37% 23% 40% SERVICES SYSTEMS AND FINANCING SOFTWARE IBM’s business 2007 Pretax Income Mix Revenue Growth by Segment
Service sector employment In 2006 the service sector’s share of global employment overtook agriculture for the first time, increasing from 39.5% to 40%. Agriculture decreased from 39.7% to 38.7%. The industry sector accounted for 21.3% of total employment. - International Labour Organization http://www.ilo.org/public/english/region/asro/bangkok/public/releases/yr2007/pr07_02sa.htm
Jobs and tasks are changing Levy, F, & Murnane, R. J. (2004). The New Division of Labor: How Computers Are Creating the Next Job Market. Princeton University Press. Based on U.S. Department of Labor’ Dictionary of Occupational Titles (DOT) Expert Thinking Complex Communication Routine Manual Non-routine Manual Routine Cognitive
Services account for more than 80 percent of the U.S. gross domestic product, employ a large and growing share of the science and engineering workforce, and are the primary users of information technology. … [The] academic research enterprise has not focused on or been organized to meet the needs of service businesses. Major challenges to services industries that could be taken up by universities include: (1) the adaptation and application of systems and industrial engineering concepts, methodologies, and quality-control processes to service functions and businesses; (2) the integration of technological research and social science, management, and policy research; and the (3) the education and training of engineering and science graduates prepared to deal with management, policy, and social issues.”
National Academy of Engineering (2003). "The Impact of Academic Research on Industrial Performance"
“ Our economy is increasingly dependent on services, yet our innovation processes remain oriented to products.”
from Harvard Business Review, April 2003
“ Services dominate economic activity in developed economies, and yet understanding of innovation in this sector remains very limited…… At this early stage, academic research about innovation in services is not well defined.”
from Financial Times, October 2004
“ Services is an understudied field”
Matthew Realff, Director, NSF SSE Program
from NY Times article April 18, 2006
Academia Dissects the Service Sector, but Is It a Science? - Steve Lohr
Services are different, because they integrate… Many say that “service is just ___<see list of disciplines below>____” Most like general systems theory (abstract) and systems engineering (applied) Operations Research … Industrial Engineering Systems Engineering Organization Theory Economics & Law Multi-agent Systems Information Management Game Theory Management Science Mngmnt of Info Sys (MIS) General Systems Theory Anthropology CS/Artificial Intelligences Information Science Social Science/ Poli-Sci Cognitive Science/Psych Marketing Operations Mngmnt … Most disciplines specialize… Service science integrates Service system entities are dynamic configurations of resources… people, technology, organizations, shared information (e.g., language, laws, measures, models, processes, policies, relationships, rights, etc.) connected to other service system entities by value propositions for the purpose of value-cocreation relationships, with governance mechanisms for dispute resolution. Queuing Theory A Service System is Complex
For a service science outline and 200+ annotated references, refer to: http://www.cob.sjsu.edu/ssme/refmenu.asp T-shaped professionals are in high demand because they have both depth and breadth They combine expert thinking (depth in one or more areas) and complex communications (breadth across many areas) complex communication expert thinking
Stakeholder Priorities Education Research Business Government Service Systems Customer-provider interactions that enable value cocreation Dynamic configurations of resources: people, technologies, organisations and information Increasing scale, complexity and connectedness of service systems B2B, B2C, C2C, B2G, G2C, G2G service networks Service Science To discover the underlying principles of complex service systems Systematically create, scale and improve systems Foundations laid by existing disciplines Progress in academic studies and practical tools Gaps in knowledge and skills Develop programmes & qualifications Service Innovation Growth in service GDP and jobs Service quality & productivity Environmental friendly & sustainable Urbanisation & aging population Globalisation & technology drivers Opportunities for businesses, governments and individuals Skills & Mindset Knowledge & Tools Employment & Collaboration Policies & Investment Develop and improve service innovation roadmaps, leading to a doubling of investment in service education and research by 2015 Encourage an interdisciplinary approach The white paper offers a starting point to - “ Succeeding through Service Innovation” Whitepaper: A Framework for Progress (http://www.ifm.eng.cam.ac.uk/ssme/) Glossary of definitions, history and outlook of service research, global trends, and ongoing debate 1. Emerging demand 2. Define the domain 3. Vision and gaps 4. Bridge the gaps 5. Call for actions Call to Create National Service Innovation Roadmaps (SIR) Reports
Service is the application of competence for the benefit of another entity
Service involves at least two entities, one applying competence and another integrating the applied competences with other resources and determining benefit (value co-creation).
