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2008 Cambridge IBM report: Succeeding through service innovation

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Succeeding through service innovation
A service perspective for education, research, business and government

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  • 1. Succeeding through service innovation A service perspective for education, research, business and governmentA White Paper based on Succeeding through service innovation 1- Cambridge Service Science, Management and Engineering Symposium (July 2007)- The consultation process (October – December 2007)
  • 2. Succeeding through service innovation: A service perspective for education, research, business and governmentISBN: 978-1-902546-65-0Copyright © University of Cambridge Institute for Manufacturing (IfM) and International Business Machines Corporation(IBM), April 2008. All rights reserved.First published in the United Kingdom by the University of Cambridge Institute for Manufacturing, Mill Lane, CambridgeCB2 1RX.An electronic copy of this document and contact details can be found at www.ifm.eng.cam.ac.uk/ssmePlease feel free to forward this document, a link to it or the contact details to any individuals or organisations who youthink might be interested, providing that the material is circulated and used in its entirety. The publication must beacknowledged as IfM and IBM copyright and the title of the document specified.Reference to this document may appear as:IfM and IBM. (2008). Succeeding through service innovation: A service perspective for education, research, business andgovernment. Cambridge, United Kingdom: University of Cambridge Institute for Manufacturing.ISBN: 978-1-902546-65-0.Reference citation in text may appear as:(IfM and IBM, 2008)
  • 3. Executive summaryService systems1 are dynamic configurations of people, such roadmaps, it serves as a benchmark for improvement.technologies, organisations and shared information that More specifically, drawing upon the expertise andcreate and deliver value to customers, providers and other experience of leading academics and senior practitioners,stakeholders. They form a growing proportion of the world this document makes the following interrelatedeconomy and are becoming central to the way businesses, recommendations:governments, families and individuals work. Innovation, aterm applied almost exclusively to technologies in the past, For education: Enable graduates from various disciplinesis increasingly used in relation to service systems. to become T-shaped professionals or adaptive innovators; promote SSME education programmes and qualifications;Ideas of service are, of course, not new. However, the develop a modular template-based SSME curriculum inscale, complexity and interdependence of today’s service higher education and extend to other levels of education;systems have been driven to an unprecedented level, due explore new teaching methods for SSME education.to globalisation, demographic changes and technologydevelopments. The rising significance of service and the For research: Develop an interdisciplinary andaccelerated rate of change mean that service innovation intercultural approach to service research; build bridgesis now a major challenge to practitioners in business and between disciplines through grand research challenges;government as well as to academics in education and establish service system and value proposition asresearch. A better understanding of service systems is foundational concepts; work with practitioners to createrequired. data sets to understand the nature and behaviour of service systems; create modelling and simulation tools forMany individual strands of knowledge and expertise service systems.relating to service systems already exist, but they oftenlie in unconnected silos. This no longer reflects the reality For business: Establish employment policies andof interconnected economic activities which, for example, career paths for T-shaped professionals; review existingsees manufacturers of engineering products adopting approaches to service innovation and provide grandservice-oriented business models and health care providers challenges for service systems research; provide fundinglearning lessons from modern manufacturing operations. for service systems research; develop appropriateIndeed, there are wide gaps in our knowledge and skills organisational arrangements to enhance industry-across silos. academic collaboration; work with stakeholders to include sustainability measures.In response, Service Science, Management andEngineering (SSME), or in short Service Science, is For government: Promote service innovation and provideemerging as a distinct field. Its vision is to discover the funding for SSME education and research; demonstrate theunderlying logic of complex service systems and to value of Service Science to government agencies; developestablish a common language and shared frameworks relevant measurements and reliable data on knowledge-for service innovation. To this end, an interdisciplinary intensive service activities; make public service systemsapproach should be adopted for research and education on more comprehensive and citizen-responsive; encourageservice systems. public hearings, workshops and briefings with other stakeholders to develop service innovation roadmaps.Developing Service Science is no easy task; it not onlyrequires intensive collaboration across academic disciplines Service Science is still in its infancy; but we are confidentbut also a doubling of R&D investment in service that, by adopting these recommendations, we caneducation and research by governments and businesses. accelerate its development and place ourselves in a betterAll stakeholders must start to engage each other and make position to create and benefit from service innovation inplans for service innovation. the future.For those responsible for creating a service innovationroadmap, this white paper provides a starting point toraise awareness. For those who have already developed1 Words in italics are defined in the glossary. Succeeding through service innovation 1
  • 4. Succeeding through service innovation: A framework for progress1. Emerging demand 2. Define the domain 3. Foundations & gaps 4. Bridge the gaps 5. Recommendations Service Service Service Stakeholder The white paper offers a starting Innovation Systems Science Priorities point Growth in service Customer-provider To discover the Education GDP and jobs interactions that underlying principles enable value of complex service Skills Develop programmes Service quality cocreation systems & Mindset & qualifications & productivity Dynamic Systematically create, Research Environmental Encourage an configurations of scale up and improve Knowledge friendly & resources: people, service systems interdisciplinary & Tools approach sustainable technologies, organisations and Foundations laid by Urbanisation & information existing Business aging population disciplines Develop and Employment Increasing scale, & Collaboration improve service Globalisation & complexity and Progress in academic innovation technology drivers connectedness of studies and practical roadmaps, leading service systems tools Government to a doubling of Opportunities for R&D investment in Policies businesses, B2B, B2C, C2C, Gaps in knowledge & Investment service education governments and B2G, G2C, G2G and skills and research individuals service networks Glossary of definitions, history and outlook of service research, global trends, and ongoing debate2 Succeeding through service innovation
  • 5. ContentsExecutive summary 11. Introduction 41.1 The demand for service innovation 41.2 New skills and knowledge required 41.3 Service Science: an emerging field 41.4 Drawing the threads together: the white paper 51.5 Key concepts 52. Clarifying the rationale and defining the domain 62.1 What is a service system? 62.2 Why are we interested in service systems? 62.3 What is the vision for Service Science? 72.4 Who are the stakeholders of Service Science? 72.5 Why now? 73. Recognising the foundations and identifying the gaps 83.1 What foundations have been laid by existing theories? 83.2 Where is the knowledge gap? 83.3 Where is the skill gap? 94. Working together to bridge the gaps 104.1 What are the possible approaches to addressing the gaps? 104.2 Where are the opportunities to address the knowledge gap? 104.3 Where are the opportunities to address the skill gap? 115. Recommendations 125.1 Recommendations for education 125.2 Recommendations for research 135.3 Recommendations for business 135.4 Recommendations for government 146. Taking it forward 15Glossary 16Appendix 21I: History and future outlook of service research 21II: Contributor list 22III: Respondent list 23IV: Service sector in global economies 24V: Business challenges for service research 25VI: Global trends and service innovation 26VII: Example of innovation roadmap 28VIII: Ongoing debate 29 Succeeding through service innovation 3
  • 6. 1. Introduction1.1 The demand for service innovation diverse, requiring innovative solutions to cope with the vast scale of the demand. For families and individuals,Growth in service each generation aspires to a richer and more fulfilling lifeThe growth of service activity across industries is now than their predecessors. Service innovation is requiredwidely recognised. However, is it really anything new? to improve the quality of life and help society deal withService is as old as the division of labour and has been important issues such as aging populations.provided in various forms since record keeping began.Indeed writing records was a form of service! What has Service innovation has also found its place in the virtualchanged, however, is the scale and complexity of service world. Information and communication technologiessystems –configurations of resources that create and (ICT) and on-line spaces have enabled the creation ofdeliver value to stakeholders through service activities. new service businesses such as Amazon and Google, not to mention the fast emergence of ‘Web 2.0’. These newService systems are growing rapidly and have become an services in turn are changing our behaviour in decisionever greater part of value creation in modern economies. making and in many other areas.We are paying proportionally more for services in theform of experience, advice, information, assurance, 1.2 New skills and knowledge requiredinfrastructure and leasing, and proportionally less ongrowing, building and owning physical goods. And more The rising demand for service innovation has hugethan ever before, we are constrained by natural resources implications for skills and the knowledge base thatand have to achieve the triple targets of effectiveness, underpins them. People are needed who can understandefficiency and sustainability. The rise in complexity is partly and marshal diverse, and increasingly global, resources todue to the expansion of our values in social, ecological and create value. Quite often, these resources are accessedpolitical dimensions. using advanced ICT and new globe-spanning business models. The people with such skills are known as adaptiveOpportunities for service innovation innovators - those who identify and realise a continuousThanks to the application of science, management and stream of innovation in service systems.engineering to the improvement of agriculture andmanufacturing, remarkable products, from disease The need for science, management and engineeringresistant crops to automobiles and personal computers, in relation to agricultural and manufactured productscan be produced flexibly and efficiently and are widely has not gone away. They are an integral part of serviceavailable. However, as product complexity and diversity innovation and have a strong impact on the way thatincrease, it can take more time and consume more products behave and perform in larger service systems. Forresources to search for, obtain, install, maintain, upgrade example, cutting-edge technologies such as biotechnologyand dispose of products than production itself. This offers and nanotechnology can be applied to enhance consumergreat opportunities for service innovation – including both experience. But as the scope of innovation continues toincremental improvements and radical changes to service move beyond products, we must prepare ourselves withsystems. skills and knowledge required for service innovation.Service innovation can impact customer-provider 1.3 Service Science: an emerging fieldinteractions and improve the experience of finding, The growth of service in modern economies has graduallyobtaining, installing, maintaining, upgrading and driven scholars to service-related studies. Whilst researchdisposing of products. Service innovation can enhance into service can be traced to as early as the 1940s,the capabilities of organisations to create value with significant developments were not possible until thestakeholders. Service innovation can deliver better self late 1970s when service research was broken free fromservices, eliminating waiting and allowing 24/7 access via product-centric concepts and theories (see Appendix I:modern devices such as mobile phones, web browsers and History and future outlook of service research). The fieldkiosks. of service research now covers a wide range of subjects, including service economics, service marketing, serviceOpportunities for service innovation can be extended well operations, service management, service engineering,beyond the business world. Government programmes, service computing, service human resources management,for instance, have become increasingly complex and service sourcing, service design, and many others.4 Succeeding through service innovation
