Spohrer and Maglio Yorktown 20061020 v2
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Spohrer and Maglio Yorktown 20061020 v2

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History of SSME (Service Science Mangement Engineering) forming, one of the early presentation to IBM Research at Yorktown Heights Watson Lab in New York

History of SSME (Service Science Mangement Engineering) forming, one of the early presentation to IBM Research at Yorktown Heights Watson Lab in New York

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  • The study of service phenomena (or service systems) is a next frontier in education, employment, innovation, and economic growth. IBM has begun working with universities around the world to promote a multidisciplinary study of service systems and service innovation, that we call service science, management, and engineering (or SSME). We are indebted to the foundational work of service research pioneers who have been developing services-related curriculum for decades. We hope to draw attention to and promote more of this foundational work through our efforts. ---------------------------------------------- Please contact Wendy Murphy (wendym@us.ibm.com) if you have any questions. Wendy Murphy is the Almaden Services Research, Service Science, Management, and Engineering, Project Coordinator.
  • Website with papers and presentations: http://www.almaden.ibm.com/asr/summit/index.shtml We had about 254 attendees from 21 countries. Roland Rust, service research pioneer, University of Maryland, "The SSME Palisades event was the biggest and most diverse gathering ever in support of service education. Paul Maglio and Wendy Murphy deserve a great deal of credit for making the event the success that it was."
  • Today, Services Research is the fastest growing part of IBM Research – the number of people focused on service innovation has increased by more than a factor of ten over the last three years, and now accounts for more than 1/6 of the over 3000 researchers in IBM Research. When we started the first service research group totally focused on services three and half years ago in IBM Research, it immediately became clear that service research is multidisciplinary in nature. To be successful, we’d need to attract more t-shaped people – who had both depth in some area relevant to service innovation, but breadth as well – so they could speak the languages of business, technology, and social-organizational change.
  • Our view is that service innovation is integrated technology innovation, business model innovation, social-organizational innovation, and demand innovation – increasingly the service economy is made up of t-shaped knowledge workers, who are deep in one area such as technology, business, or social science – but have learned to work on teams with other specialists as well as t-shaped people.
  • Before describing IBM’s perspective on SSME -- I’d like to quickly review and provide a partial overview of the growing body of knowledge about service -- I guess in some ways it is not surprising. As the service sector continues to grow, accounting for more and more of the labor force contributing to GDP measures, both in the US and in the World --- the body of knowledge about service – studied from economic and social science perspectives, management and business practice perspectives, and engineering perspectives as well – is growing rapidly. While the following list of references is very incomplete, we note that the economists (like Adam Smith) and political economists and philosopher (like Karl Marx) both agreed that services where a parasite on the rest of the economy which was primarily agriculture and early manufacturing in their days. Not until the economist Colin Clark in his book “The Conditions of Economic Progress” was the error of Smith and Marx apparent.
  • We are beginning to see references to service science or SSME appearing broadly in the literature and in the press now. The CACM issue is especially exciting because it does --- in the context of the ACM even --- bring together folks from a variety of disciplines, and starting to articulate this broad and deep thing. Could mention a few of the highlights of the issue. Transition to, so why are we here? We’re here to try to begin capitalize on this momentum more precisely.
  • Over the last decade, some excellent texbooks on service have been created…. http://www.servsig.org/syllabi.htm
  • And the last decade and a half has also seen the creation of new journals and conferences that deal with service, and help build the body off knowledge about service and service innovation.
  • Roland Rust, Paul Maglio, Wendy Murphy, and I look forward to welcoming you all back to the Frontiers 2007 conference in San Francisco – we plan to take advantage of the location to get our colleagues from Silicon Valley companies to attend and provide industry perspectives on service science.
  • In fact, with the growth of services, the view of service as the dominant logic, and not products is beginning to be explored. http://www.mesharpe.com/mall/resultsa.asp?Title=The+Service-Dominant+Logic+of+Marketing%3A+Dialog%2C+Debate%2C+and+Directions
  • SSME, or the study of service systems, is important because the world is becoming a giant service system. ------------------------------------------------ We’ve seen that service innovation is important to governments, businesses, and academics. However, how important is service innovation really becoming? The charts on this page try to provide a more quantitative view of the growth of services. Start with the chart of the United States. In 1800, 90% of the labor in the US was working on farms doing agriculture production. Today only 3% of the US labor force is involved in agriculture production. This represents over a one million times productivity increase in about 200 years. Manufacturing peaked in the 1950’s, and due to automation and outsourcing is now only about 20% of US labor. The shift towards services is not simply a US phenomenon, or a developed nations phenomenon – the chart shows the top ten nations of the world by size of their labor force – China is 21% of the world’s labor force, and Germany is 1.4% of the world’s labor force. China has seen its servce sector grow by 191% in the last 25 years. German has seen its service sector grow by 44% in the last 25 years. The shift to services represents the single largest labor force migration in human history. The shift to services represents the single largest labor force migration in human history. Global communications, business and technology growth, urbanization, and low labor costs in the developing world, are all in part responsible for this dramatic shift. The world is becoming a giant service system, composed of six billion people, millions of businesses, and millions of technology products connected into service networks. We need “a science of services” to better understand the design, evolution, and emergent properties of service systems. Especially, to understand how innovation leads to productivity gains in the service sector. Some ask, where will the labor go, once productivity improves in the service sector? The short answer is new service sector industries and business – recall the service sector is very diverse and becoming more so every day. Consider the growth of retail (franchises, ecommerce, Amazon, eBay), communication (telephones, T-Mobile, Skype), transportation (airlines, FedExp), financial (discount ebrokers,Schwab), as well as information (television, CNN, Google) services. Not to mention all the new services in developing nations of the world. The creative capacity of the service sector for new industries and business has scarcely been tapped – SSME aims to provide the basic skills in the science of services to enable a whole new set of service sector entrepreneurs, as well as more successful transformation of business performance in existing large companies.
  • Why does IBM care? Simply put, our ability to innovate depends on our ability to hire needed talent. Also, it may be surprising to some, the role that IBM played in helping to establish computer science departments, when our growth depended on access to more of that type of talent. When computer science started, it looked very multidisciplinary combining physics (tubes and transistors), electric engineering (analog, digital circuits, power supplies, cooling, packaging), mathematicians (dealing with failure rates of components in complex systems, beginning to explore optimal algorithms for computation), and even philosophers (boolean logic was most highly developed in mathematics oriented philosophy departments). Just as IBM worked with governments and academics to help establish computer science, IBM is now working to establish SSME. And again, SSME looks very multidisciplinary at this stage in its evolution. If one considers the number of PhD’s in IBM Global Services in the United States, one sees that over 50% are technical (mostly computer science), and that about 25% are from social sciences (organization theory, psychology, economics), and then about 15% are from business and management. IBM Research is currently better positioned for technology innovation than service innovation, as 90% of the degrees are technology oriented. -------------------- Why does service innovation require a combination of technology, social-organizational, and business specialists? First, in practice, complex IT-driven business to business services can fail for one of three reasons – the technology design is not right, the business design (ROI) is not right, or the organizational change design (including culture change and responsibility shifts) is not right. The project team members responsible for each of these three aspects of the service engagement speak very different languages, but must work together to integrate their skills and those of the clients as well to create a successful solution to a business transformation challenge. After about five years on the job, it has been observed that independent of the original degree of the project team member, they become fluent in the vocabulary of the other specialists in the engagement team, and communication and problem solving can go to a higher level of productivity. All clients want the transformations to happen faster and at consistently high quality. If SSME education combined with on the job educational experiences could get engagement team members to the high productivity level faster, the economic benefits could be large, to client, to the industry and economy as a whole, and to the provider of complex business services as well. In sum, IBM played a role in establishing computer science because of a need for talent to help IBM innovate and perform, and today IBM is playing a role in establishing SSME for the same reasons – the need for talent to innovate and perform in the arena of complex business services that transform the capabilities of organizations.
