The Netherlands' Drive to Build a Service Economy

Focusing on improving and innovating services is a smart way to foster economic growth. Just ask the Dutch

By Jeneanne Rae

How has a country with just 16 million inhabitants become the 15th-largest economy in the world? Answer: through a combination of resourcefulness, hard work, and acute foresight for what might make the nation rich. Since the 14th century, the Netherlands has played a major role in shaping the world economy. Now the country that brought us such major innovations as the stock exchange and the insurance industry has identified another big opportunity: the services sector.

Recognizing the need to steer the typical conversation about innovation away from technology and products toward services, Minister of Economic Affairs Maria Van Der Hoeven—a power woman if I ever met one—recently focused the country's prestigious annual Innovation Lecture on this topic. The audience comprised business leaders, government officials, and selected creative individuals who all play important roles in the Netherlands' various government agencies and business sectors. (Read the full presentation.)

Here are some highlights from the event, along with some ideas other nations might consider importing.

Service innovation for higher growth and productivity

A number of attributes about services are of particular relevance in driving economic growth. For instance, automated services delivered through information- and communications-technology platforms can attract significant revenues from outside a country's physical borders with relatively little incremental investment. Just look at Amazon.com (AMZN) or the Dutch GPS company, Tom Tom, each of which does considerable business outside its home base. Heightening revenue from abroad stimulates a country's trade balance and productivity growth. Today 60% of the Netherlands' gross domestic product is made up of exports; additional services could drive the figure higher.

Do, don't think

The U.K. Design Council set up the "Red" initiative to tackle social and economic issues through design-led innovation.They run a "Do Tank" to create prototypes of new ideas for government services quickly.(It is designed deliberately to contrast with "Think Tanks" typically populated by paper-writing policy wonks.) Van Der Hoeven liked the idea and decided to take immediate action. Following the lecture she put her staff to work to create a pilot to run a similar "Do Tank" in the Netherlands. Her goal: put it toward tackling issues of departmental efficiency.

Service innovation needs new inputs

Change management is often considered a boring topic, but it's critical to the service innovation equation. After all, service delivery depends on an organization's systems, processes, and talent base. When a company's service portfolio shifts, these critical inputs must shift with it—and as we know, people hate change. This idea resonated with the corporate leaders in the audience. Later, Manon Janssen, Chief marketing officer and senior vice-president for Philips Lighting told me that managing change is a huge issue for her business as it tries to transform from selling lamps and light bulbs to offering service solutions that involve new business models, marketing plans, and a different type of sales force. Philips Lighting's new strategy calls for selling LED lighting solutions that are capital-intensive but low in operating cost to city governments around the world.

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