About EU-MACS Project

Failure to understand the needs and capabilities of users is not trivial

Until recently practically all outlooks, surveys and inventories conducted by national, EU and WMO agencies with backgrounds in (upstream) climate services provision tended to emphasize the vantage point of climate data generation and deployment. This prevailing orientation seriously hinders the capability to appreciate how climate risks and opportunities fit into the wider risk portfolio that the actual or potential climate service user is facing. Eventually, this may have non-trivial consequences for the effectiveness of investments in risk reduction in various sectors, when sources of uncertainty (climatic, climate modelling, and climate observation related and other ones) are not appreciated in a comprehensive way. During the realization we have observed marked improvements in a much broader and end-user inclusive approaches to development and provision of climate services, as for example demonstrated in the infographic of the Global Framework for Climate Services

There is a need to lower translation and search costs

A complicating feature is that many potential users may not have systematic risk management approaches that would integrate climate risks to other aspects of risk management. The use of climate services may follow from regulatory obligations, such as in the case of land use planning, but the risk framework – if any – of such a policy area may be patchy, making it difficult to identify the appropriate bundle of climate services. Regardless of whether there is an integrated risk framework the potential end-user may lack skills to properly judge alternative climate services products, as well as to anticipate possible uses of similar products. This hints at the needs of supplementary consultancy, information provision and articulation of expectations in the climate services field, where it remains to be assessed how to effectively and fairly organize such supplementary information and advice. Summarizing, these obstacles can be referred to as transaction and search cost. As above mentioned, the lowering of transaction cost often requires also measures outside the realm of economics, such as regulatory changes, education, and awareness raising.

Standardization to promote recognizable terminology

There is a fairly large non-unified set of terms used in climate services development and delivery. Lack of harmonization in terminology contributes to the confusion among prospective users and thereby slows down uptake through various mechanisms. This obfuscating terminology includes the very term ‘climate services’ itself, of which the interpretation varies between ‘nothing else than climate data’ and ‘anything that contributes to better coping with climate change, climate variability, and climate policy’. Furthermore, the different main categories of climate services (seasonal, adaptation oriented, classic statistical) imply major differences in the nature of the products.
Also the distinction in providers and users of climate services is not optimal, since many midstream and downstream providers of climate services are both users (of climate services produced more upstream) and providers (of their own climate services). In other words the position in the value chain is as important for typecasting the climate services product as the notion user or provider and the main type of climate services (seasonal, adaptation related, ..). For these reasons also the term ‘purveyor’ has been suggested, for all actors other than those in first segments of the value chain. Instead, it may be more appealing to prospective users to name ‘climate services’ by a more precise function these fulfil, e.g. ‘climate scenario specific flood risk maps’.

Lack of awareness and/or incentives

In quite some sectors, such as in tourism and in financial service, potential users may not be aware of the availability of climate services or the option to co-develop tailored climate services. Furthermore, such actors may perceive that their main risks are in other domains or that climate risks can be easily absorbed by means of insurances and intelligent pricing schemes. Similarly, there may be no clear picture of what the risk constitutes. Initiatives and policies to improve risk transparency and accountability can alleviate these obstacles and offer drivers for uptake.

Exclusivity of the value added information can be a burden

Although less easy to assess than the benefits of weather and seasonal projections, also climate services (at least in the narrower sense of climate change projections or close derivatives) are likely to generate societal benefits exceeding many times their costs, provided that they are rightly understood and used (Clements et al 2013; Anderson et al 2015). Therefore, policy frameworks, provision modes and ethical issues are deeply intertwined. In particular, the extent to which climate services-generated benefits can be straightforwardly monetized varies greatly, thereby hinting at roles for both public and private climate service providers.
Private sector users are willing to pay for value added generating services usually in exchange for the exclusivity of the information. This is efficient for society under normal operations. Yet for disruptive risks (e.g., resulting from natural hazards) information should be shared so as to enable upkeep of societal resilience. There is evidence (e.g Tompkins and Eakin 2012) that private actions based on climate information could generate benefits in the public sphere. In this case the coordination and the commitment of private actors is essential, although the benefits of private actions do not directly accrue back to the private actors. In such cases the public-private exchange needs clear regulation and sometimes options for compensation so as to minimize ethical biases. Ethics in climate services is also related to quality assurance of data and communication of uncertainties tuned to capabilities, knowledge and vulnerabilities of users.

