One of the primary objectives of the European Service Innovation Centre (ESIC) is to provide customised advice to selected model demonstrator regions. Within the framework of its regional assessments, ESIC tests whether the regional policy mix is conducive to supporting emerging business models and transforming sectors by applying service innovation processes and concepts. The expected outcome of a modern regional innovation policy mix is the ushering in of structural change and a shifting of the regional economy towards higher value added products and services.
Such structural change requires a systemic approach from innovation policy-makers that takes into account the interwoven character of the regional eco-system. A systemic innovation policy must consciously build upon cross-sectoral synergies and capitalise on all forms of innovation. However, there is no one-size-fits-all model and there is no single best practice that can be replicated. All regions have to find their own strengths and carve out their own niches and opportunities.
The determinants of innovation include – amongst others - economic, social, political, organisational and institutional factors. A central assumption is that innovation systems perform well when they support a number of essential functions or activities  .
For these reasons, ESIC has adopted an analytical framework to assess regional policy, which covers the five most important functions of the innovation system:
In ESIC, the assessment of the ‘five innovation system functions’ addresses those aspects that are most crucial for inducing structural change. For example, the analysis of knowledge development and diffusion takes into account the fact that the results of service innovation are not only appropriated by means of patents, but also by means of copyright, trademarks and first-mover advantages. Likewise, collaboration across the boundaries of sectors is very important for service innovation. A systemic policy approach is one that focuses on all forms of knowledge and innovation. It does not only support a given set of manufacturing or service sectors but rather focuses on the links between sectors. This approach, then, creates the framework conditions conducive to ensuring that regional businesses continue to develop. The importance of infrastructure should also be noted such as broad-band or testing facilities that can be important enablers of service innovation.
In addition to assessing the five functions individually, the ESIC approach also explores their coherence and the interfaces between them. In order for service innovation to flourish, an innovation system, which involves both private and public agencies, should ideally carry out all five functions effectively.
Figure1. Assessment of the Regional Innovation System’s Functions
 Hekkert, 2007; Wieczorek & Hekkert, 2012 identified seven system functions: entrepreneurial activities, knowledge development, knowledge diffusion, guidance of search, market formation, mobilisation of resources and creation of legitimacy. These have been simplified to five for the purposes of the ESIC analysis.