  • This is a proposal by North Carolina State University to develop a services track for their MBA program. It is being developed in consultation with IBM, and was inspired by SSME. They are also incorporating several of these courses in a cross-school masters degree in computer networking --- adding a service component to create more marketable skill set.
  • Some nice picture of complex systems that are service oriented Systems nations, businesses, cities, families, people (with people, technology, internal & external, and shared information)
  • On coproduction of value and value propositions…. Is “your money or your life” an instance of value coproduction – yes, sadly it is – extreme coercion forces a choice about what is most valuable to someone. If I have 12 people who want Van Gogh paintings, and I have 12 paintings, I may in fact create more value by destroying one of them before I start the bidding – sad, but possibly true. In service systems it is sometimes difficult to tell the difference between cheating and innovation – since both are non-compliant with traditional rules. Is this too much to pack into someone’s head? Can students really learn the evolution of the business models of 20 different industries over decades? Strange as it may seem, I run into high school kids that keep an encyclopedia of sports statistics in their head for baseball, football, basketball, and hockey over generations of players – because they trade cards and know the value of key players and teams… what would make learning about business and service system evolution as exciting as sports? Are sports teams examples of service systems?
  • Service scientists will need new tools to do their jobs. The profession will own the problem of improving and innovating new service systems. The profession will need tools to model, simulate, and perform empirical studies of service systems, analytic tools for mathematical modeling service systems, engineering and design workbenches for exploring alternative service system designs (CAD/CAM for service systems), and a theoretical framework (Services Rosetta Stone) that bridges and integrates across academic discipline silos. ---------------- Every new science has its new tools that improve measurement and experimentation – biology had the microscope, physics has particle accelerators, astronomy the telescopes – so what kinds of tools should a service scientist have? Empirical –measurement tools, simulation tools and techniques Theoretical – standard terminology, measures, models, and principles Analytic – mathematical tools and techniques Engineering – workbench to assemble standard components, and infrastructure platform to deploy them into practice Multidisciplinary design – palette of customizations, expression Image credits: http://images.google.com/imgres?imgurl=http://graphics8.nytimes.com/images/2004/11/23/science/23natu.2.650.jpg&imgrefurl=http://www.nytimes.com/imagepages/2004/11/23/science/23natu.2.html&h=450&w=650&sz=160&hl=en&start=237&tbnid=4lQCodIzNmMHpM:&tbnh=95&tbnw=137&prev=/images%3Fq%3Dscience%26start%3D220%26ndsp%3D20%26svnum%3D10%26hl%3Den%26lr%3D%26sa%3DN
  • Wikipedia comparative advantage…
  • So what would a service scientist actually do? Service scientist would own the body of knowledge around service system problem solving, all the weak and strong methods. First, service scientists identify a service system that needs improvement. Next, service scientists identify the stakeholders their concerns and perceived opportunities. Finally, service scientists envision augmentations (additional new service systems) or reconfigurations (of old service systems components) that best address all problems and opportunities. Especially important is the identification of year-over-year improvement trajectories and incentives to change (ROI, leadership, laws). The strongest incentive for a service scientist would be to get a share of the year-over-year value created from their innovation (augmentations and reconfigurations, or invention of new service systems), either in capital or reputation.
  • Are there “scale laws” of service innovation – year over year compounding effects? Can productivity, quality, compliance, sustainability, and innovation gains be made predictable, when service systems are augmented, reconfigured, or invented? These are the grand challenge questions for service scientists to answer. For example, consider a simple service system such as a computer science degree program. After the dot.com bubble burst and programming jobs were shifting to India, many computer science degree programs fell on hard times. Faculty complained that the quality of students was dropping each year, and their motivation was also dropping. Industry complained that graduates did not have all the skills required as jobs evolved. The three problems can be addressed by three new service systems – three augmentations. One takes 20% of the faculty time and implements service system A, which develops an elearning certification system based on the materials the faculty would have taught – students are not allowed into the course until they master this material, ensuring that student quality improves year over year. Filling 10% of the newly available course time is the purpose of Service System B, which surveys faculty interests, creates new relevant curriculum, and improves year over year faculty motivation. Filling the remaining 10% of available course time is the purpose of Service System C, which survey industry about on-the-job skills, creates new relevant curriculum, and improves year over year industry fit. The original problematic service system has been augmented with three new service systems that allow it to learn, and improve year over year. After a decade the course may look quite different. In this simplified example, the incentive structure for the stakeholders and the owners of the three new service systems has not been addressed. ROI, leadership, and laws all can play a role in the engineering of incentives for service system change.
  • Smith viewed services as unproductive labor, in comparison to manufacturing products.
  • Marx was hardly better noting that the array of service workers – were maintained at the expense of the whole community. --------------------------- http://www.marxists.org/archive/marx/works/1847/wage-labour/index.htm People must consume to survive, but to consume they must produce, and in producing they necessarily enter into relations which exist independently of their will. In the process of production, human beings work not only upon nature, but also upon one another. They produce only by working together in a specified manner and reciprocally exchanging their activities. In order to produce, they enter into definite connections and relations to one another, and only within these social connections and relations does their influence upon nature operate – i.e., does production take place. But the productive forces of labor is increased above all by a greater division of labor and by a more general introduction and constant improvement of machinery. The larger the army of workers among whom the labor is subdivided, the more gigantic the scale upon which machinery is introduced, the more in proportion does the cost of production decrease, the more fruitful is the labor. And so there arises among the capitalists a universal rivalry for the increase of the division of labor and of machinery and for their exploitation upon the greatest possible scale. We have hastily sketched in broad outlines the industrial war of capitalists among themselves. This war has the peculiarity that the battles in it are won less by recruiting than by discharging the army of workers. The generals (the capitalists) vie with one another as to who can discharge the greatest number of industrial soldiers. The economists tell us, to be sure, that those laborers who have been rendered superfluous by machinery find new venues of employment. They dare not assert directly that the same laborers that have been discharged find situations in new branches of labor. Facts cry out too loudly against this lie. Strictly speaking, they only maintain that new means of employment will be found for other sections of the working class; for example, for that portion of the young generation of laborers who were about to enter upon that branch of industry which had just been abolished. Of course, this is a great satisfaction to the disabled laborers. There will be no lack of fresh exploitable blood and muscle for the Messrs. Capitalists – the dead may bury their dead. This consolation seems to be intended more for the comfort of the capitalists themselves than their laborers. If the whole class of the wage-laborer were to be annihilated by machinery, how terrible that would be for capital, which, without wage-labor, ceases to be capital! But even if we assume that all who are directly forced out of employment by machinery, as well as all of the rising generation who were waiting for a chance of employment in the same branch of industry, do actually find some new employment – are we to believe that this new employment will pay as high wages as did the one they have lost? If it did, it would be in contradiction to the laws of political economy. We have seen how modern industry always tends to the substitution of the simpler and more subordinate employments for the higher and more complex ones. How, then, could a mass of workers thrown out of one branch of industry by machinery find refuge in another branch, unless they were to be paid more poorly? An exception to the law has been adduced, namely, the workers who are employed in the manufacture of machinery itself. As soon as there is in industry a greater demand for and a greater consumption of machinery, it is said that the number of machines must necessarily increase; consequently, also, the manufacture of machines; consequently, also, the