Four main types of drivers of CS market can be distinguished

A part of the demand for climate services is born out of legal obligations, e.g. to account for climate change effects in urban and infrastructure planning. On the other hand in the private sector the degree of acknowledgement of climate change as an element of risk assessment is varying greatly, with additional challenges owing to limitations in capability and in sector relevant climate information (i.e. leading to the perception of no relevant signals observed yet). For a start we distinguish four main types of drivers for the use of climate services, being: (1) legal obligations explicitly specifying that information on climate risks should be integrated in decision making or practices (such as in urban planning and permitting), (2) implied motivations owing to market led or legislative accountability for damage and/or malfunctioning (such as failure minimisation in networks), (3) proactive opportunity seeking (such as ski slope snow management as constituting element of a ski centre’s marketing strategy), and (4) science and curiosity. Only the fourth category is not directly driven by (broad scoped) risk management, but scientific interest in the use of climate services is in turn directly or indirectly driven by questions pertaining to risk management. From this categorization it can be inferred that legislation can help to create demand for CS, but is by no means the only driver.

Acknowledging common interest appears to support climate services market

From a technical, economic and regulatory point of view the emergence of climate services ties in with general trends in (1) opening of public sector datasets for use by third parties, stimulated by the INSPIRE directive (de Vries et al 2011), and (2) creation of cooperative public-private information networks (e.g. regional resilience management, health care, comprehensive logistics management, etc.) (Klievink and Janssen 2014). The actual implementation of such facilities appear to be often more driven by acknowledging common interests than by the original legal initiation of the process (Klievink et al 2012), even though the adoption of new legislation may have an incubator function for innovations.

In this study two modes of analysis, static and dynamic, are conducted to feed into synthesis and policy recommendations for CS market development. The static level of analysis, aiming at identifying and investigating market failures and points of departure for innovations, is carried out in work package 1 (WP1) and entails various information collection approaches and comparative analysis. The question how to tackle these market failures is taken up in WP5 in conjunction with the findings regarding the exploitation of the innovation potential, resulting from the dynamic level analysis in WP2-WP4. The dynamic level analysis is framed in a Constructive Technology Assessment (CTA) approach. For two of the three focus sectors (Tourism and Urban planning) a Living Lab approach is used within the context of the CTA frame. For Urban planning -sector Social Network Analysis (SNA) will be utilized as well. For the third sector (Finance) a more formalized exploration approach will be followed, tuned to the existing risk management and decision support frameworks in the financial sector.

Methodological framework

Overview of the logic structure of the study (communication and management actions not shown)

The PEST framework (or in this case PESTEL) is a common workhorse in market research with the purpose of a systematic screening of designated markets with respect to premeditated external influences on that market. (e.g. Oxford Learning Lab^[1]). The assessment may include any external factor deemed useful, i.e. in this case Policies (governance), Economics, Science, Technology, Ethics, and Legislation (regulation), hence PESTEL instead of the original PEST (meaning Policies, Economics, Socio-cultural factors, Technology). In this study the external PESTEL factors are assessed for the purpose of (1) the static level analysis, i.e. identifying market failures and straightforward market opportunities as discussed in 1.3.1 and of (2) creating a point of departure for the dynamic level analysis. The actual dynamic level analysis will be supported by Constructive Technology Assessment (CTA), the Living Lab approach, and by CS offer selection experiments as realization of the collaborative market development exercises.

