with Planet Noise and launch it internationally.

The Norwegian Government also wants to address the challenges posed on our public service system

Demographic developments increase pressure on public services, and thus the need for change and restructuring across sectors. We want to improve efficiency and quality within

• public administration
• the education system
• health services
• and social care.

This is not only a question of increased spending, but also an ambition of more quality for each krone spent. Thus developments within public services must be seen also in an innovation perspective, in order to explore and realise commercial and export potential.

A good example is provided by IscAlert™ - a new way of diagnosing ischaemia [ is-'ki-mi-a – def. inadequate blood flow to a bodily organ] developed in broad cooperation between institutions from the public and private sector. Ischaemia is the most frequent cause of death in the Western world. It leads to interruptions in blood flow, and is the most common cause of stroke. If ischaemia is diagnosed earlier, more patients will survive and damages can be reduced.

Alertis Medical has developed IscAlert™ in cooperation with, among others, researchers from the University of Oslo and SINTEF - the largest independent research organisation in Scandinavia. IscAlert is a simple and low-cost diagnosis tool. Market analyses estimate that IscAlert has a market potential in Europe and the US of 10 billion kroner. Alertis Medical will now, with Government support, make IscAlert™ ready for production and sale in cooperation with the Rikshospitalet University Hospital and the international micro-mechanics company Memscap. The plan is for the first sales of IscAlert™ to take place in 2006.

IscAlert shows us how effective responses to challenges in the public sector may actually generate export potential and – hopefully – wealth creation. That is, if we face the challenges instead of avoiding them.

As these examples illustrate;

Growth in services is based on innovation

• Two service industries – retailing and domestic communication – have registered the highest productivity growth in the Norwegian economy over the last 20 years. Some of the most radical innovations in this period have occurred within Norwegian grocery trade.
• The retail chains REMA 1000 and RIMI marked a revolution within retailing through the 80s and 90s by major adjustments in their value chains, and introducing new and smarter solutions for grocery shopping, which in turn made groceries cheaper for the customer. Since then, other retailing industries have followed. Today, this period – marked by efficiency and logistics improvement - represent the innovations of ”yesterday”.
• Today, innovations within grocery trade are far more oriented towards the customer’s demand for greater variety and quality. The customer is also far more conscious about the value of experiences – even when shopping. The establishment of Deli de Luca illustrates this. The Deli de Luca concept is a mix of groceries and delicatessen shop, focussing on quality food and a variety of meals.

Knowledge-intensive services are growing rapidly

• employment within knowledge-intensive services, such as research and development, programming or business consulting, has grown by 160 per cent over the last 20 years. Meanwhile, there has been a significant increase in international trade with knowledge-intensive services.
• This represents a new setting for industrial policy: When knowledge becomes the most important input, and services are increasingly exchanged across national borders, competition also becomes harder. Therefore, a strong political focus on knowledge is vital.
• Moreover: Norway is, and will continue to be, an attractive place for the localisation of innovative service activities.

Our common challenge is: To understand the nature of innovation and wealth creation within services.

• The challenge is shared by researchers, business leaders and policy-makers.
• The Norwegian Government will strengthen its focus on this area. Our ambition is for Norway to become a knowledge-based welfare society where innovative services account for a considerable part of Norwegian wealth creation and export.
• However, as this conference will address, we need to improve our knowledge and to develop policy instruments in order to realise this ambition
• ECON Analysis (who some of you will meet during the parallel sessions tomorrow) and Menon are about to complete a study initiated by the Ministry of Trade and Industry. The study examines the characteristics of innovations within service industries, and map factors of importance to innovation capability. Moreover, the project shall identify drivers and bottlenecks as a basis for considering policy measures that may contribute to strengthening innovation in services. The project is in its final stage, and will be presented in a couple of weeks.
• So far, we have already seen some interesting findings from the project.
• First of all, and not surprising, it seems meaningless to define services as a separate and unified policy area. Services are extremely diverse.
• Services are what services do. The project has established a new categorisation of services – based on the basic understanding of services as activities. This opens up a whole new way of classifying services, in terms of the service action – whether it is problem solving, communication services or creating an experience for the customer. Classified in this way, it might prove possible to identify and develop industry-specific policy measures.
• Services are found within a wide range of sectors and industries, and a wide range of policy areas influence service innovations.
• For example: major service growth mainly occurs in cities. The development of new and knowledge-intensive services seems to be an urban phenomenon. This has possible implications for urban policies, along with infrastructure and knowledge policies.
• Customer interaction seems to be another important factor for service innovations. In many cases, the innovation cannot be separated from the actual meeting between service supplier and user. This meeting is not necessarily influenced by public policies. However, the authorities might also have a role to play by facilitating commercial interaction and access to markets.
• I mentioned Planet Noise, which bears witness of a vital Norwegian entrepreneurial culture. The solution also illustrates an important challenge faced by many service providers who want to enter the international market: The issue of protection. After a lot of hard work, Planet Noise has proved usable – even user-friendly. However, it has yet to prove patent-friendly. The immaterial character of services poses the obvious question of what to protect. Can the actual combination of media use be patented? Or what about the customer’s experience produced by the service – can it be protected? Probably not.
• The example of Planet Noise is one of a radical innovation with a much larger potential for profit than it has brought so far. However, further growth and development may be obstructed by a lack of possibilities for protection.
• By protecting their intellectual property – their patents, designs and trademarks, Norwegian enterprises will strengthen their position faced by global competition. My government will look into and improve Norwegian patent policies, in order to secure that Norwegian enterprises can participate on equal terms in international competition.
• Planet Noise represents one among many growing challenges connected to the growth of service exports.
• The Norwegian Government will increase its focus on these and other challenges related to growth, wealth creation and trade based on services
• and hopefully – along with our colleagues and others – we will increase our understanding and develop good and effective policies.

To sum up:

• The Norwegian Government will lead a broad and active industrial policy to promote innovation and creativity in the Norwegian economy
• We will strengthen the positive spiral of welfare development and wealth creation
• We will invite research institutions, competence centres, the business sector, employer and employee organisations in the further efforts to increase our innovative capabilities and to realise our potential for wealth creation.
• We will meet increased international competition with increased knowledge and competence.
• We will work to enhance innovation and wealth creation within services.
• And I would like to invite you, participants of this conference, to help us gain knowledge and develop policies that enable us to do so. The Ministry is strongly represented here, they will be happy to receive and discuss your ideas. And don’t hesitate to send an e-mail with your views and opinions to the ministry.

Thank you for your attention, and enjoy the conference.