We call these interacting entities service systems .
Spohrer, J., Maglio, P. P., Bailey, J. & Gruhl, D. (2007). Steps toward a science of service systems. Computer, 40 , 71-77.
A. Service Provider
Public or Private
C. Service Target: The reality to be
transformed or operated on by A,
for the sake of B
People, dimensions of
Business, dimensions of
Products, goods and material systems
Information, codified knowledge
B. Service Client
Public or Private
Forms of Ownership Relationship (B on C) Forms of Service Relationship (A & B co-create value) Forms of Responsibility Relationship (A on C) Forms of Service Interventions (A on C, B on C) Gadrey, J. (2002). The misuse of productivity concepts in services: Lessons from a comparison between France and the United States. In J. Gadrey & F. Gallouj (Eds). Productivity, Innovation, and Knowledge in Services: New Economic and Socio-economic Approaches. Cheltenham UK: Edward Elgar, pp. 26 – 53.
Value depends on the capabilities a system has to survive and accomplish other goals in its environment. Taking advantage of the service another system offers means incorporating improved capabilities. Value can be defined as system improvement in an environment
Experience and knowledge, and the experience and knowledge of others, provide hints as to what is reasonable to exchange for some new capability. But measuring exchange value this way – through human judgment and operationalized in the market – is not necessary for one system to provide value to another.
All ways that systems work together to improve or enhance one another’s capabilities can be seen as being value creating. Some organisms may have symbiotic relationships with others, completely dependent on one another for food, each dependent on capabilities the other provides. Neither may measure or judge explicitly what is exchanged, but each provides service for, and creates value with, the other nonetheless.
Vargo, S. L., Maglio, P. P., and Akaka, M. A. (2008). On value and value co-creation: A service systems and service logic perspective. European Management Journal , 26 (3), 145-152.
Interactions are key Johnson, B., Manyika, J., & Yee, L. (2005). The next revolution in interactions. McKinsey Quarterly , 4, 20-33.
As more 21 st century companies come to specialize in core activities and outsource the rest, they have greater need for workers who can interact with other companies, their customers, and their suppliers.
The traditional organization, where a few top managers coordinate the pyramid below them, is being upended.
Raising the productivity of employees whose jobs can’t be automated is the next great performance challenge – and the stakes are high.
Companies that get that right will build complex talent-based competitive advantages that competitors won’t be able to duplicate easily – if at all.
Processes vs. Work practices ENGAGE / DEAL TRANSFORM & TRANSITION DELIVER & OPERATE MANAGE PRE-SALES CONCEPT Service Cycle 1 2 3 4 5 6 8 9 Client 7
Work is investigative, collaborative, iterative, parallel, creative CSE Lead TSM 2 nd CSE 2 nd TSM DEM PM TSA Team C&N HR DPE PE Pricer Support Client Team Client Out-Sourcing Consultant Proposal RFP Ambiguities / Conflicts Clarification Update Client C&N, Lead TSM, DPE Assumptions Input Discover Collaborative Review Submit Update RFP The Client Client Out-Sourcing Consultant
Service Science is emerging as a distinct field. Its vision is to discover the underlying logic of complex service systems and to establish a common language and shared frameworks for service innovation. To this end, an interdisciplinary approach should be adopted for research and education on service systems.
For education: Enable graduates from various disciplines to become T-shaped professionals or adaptive innovators ; promote SSME education programmes and qualifications; develop a modular template-based SSME curriculum in higher education and extend to other levels of education; explore new teaching methods for SSME education.
For research: Develop an interdisciplinary and intercultural approach to service research; build bridges between disciplines through grand research challenges; establish service system and value proposition as foundational concepts; work with practitioners to create data sets to understand the nature and behaviour of service systems create modelling and simulation tools for service systems.
For business: Establish employment policies and career paths for T-shaped professionals; review existing approaches to service innovation and provide grand challenges for service systems research; provide funding for service systems research; develop appropriate organisational arrangements to enhance industry-academic collaboration; work with stakeholders to include sustainability measures.