  • 7. Despite these advances in the service field, however, was then put into a broad consultation process, involvingthere has been a growing perception that it is time to take over one hundred respondents from academic, businessstock and to explore the possibility of bringing coherence and governmental organisations all over the world (seeinto the various strands of knowledge and experience. Appendix III: Consultation respondents). Based on theirWithout a clear understanding of the domain and how it comments, the discussion paper was further developedrelates to existing theories, knowledge will continue to be into this white paper.fragmented. Indeed, a more integrated approach is neededif real progress is to be made. In response, Service Science, Target audience and key messagesManagement and Engineering (SSME), or in short Service The paper is aimed at all those who have the responsibilityScience, is emerging as a distinct field to look for a deeper to understand service innovation and improve theirlevel of knowledge integration2. organisation’s capacity to meet future demands. It describes the changing structures of the modern economy,1.4 Drawing the threads together: demonstrates the growing significance of servicethe white paper activities, and examines the nature of service systems. It identifies knowledge and skill gaps in service innovationSince 2004, IBM has been working with many other and proposes potential ways to address those gaps. Itpioneers to call for a systematic approach to service continues to invite discussion about service innovation -research and education. The initiative was clearly driven new ways that service systems can improve our economicby IBM’s own substantial growth in services and its and social well-being sustainably.recognition of a potential future shortage of knowledgeand skills required for service innovation. Over the past 1.5 Key conceptsfew years, this movement has led to dozens of SSME-related meetings in various countries. To establish a basis for an inclusive discussion, this document would like to create a shared view on theThe Cambridge symposium key concepts of Service Science: service system, valueIn July 2007, IBM and Cambridge University’s Institute for proposition, adaptive innovator, and Service Science,Manufacturing (IfM), in conjunction with BAE Systems, Management and Engineering (SSME) graduates. Theseorchestrated an international symposium to help distil concepts provide a service perspective on the traditionalthe key issues surrounding the nature of service and to concepts: factory, trade, problem solver, and Science,identify guidelines for future development. The two-day Technology, Engineering and Mathematics (STEM)meeting was attended by a group of leading academics graduates.and senior business leaders with a wide and deepknowledge of service research and practice – some 200 The changing global landscape of business and societyyears experience in all. The symposium was also informed can be described, for the purpose of increasing serviceby ‘correspondents’, those who were unable to attend innovation, as a very large global service ecosystem. Thethe meeting but made contributions through completed ecosystem is populated by many species (types) of servicequestionnaires and position statements or papers. In spite systems (from individuals to complex businesses andof the diverse backgrounds of this multidisciplinary group government agencies) interacting via value propositions(see Appendix II: Contributor list), the event produced a to exchange service for service (with value-cocreationremarkable commonality of view as to how we can move as desired outcomes). Individuals fill roles in complexthe field forward. service systems. Complex service systems can fill roles in even more complex service systems. When problemsWhite paper development arise, individuals may want to change, improve, or createAn important outcome of the Cambridge symposium was new types of service systems. In this context, adaptivea discussion document (IfM and IBM, 2007)3. To collect innovators will benefit from their knowledge of Serviceviews from a wider group of stakeholders, the document Science, Management and Engineering (SSME) or Service Science.2 Considering the integral role of design and the arts in customer experience,SSME could be logically extended to SSMED or SSMEA (Service Science,Management, Engineering and Design/Arts).3 IfM and IBM. (2007). Succeeding through Service Innovation: A DiscussionPaper. Cambridge, United Kingdom: University of Cambridge Institute for Manu-facturing. ISBN: 978-1-902546-59-8. Succeeding through service innovation 5
  • 8. 2. Clarifying the rationale and defining the domain2.1 What is a service system? economies, investment in services represents less than one third of total R&D spending5. This mismatch hinders theA service system can be defined as a dynamic progress we could make to address many challenges.configuration of resources (people, technology,organisations and shared information) that creates and Critical questions for businessesdelivers value between the provider and the customer Businesses, competing in a global economy, are familiarthrough service. In many cases, a service system is a with many of the service issues and challenges that needcomplex system in that configurations of resources interact to be addressed. Service systems can be divided into ‘frontin a non-linear way. Primary interactions take place at stage’ and ‘back stage’. The ‘front stage’ is about provider-the interface between the provider and the customer. customer interactions: how can customer satisfaction beHowever, with the advent of ICT, customer-to-customer ensured in the presence of multiple customer touch pointsand supplier-to-supplier interactions have also become and various channels of contact? The ‘back stage’ is aboutprevalent. These complex interactions create a system operational efficiency: how can productivity be improvedwhose behaviour is difficult to explain and predict. through skilled employees, streamlined processes and robust relationships with partners and suppliers (service2.2 Why are we interested in service systems? networks)? Service performance relies on both front-stageA world of service systems and back-stage components: how can the ‘voice of theWe live in a world where it is a daily experience to customer’ (customer needs) and the ‘voice of the process’interact with various service systems such as banking, (provider capability) be matched for the best overallcommunications, transport and health care. We all suffer performance?frustrations (or worse) when service quality is poor and weall pay more when productivity is low. Yet this business-to- Changes in the modern world have posed additionalconsumer (B2C) or government-to-consumer (G2C) view questions. Increasingly, service excellence implies theof service systems is just the tip of the iceberg. use of global resources: how can opportunities in global sourcing and constraints in regulatory compliance beIndeed, service systems in business-to-business (B2B), balanced? Growing competition means service leadershipbusiness-to-government (B2G) and government- never stands still: how can service innovation beto-business (G2B) environment are invisible to most stimulated, realised and sustained? Service growth requiresconsumers and citizens, but are experiencing enormous the ability to rapidly create a definable, repeatable,change and growth. This is driven by global sourcing scalable and unique market success: how can promisingof organisational capabilities. It is also enabled by an service offerings be scaled up with growth in both revenueincreasing use of technologies to ensure the fulfilment of and margin? More than anything else, businesses wantservice level agreements between organisations. to know: how can the enterprise work in a seamlessly integrated manner?The shift to service as an economic driver is clear. The2007 report by the International Labour Organisation Service businesses are not the only ones concerned withindicates that, for the first time in human history, these questions. Increasingly, manufacturers are alsoworldwide service jobs (42%) outnumbered jobs in keen to understand the same issues as they embark on aagriculture (36.1%) and manufacturing (21.9%)4. While servicisation journey (see Appendix V: Business challengesdeveloped economies are dominated by the service sector, for service research).developing countries also start to assess their role inthe service economy (see Appendix IV: Service sector in Pressure in non-business areasglobal economy). If we take into account service activities Perhaps somewhat less intuitively, organisations in non-in manufacturing, even the latest figures become an business areas are under similar pressure to improve serviceunderstatement. systems. Government agencies feel the need to provide better service to the public. Commercial competitionHowever, the importance of service has not led to is replaced by demands for transparency, quality andincreased investment in service research and development. efficiency. Similarly, non-profit organisations are alsoIndeed, despite the fact that the service sector accounts urged to improve quality, productivity and innovation. Forfor over two thirds of GDP and jobs in many developed households, there is a growing recognition of the need to4 Key Indicators of the Labour Market (KILM), 5th edition, 2007 5 RTI international. (2005). Measuring Service-Sector Research and Develop- ment. RTI Project Number 08236.002.004.6 Succeeding through service innovation
  • 9. seek better education, health care and financial planning. Potential benefits of Service ScienceAnd environmental concerns are high on everyone’s Service Science is about integration, optimisation andagenda. sustainability. We have pieces of knowledge today, but they are not integrated into a unified whole. Service2.3 What is the vision for Service Science? Science provides motivation, methods and skills for integration. Service Science has the potential to benefitDiscovering the fundamentals individuals, businesses and society, drawing upon theChallenges facing modern organisations are, to a large integrated talents of a diverse community. Service Scienceextent, due to our poor understanding of the nature and will enable adaptive innovators to identify the seedsbehaviour of service systems. Unlike the IT industry, there around which innovation can take root and grow.is no Moore’s Law roadmap for the service domain toguide organisations on what investments to make in order 2.4 Who are the stakeholders of Service Science?to see predictable performance improvements. Individuals and organisations dependent on complexThe vision of Service Science, therefore, is to discover the service systems are all stakeholders of Service Scienceunderlying principles of complex service systems (and in that they need the knowledge and skills required forthe value propositions that interconnect them). It should service innovation. Businesses that want to improve theirprovide the structure and rigour for building a widely service revenues and profit margins have a clear interest inaccepted and coherent body of knowledge to support Service Science. Organisations in non-profit sectors shareongoing innovation in service systems. similar concerns and aspirations as they seek to deliver unique service offerings sustainably. Governments, at bothKey questions for Service Science national and local levels, wishing to create a high-skilledWhile it is important to acknowledge the differences workforce and develop infrastructures to improve theirbetween the many types of service systems, it is crucial competitiveness would benefit from the insights providedto accept their variability and get on with the task of by Service Science.discovering the fundamentals. We still need specialists todeal with the complexity within individual areas but, to Clearly, knowledge workers across a wide range ofextract the full potential, we must develop our knowledge disciplines are also stakeholders. The past twenty yearsabout: (1) how to invest in service systems to sustainably have seen the establishment of disciplines such as serviceimprove key performance indicators (e.g. revenue, margin, marketing, service operations, service management,growth, customer satisfaction, productivity, innovation, service engineering, service design, service computing,quality of life, social responsibility, environmental and many others. Different strands of knowledge wouldsustainability, and regulatory compliance), and (2) how to contribute more value to practice if they were broughtdevelop new service offerings, together with creative value together to form an integrated theory. For individualpropositions and improved service systems. disciplines, Service Science in turn provides a platform for critical examination of their relevance, assumptions,These enquiries lead to the following questions: strengths and limitations.• What are the architectures of service systems? 2.5 Why now?• How can service systems be understood in terms of a small number of building blocks that get combined to Global trends, such as demographic shift, self-service and reflect the observed variety? web-based technologies, outsourcing and offshoring,• How might architectures and building blocks help us are challenging us to create new ways of doing things understand the origins, lifecycles and sustainability of (see Appendix VI: Global trends and service innovation). service systems? This requires a solid scientific foundation if we are to understand increasingly complex service systems.• How can service systems be optimised to interact and Service Science has the potential to be as important as co-create value? the foundation provided by physics, chemistry, biology,• Why do interactions within and between service systems cognitive science and computer science for agriculture and lead to particular outcomes? manufacturing. We must act now in order to create the next generation of innovation. Succeeding through service innovation 7