employment of workers in machine manufacture; – and the workers employed in this branch of industry are skilled, even educated, workers. Small businesses squeezed out… It is evident that the small manufacturer cannot survive in a struggle in which the first condition of success is production upon an ever greater scale. It is evident that the small manufacturers and thereby increasing the number of candidates for the proletariat – all this requires no further elucidation. Side by side with the masses thus occupied with one and the same work, we find the "chief inhabitant," who is judge, police, and tax-gatherer in one; the book-keeper, who keeps the accounts of the tillage and registers everything relating thereto; another official, who prosecutes criminals, protects strangers travelling through and escorts them to the next village; the boundary man, who guards the boundaries against neighbouring communities; the water-overseer, who distributes the water from the common tanks for irrigation; the Brahmin, who conducts the religious services; the schoolmaster, who on the sand teaches the children reading and writing; the calendar-Brahmin, or astrologer, who makes known the lucky or unlucky days for seed-time and harvest, and for every other kind of agricultural work; a smith and a carpenter, who make and repair all the agricultural implements; the potter, who makes all the pottery of the village; the barber, the washerman, who washes clothes, the silversmith, here and there the poet, who in some communities replaces the silversmith, in others the schoolmaster. This dozen of individuals is maintained at the expense of the whole community. [44] "The man of knowledge and the productive labourer come to be widely divided from each other, and knowledge, instead of remaining the handmaid of labour in the hand of the labourer to increase his productive powers ... has almost everywhere arrayed itself against labour ... systematically deluding and leading them (the labourers) astray in order to render their muscular powers entirely mechanical and obedient." (W. Thompson: "An Inquiry into the Principles of the Distribution of Wealth." London, 1824, p. 274.) Goods and Services “ Goods” and “services” are terms from the lexicon of bourgeois economics, not Marxism, carrying with them the idea of sectors of the economy producing differents kinds of things, in the case of services, “immaterial” or intangible commodities, doing something for someone rather than making something for someone. This conception, however, confuses the mind, and clarification is complicated by the breadth of the category “services” and the muddled nature of the distinction. Firstly, both goods and services are commodities , i.e., meeting someone else’s need to earn a living. In general, the kind of labour may be the same; what differs is the manner in which the exchange is effected. For example, if I make a pizza and it goes into the supermarket, I have manufactured a good. But if I work as the cook in a restaurant and make exactly the same pizza to be handed over the counter, then I have become a “service worker”. If you buy a car, that’s a good; but if you lease the same car, that’s a service. The line between “hire purchase” and leasing is hard to draw. It may be that additional labour (regular servicing for example) is combined with the manufacture of the car by socialising labour which would have been carried out by the owner themselves, but hire remains simply a means of effecting a sale . Socialisation of labour may involve replacing activity formerly carried out outside the market with manufacture, but then later the manufactured labour is incorporated into a “service”. For example, during the second half of the 20th century, cooking in the domestic environment was largely replaced by manufacture of food products, and increasingly take-away, fast food and the restaurant trade – services – supplant the sale of prepared food. Thus manufacture and service here mark stages in the process of socialisation of labour. The growth of what is called the service sector sometimes takes place through the break-up of enterprises, with separate firms, which would previously have been divisions of the same enterprise, instead of simply collaborating with each other, selling their services to each other. For example, clerks doing the salaries in a manufacturing company, may find themselves as employees of a firm selling salary services to the manufacturer. Exactly the same work, first manufacture, now a service. In the case of labour hire firms, workers doing good old fashioned factory work are magically transformed into employees in the service sector! Whether I buy a meal off you, as a producer in the manufacturing sector, or ask you to bring the ingredients into my kitchen and cook the meal for me, as a producer in the service sector, does not affect the nature of your labour. “ For example, when the peasant takes a wandering tailor, of the kind that existed in times past, into his house, and gives him the material to make clothes with. ... The man who takes the cloth I supplied to him and makes me an article of clothing out of it gives me a use value. But instead of giving it directly in objective form, he gives it in the form of activity. I give him a completed use value; he completes another for me. The difference between previous, objectified labour and living, present labour here appears as a merely formal difference between the different tenses of labour, at one time in the perfect and at another in the present.” [ Grundrisse , part 9. Original accumulation of capital ] There is a difference however, if I hire you as a kitchen hand (so to speak) to work under my direction in my kitchen, and pay you by the hour. In this case, I do not buy your labour, but your labour -power , which I use according to my own will, and transform you from an independent contractor into a servant and wage-worker . “ If a capitalist hires a woodcutter to chop wood to roast his mutton over, then not only does the wood-cutter relate to the capitalist, but also the capitalist to the wood-cutter, in the relation of simple exchange. The woodcutter gives him his service, a use value, which does not increase capital; rather, capital consumes itself in it; and the capitalist gives him another commodity for it in the form of money.” [ Grundrisse part 5., Capital and labour ] If my aim is not to satisfy my own hunger, but to sell the meal to someone else, then I become your employer, and you are transformed into, not only a wage worker, but a productive worker ! “ a schoolmaster is a productive labourer when, in addition to belabouring the heads of his scholars, he works like a horse to enrich the school proprietor. That the latter has laid out his capital in a teaching factory, instead of in a sausage factory, does not alter the relation.” [ Capital , Chapter 16 ] Nevertheless, there are changes taking place in the labour process and changes in the consciousness of the workers involved which arise from the relationships through which the labour process is organised. “ Goods” and “services” are confusing categories for grasping these changes. The category of “services” embraces banking and insurance, health and education, sex and gambling, labour-hire and contracting in the building trade, food production, maintenance and repair, personal care, transport, both public and private, entertainment and retail, all in a mish-mash of confusion.
  • Colin Clark noted the rapid growth of the service sector, and commented that… One reason why I’m delighted to be here at University of Queensland – is that Colin Clark, the first economist to really deeply “get” the importance of services – did his work here at Queensland – I’m truly delighted to be here, and had my first meeting yesterday in the Colin Clark Building.
  • Question: How did the service economy arise, what came before the modern service economy? Without going into detail, many economists and social scientists have worked to understand the rise of services, as part of the rise of modern organizations and technology… Eric Beinhocker in Origins of wealth traces estimates of the Global GDP per capita for 2 million years, nearly all the action happens from 1800 on, with the rise of the use of modern technology and more complex organizational forms. A facinating part of the book deals with the explosion of SKU or product and service numbers. People – hunters to farmers to factory workers to (knowledge workers and entrepreneurs – what Florida calls the creative class, what pine & gilmore call labor in the experience and transformation economies)… ---------------------------------------------------- Sources: Porat, M. (1977) The Information Economy: Definitions and Measurements, Special Publication 77 12(1), Office of Telecommunications, US Department of Commerce. Book picture: http://images.amazon.com/images/P/0631211020.01.LZZZZZZZ.jpg Author picture: http://images.google.com/imgres?imgurl=www.cso.edu/ancien_site/march_portrait.jpg&imgrefurl=http://www.cso.edu/ancien_site/march_bio.htm&h=270&w=250&sz=8&tbnid=eAHBA8fmVlUJ:&tbnh=108&tbnw=100&start=5&prev=/images%3Fq%3D%2522James%2BG.%2BMarch%2522%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8%26safe%3Doff Book text: http://www.amazon.com/exec/obidos/tg/detail/-/0631211020/qid=1077242349/sr=1-1/ref=sr_1_1/103-3454405-6368663?v=glance&s=books Time Line: http://www.pbs.org/wgbh/amex/telephone/timeline/f_timeline.html Farm Labor: http://www.usda.gov/history2/text3.htm Brief History of Work: http://courses.nus.edu.sg/course/socsja/SC2202/Labor/Occupationsa.html 1800 and the Jeffersonian ideal – citizens as independent and self sufficient 1800 – mobile people called settler (move and stay), conquerors (come in to rule), or sailors (come from afar to trade), changed by 1900 to include travelers -- local travel to family, on business, leisure, schools, medical, government or military service.