For government: Promote service innovation and provide funding for SSME education and research; demonstrate the value of Service Science to government agencies; develop relevant measurements and reliable data on knowledge- intensive service activities; make public service systems more comprehensive and citizen-responsive; encourage public hearings, workshops and briefings with other stakeholders to develop service innovation roadmaps.
Service Science, SSME – What are we talking about? Service Science, Management, and Engineering (SSME) is a term introduced by IBM to describe Service Science, an interdisciplinary approach to the study, design, and implementation of services systems – complex systems in which specific arrangements of people and technologies take actions that provide value for others. More precisely, SSME has been defined as the application of science, management, and engineering disciplines to tasks that one organization beneficially performs for and with another.
Service Science is about building common language
Definitions of 'service science' can be misleading. An analogy can be made with Computer Science. The success of CS is not in the definition of a basic science (as in physics or chemistry for example) but more in its ability to bring together diverse disciplines, such as mathematics, electronics and psychology to solve problems that require they all be there and talk a language that demonstrates common purpose.
Service Science may be the same thing - just bigger - as an interdisciplinary umbrella that enables economists, social scientists, mathematicians, computer scientists and legislators (to name a small subset of the necessary disciplines) to cooperate in order to achieve a larger goal - analysis, construction, management and evolution of the most complex systems we have ever attempted to construct.
Successful enterprises focus on selected areas of specialization Enterprise Optimized Process Optimized Business Unit Optimized Internally Integrated Strategically Partnered Industry Networked Internal Specialization Process Centers Silo 1 Silo 2 Silo 3 External Partner External Partner Silo 2 Silo 3 Silo 1 Silo 2 Silo 3 Silo 1 Silo 2 Silo 3 Accountability Level Business Competency Direct Control Execute Business Components “ Specialized Enterprise” External Specialization Accountability Level Business Competency Direct Control Execute Business Components Silo 1
A Business Component Map is a one-page, simplified view of an enterprise or industry Strategic Planning Analytics Recreational Facilities Oversight Engineering Reporting Performance Monitoring Contracts Regulatory Reporting Disaster Management Public Safety Reporting Property & Land Management Housing Adminis-tration Sports Facilities & Events Prevention & Awareness Emergency Response Service Delivery Legal HR Document Management Libraries Heritage Preservation Development Control Preparedness Planning Admin Planning Infrastructure Strategy Event Planning Services Strategy Program Management Columns are Business Competencies, defined as large business areas with characteristic skills and capabilities, for example, product development or supply chain.
An Accountability Level characterizes the scope and intent of activity and decision-making . The three levels used in CBM are Directing, Controlling and Executing.
Directing is about strategy, overall direction and policy.
Controlling is about monitoring, managing exceptions and tactical decision making
Executing is about doing operational work
Business Components are the essential and unique/non-overlapping building blocks that make up the business/mission of an enterprise . They have the potential to operate independently, in the extreme as a separate unit, shared service, contractor managed or outsourced component. They contain Activities, Resources, Processes, Business Services, Key Performance Indicators IT Control Execute Direct City Planning Public Safety Transportation & Infrastructure Recreation Services Public Works Services Municipal Management Services
CBM also models dependencies among components, thus forming an extended value-proposition ecosystem
A business process can be represented by reusing business services provided by business components Component Name Market Segment Planning Description To analyze segments and derive targets Component Name Business Strategy Description Define business strategy Component Name Segment Tracking Description Track target segments Business Plans Tracking Models & Targets Market Events To “Product Management” business component Product Portfolio Updates Product Portfolio Updates
Component Business Model to Help Decompose Your Business Experience and Know-how from Thousands of Client Engagements
70+ maps supporting 17 industries
23 enhanced with key performance indicators (KPI)
Over 2,000 trained CBM specialists armed with the CBM tool
30 CBM patents filed
CBM tool license available to clients
Component Business Modeling tool 2.0 Integrates with WebSphere Business Modeler