To enable the PESTEL framework to create a solid basis for the static and dynamic levels of analysis a supporting analysis of the use (and non-use) of CS will be carried out. The PESTEL framework is created and filled in WP1, and subsequently used to prepare the collaborative market development exercises in WP2-WP4. The PESTEL framework is taken up again in WP5 (Synthesis) to assess effective measures for alleviating or removing market failures and promote CS market opportunities.

A second supporting action is the assessment of the resourcing of CS, both from a supplier and user perspective. In conjunction with the resourcing alternative business models and willingness to pay (WTP) will be assessed. The resourcing and applied business models will be reviewed in WP1. Alternative business models and WTP will be assessed as part of the explorative market development exercises in WP2-WP4.

^[1] http://www.oxlearn.com/arg_Marketing-Resources-PESTLE—Macro-Environmental-Analysis_11_31 visited 22.02.2016

For the static level analysis the study will employ assessments both addressing larger audiences by means of surveys, desk research, and statistics of climate service use, and addressing more focused audiences by means of (group)interviews, mini-surveys, CS product reviews to enable more detailed composition and analysis of use and choice behaviour as well as learning effects.

Exploring the data on service use and interviews of present and potential CS providers and users are used to construct a systematic profile on what types of CS are used and provided and how. The data on service use and contacts to existing users are directly available by the project partners, many of which are directly involved in CS provision, whereas good contacts with other CS providers also to several users can extend this statistics base.

Equally important for the analysis of CS usage is to understand what is not used or provided and why. For this reason, the research extends to cover also underutilization and non-users. Underutilization can be caused by CS users that nevertheless use less CS than they optimally could have, considering their risk management framework. Obviously underutilization of CS is also caused by non-users of CS. Underutilization can be approximated by comparing the use of CS for the same theme area in two different countries or regions, after correction for key differences between the regions. Non-users will be identified by comparing the service use information to knowledge about climate sensitivity of specific markets or sectors (besides direct climate sensitivity this can also refer to increasing adaptation and/or mitigation requirements). The assessment will also review the occurrence of non-optimal use of CS, i.e. when not using the most suitable data available.

This ‘static level’ analysis cast in the PEST framework, the creation of a multi-layer perspective on CS, and the creation of an interactional format for WP2-WP4 are conducted in WP1. This output as well as findings from parallel MARCO project provide the basis for the explorative dynamic components of the project realized in WP2-WP4. In these explorative components committed stakeholders from selected sectors are brought together to co-create and innovate improved and new climate services, and climate service supply chains. In due course the necessary conditions are identified under which existing and new CS could abound. These insights will be used to formulate recommendations for the different actors in the CS market, as well as for policy makers affecting the CS market indirectly in WP5 (Synthesis).

Two aspects mentioned in 1.3.1 are key in deriving an ad hoc co-productionist methodology. First, the apparent limited abilities of most CS providers to acquire sufficient affinity with users’ needs signals that CS supply chains should more consistently account for users’ perspectives. Second, potential users’ lack of skills to judge alternative climate services and anticipate possible innovative uses requires an attention on the learning processes of users themselves as a pre-condition for market growth.

Constructive Technology Assessment (CTA) is one of the best-known and successful methodologies in this field. Being originally developed at the University of Twente (UT, partner of this project), CTA aims to reduce the costs of learning during market introduction and dissemination of new technological products (Rip et al. 1995; Rip & Te Kulve 2008). CTA workshops take mainly the format of scenario-building exercises in which stakeholders are stimulated to interact in projecting possible outcomes of the technological products they are developing. CTA is well suited to identify constraints and enablers of the uptake of climate services since it:

• addresses cases in which users’ expectations and decision frameworks are not clearly determined;
• activates processes of demand articulation, during which user requirements (including modes of provision and ethical concerns) are formulated (sometimes for the first time);
• supports multilevel processes of demand articulation not only at the level of individual users or organizations, but also at sector level;
• leaves room to identify in progress which further stakeholders need to be involved – besides providers and potential users;
• stimulate actors’ mutual learning and exploration of possible future developments,
• as a consequence, CTA elaborates and suggests policy measures like agenda-building, sector-wide regulations, standards and common practices.