  • Question: How did our modern service economy arise, what were the fundamental prerequisites? One key to productivity in service systems is trust. Trust may seem like a soft concept, however one only needs look at eBay to see the role that technology is planning in helping to quantify trust in eBay’s recommendation. One of the biggest questions on the minds of business leaders today is how to invest to grow their businesses… the options are to invest in technology, invest in their people, invest in their organizational processes, invest in their partnership networks and value webs – clearly investment has to be made in all of these area, but how should those investments be made…. Understanding the growth of services systems is key… ------ http://www.pupress.princeton.edu/titles/7706.html Paul Seabright (2004) The company of strangers: A natural history of economic life. Princeton University Press. Princeton, New Jersey. In The Company of Strangers , Paul Seabright provides an original evolutionary and sociological account of the emergence of those economic institutions that manage not only markets but also the world's myriad other affairs. , Drawing on insights from biology, anthropology, history, psychology, and literature, Seabright explores how our evolved ability of abstract reasoning has allowed institutions like money, markets, and cities to provide the foundation of social trust. But how long can the networks of modern life survive when we are exposed as never before to risks originating in distant parts of the globe? This lively narrative shows us the remarkable strangeness, and fragility, of our everyday lives.
  • Question: How does one understand economic growth in a services economy? A good place to start in understanding growth in economic systems that are becoming largely dominated by services, is to look at the work of Nobel Prize winning economist – for those who like their understanding to come in the form of equations, Solow is a great place to start – not surprisingly the variables in his equations correspond to people (labor), capital (investment) and technology. ---------------------------- For those that prefer differential equations to squishy terms like freedom, Solow provides DEQ that say the same thing…. Growth of capabilities comes from more workers, with better tools, and better organizations that have profits to invest in creating new innovations. In simple terms, Solow might say the things that make us smart are the six billion potential laborers on earth today (enormous capability to produce or achieve goals), the cumulative capital assets produced by the hundred billion humans who have every lived, and our current capabilities for creating new technologies (capabilities) to improve the productive efficiency of everyone and everything that exists. Jim March might say that L and K are doing things the way they’re done now (exploitation) and that I is about looking for new ways to do things (exploration). Of course, L & K could be applied to “normal” ways of doing exploration – for example, universities. I is about innovation and investment. Graph: http://www.macalester.edu/~ferderer/ http://www.itam.mx/lames/papers/invitses/hanseng.pdf Author Picture: http://www.econ.canterbury.ac.nz/nobel/robert.solow.jpg Book Text: http://www.amazon.com/exec/obidos/tg/listmania/list-browse/-/3ITRP78BDVN7J/qid=1076859419/sr=5-1/ref=sr_5_1/103-3454405-6368663 Book Picture: http://images.amazon.com/images/P/0195109031.01.LZZZZZZZ.jpg Good books: http://www.amazon.com/exec/obidos/tg/listmania/list-browse/-/3ITRP78BDVN7J/qid=1076859419/sr=5-1/ref=sr_5_1/103-3454405-6368663 Review: Editorial Reviews Synopsis Exogenous growth: growing or originating from outside, a growth model that takes the rate of growth as a given (coming from the outside model). Endogenous growth: growing or originating from within, a growth model that explains the rate of growth from within the model itself. In the preface to the first edition the author writes: "I have tried to give some feeling for the scope of aggregate theory of growth, a notion of the technical details, and some idea of the directions in which future research is, likely to go." This second edition begins with the author's Nobel Prize Lecture "Growth Theory and After" (1987) followed by the original six chapters of the first edition. Book Description Growth Theory presents a concise survey of the modern macroeconomic theory of growth. This new edition includes six lectures presented in the Summer of 1992 at the University of Siena and includes a new chapter where Solow charts the changes in growth theory from 1969 to the present.
  • Question: How does one begin to measure economic development in a service economy, dominated more and more by intangibles? For those who prefer to understand economic growth without equations, Amartya Sen, another Nobel Prize Winning Economist, see economic growth in terms of the services that remove unfreedoms from a population – the removing unfreedom of being unhealthy requires health services, or removing the unfreedome of being uneducated requires education serivces, etc. ------------------------- Easiest to see the relationship between human capability (productivity) increases and service economy growth, if you look at it like Amartya Sen did in terms of removing “unfreedoms” – lack of health is an unfreedom, lack of education is an unfreedom, lack of basic human rights is an unfreedom, and services government, education, healthcare and others remove unfreedoms by enhancing the capabitiies of both individuals and nations. Services transform the states of things, while preserving the identity of the thing transformed or enhanced. Services are most often coproduced, requiring the client to decide what part they do (responsible for) and what part the provider does (responsible for). Service very fundamental to entity-system coevolution phenomena. Services transform the state of products, people, businesses, and processes. The transformations are the co-production of a service provider and a client. For example, in medicine the patient must often perform diet and exercise changes to get well. In education, the student must expend effort to learn from the teacher. A business must change its processes to work with a business service provider to deploy technology in the organization. Basic services transform fundamental properties: location (transportation) and ownership (retail) Sophisticated services transform capabilities: purchase power (financing) and knowledge (education) Service providers specialize to perform a service at lower cost and higher quality than one could do alone. Services exist in all modern economies. Only in an agrarian economy, in which all families are self sufficient, and independent of each other, can one find a society with no services component. Services arise whenever the decision is made to allow someone else to do some portion of work/activity for you (shared responsibility), in exchange for a fee. The service provider can typically perform the service at lower cost and higher quality due to specialization of effort and specialization of skills. In modern times, services arise around products, especially complex products where the manufacturer provides financing, maintenance, operating assistance, etc. Some of the most ancient services were healthcare and education as well as protection and legal (public administration). Why the recent rapid growth in services? Clark-Fisher Hypothesis – as productivity increases in one sector, the labor force migrates to another. Amos H. Hawley (1986) Human Ecology. Chicago Press. States that in human populations that (1) adaptation proceeds through the formation of interdependencies among the members of a population; (2) system development continues, ceteris paribus, to the maximum size and complexity afforded by the technology for transportation and communication possessed by a population; (3) system development is resumed with the acquisition of new information that increases the capacity for movement of material, people, and messages and continues until the enlarged capacity is fully utilized. Colin Clark (1957) Conditions for Economic Growth. Notes that “It was an outstanding error on Adam Smith’s part to attempt to exclude services from his definition of real national product. This exclusion, together with other obsolete doctrine, persisted in the Soviet definition of national income until Stalin…” From Fitzsimmons and Fitzsimmons (2001) Services Management. McGraw Hill, NY. 3 rd Edition “ Services lie at the very hub of economic activity in any society. Writing about the role of the service sector in world development, Dorothy Riddle formulated the economic model shown in Figure 1.1. This model shows the flow of activity among the three principle sectors of the economy: extractive (mining and farming), manufacturing, and service, which is divided into five subgroups. All activity eventually leads to the consumer. Examples of services in each of the five subgroups are: Business services. Consulting, finance, banking Trade services. Retailing, maintenance, repair Infrastructure services. Communications, transportation Social/personal services. Restaurants, healthcare Public administration. Education, government
  • Question: What is the role of geography in the service economy, does geography matter any more? So over and over in economic growth we see the need to invest in people, organizations, and technologies, and share information about them – for exampley Bryson, Damiels, and Warf describe the world we live in today in terms of service worlds….