  • 10. 3. Recognising the foundations and identifying the gaps3.1 What foundations have been laid by existing • Sociology and anthropology (1,2,3,4) • Software metrics and development (2)theories? • Statistical control theory (2,4)Resource clusters • Strategy and finance (1,2,3,4) • Supply chain management (1,2,4)The resources used to form service systems offer a useful • System design and software architecture (2,4)starting point for the development of Service Science. • Systems dynamics theory and design (1,2,3,4)They can be divided into four clusters: • Total quality management, lean, six sigma (1,2,3,4)(1) Whole businesses and organisations: Studied primarily Progress in academic studies by schools of management (marketing, operations Discovering fundamental building blocks of service management, operations research and management systems and the way they can be combined to reflect sciences, supply chain management, innovation the reality is already underway. Resource classification management) schemes are being developed, along with associated access rights, service level agreements, standards and(2) Technology: Studied primarily by schools of science and protocols, safeguarding mechanisms, intellectual property engineering (industrial engineering, computer science, and failure recovery methods. Multiple perspectives are statistical control theory) being established on service systems (such as provider,(3) People: Studied primarily by schools of social sciences customer, governance authority, competitor, partner, and humanities (economics, cognitive science, political employee) to introduce systematic approaches to service science, design, humanities and arts) innovation. Encouragingly, pioneering attempts are being(4) Shared information: Studied primarily by schools made to develop a normative view on how service systems of information (communications, management can be described and their behaviours explained, including information systems, document engineering, process the Customer Contact model, the Service Quality GAPS modelling, simulation) model, Service-Dominant Logic, Unified Theory of Service, Service as Leasing, and Work Systems Theory, to name butAcademic disciplines a few.Our knowledge of service systems benefits from thefollowing disciplines, which study some or all of the four Development of practical toolsresource clusters: Meanwhile, tools, methods and data sets for practical use are also emerging (e.g. IBM’s Component Business• Architecture and designed systems (1,2,3,4) Modelling approach and toolkit). They provide starting• Behavioural sciences and education (3, 4)• Cognitive science and psychology (1,2,3,4) points for practitioners to establish an overarching• Complex adaptive systems theory (1,2,3,4) framework and outline the problem space at multiple• Computer science and AI/web services (2,4) levels. They are used to model not only businesses but• Computer supported cooperative work (1,2,3,4) also government agencies and the public sector. Tools• Economics and law (1,3,4)• Engineering economics and management (1, 2, 4) and methods are also being developed to model industrial• Experience design, theatre and arts (3) evolution, which has generated interest among historical• Financial and value engineering (1,2,3,4) economists and organisation theorists. The development• Game theory and mechanism design (3,4) of service-oriented architectures (SOA) for describing• Human resource management (1,3)• Industrial engineering (IE) and systems (1,2,3,4) information technology ‘services’ that support work and• Industrial and process automation (1,2,3,4) business practices is on the rise and has gained widespread• International trade (1) acceptance.• Knowledge management (1,2,3,4)• Management of information systems (1,2,3,4) 3.2 Where is the knowledge gap?• Management of technology & innovation (1,2,3,4)• Marketing and customer knowledge (1,2,3,4) Challenges facing individual disciplines• Mathematics and non-linear dynamics (1,2,3,4)• Operations management (OM) (1,2,3,4) Despite significant progress, we are far away from• Operational research (OR) (1,2,3,4) achieving the vision of Service Science. For one thing,• Organisation theory and learning (1,2,3,4) there are still challenges within individual disciplines. For• Political science (1,3) example, operations research and industrial engineering• Project management (1,2,3,4)• Queuing theory (1,2,3,4) often model people waiting in queues, but the model• Simulation, modelling visualization (1,2,3,4) fails to recognise people as emotional and psychological8 Succeeding through service innovation
  • 11. beings that can learn and adapt over time. Computer perspective or providers from an operations perspective.science and information science often model information This is reflected, and indeed reinforced, by top journals,system architectures on the basis of well-understood which tend to be highly specialised. In operationsenvironmental variations, but the design of governance management journals, for example, less than 20 per centmechanisms that allow information systems to respond of the papers focus on service topics although the majorityproactively to strategy changes and predictable of the economy is service-based. Moreover, disciplinestechnological advances is less understood. also tend to focus on specific sectors; marketing tends to be concerned with business-to-consumer and operationsIn a similar vein, economics and business strategy with business-to-business. Gradually, a gap has emergedneed to accommodate predictable innovations. Service between academic output and practical interest.management and operations need to create a betterknowledge of service system scaling and lifecycle. Law andpolitical science need to build a better comprehension ofsocial innovation and the way that legislation can improve IT OMservice system productivity. Complex systems engineeringshould provide more specific insights into the robustness ofservice systems. The things that etc MKT divide usMore fundamental challengesIn addition to challenges within disciplines, there are morefundamental challenges in integrating various strands ofknowledge. Specialisation remains important, but one ENG HRshortcoming is that each discipline tends to focus onparticular configurations of resources. And academicshave well defined research agendas to deal with discipline- Figure 1 The gaps between academic disciplinesspecific issues. The complexity of service systems,however, requires an integrated approach. 3.3 Where is the skill gap?The key to understanding service systems is not just to Similarly, the supply of people with the right skills isexamine one aspect of service but rather to consider increasingly inadequate. The role of education in theservice as a system of interacting parts. As service systems 20th century was in a large part to prepare students forbecome more complex, our ability to understand them is jobs. Universities have been rewarded for creating peoplehampered by the isolation of different disciplines. The hard with specialised knowledge. The increasing complexitywork of creating an integrated theory that spans many of service systems, however, requires an extended role ofdisciplines has not been done. education in the 21st century - universities must prepare people to be adaptive innovators.Causes of the knowledge gapThe current situation stems from the tradition that Adaptive innovators are still deeply educated in their homeacademic institutions are structured along disciplines and disciplines. However, they also have the ability to think andsub-disciplines. Academic silos are created to encourage act across multiple disciplines. They can build consensusdeeper understanding of a specialised subject (see Figure across functional silos and work across inter-organisational1). The expectation from institutions and funding bodies boundaries. They can communicate with specialistsis that academics conduct research and provide courses who do not necessarily have the same background.within their disciplines. Although often addressing similar They embrace a service mindset, which is supported bymatters, each discipline or department usually has a intellectual, psychological and social capital components.presumed set of interests, paradigms and methodologies. They are driven by an integrative ‘service logic’ rather thanOver time, academics see interdisciplinary research as one of the competing logics associated with organisationalbeing highly risky and potentially career-damaging. functions and units. As the service economy continues to grow, adaptive innovators will be in high demand.As a result, there is an imbalance in service research;studies tend to focus on either customers from a marketing Succeeding through service innovation 9
  • 12. 4. Working together to bridge the gaps4.1 What are the possible approaches to The interdisciplinary approachaddressing the gaps? In this document we advocate the interdisciplinary approach. Since many barriers to integration are wellThe gaps in knowledge and skills needed to deal with established, attempts to remove them would not onlycomplex service systems indicate that we need to reassess require considerable effort but deflect attention fromour approach to research and education. Figure 2 shows purposeful bridging activities. Therefore, one way tothree possible routes to address the gaps. To some overcome the barriers is to accept their existence and buildpeople, Service Science is seen as a multidisciplinary bridges over them. This approach will lead to‘superset’ embracing all appropriate, but as yet not agreed,disciplines and functions. To others, Service Science is seen “curricula, training, and research programs that are designed to teach individuals to apply scientific, engineering, andas a multidisciplinary ‘subset’ embracing select elements of management disciplines that integrate elements of computerthe major disciplines and functions. Finally, Service Science science, operations research, industrial engineering, businesscan be seen as an interdisciplinary activity which attempts strategy, management sciences, and social and legal sciences,to create an appropriate set of new knowledge to bridge in order to encourage innovation in how organisations create value for customers and stakeholders that could not beand integrate various areas based on transdisciplinary and achieved through such disciplines working in isolation” (UScrossdisciplinary collaboration. Congress HR 2272, 2007). From a practical perspective, the approach would IT OM help develop a rigorous methodology to invest in the improvement of service systems and the design of high- value service offerings. From an academic perspective, the etc MKT Multidisciplinary approach would provide a rigorous foundation based on ‘superset existing’ which research and education could be advanced more rapidly. ENG HR 4.2 Where are the opportunities to address the knowledge gap? IT OM Interdisciplinary activities are not new. They are in evidence in many universities and industries. Indeed, there is an established body of knowledge about how to undertake interdisciplinary work, which can be adapted toMultidisciplinary etc MKT service research. Opportunities exist at all levels to address‘subset existing’ the barriers between disciplines. Individual: Leaders in academia, business and ENG HR government are well positioned to highlight the value of interdisciplinary work and to reduce the risks associated with moving outside a specialism or discipline. They can help articulate challenges in service innovation. The IT OM potential of service science to improve business as well as society will attract sophisticated and capable people to the field. etc MKT Structural: Interdisciplinary interactions happen at a project or activity level. Cross-functional teamwork on Interdisciplinary specific projects with common goals encourages mutual ‘new bridging awareness and creates respect for other disciplines. A ENG HR knowledge’ shared belief in customers-provider interactions can provide a useful starting point. Exemplary projects in the form of case studies can stimulate more cooperativeFigure 2 Three perspectives of Service Science behaviours with common purpose across disciplines10 Succeeding through service innovation