Integrating Component Business Models with Industry Process Models + = IBM is bringing together its Business Process Management Center of Excellence (BPM CoE), IBM Research, and the Global Business Solution Center (GBSC) to map Component Business Models (CBM) to Industry Process Models Component Business Models (CBM) and Tool Industry Process Models in WBM, built by BPM CoE, leveraging APQC’s Process Classification Framework Result : business transformation engagements delivered more quickly, through more industry-specific insights and more powerful CBM Tool
Resources are the building blocks of service systems Formal service systems can contract Informal service systems can promise/commit Trends & Countertrends (Evolve and Balance): Informal <> Formal Social <> Economic Political <> Legal Routine Cognitive Labor <> Computation Routine Physical Labor <> Technology Transportation (Atoms) <> Communication (Bits) Qualitative (Tacit) <> Quantitative (Explicit) First foundational premise of service science: Service system entities dynamically configure four types of resources The named resource is Physical or Not-Physical (physicists resolve disputes) The named resource has Rights or No-Rights (judges resolve disputes within their jurisdictions) operant operand Physical Not-Physical Rights No-Rights 2. Technology 4.. Shared Information 1. People 3. Organizations
Value propositions are the building blocks of service system networks Second foundational premise of service science: Service system entities calculate value from multiple stakeholder perspectives A value propositions can be viewed as a request from one service system to another to run an algorithm (the value proposition) from the perspectives of multiple stakeholders according to culturally determined value principles. The four primary stakeholder perspectives are: customer, provider, authority, and competitor Value propositions coordinate & motivate resource access Model of competitor: Does it put us ahead? Can we stay ahead? Does it differentiate us from the competition? Will we? (invest to make it so) Strategic Sustainable Innovation (Market share) 4.Competitor (Substitute) Model of authority: Is it legal? Does it compromise our integrity in any way? Does it create a moral hazard? May we? (offer and deliver it) Regulated Compliance (Taxes and Fines) 3.Authority Model of self: Does it play to our strengths? Can we deliver it profitably to customers? Can we continue to improve? Can we? (deliver it) Cost Plus Productivity (Profit) 2.Provider Model of customer: Do customers want it? Is there a market? How large? Growth rate? Should we? (offer it) Value Based Quality (Revenue) 1.Customer Value Proposition Reasoning Basic Questions Pricing Decision Measure Impacted Stakeholder Perspective (the players)
Special Issue on SSME Toward a conceptual foundation for service science: Contributions from service-dominant logic R. F. Lusch, S. L. Vargo, and G. Wessels Designing a discipline in service science R. J. Glushko Service science: Catalyst for change in business school curricula M. M. Davis and I. Berdrow Service science: At the intersection of management, social, and engineering sciences R. C. Larson Complexity of service value networks: Conceptualization and empirical investigation R. C. Basole and W. B. Rouse Service system fundamentals: Work system, value chain, and life cycle S. Alter Estimating value in service systems: A case study of a repair service system N. Caswell et al. BEAM: A framework for business ecosystem analysis and modeling C. H. Tian, B. K. Ray, J. Lee, R. Cao, and W. Ding Patterns of innovation in service industries I. Miles Business services as communication patterns: A work practice approach for analyzing service encounters R. J. Clarke and A. G. Nilsson Legal research topics in user-centric services O. Pitkänen et al. Managed service paradox N. Leon and A. C. Davies Improving service delivery through integrated quality initiatives: A case study J. Hickey and J. Siegel Predicting customer choice in services using discrete choice analysis R. Verma et al.
198 courses, programs, or degrees established in 42 countries
12 centers, seminars, or groups established
11+ programs for service research and education in 11 countries
$1B+ committed worldwide
SRII established to promote service research and innovation agenda, with $1M in funding from IBM, Oracle, Xerox, Microsoft and others
AIS – Service Science SIG
INFORMS – Service Science Section
Access rights are the building blocks of service system ecology
Access to resources that are owned outright (i.e., property)
Access to resource that are leased/contracted for (i.e., rental car, home ownership via mortgage, insurance policies, etc.)
Shared access (i.e., roads, web information, air, etc.)
Privileged access (i.e., personal thoughts, inalienable kinship relationships, etc.)
Third foundational premise of service science: The access rights associated with customer and provider resources are reconfigured by mutually agreed to value propositions relationships service = value-cocreation B2B B2C B2G G2C G2B G2G C2C C2B C2G *** provider resources Owned Outright Leased/Contract Shared Access Privileged Access customer resources Owned Outright Leased/Contract Shared Access Privileged Access OO SA PA LC OO LC SA PA S A P C Competitor Provider Customer Authority value-proposition change-experience dynamic-configurations (substitute) time