  • Question: What comes after the service economy? Pine and Gilmore see the service world splitting into two parts in the future consumers services ++ that are part of an experience economy, and business services ++ that are part of a transformation economy. ----------------------- Service economy is splitting into a largely B2C experience economy part and largely B2B transformation economy part. Pines and Gilmore do a nice job of summarizing the economic distinctions in the economy, and the evolution of value growth to services, and then beyond commodity services to the experience economy (consumer services ++) and the transformation economy (business services ++). Business and professional services are the second fastest growing part of the service sector (2.7% CAGR on labor versus 2.8% CAGR on labor growth for health and education; 5.7% CAGR for revenue growth versus 6.0% CAGR for government). Sources: Book Image: http://www.amazon.com/gp/reader/0875848192/ref=sib_dp_pt/104-5056684-8349508#reader-link Author Image: http://www.tians.org/Conference/pine.jpg, http://www.eaglestalent.com/ talent2.asp?ID=636 Pine II, B. Joseph and Gilmore, James H. (1999) The Experience Economy. Harvard Business School Press: Boston. Figure based on Table 9-1 on page 170. Modified to consider Experience and Transformation as types of services, with experience more relevant to consumers (B2C) and transformation more relevant to businesses (B2B).
  • Question: How does one measure productivity in a service economy? --------------------------------- Here, Jack Triplett and Barry Bosworth analyze services sector productivity, demonstrating that fundamental changes have taken place in this sector of the U.S. economy. They show that growth in the services industries fueled the post-1995 expansion in the U.S. productivity and assess the role of information technology in transforming and accelerating services productivity. In addition to their findings for the services sector as a whole, they include separate chapters for a diverse range of industries within the sector, including transportation and communications, wholesale and retail trade, and finance and insurance. The authors also examine productivity measurement issues, chiefly statistical methods for measuring services industry output. Triplett, Jack E. and Barry Bosworth (2004). Productivity In The U.S. Services Sector: New Sources Of Economic Growth. Brookings Institution Press (September, 2004) Amazon URL: http://www.amazon.com/exec/obidos/tg/detail/-/0815783353/qid=1102227549/sr=1-1/ref=sr_1_1/104-5056684-8349508?v=glance&s=books Editorial Reviews About the Author Jack E. Triplett , is a visiting fellow in Economic Studies at the Brookings Institution. He served previously as a chief economist at the U.S. Bureau of Economic Analysis. He is the editor of Measuring the Prices of Medical Treatments (Brookings, 1999). Barry Bosworth is a senior fellow in the Economic Studies program at the Brookings Institution. His previous books include Saving and Investment in a Global Economy (Brookings, 1993) and Aging Societies: The Global Dimension (Brookings 1998). Product Description: The services industries—which include jobs ranging from flipping hamburgers to providing investment advice—can no longer be characterized, as they have in the past, as a stagnant sector marked by low productivity growth. They have emerged as one of the most dynamic and innovative segments of the U.S. economy, now accounting for more than three-quarters of gross domestic product. During the 1990s, 19 million additional jobs were created in this sector, while growth was stagnant in the goods-producing sector. Here, Jack Triplett and Barry Bosworth analyze services sector productivity, demonstrating that fundamental changes have taken place in this sector of the U.S. economy. They show that growth in the services industries fueled the post-1995 expansion in the U.S. productivity and assess the role of information technology in transforming and accelerating services productivity. In addition to their findings for the services sector as a whole, they include separate chapters for a diverse range of industries within the sector, including transportation and communications, wholesale and retail trade, and finance and insurance. The authors also examine productivity measurement issues, chiefly statistical methods for measuring services industry output. They highlight the importance of making improvements within the U.S. statistical system to provide the more accurate and relevant measures essential for analyzing productivity and economic growth.
  • Question: Does manufacturing matter in a services economy? -------------- The widely held belief that we live in a "post-industrial" economy in which manufacturing has been displaced and somehow rendered obsolete by white-collar and service economy is a dangerous myth that is seriously undermining our ability to compete successfully in world markets. http://www.polisci.berkeley.edu/faculty/bio/permanent/Zysman,J/
  • While there are many taxonomies of services jobs, we introduce the notion of the services square – a simple 2x2 table that highlights services for people, business, products, and information. While services targeted at people and products are important, increasingly the fastest growth seems to be in services targeted at businesses and information. ------------------------ Most people think of the services around people – healthcare, education, retail, entertainment – however many of the highest value jobs deal with business services, product or industrial services, and information services. There are also services around relationship, ownership, and intervention transaction costs. 2x2 – people and business have rights and are governed by human laws Products and information are owned and are governed by physical and mathematical laws, as well as ownership by human laws People and products are spatially defined and embodied in atoms Businesses and information are less easily spatially defined, and more distributed
  • The services square is also important in that it helps us understand the services triangle, and the definition of services proposed by Gadrey (2002). A service provider (A) creates a service relationships with a service client (B) in order to operate on or transform some portion of reality (people, business, products, information). The services triangle highlights four key areas for innovation in services – the service relationship, the service interventions, the ownership relationship, and the responsibility relationship. It is also worth mentioning that the value coproduced in the service relationship often has elements of capital (money) but also reputation (brand) two very different kinds of information. --------------------- 7. Gadrey, Jean (2002) The misuse of productivity concepts in services: lessons from a comparison between France and the United States. In Productivity, Innovation and Knowledge in Services : New Economic and Socio-Economic Approaches . Editors, Jean GadreyGadrey, Jean, Gallouj, Faiz. Edward Elgar Publisher. Key are economic entities: people and organizations (have rights and can form “ownership relationships”, form “service relationships”, perform “service interventions”) Key interactions: create or transform ownership relationships, service relationships, and service interventions. Key objects of service: dimensions of people, dimensions of organization, products (technological or environmental), and information (coded goods, including capital and reputation) The service triangle does not include the notion of competitors or substituters – need to extend to include this and other Bamberger notions.
  • Question: How do service systems improve over time? ----------------------------- From: http://www.infed.org/thinkers/argyris.htm
  • Question: How to deal with trade-offs in improving service systems? Some think you can have either better productivity or better quality, but not both – but in fact it is often possible to create self-reinforcing service cycle relationships so that the more productivty improves the more quality improves, and the more quality improves the more productivity improves. Example: ATM Example: Amazon book recommendation quality, and efficient bundling and pricing. ---------------- Heskett, James L., W. Earl Sasser, Christopher W.L. Hart (1990) Service breakthroughs: Changing the rules of the game. Free Press. NY.
  • Question: Can we understand a business as a service system? Economists and organizations theorists are working with management practitioners – to create a better understanding of coordination mechanisms.
  • Question: Are there any lessons to be learned from the evolution and industrialization of manufacturing?
  • http://www.worksystemmethod.com/
  • Book Picture: http://www.amazon.com/gp/product/0262072610/qid=1134057686/sr=8-1/ref=pd_bbs_1/104-0926830-2346347?n=507846&s=books&v=glance
  • Sources: Book Image: http://www.amazon.com/exec/obidos/tg/detail/-/007238915X/qid=1120429810/sr=8-1/ref=pd_bbs_ur_1/002-8311376-6681610?v=glance&s=books&n=507846 Author Picture: http://web.mit.edu/jsterman/www/
  • Today’s talk will provide short answers to the following frequently asked questions.
  • SSME stands for Services Sciences, Management, and Engineering. It is an urgent call to action to become more systematic about service innovation, a proposed academic discipline that some universities have started creating, and a proposed research area that attempts to integrate and bridge theoretical silos. --------------------------- First and foremost, at this time, SSME is an urgent “call to action” for governments, industry, and academic to work together to get more systematic about service innovation. As the economies of the world shift more towards services, service innovation is a natural complement to product and process innovation – which the world is already very good at. To get more systematic about service innovation, government, industry, and academics need to work together to raise the common knowledge level about services and service innovation, and in the process develop “a science of services.” SSME is also a proposed academic discipline. SSME will borrow curricula elements (lectures, portions of courses) from many existing disciplines. SSME aims to integrate these curricula elements into a new specialty. SSME is also a proposed research area. The science of services will very likely be the study of service system design and evolution. Service systems are a kind of sociotechnical system, simply meaning they have a social component (people and organizations, like work groups and businesses and industries and nations with their regulations and laws) as well as a technological component (and we emphasize information technologies, and especially web services and ecommerce websites that often provide self-service via technology). At IBM we are especially interested in the most complex business-to-business services, that require a great deal of information technology and organizational change to accomplish a Business Performance Transformation Services (BPTS). Service systems are designed (think of computer system design), service systems evolve (think of biological systems evolution), and service systems have emergent properties, or things that only make sense at particular scales, like economic systems). Emergent properties are properties/capabilities that can only be realized at particular scales or sizes of the system – for example insurance and market clearing are only robust when systems are above a certain threshold of complexity or size.