  • 13. or functions. However, rigour and relevance in 4.3 Where are the opportunities to addressinterdisciplinary research is still important in order to the skill gap?generate robust and reliable knowledge. Developing T-shaped professionals Discipline-based education remains a vital role of modernBusiness: Business challenges are often interdisciplinary universities. In order to close the skill gap, however,and cross-functional. Business problems commonly require universities should also offer students the opportunity toparticipants with different disciplinary backgrounds to gain qualifications in the interdisciplinary requirementslearn enough about each other’s perspective in order to of SSME. Such qualifications would equip graduates withachieve effective and productive work. Problems should the concepts and vocabulary to discuss the design andbe clearly expressed in the business context, which improvement of service systems with peers from otherdemonstrates that no single academic community has disciplines. Industry refers to these people as T-shapedexclusive ‘ownership’ of the problems. Businesses can also professionals, who are deep problem solvers in theirsupply hard data for academic research to reach robust home discipline but also capable of interacting with andand practical conclusions. Industrial structures focused on understanding specialists from a wide range of disciplinesservice are already emerging, through which businesses and functional areas.can encourage the development of business professionalsand academic fellows in service, and the cultivation of a Widely recognised SSME programmes would helpservice ethos. Employment policies should start to include ensure the availability of a large population of T-shapedpsychological and emotional qualities into the assessment professionals (from many home disciplines) with theof existing employees as well as the recruitment process. ability to collaborate to create service innovations. SSME qualifications would indicate that these graduates couldAcademia: Leading journals in the field of service research communicate with scientists, engineers, managers,are extremely influential in setting the tone and agenda of designers, and many others involved in service systems.academic research. They are uniquely placed to encourage Graduates with SSME qualifications would be wellinterdisciplinary studies. Major specialised journals should prepared to ‘hit the ground running’, able to becomebe encouraged to initiate special issues on interdisciplinary immediately productive and make significant contributionstopics. This is not straightforward; more work is needed to when joining a service innovation project.define precisely what constitutes ‘good’ interdisciplinaryresearch. One of the tools that can be used is web- Support needed from business and governmentbased communication. This could enable the required Establishing SSME qualifications is a challenging task.multidisciplinary social networks to form as needed Interdisciplinary course development requires significantand facilitate the shift from knowledge silos to webs of effort to develop because different faculty membersknowledge. might find it hard to work together sustainably over time. Educational innovations are vulnerable becauseFunding and Incentives: Except in certain areas of they are often reliant on the efforts of one or twophysics and mathematics, little is known about the people. Interdisciplinary programmes are even harder tomethods needed to create integrated yet parsimonious organise, and more expensive to initiate and maintain,theories that span multiple areas. Besides discipline-specific than conventional ones. Rapid progress in the design andstudies, funding should also be provided to support delivery of these programmes would require support andinterdisciplinary service research through mechanisms resources from business and government.such as dual appointments and shared rewards. Fundingbodies should introduce interdisciplinary requirementsinto the proposal assessment and therefore encourageinterdisciplinary studies. Close partnerships betweenfunding bodies and industry stakeholders can helpacademics to develop relevant research agenda. This willlead to the development of interdisciplinary tools, modelsand frameworks that reflect interactions between a firm’sdifferent departments and its external partners. Succeeding through service innovation 11
  • 14. 5. RecommendationsIn many ways, Service Science is in a similar position to the The main disciplines of Service Science include servicescience, management and engineering of agriculture and economics, service marketing, service operations,manufacturing two centuries ago. Although better tools service management, service quality (especiallyand information systems may exist today to develop Service customer satisfaction), service strategy, serviceScience, the problems facing service scientists are far more engineering, service human resource managementcomplex. (especially in a professional service firm), service computing, service supply chain (especially eSourcing),However, even though the service sector contributes service design, service productivity, and serviceover two thirds of GDP and employment in developed measurement.economies, investment in services accounts for less than onethird of total R&D expenditure. To address this imbalance, Within the disciplinary areas, additional topicswe urge the development of service innovation roadmaps, include service process analysis, SERVQUAL andleading to a doubling of service R&D investment, as well TQM (including when to use and when not to useas specific government programmes to support service these methods), Lean and Six Sigma, servicisation,innovation. self service, integrating competing logics of different disciplines, managing the service experience overThe following recommendations are offered as a point time, managing service failure and recovery, managingof departure for a more inclusive conversation as various organisational change, and service provisioningstakeholders start to formulate action plans for service (including interpersonal skills such as cross-functionalinnovation (see Appendix VII: Example of innovation teamwork and conflict resolution).roadmap). Many universities are piloting SSME-related courses,5.1 Recommendations for education programmes and degrees, so a wealth of materials is being created. Much remains yet to done in order to1 Enable graduates from various disciplines to establish standard curricula templates and associated become T-shaped professionals, who are adaptive quality standards. innovators with a service mindset and can make early contributions to the service-driven economy. 3 Develop a modular template-based SSME curriculum in higher education, add new materials All students and employees, who wish to, should have and refinements as research develops over time, the opportunity to learn about Service Science and and then extend to all levels of education. develop themselves into T-shaped professionals. This can be achieved by adding SSME qualifications to an existing SSME qualifications should employ a template-based deep home discipline of study. As adaptive innovators, curriculum model and specify modules that can be they will have a good background in the fundamentals switched in and out across different faculty and of service innovation. With a service mindset, they can courses. Practical or industry capstone projects are work effectively in project teams across discipline and essential for students to develop a service mindset functional silos. As research creates a truly integrated and to acquire the ability to solve problems cross- theory of service systems, students of Service Science functionally in real-time. will become system thinkers prepared to succeed in a Capstone projects could help prepare students to 21st century service-driven globally integrated economy. become adaptive innovators with a balance of practical2 Promote SSME education programmes and and theoretical knowledge of service systems. They qualifications as a way of developing a service also allow students to see service systems in action. The mindset, in conjunction with industry recognition design and provisioning of such projects should ideally and recruitment of SSME qualified graduates. involve student teams with members from different areas, including business, engineering, social sciences SSME qualifications, which we see as critical to and information science, and sometimes from different developing adaptive innovators with a mindset for universities. service innovation, should include interactional skills across the main disciplines of Service Science. The design of Service Science laboratory space would Interactional skills enable proficiency in the concepts enable small multidisciplinary project teams to work and vocabulary for framing problems and discussing together with collaborators in remote locations. Service potential solutions across disciplines. Science labs should focus on entrepreneurial projects.12 Succeeding through service innovation
  • 15. Support should be given to tele-presence meetings and 3 Establish service system and value proposition as the design of remote collaborations. Projects should foundational concepts. especially be encouraged to link service systems in Every science must clearly define its boundaries in the real world, those in virtual worlds and those in terms of the entities that it studies and the relevant simulated worlds. interactions between those entities. Service systems Along with the development of SSME curriculum at and value propositions represent a starting point for the university level, attention should also be given to Service Science. primary and secondary education. Students should 4 Work with practitioners to create data sets to be encouraged to work in teams and explore ways to better understand the nature and behaviour of improve the service systems around them. service systems.4 Explore new teaching methods for SSME related Much real world data about service systems often has education. a proprietary nature and security concerns associated with it. The confidential feature of the data may require SSME qualifications should be accessible through a novel methods of archiving and releasing. Unlike many range of channels, including on-line eLearning and other subjects, service science researchers must focus virtual worlds. They should offer access to cases, their efforts on establishing appropriate legal, social, simulations, and lab activities in major sectors and economic conventions around data sharing for of the modern economy, including the public specific purposes. sectors (government and security, healthcare and education, environment and recreation), commercial 5 Create modelling and simulations tools for service sectors (retail and franchise, hospitality and systems. entertainment), information sectors (financial and Perhaps more than any other subjects, advancement in banking, consulting and professional, media and Service Science depends on models and simulations of internet), and infrastructure sectors (transportation alternative service systems designs. When data are not and communications, utilities and construction, readily available, service practitioners need simulation manufacturing and mining). tools to support their decision-making processes.5.2 Recommendations for research 5.3 Recomendations for business1 Develop an inclusive interdisciplinary and 1 Establish employment policies and career paths intercultural approach to service research. for T-shaped professionals. Many of the pioneering service research journals Businesses should define career paths for T-shape and conferences have made this a stated priority. professionals and indicate their preference for SSME However, much more needs to be done to measure qualifications in recruitment. This would demonstrate the demand for academic programmes and encourage and reward efforts that increase the actual amount of the formation of interdisciplinary Service Science interdisciplinary and intercultural work in this emerging communities. field. 2 Review existing approaches to service innovation2 Build bridges between disciplines through grand and provide grand challenges for service systems research challenges. research. With good architecture, we would be able to reduce Understanding, modelling and measuring service a complex problem to separable components. activities that take place in business today is already However, when decomposition is not fully effective underway; for example, activity-based costing and or has enormous complexity associated with it, a service-oriented architecture. Despite promising deeper foundational understanding is often needed. progress, surprisingly little is known about (a) how to Researchers from multiple disciplines should look for make optimal investment for service innovation, (b) opportunities to bridge between disciplines, especially how to scale up margins as service revenues increase, in the context of grand research challenges that span (c) how to systematically reduce the complexity of multiple disciplines. service systems, and (d) how to devise measurement Succeeding through service innovation 13