Based on insights obtained through the PESTEL analysis, supplemented by historical innovation experiences in CS and current CS innovation prospects, an ad-hoc CTA method will be elaborated in WP1. These methodological elements will contribute to inform the design of workshops organized in WP2-WP4, in which collaborative market development exercises are carried out. At a later stage, CTA will be used to analyze the joint output of WP2-WP4 in terms of implications for policies and measures as well as for further research needs regarding understanding of CS market development.

Whereas Constructive Technology Assessment (CTA) provides a methodology to align innovation actors’ interests at the initial stages, Living Labs, Joint Fact Finding (JFF) and Social Network Analysis (SNA) are facilitating and shaping deliberation processes – in this case with the aim to improve CS market functioning and promote uptake of CS. Furthermore, Value Proposition Design (VPD) will be used to facilitate the generation of CS package alternatives.

1. EU-MACS focuses in three sectors

Three CS user segments has been singled out as being of special interest: (WP2) Finance (incl. insurance), (WP3) Tourism, and (WP4) Urban planning. These sectors represent quite different yet significant types sensitivity to implications of climate change and climate policies. Furthermore, inadequate use, underutilization or even neglect of climate services in these sectors can have significant impacts on EU citizens’ and societies wellbeing and wealth. Currently Finance and Tourism are still sectors with vastly untapped potential for use of CS. For urban planning the use of CS is already more common, but complexities are high and by no means all needs are adequately served. A text box on the next page introduces the sectors further.

The implementation of Value Proposition Design will differ to some extent between the user segments in WP2 – WP4. The Finance sector attaches very high value to approaches that can be formalized and linked to their existing risk management and appraisal systems. For the other two sectors the methods will be more hybrid and embedded in a Living Lab approach.

1. Value proposition approach

To ensure that the users needs are fully understood by CS providers appropriate methods and tools have to be deployed. UnternehmerTUM developed the methodology Business Design for facing those challenges in entrepreneurial and innovation projects. With proven principles of design and strategic management, sustainable business is identified, developed and realized. Best practice tools are condensed in the UnternehmerTUM business design method kit http://www.unternehmertum.de/business-design-method.html.

The Business Design method set can be used in any phase of the project. UnternehmerTUM distinguishes between the three phases, ‘identify chances’, ‘develop concepts’ and ‘implement business’. The guiding principles of Business Design form the framework of how UnternehmerTUM approaches tasks of innovation. In this way such factors as market requirements and customer needs will be better understood, timely communication with major interest groups supported, uncertainties more rapidly removed, creativity and the ability to find solutions increased, or the time until market entry accelerated. The principles are interdisciplinary work, human-centeredness, contextual observation, holistic approach, social prototyping and iterative steps.

When implementing business as it is aimed in the CS project the tool Value Proposition Design can be used to create products and services users/customers want (Osterwalder et al. 2014). Value Proposition Design helps to find out information about customers and what they want. Subsequently patterns of value creation can be easily recognized. Holding that knowledge value propositions of climate services are created and profitable business models are designed. The information for the value proposition have to be gathered from users/customers via interview. As fundamental principle for conducting interviews the Mom Test offers a guideline for customer conversations (Fitzpatrick 2013). The imparted foundational skills enables the interviewer to get honest answers from the user/customer. The tools mentioned shape an approach to address and join provider and user/customer of climate services within a given framework.

1. Living labs

LL has been quite successful in boosting user driven, open innovation in different European regions so far. However, it is important to note that LL is not a brand new approach, rather a recombination of existing user-centred methods and tools, aimed to put the citizen/customer in focus of – not only development, but also deployment of – new product and service prototypes in real-life environments. Coherently, the LL approach extends its vision to the full product/service life cycle process, i.e. from the definition of an idea to the design of a solution, from validation and testing to user-centred support and maintenance of a commercialized product or service.