  • We define SSME as “the application of scientific, management, and engineering disciplines to tasks that one organization beneficially performs for and with another (‘services’) .” SSME is the study of the evolution and design of service systems, especially measurement and understanding of service productivity, quality, compliance, sustainability, and innovation. We view Science as a way to create knowledge. Engineering is a way to apply knowledge and create new value. Management improves the process of creating and capturing value. ---------------- We define SSME as “the application of scientific, management, and engineering disciplines to tasks that one organization beneficially performs for and with another (‘services’). In general, service innovations can improve service productivity, service quality, service compliance, service sustainability, service learning rates, as well as innovation rates – with the goal of making improvements more predictable and hence worthy of investment (predictable ROI and scaling of investment results). IBM is especially interested in the most complex types of organization to organization services – especially IT-enabled business and organizational transformation and change. For example, strategic outsourcing (SO) services, business transformation outsourcing (BTO) services, and business performance transformation services (BPTS). A simple definition of services that does justice to the abundant variety and types of services has proven quite challenging – and consensus in the academic community has not yet been fully achieved. In desperation some have quipped that a service is anything of economic value that cannot be dropped on your foot! However, the key to understanding service value is in understanding the value of actions, performed at the time of the service purchase and delivery or the promise that the actions will be performed at a future time, in such a manner as to satisfy the client or at least according to specific agreed upon terms and conditions. The most common results of services are that the client or some designated target of the service is transformed or protected by the service – the target of the service has “state variables” then some change or protection from change of those state variables can be a concise description of the purpose of many services. The clients motivations for entering into a service agreement are as diverse as the types of services, but include reasons such as the client does not have the skills, time, desire, or authority to perform the service for themselves (self-service). Thus services often create mutual interdependencies in sociotechnical systems – as clients and providers depend on each other economically and politically. For anyone who has ever written a complex program or done software engineering, they can appreciate the complexity of coordinating many different modules to achieve a desired computational end – each module performs some actions in service of other modules and an overall hierarchy of intertwined goals. Service economies are no less complicated, in fact they are in many ways more complicated because the motivation of the clients/providers (modules) as well as their effort/quality levels is not typically as much of an issue. Complex sociotechnical systems also have a political context, with different laws and requlations as well as dynamic forces at work constantly perturbing and changing the systems as the “service design attempts to execute on the sociotechnical system.” As important as understanding the value of actions and promises in services, it is also important to understand that service by their very nature require coproduction of value – both the provider and client must perform actions in order to create the value. So just as the client may wonder about the motivations and capabilities of the provider, the provider must accommodate a great variety of motivations and capabilities on the client side – especially in complex business to business services these issues are important to understand. Service level agreements and contracts are an effort to specify as clearly as possible the mutual responsibilities and expectations that are being agreed to. However, mutual responsibility is easy to see even in simpler services like education (students must read and study as directed by the teacher) or healthcare (patient must exercise and eat right). Even in the most trivial of services like a haircut, there is mutual responsibility as can be observed when the service is being provided to a child (who won’t sit still) or an overly indecisive person (who doesn’t know the style they want until it is too late – the hair is gone!). The large variety of services results from innovation in work sharing, risk sharing, information sharing, asset sharing, and decision sharing arrangements (to name just a few). For example, IKEA created a successful furniture business, by shifting the work sharing arrangement from the industry norm – instead of selling assembled furniture, they focused on low cost, high quality, by shifting the assembly task to the customers. Many important services are essentially hedging strategies or promises for future actions (insurances) in case of unexpected or low probability events. Again, the study of service systems is in many ways like computer systems (designed) but in other ways like biological systems (constantly evolving new species of services with alternative work sharing and risk sharing arrangements). Across all the many types of services, from simple to most complex business to business, there is always value in the action of others as well as coproduction of value, by actions or the promise of actions from both parties. Service sector – government and security, health and education, financial and business, communication and transportation, retail and wholesale, entertainment and hospitality, utilities and environmental -- all the skilled based performances, needed infrastructures, and “promises and social contacts” that make modern life possible. Is this too broad? We think that understanding the design and evolution of service systems can be reduced to understanding the shifting value of knowledge between technology, people, and organizations as clients and providers seek new and better ways to coproduce value. Business Performance Transformation Services are one of the most complex and important types of services to be understood and innovated. To oversimplify greatly, we see science as a way to create knowledge. Engineering as a way to apply knowledge and create new value. Business model is a way to apply knowledge and CAPTURE value. And management improves the process of creating and capturing value. So SSME – Services Sciences, Management, and Engineering – seeks a science of services that creates new knowledge, and then applies it to create new value and capture portions for the investors and providers of those service innovations (new services or improved old services). Often a service innovation when applied to one’s own business looks like a process improvement, but when applied to a client’s business looks like a service offering.
  • SSME is important because increasingly GPD growth of nations depends on service innovation, revenue and profit growth of businesses depends on service innovation, and academics ability to impact business and society depends on service innovation. ----------------------------- Creating a science of services is not a trivial undertaking – given that creating SSME is going to be so difficult, is it really worth the effort? We think so. Governments need to make service innovation a priority because their GDP growth depends on it. Businesses need to make service innovation a priority because their revenue and profits depend on it. And academics need to make service innovation a priority because of (1) their responsibility to prepare their students for the high value jobs of the future, (2) since education is one of the most important services in a modern economy, their productivity and quality depend on service innovation, and (3) there are outstanding research opportunities that matter to both business and society, and are as exciting as understanding computer systems, biological systems, and economic systems. A new frontier in innovation, education, and economic growth awaits. If we didn’t think SSME was a new frontier in innovation, education, and economic growth – then we would not be advocating it. We’d be advocating that improving the quality of the separate specialists is enough – and trusting that their separate efforts could be integrated in the normal fashion to create value – however, while Adam Smith was right that the wealth of nations depends on specialization, and we are not arguing for a minute that any of the specialized disciplines that SSME draws on will go away, they are important and necessary – we do challenge the claim that normal approaches to integrating the efforts of the specialists are the best approach for the increasing complex and dynamic service systems of the future. To make clear that specialization is not alone enough (yes we do need more specialists, but not just specialists), consider the following. If specialization alone were the key to economic growth and wealth, then why do we not still use “scribes’ in our society? What is the advantage of having general literacy? General literacy raises the over all productive capacity of the system, as well as increasing the capacity to specialize more people “on demand.” In a world dominated by language and quantity, the 3 R’s were good preparation – faster sharing of relevant information. In a world dominated by services, SSME might be good preparation – faster sharing of relevant information.
  • Many governments, industry players (including our competitors), and universities from around the world have voiced and interest in SSME. Berkeley faculty are actively working on creating the “Services Rosetta Stone” to summarize how different academic disciplines solve problems related to common stages in the life cycle of a service. Also, North Carolina State University, Penn State University, and Arizona State University are just a small sampling of universities working to establish SSME-related programs that cut across academic discipline silos. ---- The list on this slide is not exhaustive – however, it provides a sampling of some of the many nations, businesses, academic institutions, and other groups that have participated in SSME workshops and discussions.