  • 16. systems that can be used internally and shared opportunities and increasing the level of national externally to protect privacy and preserve competitive funding in Service Science are important steps in advantage. These issues are potential grand challenges advancing research and academic curricula. for multidisciplinary research teams to work on. 2 Demonstrate the value of Service Science to3 Provide funding for service systems research. government agencies, and thereby create methods, data sets, and tools to inform and Businesses should provide funding for service systems challenge current education and research support. research, directly through many regional industry- academic-government collaboration forums, or Improvements in government service systems, which indirectly via global organisations such as the Service employ over 20% of the populations in some nations, Research and Innovation Initiative (SRII). A starting would lead to a ripple effect through the rest of the point is to establish benchmarks on the level of service economy. As with business stakeholders, government research investment compared to other areas. agencies are well positioned to challenge existing education and research efforts.4 Develop appropriate organisational arrangements 3 Develop relevant measurements and reliable data to enhance industry-academic collaboration. on knowledge-intensive service activities across sectors to underpin leading practice for service Businesses can also encourage employees to participate innovation. in SSME relevant conferences and to support academic SSME programmes with the latest projects and case Measuring service activities across sectors of the studies. Tools, methods and data sets related to SSME economy to better understand service quality, are an ideal focus for business-academic collaborations productivity, regulatory compliance, and sustainable to stimulate rapid progress. innovation is an important starting point. More funding is needed for nationally directed data collection5 Work with stakeholders to include sustainability about multiple aspects of the service economy, measures and create actionable service innovation including employment, skills and career paths, exports, roadmaps. investment, pricing, and IT-enabled activities, among As sustainability becomes an increasingly urgent global others. concern, businesses should take the opportunity to 4 Make government service systems more expand the definition of stakeholder value to include comprehensive and citizen-responsive. new measures. More emphasis should be placed on the balance between efficiency, effectiveness and Government service systems are especially in need of sustainability. Roadmaps for service innovation should comprehensive review by engaging citizens concerned. include updated performance measures and adjust A first step is to change the orientation of existing mechanisms of measurement. service systems from a provider-centric one to a citizen-centric one.5.4 Recommendations for government 5 Encourage public hearings, workshops, briefings1 Promote service innovation for all parts of the with other stakeholders to develop service economy and provide funding for SSME education innovation roadmaps. and research. It is critical to carry out a review of service innovation Service innovation is still poorly understood considering roadmaps for collaborations between academia, its growing importance to the economy. Nevertheless, industry and government. Priority should be given to history has shown that focused research and investment, legislative and policy initiatives that can development efforts can advance science and build a systematically support the growth of the knowledge body of knowledge with long-term practical benefits. economy (knowledge creation) and the service The separate discipline areas of service research have economy (knowledge application to create value). developed to a point that an integrated theory is within reach. National funding for university-based research in Service Science is critical and has far-reaching benefits for economy and society. Cataloguing existing funding14 Succeeding through service innovation
  • 17. 6. Taking it forwardOver one hundred people have contributed their is that today, to grow the wealth of nations sustainably,knowledge and experience to the issues discussed in we must become far more systematic about servicethis document. However, we are acutely aware that our innovation in a world of increasing division of labour andjourney to develop a Service Science is far from complete specialization (Smith was right, in part). Nevertheless, the(see Appendix VIII: Ongoing debate). We see this white foundations of Service Science are based on the premise ofpaper as just a step in an ongoing dialogue that will the need for knowledge integration (adaptive innovators,engage many more stakeholders who seek to improve SSME T-shaped professionals).service systems and to develop successful adaptiveinnovators. We know division of labour alone is not the answer to increasing value creation capacity of nations (or else weThis document will be widely distributed to universities, would still be using scribes for our record keeping andresearch institutions, business organisations, non-profit communications!). We need both specialization andorganisations, government departments and agencies. integration to solve the complex coordination problems ofWe will continue to challenge academics, researchers, applying new knowledge to improve service systems andpractitioners and policy makers to perform or support the that value propositions that interconnect them.interdisciplinary work needed to lead to a breakthroughin Service Science and bring about the positive impact on We continue to invite feedback on this important topic andbusiness and society that more systematic and sustainable comments on this document are welcome.service innovations could achieve. Please find further information at:Adam Smith laid the foundations of modern economics www.ifm.eng.cam.ac.uk/ssmewith his exploration of division of labour (specialists) and www.research.ibm.com/ssmeits role in creating the wealth of nations. Our consensus Succeeding through service innovation 15
  • 18. GlossaryAdaptive innovators: People who are entrepreneurial Moore’s Law: In 1965, Intel co-founder Gordon Mooreand capable of systems thinking in the many project roles forecasted that the number of transistors on a chip willthey may fill during their professional life. In contrast to double about every two years. The prediction, popularlythe specialised problem solvers of the 20th century, who known as Moore’s Law, has proved to hold for more thanare sometimes called ‘I-shaped’ professionals for their 40 years.knowledge depth, adaptive innovators of the 21st century Multidisciplinary: Relating to two or more existing,are still grounded in their home disciplines but have strong separate disciplines (e.g., physics and biology). Thecommunication skills across areas of business, technology knowledge of individual disciplines is viewed as separateand social sciences. Hence, they are sometimes called and additive to each other.T-shaped professionals. Organisations: From a service system perspective, anBack-stage service activities: Activities that do not organisation is an accessible non-physical resource that hasinvolve direct interaction with the customer, for example, the ability to establish formal contractual relationships asback office operations of a retail bank or marking of well as informal promissory relationships. Organisationsstudent coursework by a teacher. Information processing is themselves are either formal (legal entities that cana common back-stage service activity. contract and own property) or informal service systems.Crossdisciplinary: The teaching of one discipline from Organisations that are formal service systems includeanother disciplinary perspective (e.g., physics for poets). businesses and government agencies. OrganisationsThe knowledge of one discipline is used as a lens through that are informal service systems include open sourcewhich another discipline is studied. communities, temporary project teams and working groups.Customer service system: A service system from theviewpoint of a customer or consumer. A customer service People: From a service system perspective, people aresystem searches provider value propositions looking for legal entities that have knowledge, capabilities, authoritywin-win value-cocreation opportunities. For example, and can create contracts (formal value propositions) anda task the customer currently does (self service) may be promises (informal value propositions) with other serviceoutsourced to a provider, a problem the customer does not systems. People can own property (such as technologyhave the knowledge, capability, or authority to solve may and shared information). People exist in modern societybe outsourced to a provider, or the customer may learn as roleholders (see Stakeholder) in many service systems.of a novel service offered by a provider that they desire People are complex and adaptive, with the ability to(demand innovation). learn and change their knowledge and capabilities over time. People have unique life cycles and life spans. PeopleGoods-dominant logic: Goods-dominant logic is the are resources that can be accessed in creating valuetraditional economic world view, which considers services propositions. They are also the atomic type of service(plural) and products as two distinct value-creating systems, capable of configuring resources and creatingmechanisms. value via interactions with other service systems.Front-stage service activity: Activities that involve direct Provider service system: A service system from theinteraction with a customer, for example, a doctor talking viewpoint of a provider (see Stakeholder). A providerto and examining a patient or a teacher lecturing to a class service system aims to meet the customer’s needs betterof students. Customer communication is a common front- than competing alternatives consistently and profitably (instage service activity. business context) or sustainably (in non-business context).Interactional Skills: Also known as complex Provider service systems seek deep knowledge of customercommunications skills, the ability to communicate across service systems (their own service activities, their unsolvedknowledge domains or disciplinary boundaries, without problems, and their aspirations) to improve existing, andnecessarily possessing deep contributory expertise. create new, value propositions.Contributory expertise allows experts or specialists to Service or service activity:extend the knowledge in a discipline. (1) Archaic: Referring to economic residual; any economicInterdisciplinary: The creation of new knowledge that exchange or production process that does not result in abridges, connects, or integrates two or more disciplines physical product transfer or output; non-productive labour.(e.g., biophysics). (2) Modern: The application of competences (knowledge,16 Succeeding through service innovation
  • 19. skills and resources) by one entity for the benefit of Service engineering: The application of technologies,another entity in a non-coercive (mutually agreed and methodologies and tools to the development of newmutually beneficial) manner. service offerings and the improvement of service systems.(3) Modern: Value-cocreation interactions (typically with Service experience and service outcome: Thewell-defined customer-provider entities as parties who customer’s perceptions of the process and result ofinitiate, directly or indirectly, front-stage and back-stage a service interaction or relationship. The perceptionsactivities in anticipation of value-cocreation results). are based in large part on customer expectations and hence there is always a subjective as well as objective(4) Modern: An economic activity offered by one party component to the customers’ evaluation of the processto another, most commonly employing time-based and result. Expectations may inflate over time, resultingperformances to bring about desired transformation results in degradation of service experience even when objectivein recipients themselves or in objects or other assets for measures have not changed. Exceptional recovery from awhich purchasers are responsible. In exchange for their service failure has been shown, under certain conditionsmoney, time and effort, service customers expect to obtain for repeated service, to lead to greater customer lifetimevalue from the access to goods, labour, professional skills, value for a provider.facilities, networks and systems; but they do not normallytake ownership of any of the physical elements involved. Service human resources management: The application of human resource management to service activities.Many typologies of service exist: external customer This term is rejected by many social scientists and those(market-based) and internal customer service; direct and who do not believe it is appropriate to talk about peopleindirect customer and provider interactions; automated, as resources. The term human relations management isIT-reliant and non-automated service; customised, semi- sometimes seen as a more appropriate alternative. Manycustomised and non-customised service; personal and service firms have the motto to treat employees like theyimpersonal service; repetitive and non-repetitive service; treat valued customers.long-term and short-term service; service with varyingdegrees of self-service responsibilities. Service innovation: A combination of technology innovation, business model innovation, social-Service computing: The use of information technology organisational innovation and demand innovation with the(IT) to support customer-provider interactions. Topics objective to improve existing service systems (incrementalinclude web services, e-commerce, service-oriented innovation), create new value propositions (offerings) orarchitectures (SOA), self-service technologies (SST), create new service systems (radical innovation). Oftensoftware as a service (SaaS) and IT Infrastructure Library radical service innovation will create a large population(ITIL). of new customers (public education – students; patentService design: The application of design methods and system – inventors; money markets – small investors).tools to the creation of new service systems and service Service innovation can also result from novel combinationsactivities with special emphasis on perceptions of quality, of existing service elements.satisfaction and experience. Examples of service innovation include: On-line taxService-dominant logic: The service-dominant logic returns, e-commerce, helpdesk outsourcing, musicadvocates that service (singular) involves value-cocreation download, loyalty programs, home medical test kits,interactions as service systems create, propose and mobile phones, money market funds, ATMs and ticketrealise value propositions. The interactions may include kiosks, bar code, credit cards, binding arbitration, franchisethings, actions, information and other resources. Value chains, instalment payment plans, leasing, patent system,propositions are built on the notion of asset sharing, public education and compound interest saving accounts.information sharing, work sharing (actions), risk sharing Service management: The application and extensionas well as other types of sharing that can create value in of management methods and tools to service systemscustomer-provider interactions. Service Science embraces and service activities, including capacity-and-demandthe world view of the service-dominant logic. management that integrates insights from serviceService economics: The definition and measurement of operations (supply capacity) and service marketingservice activities in an economy. Typical measures include (customer demand).productivity, quality, regulatory compliance and innovation. Succeeding through service innovation 17