Obviously, such a holistic vision of the product/service life cycle has challenged the traditional distinction of roles and functions between producer (or provider) and user (or customer). We refer to co-creation (of a product or service) as the outcome of the convergent work of end users with other industrial and non-industrial stakeholders in a common prototyping environment. While the term triple helix was coined some years ago to describe the cooperation of Research, Government and Industry within a regional innovation system, the Living Lab approach has enhanced that scheme into the quadruple helix, by adding the end user/citizen/customer as the 4th stakeholder. In this sense, we also speak about 4P – or Private Public People Partnerships – as the most common way of user and stakeholder involvement in innovation related activities at local level.

LL has been extensively implemented to support urban innovation (http://www.openlivinglabs.eu/). A few experiences are also mentioned in the scientific literature about LL for Urban adaptation to climate change (e.g. https://www.gfdrr.org/innovation-lab; http://resilient-cities.iclei.org/). These experiences show the LL’s potentialities to actively involve a wide range of actors in a creative co-development process, and to guarantee the long term sustainability of the creative environment (World Bank, 2014). The project will implement a well known approach for organizing and managing the LL activities, the 7-step LEADERS approach. The 7 steps of the LEADERS approach are as follows (Molinari et al., 2013): Localize and identify your stakeholders; Establish a Living Lab PPP; Assess the relevance of «translocal» issues; Deploy an ICT infrastructure for the Living Lab; Establish a local and/or « translocal » 4P community (Private Public People Partnerships); Run one or more User Driven, Open Innovation pilots; Summarize and evaluate the results. This stepwise oriented approach brings with it the advantage of letting the individual urban labs autonomous in self-organizing the respective activities (under various profiles, i.e. tools trialed, adopted methodologies for user integration etc.) while at the same time being “constitutionally” oriented towards the convergence to a single, common model that will be among the key aspects of project’s permanent heritage.

Living Labs will be used for the urban planning sector (WP4).

1. Joint Fact Finding

Joint fact-finding (JFF) is a collaborative approach for tackling wicked problems by bridging divides between science and policy insights and by reconciling different stakeholders’ views in situations. Moreover the decision context includes uncertainties and differences of opinion (and underlying values). Yet, finding common ground can be sufficient beneficial for all (or at least for a crucial majority) so as to motivate the effort of evaluation and convergence. It is typically a multi-stage process in which first agreement on the key questions and key shortfalls in information is sought. Subsequent steps aim to reduce the information shortfall and specify the criteria and evaluation approach(es). Gradually applications of JFF have been arising for adaptation planning and articulation of the consequent needs for climate services (Schenk et al 2016). JFF will be applied to the exercises for the Finance sector (WP2) and the Tourism sector (WP3).

1. Structured choice processes

For the finance sector the evaluation of CS offers and responses will be based on the assumption that in this sector formal structured choice processes prevail. Various approaches can be considered for evaluation, such as Analytical Hierarchical Programming (AHP) and Elimination by Aspects (EBA). Especially the latter one may be assumed to be a relevant representation for selection of CS in the Finance sector. Such tools will be applied only later on in the market development exploration, initially the emphasis is on Joint Fact Finding.

1. Social Network Analysis

With Social Network Analysis (SNA) complex networks of interactions taking place during a decision-making process, for example about climate change adaptation measures, can be analyzed. In other terms, the SNA will allow to investigate with whom the decision-makers interact during the process, and to analyze the mechanisms of interaction. In SNA, three different kinds of interaction mechanism are considered: i.e. information sharing, cooperative task performance, conflict. By means of SNA not only the main actors in a network but all potential stakeholders that need to be involved in the study can be identified, too. For what concerns the identification of potential barriers for CS mainstreaming in the climate adaptation decision-making processes, the analysis of the networks can be used to identify the main vulnerability in the network.