  • Some universities are revising their degrees to include more business and information services case studies, others are creating new courses and degrees that are interdisciplinary in nature (reassembling curricular building blocks) , and a few have taking on the challenge of creating a “Services Rosetta Stone” that unifies across discipline silos. ------------------------- SOA = Service Oriented Architectures. The growth of services can be seen in academics – disciplines like Operation Research born in the manufacturing era are being revised to reflect services and renamed to service operations. Other disciplines are also being revised. The next stage in the evolution of academics is likely to deal with aggregation, as new multidisciplinary centers of service excellence spring up (already started) at universities. Today, we ask the question – is the next phase a true unification or integration, leading to a service science discipline?
  • As the composition of IBM Global Services business suggests the key skills of a service scientist must bridge technology, business, and social-organizational skills. ---------------- Technology: create and deploy new technical capabilities (technical capability = understand and control natural phenomena of materials and things) Make, Verify, Deliver, Operate (a service scientist should have tools and skills to allow the construction of new service offerings from components, and a global service platform to deploy them into) Business: create and manage new business capabilities (business capability = value creation and capture mechanisms) Propose, Invest, Sell, Manage (a service scientist should have tools and skills to allow the construction of new business models, and motivate others to invest) Social-organizational: create and govern new organizational capabilities (organizational capability = human relationships, roles, identities, assets, laws, interactions, skills, networks) Coordinate, Motivate, Govern, Learn (a service scientist should have tools and skills to allow the construction of new social-organizational frameworks, and motivate others to participate) Technology, business, and social-organizational components can be enhanced/diminished as well as combined/disassembled to achieve technical, business, or social-organizational goals. A person who specializes has certain skills enhanced and other diminished over time. Demand Innovation Segment, Prioritize, Stage, Popularize, plus eMarket mechanisms
  • The intersection of technology, business, and social-organization skills seems to be part of the natural evolution of academic disciplines – consider the emergence of MIS, computer-supported collaborative work, computational organization theory, mechanism design theory, and agent-based computational economics. ------------ Source: IBM Research
  • Christof Weinhard and colleagues at Karlsruhe University in Germany have been making good progress in developing a CAD/CAM tool for service system design that they refer to as a Computer-Aided Market Engineering system. ----------------- This is just one example. Beyond the existing service sector industries, new markets wait to be born – this is a kind of demand innovation. eCommerce, eBusiness, eMarkets.
  • While many well educated service employees in government, industry, and academia persist in the myth that service jobs are low skill jobs, the reality is that the majority of service employees are high skill knowledge workers and that is the foundation of not only the service economy, but also the innovation economy that drives economic growth around the world. William J. Baumol has said that “Innovative activity is fundamentally a service activity.” Douglass C. North has said that “We are continually creating a new and novel world.” Both of these economists understand the important role of the service sector to economic change and sustainable economic growth. --------------------------------- Quote from: Preface pg. xii Jean Gadrey and Faiz Gallouj (2002) Productivity, Innovation, and Knowledge in Services: New economic and socio-economic approaches. Edward Elgar Publishing. Cheltanham, UK. Quote from: pg 13 Douglass C. North (2005) Understanding the process of economic change. Princeton University Press.
  • While there are many taxonomies of services jobs, we introduce the notion of the services square – a simple 2x2 table that highlights services for people, business, products, and information. While services targeted at people and products are important, increasingly the fastest growth seems to be in services targeted at businesses and information. ------------------------ Most people think of the services around people – healthcare, education, retail, entertainment – however many of the highest value jobs deal with business services, product or industrial services, and information services. There are also services around relationship, ownership, and intervention transaction costs. 2x2 – people and business have rights and are governed by human laws Products and information are owned and are governed by physical and mathematical laws, as well as ownership by human laws People and products are spatially defined and embodied in atoms Businesses and information are less easily spatially defined, and more distributed
  • The service square not only helps highlight the growth in business and information services, but also hints at some other important distinctions. People and businesses have rights, and can act as service providers. Products and information are owned, and while products can provide services, information provides a service only via people, businesses, or products. Furthermore, while there are exceptions, there appear to trends driving up the local capabilities of people and products, and trends driving up the network capabilities of businesses and information. ----------------------------------------- Yellow: Can be the provider of a services – an ability to act (service interventions) Blue: Can enable providers of service to provide new and improved services Capital and Reputation: Two key kinds of information that measure value and are “owned by” and/or “attributed to” people and organizations. Capital owned by people and organizations, and while it can be measured on a linear scale at any one time – capital is typically the function of many holding and many actions and fluctuates over time. Reputation is attributed to people and organizations, and while it is difficult to measure from moment to moment - because it requires polling all economic entities that have a view on the reputation of another economic entity – typically there are a few “important” economic entities whose view on the reputation of another economic entity will have the largest impact on that economic entities ability to produce value (coproduce value in service relationships). Process (ways of doing things) and Laws (compliance rules on how things must be done) are also very important types of information.
  • The services square is also important in that it helps us understand the services triangle, and the definition of services proposed by Gadrey (2002). A service provider (A) creates a service relationships with a service client (B) in order to operate on or transform some portion of reality (people, business, products, information). The services triangle highlights four key areas for innovation in services – the service relationship, the service interventions, the ownership relationship, and the responsibility relationship. It is also worth mentioning that the value coproduced in the service relationship often has elements of capital (money) but also reputation (brand) two very different kinds of information. --------------------- 7. Gadrey, Jean (2002) The misuse of productivity concepts in services: lessons from a comparison between France and the United States. In Productivity, Innovation and Knowledge in Services : New Economic and Socio-Economic Approaches . Editors, Jean GadreyGadrey, Jean, Gallouj, Faiz. Edward Elgar Publisher. Key are economic entities: people and organizations (have rights and can form “ownership relationships”, form “service relationships”, perform “service interventions”) Key interactions: create or transform ownership relationships, service relationships, and service interventions. Key objects of service: dimensions of people, dimensions of organization, products (technological or environmental), and information (coded goods, including capital and reputation) The service triangle does not include the notion of competitors or substituters – need to extend to include this and other Bamberger notions.
  • As the world becomes an ever larger service system, and service systems are augmented, reconfigured, and invented, an important grand challenge is to attain predictable service productivity growth – up the whole stack from knowledge worker to work system to enterprise to industry to nation to the global service system. The challenge is enormous, but the key is transforming all service systems into more optimal learning systems that can create and adapt to integrated technology, business, social-organizational, and demand innovation. --------------------- Measurement of productivity in service systems – a kind of sociotechnical system Measurement of dollars – capital – economics (capital) Measurement of words – issues – communications (reputation)
  • We all know the benefits of innovation in terms of skilled employment and exports growth. Over the last 200 years, it has become increasingly clear that innovation sustains skilled employment and exports growth. From England and the industrial revolution, Germany and the chemicals revolution, USA and the electrical and information revolution, Japan and product quality, India and low cost services, China and low cost products – regions that excel in future product exports and services exports are likely to do so as a result of government, industry, and academic collaboration – and a focus on innovation. ------------------------------------- We are here today to discuss services, innovation, and employment – and think about future services export that countries such as Germany might specialize in. Over the last 200 years, the world has seen a series of innovations – a few summarized here -- Pay attention to low cost labor shift in every case… followed by technology build out. 1800- England Steam Engine, Railroads, Factories, Textiles Industrial Revolution 1840- Germany Dyes & Chemicals & Metallurgy Chemical & Metallurgy Industries 1900- USA Telephone, Radio, Television, Computers Electronics & IT Industry 1950- Japan Low cost transistor radio and gas engine, then high quality Electronics and Automobile Industries (Quality Movement) 1990- India Low cost call centers and back office, increasingly higher quality IT Services, Legal & Medical Services Industries 1990- China Low cost products, increasingly higher quality Consumer and industrial goods ? Industrialized Product Exports (Carpet Mills of Georgia, USA) ? Industrialized Services Exports (IT Data Centers of Google)
  • Scale laws are where science and engineering meet business. A good scale law means that investors can invest and gain predictable capability increases. Are there “scale laws” of service innovation? We think so, and this is one of the exciting areas for service research scientists to explore.