  • 20. Service marketing: The study of value-creating customer- satisfaction), service strategy, service engineering, serviceprovider interactions, outcomes and relationships. It uses human resource management (especially in a professionaland extends the tools and methods of marketing. It is service firm), service computing, service supply chaingradually replacing ‘services marketing’, with the emphasis (especially eSourcing), service design, service productivity,on the outcome of all economic activity being service and service measurement.(or value) whether the service/value comes from things(‘goods’) or activities (‘services’). Service sourcing: The make-versus-buy decision for service activities, including the study of outsourcing,The notion of service marketing is supported by contracts, service level agreements, and business-to-relationship marketing and customer relationship business on-line markets.management, both primarily focused on the two-partyrelationship between customer and provider, and the Service system: Service systems are dynamicnew concept of many-to-many marketing (a network and configurations of resources (people, technology,stakeholder perspective). organisations and shared information) that can create and deliver service while balancing risk-taking and value-This discipline places special emphasis on quality and cocreation. The dynamics are in part due to the ongoingcustomer satisfaction, demand forecasting, market adjustments and negotiations that occur in all systemssegmentation and pricing, customer life-time value, and involving people. People are the ultimate arbiters of valuethe design of sustainable value propositions. and risk in service systems (in part because people are legalService mindset: An orientation geared towards the entities with rights and responsibilities).innovation of customer-provider interactions (servicesystems and value propositions), combined with Service systems are complex adaptive systems. They areinteractional skills to enable teamwork across academic also a type of ‘system of systems’, containing internaldisciplines and business functions. It is one of the smaller service systems as well as being contained in acharacteristics of adaptive innovators. larger service system (see Stakeholder). They typically interact with other service systems via value propositions,Service operations: The study of value-creating which may form stable relationships in extended value(work) processes, which include customer-input as a key chains or service networks (see Service networks).component. It uses and extends the tools and methods ofoperations research, industrial engineering, management Formal service systems are legal entities that can createscience, operations management, human resource legally binding contracts with other service systems.management, lean methods, six sigma quality methods, Informal service systems cannot create contracts, thoughlogistics and supply chain management. individual people within them may be able to do so.Service networks: Also known as service system Servicisation: A process whereby manufacturers movesnetworks. As service systems connect to other service from product-led towards a service-oriented businesssystems, they form networks of relationships, which may model. For example, instead of selling jet engines,have one or more associated value propositions. Social manufacturers develop service offerings in whichnetwork analysis (people as service systems) and value customers are charged for propulsion usage.network analysis (businesses as service systems) aretools that can be used to analyze service networks for Shared information: From a service systems perspective,robustness, sustainability, and other properties. an accessible conceptual resource that does not have the ability to establish formal contractual relationships.Service Science: An umbrella term for the emerging It includes language, laws, measures, methods, processdiscipline of Service Science, Management and Engineering descriptions, standards, and others. It can be codified and(see SSME below), it is named as a symbol of rigour in turned into explicit information. If people can talk about itpursuing the truth. Service Science is the study of service and name it, then from a communication perspective, it issystems and value propositions. It is the integration of a type of shared information.many service research areas and service disciplines, such asservice economics, service marketing, service operations, Stakeholders: Stakeholders include participants inservice management, service quality (especially customer service systems and others who are indirectly affected.18 Succeeding through service innovation
  • 21. Stakeholders who are ‘named participants’ are also known cocreation outcomes. Understanding the evolution mayas roleholders, who can be people or other service systems shed light on the shifts from social to economic, politicalthat fill named roles in service systems. to legal, and cognitive to computational systems. The shift seems to depend heavily on an increasing amount ofThe two main roles in any service system are customer shared information to solve motivation and coordinationand provider. To create successful value propositions, it is problems.also important to consider authority and competitor roles. T-shaped professionals: Those who are deep problemExamples of roleholders are employees and customers in solvers with expert thinking skills in their home disciplinebusinesses, politicians and citizens in nations, teachers and but also have complex communication skills to interact withstudents in schools, doctors and patients in hospitals, and specialists from a wide range of disciplines and functionalparents and children in families. areas (see also Adaptive Innovators).SSME: Service Science, Management and Engineering Technology: From a service systems perspective,(SSME), or in short Service Science, is an emerging field. technology is an accessible physical resource that doesIt includes curricula, training, and research programs not have the ability to establish formal contractualthat are designed to teach individuals to apply scientific, relationships. It includes any human-made physical artefactengineering, management and design disciplines that or portion of the environment accessible to service systemintegrate elements of computer science, operations stakeholders. Technology (physical) and shared informationresearch, industrial engineering, business strategy, (codified conceptual) are two important types of propertiesmanagement sciences, social and legal sciences, and others that service systems can own and provide access rights toin order to encourage innovation in how organisations others in value exchanges.create value for customers and stakeholders that could notbe achieved through such disciplines working in isolation. Transdisciplinary: Transcending, or extending beyond the knowledge of any existing disciplines. For example,STEM: The Science, Technology, Engineering and symbolic reasoning and general systems theory areMathematics (STEM) fields are widely considered to be considered to be applicable to all disciplines and hencethe driving force behind a modern society. The STEM labelled as transdisciplinary knowledge.workforce is viewed by many governments, academic andbusiness organisations as the key to a nation’s innovation Value proposition: A specific package of benefits andcapacity and long-term competitiveness. solutions that a service system intends to offer and deliver to others. Division of labour is at the root of many valueSystems and systems world view: Systems are dynamic propositions. By traditional economic and marketingconfigurations of entities (elements or components) definitions, value propositions may be confined to eitherthat interact over time and result in outcomes (internal products (things) or services (activities). However, thechanges to entities and external changes to regions of the modern meaning of service is value-cocreation thatsystem and the system as a whole). The study of physical, involves both products and services.chemical, biological, computational, cognitive, economic, Value proposition emphasizes key points of differencelegal, social, political, service or any other type of in comparison to competing alternatives. They may besystems, typically begins with a statement of the entities, rejected because a potential customer does not trust theinteractions and outcomes of interest. Reductionist science provider’s capabilities or believes the proposal violatesattempts to discover more fundamental building blocks a law or policy. They may also be rejected in favour ofout of which the entities of the system are composed (new self service, a competitor’s proposal, or other options.architectures), often with the goal of finding simpler or Designing, proposing, negotiating, realising (actualising),more parsimonious explanations of observed variety. and resolving disputes around value propositions are an integral part of the formation and improvement of serviceIn complex adaptive systems, entities have life spans and systems.the types of entities change over time in ways that aredifficult to predict. Service Science studies the evolutionof entities known as service systems, which interact viavalue propositions and result (normatively) in value- Succeeding through service innovation 19
  • 22. Appendix IHistory and future outlook of service researchTo assist new students of service in gaining an overview of the field, the evolution of service research has beencharacterized in six periods:Pre 1980: Crawling out period is when service marketing and service operations became distinct from product marketingand operations, in part as conventional service economics reports started to categorize more of the economy as valuederived from service activities.1980-1985: Scurrying about period with more published services research moving beyond goods and products butliterature still mostly conceptual. A core group of academics and business practitioners developed.1985–1992: Walking erect period with increasing number of scholars of service, and explosive growth in the literatureincluding service research journals, dissertations and textbooks. Academic events, centres and pioneers in Europe as wellas US emerged.1993-2000: Making tools period with more quantitative research - measurement, statistics, and decision supportmodelling; broadening, deepening and sharpening of the research; continued globalisation and multidisciplinary research;expanded topic areas including service design and delivery, service experiences, service quality and customer satisfaction,service recovery and technology infusion, service computing, service supply chains and eSourcing.2000-now: Creating language period with nearly a dozen models of service emerging, and the concept of a servicesystem beginning to take hold to unite the many perspectives. The field is expanding rapidly with an expansion ofliterature worldwide and increasing numbers of conferences and centres, with IBM and industries’ Service Science,Management and Engineering (SSME) initiative seeking to strengthen industry-academic-government interactions. Theservice-dominant logic view is gradually replacing the traditional view of goods-versus-services, with a view of service asvalue-cocreation that involves both things and activities.The future: Building communities period with an inclusive multidisciplinary approach to service innovation, with science,management, engineering and design being supporting academic disciplines, and with T-Shaped professionals as adaptiveinnovators to link and unite these disciplines. This will create a measurable growth in service innovation for business andsociety Succeeding through service innovation 21
  • 23. Appendix IIContributor listSymposium attendees Symposium correspondents• Kevin Bishop, IBM, UK • Steve Baron, University of Liverpool, UK• Greg Bolan, BAE Systems, UK • Mary Jo Bitner, Arizona State University, USA• David Bowen, Thunderbird School of Global • Stephen Brown, Arizona State University, USA Management, USA • Richard Chase, University of Southern California, USA• Chris Cromack, IBM, UK • Bo Edvardsson, Karlstad University, Sweden• Steve Evans, Cranfield University, UK • Robert J. Glushko, UC Berkeley, USA• Raymond P. Fisk, Texas State University, San Marcos, • Christian Gronroos, Hanken Swedish School of USA Economics, Finland• Walter Ganz, Fraunhofer Institute for Industrial • Evert Gummesson, Stockholm University, Sweden Engineering (IAO), Germany • Uday Karmarkar, UCLA, USA• Mike Gregory, University of Cambridge, UK • Doug Morse, Oracle, USA• Robert Johnston, Warwick Business School, UK • Roland Rust, University of Maryland, USA• Jos Lemmink, University of Maastricht, • Chris Voss, London Business School, UK The Netherlands• Christopher Lovelock, Yale University, USA Organising committee• Michael Lyons, BT, UK Co-chairs• Linda Macaulay, Manchester Business School, UK • Mike Gregory, University of Cambridge• Duncan McFarlane, University of Cambridge, UK • Jim Spohrer, IBM• Larry Menor, University of Western Ontario, Canada Members• Andy Neely, Cranfield School of Management, UK • Kevin Bishop, IBM• Guangjie Ren, University of Cambridge, UK • Michael Davison, IBM• Scott Sampson, Brigham Young University, USA • Bob Johnston, Warwick Business School• Jim Spohrer, IBM, USA • Linda Macaulay, University of Manchester• Philip Stiles, University of Cambridge, UK • Duncan McFarlane, University of Cambridge• Steve Street, IBM, UK • Andy Neely, Cranfield University• Paul Tasker, BAE Systems, UK • Guangjie Ren, University of Cambridge• Jonathan Throssell, Rolls-Royce, UK • Steve Street, IBM• Steve Vargo, University of Hawaii, USA • Paul Tasker, BAE SystemsThe organising committee would like to thank all the attendees and correspondents who took time to participate inthe Cambridge SSME Symposium. We are grateful to those who spent further time reviewing earlier versions of thisdocument. We are indebted to those who took part in several teleconference discussions during the consultation period.In particular, the organising committee would like to dedicate this document to the memory of Christopher H. Lovelock, apioneer of service research and education, who provided us with tremendous support throughout the project.We would like to thank colleagues in the IfM and IBM who provided assistance for the project: Kate Wilson, JennyMorgan, Cristina Payan, Nick Mann, Huw Richards, Clare Gilmour, Greg Golden, Bipasha Ray, Jai Menon, Susan Tuttle,Emma Bevan, Jo Griffiths, Ann Grady, Bill Hillier, Peter Templeton, Lewis Grantham, Giles Hainsworth, Jackie Stewart,Kristina Stephenson and Sarah Brown.Financial support for the symposium and this document was received from IBM and BAE Systems as well as NSF grantIIS-0527770. Many other individuals and organisations contributed time and effort.22 Succeeding through service innovation
  • 24. Appendix IIIRespondent listFeedback on the original discussion paper (in alphabetical order)Marlene Amorim Louis E. Freund Pei Li Meredith SingerTor W. Andreassen Yoshinori Fujikawa Kelly Lyman Jag SraiSteven Alter Neil Gibbs Ronald Mackay Metka StareStuart Aplin Mark Goh Paul P. Maglio Rudi StuderJulian Arkell Michael Gorman Allan Mayo Tacao SumiAlex Bain Dwayne Gremler Freddie Moran Kay Chuan TanJay Bayne Tom Griffin Philip Moscoso Richard TaylorRachel Berg Timber Haaker Asako Murakami Chris ToftsLeonard J. Bohmann Uzi de Haan Ravi Nemana Zaheer TravadiTilo Böhmann Christoph Heitz Andreas Neus Susan C. TuttleBenjamin Blau Sherif Hendi Brand Niemann Lorna UdenThomas J. Buckholtz Sunderesh S. Heragu Craig Nygard Pentti VähäJavier Busquets Pim den Hertog Mihoko Otake René van BuurenWolfgang Braun Tom Hill Nirmal Pal Wietze van der AaJan Bröchner Diem Ho Joan A. Pastor-Collado Ivanka VisnjicCarl Chang Axel Hochstein Mike Peters Pia VuohelainenTimothy Chou Cheng Hsu Tom Pridham Richard WeeksRahul Choudaha David Ing Javier Reynoso Paul WeinbergJon Cullen Keith E Instone Paulo Rocha e Oliveira Christof WeinhardtTugrul U Daim Jean Paul Jacob Rajkumar Roy Jochen WirtzMark M. Davis Wil Janssen Luis Rubalcaba JB WoodMark de Jong Carl Kay Abdelrahman Saad Alan K YamamotoAshutosh Dhanesha Takashi Kikuchi Vesa Salminen John YardHenning Droege Paul Kontogiorgis Syamant Sandhir Soe-Tsyr YuanJos Evertsen Stephen K. Kwan Carlos Sato Yi YueEdward Faber Alejandro Lago Gerhard SatzgerPaul Ferguson Steffen Lamparter Yuriko SawataniJames Fitzsimmons Marshall Lee Heribert SchmitzDianne Fodell Sungho Lee Corinna SchulzeLesley Forsdike Ying Tat Leung Robert D. SheltonIn total, 115 people from over 20 countries provided us with their feedback, many of which were about the same size ofthe original discussion paper. We wish to thank these respondents for their time and support. A selection of commentscan be found at www.ifm.eng.cam.ac.uk/ssme Succeeding through service innovation 23
  • 25. Appendix IVService sector in global economies6In recent years service industries have become a fast growing sector in world economies as measured by traditionaleconomic measurement methods (see Service-Dominant Logic in the Glossary for an alternative view). Services nowaccount for more than 50 percent of the labour force in Brazil, Russia, Japan and Germany, as well as 75 percent of thelabour force in the United States and the United Kingdom. Figure 3 shows the value of services to economies comparedto that of industry, construction and agriculture. % Services Industry Construction Agriculture 100 90 80 70 60 50 40 30 20 10 0 rg ng s Be om m er e nm s Sw O k itz ECD Gr d Sw ce en st 9 lia Ja y M n ge xico Po any Sp l Au n Ne Ice ria Ze nd Po d Ca Hu nd (2 y ov Fi 01) Re and ec No lic Re ay Tu lic Ko y Ire a nd a Ki te De and l th nc ar da ar Au 1 e n re pa ai an Ita ug iuUn ite ou ee b b h rw EU ra rk ed la st w la la la d Sta d na ng 0 Ne Fra pu pu rm lg al ak nl e er rt l Un mb ite d xe Lu Cz SlFigure 3 Share of total gross value added by sector, 2002Figure 4 indicates the gross added value of service sector industries within OECD countries. By 2002 services accountedfor about 72% of value added and manufacturing for about 17%. OECD reports show that the gap has widened steadilyin recent years as demand for services has risen. Belgium, France, Switzerland, the United Kingdom and the United Statesmainly reflect a high share of value added in finance, insurance, real estate and business services, and a large community,social and personal services sector. The construction sector is also relatively small in most OECD countries, accountingfor about 5.5% of OECD value added. Wholesale and retail trade, restaurants and hotels is a more important economicsector and is often large in countries with a strong tourism industry (e.g. Greece, Portugal and Spain). Finance, insurance, real estate and business services Community, social and personal services % Wholesale and retail trade, hotels and restaurants Transport and communications 100 90 80 70 60 50 40 30 20 10 0 rg ng s Be om m er e nm s Sw O k itz ECD Gr d Sw ce en st 9 lia Ja y M n rm o Po any Sp l Au n Ne Ice ria Ze nd Po d Ca Hu nd (2 y ov Fi 01) Re and ec No lic Re ay Tu lic Ko y Ire a nd a Ki te De and l th nc ar da ar Au 1 e n re pa Ge xic ai an Ita ug iuUn ite ou ee b b h rw EU ra rk ed la st w la la la d Sta d na ng 0 Ne Fra pu pu lg al ak nl e er rt l Un mb ite d xe Lu Cz SlFigure 4 Distribution of gross value added of the services sector, 20026 Source: OECD Science, Technology and Industry Scoreboard 2005 - Towards a knowledge-based economy, p.168-9.24 Succeeding through service innovation
  • 26. Appendix VBusiness challenges for service researchBusiness participants of the symposium identified five 4 Organisation and people issuesspecific challenges for service research: • Service organisation structure and behaviour; • Migrating to a service culture, with better methods to1 Understanding service systems create deep customer insights;• Establishing a language and taxonomy for service • Recruiting and keeping people with the right skills. systems and value propositions;• Developing and using systems architectures; Businesses describe new science, engineering, management and design graduates with limited service• Understanding the role, sources and use of data in thinking and service mindset. Service-oriented people service provision. seem to be difficult to find and, because they are in Business-academic collaboration is required in service high demand, they are even more difficult to keep. research, but the lack of a shared language, which is both relevant to businesses and rigorous to academics, 5 The service environment slows progress and makes collaboration difficult. • Managing the transition to a service organisation; Measurement of productivity and quality is more • Developing services based on products; challenging in service businesses. This has led to further difficulties in establishing appropriate service level • Reducing the complexity of services and their delivery; agreements and aligned incentive across stakeholders • Providing service in a changing environment. in a service supply chain and in eSourcing relationships. Businesses find it difficult to transform from a product to a service business model (the servicisation2 Business issues process). Part of the transitional challenge is being• Determining the nature, the function and structure of able to articulate what a service business looks like service contracts; and what its constituent elements are. It is seen as a• Establishing new legal requirements and intellectual significant challenge to create a language that can be property models; used to define and describe service businesses, their• Building the business case for service systems and value component elements and how they fit together. propositions. Business models, and ways that margins evolve over the product or service life cycle, need to be better understood. Without a good understanding of service business models, it is difficult to create business cases for services and to justify investment in service.3 Developing new and better types of service• Innovation – speeding up the new service introduction process;• Service design, including new types of service systems and value propositions;• Defining and developing tools for service improvement. Most businesses emphasize cost cutting more than revenue growth, leading to a bias of service research towards productivity rather than customer satisfaction (quality) or new market segments (growth). Traditional businesses are concerned with standardization, which may lead to a commodity trap. Often customization and personalization can be high margin, but hard to scale up. The challenge of consistent service delivery when scaling a service business needs to be addressed. Succeeding through service innovation 25
  • 27. Appendix VIGlobal trends and service innovationAs businesses and governments decide investment and for business transformation service activities,innovation policies, it is important for them to review and service research to improve productivity andglobal trends that entail service innovation as well as revenue growth, consistent with a triple bottomimportant areas that challenge sustainable improvement line of people, planet and profit.efforts. The rise of the globally integrated enterprise, including1 Demographic trends and sustainability concerns franchises as well as other global service providers, will drive increased demand for public sector will continue to drive demand for ICT infrastructure service activities and service research to focus on improvements that allow value to migrate to the more quality of life and environmental problems. knowledge-intensive business and professional service activities built upon the infrastructure service providers. The need for more business-to-business service Demographic trends toward a more aged, more research, including global logistics and lean operations educated and wealthier population in many developed is growing. The trend toward self-service technologies countries, a younger population in many developing that provision service locally, but are often deployed countries and more immigration between countries and maintained by globally integrated enterprises, will will continue to drive demand for healthcare and drive demand for in-the-field maintenance and security investment management, education and employment service capabilities. experience, as well as government and local community service activities. Human impact and sustainability concerns will increase energy-related There is an increase in globalisation of service activities (such as transportation and construction) and through off-shoring and regional specialization and environmental service activities. competition is growing across highly diverse cultures. Economic linkages across the globe are not new but they have intensified and accelerated over the past The society is changing; in developed countries, there decade. Countries are experiencing growth in the are growing market segments with rising expectations contribution of service activities to their national of service quality, along with aging populations. economies, hence research needs to have global Different demographic segments will demand different application, be cross cultural, transcend traditional levels of service, be they low-cost service or premium economic barriers and keep pace with the speed of high-cost high-value service. Service design and change. Because of sustainability concerns, globally experience will depend on individual and cultural integrated enterprises will increasingly be held to a differences. Research needs to address the balance triple bottom line (people, planet, profit, which may of social, technical and economic requirements of all be summarized in a fourth ‘P’, predictability of customer segments. sustainable value-cocreation). Sustainability concerns, such as the need for CO2 Technology is becoming more pervasive and reduction, increasingly affect the design and ubiquitous, IT-enabled service has risen rapidly and the provisioning of service. Service innovation increasingly worldwide IT service industry is expected to increase must achieve high-productivity and high-quality in value from US$ 635 billion in 2005 to US$ 780 service within sustainability targets. Regulatory billion by 2008. More small businesses depend on compliance issues will drive both legal and new sensor- technology and web service infrastructure as markets based monitoring service activities. increase in complexity. The time to global markets can be instantaneous as can be on-demand service2 Trends in business and technology (globalisation, enabled by smart sensors without human intervention. automation, self-service technologies, ‘service Research must help harness the power of ICT to design industrialization’, the ‘servicisation’ of and provision new types of self-service technologies, as manufacturing, and the continued rise of the well as mobile phone service offerings. type of service system known as the globally Recent decades have witnessed the rise of ‘service integrated enterprise) will further drive demand industrialization’, and the growing value of service26 Succeeding through service innovation
  • 28. innovation. However there remains a great deal of a large share of the benefits (value) through the craft-like organisation in some service industries application of IT in firms flows from the reorganisation that lack the rigour of traditional manufacturing and of activities accompanying the new technology. This engineering disciplines. The growth in service activities has particular relevance to service sectors because is creating a skills gap which requires adaptive workers many types of service until recently have scored low who change with the business; who can lead market on technology-intensity. New information technologies innovation, technology innovation, and who can have constituted a technological and industrial exploit the accelerating pace of technological and revolution in service provisioning that challenges societal change. Researchers and educators must many to consider redesigning their work practices and address the need for people with both breadth of corporate structures in unprecedented ways. understanding and depth in service industry specific skills.3 Trends in internet collaboration and web-based service, such as open source software and software as a service (SaaS), continue to mature and are driving service research around business model innovation and regulatory compliance issues. Peer-to-peer collaboration is increasing through use of internet mediated communication and social computing tools (web 2.0, YouTube, MySpace and Wikipedia) and virtual worlds (multi-user games, Second Life). In turn this is leading to service exchanges between individuals and growth in ad-hoc service network formation. Research must recognise the extension of service provision beyond the traditional boundaries of business. Napster serves as a reminder of the regulatory compliance issues that can arise in peer-to-peer collaboration and web-based service systems. New types of service systems will explore new types of business models, and as a consequence regulatory compliance issues may arise.4 Trends in organisational innovation are particularly important to service activity growth, and more service research is needed to understand the co-evolution of customer demand, technology, business models, governance, and organisational innovation. Analyses of European Innobarometer data indicate that a substantial share (almost one third) of service firms consider their major innovations to be solely organisational. It has long been commonplace that Succeeding through service innovation 27
  • 29. Appendix VIIExample of innovation roadmapThe extract below is from a European Commission report research and innovation activities. Member States shouldon innovation strategy and it provides an example of reorient their State aid budgets to target these objectives,innovation roadmap7. in full respect of their overall commitment to “less and better targeted aid”. The Commission will also present“The following 10 actions are of particularly high political a communication later in 2006 with detailed guidancepriority as part of the Lisbon strategy for growth and jobs: for the design and evaluation of generally applicable tax incentives for R&D.Action 1: Member States are invited to significantlyincrease the share of public expenditure devoted to Action 7: Drawing on the recent public consultation, theeducation and to identify and to tackle obstacles in Commission will present a new patent strategy beforetheir education systems to promoting an innovation the end of 2006 and prepare a more comprehensive IPRfriendly society. In particular, they should implement the strategy in 2007, facilitating inter alia the circulation of18 Communication from the Commission “Investing in innovative ideas.research: an action plan for Europe”, COM (2003) 226final/2, 4.6.2003. EN 17 EN recommendations included Action 8: Building on its review of the copyright acquis,in the Communication “Delivering on the Modernisation the Commission will continue its work to ensure that theAgenda for Universities” for better education and legal framework and its application are conducive to theinnovation skills. development of new digital products, services and business models. In particular, it will bring forward an initiative on “copyright levies” before the end of 2006.Action 2: A European Institute of Technology should beestablished to help improve Europe’s innovation capacity Action 9: The Commission will test in 2007 a strategyand performance. The Commission intends to put forward to facilitate the emergence of innovation friendly lead-a proposal in October 2006 and the EIT should be markets. In this context, it will conduct, after a publicoperational by 2009. consultation including in particular the Technology Platforms and the Europe INNOVA innovation panels, aAction 3: The Community and Member States should detailed analysis of potential barriers to the take-up ofcontinue to develop and implement a strategy to create new technologies in a limited number of areas. In parallel,an open, single, and competitive European labour market using this experience, the Commission will prepare afor researchers, with attractive career prospects, including comprehensive lead-markets strategy.possible incentives for mobility. Action 10: The Commission will publish and distributeAction 4: In order to address the poor up-take of a Handbook on how pre-commercial and commercialresearch results in Europe, the Commission will adopt a procurement can stimulate innovation by end 2006 toCommunication in 2006 - including voluntary guidelines support Member States in availing themselves of theand actions of Member States and concerned stakeholders opportunities offered by the new procurement Directives.”- to promote knowledge transfer between universities andother public research organisations and industry.Action 5: The EU’s cohesion policy for the period2007-2013 will be mobilized in support of regionalinnovation. All Member States should seek to earmarkan ambitious proportion of the 308 billion € available forinvesting in knowledge and innovation.Action 6: A new framework for State aid to research,development and innovation will be adopted by theCommission before the end of 2006, to help MemberStates better target State aid on market failures preventing7 Source: Putting knowledge into practice: A broad-based innovation strategy forthe EU, 2006, p. 16-7.28 Succeeding through service innovation
  • 30. Appendix VIIIOngoing debateWhile a consensus is emerging among contributors and foundation of service systems is an engineering thought.respondents, there are still different views as to howwe can best proceed to lay the foundations for service E. Marketing versus operations focusinnovation. Below is a summary of key points on which we Marketing dominates: Too much marketing focuswelcome ongoing debate: and not enough operations. Overemphasis on customer expectations may lead to mismatch in service operations.A. Two dominant views of serviceIHIP (intangibility, heterogeneity, inseparability, Operations dominates: Too much operations and notand perishability) View: Service should be defined and enough marketing. Optimizing productivity is beingstudied as different from and a complement to products. emphasized over innovating customer experience.SDL (service dominant logic) View: Service should be F. Science versus engineering focusdefined and studied as everything involving purposeful Science dominates: Too much abstract and conceptualvalue-cocreation between entities. discussion of Service Science, and not enough pragmatic engineering examples of the best way to design specificB. Two dominant views of innovation service systems based on SOA (service-orientedBroader: Innovation should be defined and studied as architecture) and quantifiable SLAs (service-levelany value-creating changes, ranging from incremental agreements).improvements to radical breakthroughs. Engineering dominates: Systems, technology andNarrower: Innovation should be defined and studied productivity focus are all engineering oriented, but theas certain types of value-creating changes, i.e. those underlying scientific concepts and foundations, on whichsignificantly beyond incremental improvements and to build an engineering discipline for service systems, areoptimizations of existing systems. often people-intensive and market-facing.C. Two dominant views of SSME as science G. Education versus management focusEmerging: Yes, the phenomenon is worthy of a new Education dominates: Too much education focus andscience. However, data and models are in early stages not enough practical management recommendationsof development, borrowing from many existing fields, and exemplar success stories. Adaptive innovators andand better tools are needed for modelling and simulating T-shaped professionals may be important concepts, butthe complexity of service systems and their interactions. ultimately managers are responsible for making investmentAnother challenge to the new science is that much of decisions in skills and innovation, and that should be thethe data required to build the science is considered main focus.confidential. Management dominates: Too much management andToo broad: No, the scope is too broad and no useful business focus, and not enough on what and how toprogress can be made until we can focus on a smaller educate a new generation of adaptive innovators, whopiece, for example, starting with discipline X and then can work in government, public and social sectors, wheredeveloping new interdisciplinary knowledge that connects profit is not a key driving force.with disciplines Y and Z. Otherwise, Service Science is littledifferent from a science of complex adaptive systems. H. SSME versus SSMED SSME: Design is already covered under engineering, besideD. Customer versus engineering focus SSME is already an established acronym and SSMED is tooCustomer dominates: Too much customer focus and long.not enough engineering consideration. The conceptualfoundation of value proposition is too complex to SSMED: Design is different from engineering in that itformalize because it involves customers who are people involves more aesthetic, artistic, and stylistic judgments.with preferences. User experience (both customer and provider) is a critical success factor in service innovation, so it is more inclusiveEngineering dominates: Too much engineering focus to speak of SSMED.and not enough customers focus. The conceptual Succeeding through service innovation 29
  • 31. I. Integrating disciplines: pairs versus lists advice to managers and leaders, references to existingDiscipline pairs: Service Science is just too ambitious, academic foundational work.listing over a dozen disciplines and expecting progress onintegrating them all. Be more practical, and start with a M. Doable versus too hardpair or at most a few pairs. Show real progress first. Doable: Given advances in computer-based education and cross-disciplinary curricular materials, it is entirely withinDiscipline lists: While there are many disciplines, there our grasp to create adaptive innovators and T-shapedis underlying simplicity. In principle, there are only four professionals who are both deep in their home disciplinetypes of resources (people, technology, organisations, and and have interactional expertise across the other SSMEshared information). In addition, the four measurements disciplines. There is enormous need for these types ofrelated to value (quality, productivity, regulatory people in business and societycompliance, and sustainable innovation) can provide thebasis for a deep theory that cuts across all the relevant Too hard: Despite the need for adaptive innovators anddisciplines. Disciplines create knowledge and service T-shaped professionals, the drive to specialization andapplies knowledge to co-create value. disciplinary silos is just too strong to be overcome. This effort is doomed to failure because, while there is theJ. People are not resources need, there is no market demand. Also, this is too much forOwnership: The term resource should only be applied to any but a few polymath individuals to ever aspire to learn,things that can be owned. Hence, the application of the even with new augmentation tools and organizations.term resource to people is entirely inappropriate.Access: The term resource should be applied to thingsthat can be accessed for a purpose. Hence, the notion ofpeople as resource is perfectly appropriate from an ‘accessto capabilities’ perspective.K. What kind of systems are service systems?Static types: Service system must be less general andtherefore falls into one type of the following classes ofsystems: economic, social, legal, political, computational,cognitive, socio-technical, linguistic-information,knowledge, business/organisation, and human.Dynamic types: The populations of types of servicesystems change over time, becoming increasingly formaland dependent on shared information to solve motivationand coordination problems, while simultaneouslybecoming increasing innovative and expanding the numberand diversity of informal service systems.L. Abstract versus pragmaticAbstract: The paper is very clearly focused on establishingthe four foundational concepts: service system, valueproposition, adaptive innovator and SSME. The paper isvery clearly intended to stimulate follow-on meetings andpublications, and provide the outline and structure to alignstakeholders.Pragmatic: The paper does not have enough concreteexamples of service innovation, existing roadmaps ofservice innovation in nations and organizations, pragmatic30 Succeeding through service innovation
  • 32. Succeeding through service innovation: A service perspective for education, research, business and governmentISBN: 978-1-902546-65-0Copyright © University of Cambridge Institute for Manufacturing (IfM) and International Business MachinesCorporation (IBM), April 2008. All rights reserved.First published in the United Kingdom by the University of Cambridge Institute for Manufacturing, Mill Lane,Cambridge CB2 1RX.An electronic copy of this document and contact details can be found at www.ifm.eng.cam.ac.uk/ssme