  • Relates to Amos Hawley’s “Human Ecology” (Population, Organizations, Technology, Environment) Atomic Service Systems (people) augment themselves with new Service Systems (value coproduction configurations of ...) that eventually transform the environment (via collective action orchestrated by institutions, such as government), and because the environment is now even more conducive to the growth of more Atomic Service Systems, population grows and the cycle repeats Blue Ocean Strategies (book) describes how scale influences the emergence of new service systems. How to Grow When Markets Don’t (book) describes how adjacency in value chains influences the emergence of new service systems
  • Systematic Design of Service Innovations requires understanding work system evolution – including the integration of demand innovation, business innovation, social-organizational innovation, and technology innovation. Early technical call centers in the 70’s (if you called them) you would reach an expert, by 80’s with FAQ (Frequently Asked Question) tools and computers you’d typically reach an less skilled person augmented with good tools, by 2000 you’d be talking to someone in India because it had been outsourced, and by 2010 you may be mostly talking to machines, as the routine questions have been automated. Many types of work seem to evolve in this Z pattern, and an important aspect of service innovation is to get more systematic about the design of work systems that as they evolve, productivity is improved as well as quality is improved. _________________________________________________________________________________ Again service science will help boost productivity by accelerating our ability to have work systems absorb innovation – work systems seem to evolve through four stages – jobs are created and destroyed along the way, and that is one of the factors that must be factored in when designing innovative new ways to work. Source: IBM Research What could be called “theory Z” of work evolution is based on Doug Engelbart’s model of human system and tool system coevolution. Specialized new forms of work start out as collaborations of people, who over time developed specialized skills as well as incentives to tightly collaborate (1) Next they develop tools that allow more productivity as well as less skilled people to contribute to the work (2) Next, assuming sufficient demand for the product of the work, specialized organization form to do the work, and other people and organizations that want the work product can get it done by outsourcing it into a competitive economy (3) Finally, at some point one of the competitors figures out a way to automate the work, making the work a form of self service interacting with an automated service provider (4). Human intelligence is augmented by tools and organizations that “make us smarter” – from a services perspective, one can redistribute (“share”) work into the tool system or the human system, to a more (all) or lesser (some) degree. Collaborate: Skilled people Augment: Skilled people with tool Delegate: Specialized people in an organization that gets the business outsourced to them Automate: Client or user interacts with tool When the tool system does it all, that is automation – example ATM machine (use technology to advantage) When the human system does it all, that is outsourcing – example low cost call center businesses in India (use economy to advantage) When the tool system does some of the work, that is having capabilities augmented – example a calculator When the human system does some of the work, that is collaboration – example bonuses for cost saving ideas, incents people to share ideas. Many KM failures due to lack of incentive for sharing and knowledge reuse. When changing work, one needs to ask four key questions: Should we – is there demand and enough potential value to be created and captured (“make sure the goal has real value”) Can we – is it technologically feasible, and can processes be designed to accomplish the work (“make sure it can be done – a feasible plan”) May we – can any stakeholders block this, what incentive design could overcome this (“design a win-win game for all stakeholders – all player happy”) Will we – when staked up against other organizational priorities does the value justify the cost at this time (“is it the most important thing to accomplish now, can it wait”)
  • Simple service system ecology simulator Measures same,, down, up, indeterminate Population of measurement makers and users (for each stakeholder, do their perspective agree on the measure?) Examples prices, salaries, success rates, etc.
  • We define SSME as “the application of scientific, management, and engineering disciplines to tasks that one organization beneficially performs for and with another (‘services’). In general, service innovations can improve service productivity, service quality, service compliance, service sustainability, service learning rates, as well as innovation rates – with the goal of making improvements more predictable and hence worthy of investment (predictable ROI and scaling of investment results). IBM is especially interested in the most complex types of organization to organization services – especially IT-enabled business and organizational transformation and change. For example, strategic outsourcing (SO) services, business transformation outsourcing (BTO) services, and business performance transformation services (BPTS). A simple definition of services that does justice to the abundant variety and types of services has proven quite challenging – and consensus in the academic community has not yet been fully achieved. In desperation some have quipped that a service is anything of economic value that cannot be dropped on your foot! However, the key to understanding service value is in understanding the value of actions, performed at the time of the service purchase and delivery or the promise that the actions will be performed at a future time, in such a manner as to satisfy the client or at least according to specific agreed upon terms and conditions. The most common results of services are that the client or some designated target of the service is transformed or protected by the service – the target of the service has “state variables” then some change or protection from change of those state variables can be a concise description of the purpose of many services. The clients motivations for entering into a service agreement are as diverse as the types of services, but include reasons such as the client does not have the skills, time, desire, or authority to perform the service for themselves (self-service). Thus services often create mutual interdependencies in sociotechnical systems – as clients and providers depend on each other economically and politically. For anyone who has ever written a complex program or done software engineering, they can appreciate the complexity of coordinating many different modules to achieve a desired computational end – each module performs some actions in service of other modules and an overall hierarchy of intertwined goals. Service economies are no less complicated, in fact they are in many ways more complicated because the motivation of the clients/providers (modules) as well as their effort/quality levels is not typically as much of an issue. Complex sociotechnical systems also have a political context, with different laws and requlations as well as dynamic forces at work constantly perturbing and changing the systems as the “service design attempts to execute on the sociotechnical system.” As important as understanding the value of actions and promises in services, it is also important to understand that service by their very nature require coproduction of value – both the provider and client must perform actions in order to create the value. So just as the client may wonder about the motivations and capabilities of the provider, the provider must accommodate a great variety of motivations and capabilities on the client side – especially in complex business to business services these issues are important to understand. Service level agreements and contracts are an effort to specify as clearly as possible the mutual responsibilities and expectations that are being agreed to. However, mutual responsibility is easy to see even in simpler services like education (students must read and study as directed by the teacher) or healthcare (patient must exercise and eat right). Even in the most trivial of services like a haircut, there is mutual responsibility as can be observed when the service is being provided to a child (who won’t sit still) or an overly indecisive person (who doesn’t know the style they want until it is too late – the hair is gone!). The large variety of services results from innovation in work sharing, risk sharing, information sharing, asset sharing, and decision sharing arrangements (to name just a few). For example, IKEA created a successful furniture business, by shifting the work sharing arrangement from the industry norm – instead of selling assembled furniture, they focused on low cost, high quality, by shifting the assembly task to the customers. Many important services are essentially hedging strategies or promises for future actions (insurances) in case of unexpected or low probability events. Again, the study of service systems is in many ways like computer systems (designed) but in other ways like biological systems (constantly evolving new species of services with alternative work sharing and risk sharing arrangements). Across all the many types of services, from simple to most complex business to business, there is always value in the action of others as well as coproduction of value, by actions or the promise of actions from both parties. Service sector – government and security, health and education, financial and business, communication and transportation, retail and wholesale, entertainment and hospitality, utilities and environmental -- all the skilled based performances, needed infrastructures, and “promises and social contacts” that make modern life possible. Is this too broad? We think that understanding the design and evolution of service systems can be reduced to understanding the shifting value of knowledge between technology, people, and organizations as clients and providers seek new and better ways to coproduce value. Business Performance Transformation Services are one of the most complex and important types of services to be understood and innovated. To oversimplify greatly, we see science as a way to create knowledge. Engineering as a way to apply knowledge and create new value. Business model is a way to apply knowledge and CAPTURE value. And management improves the process of creating and capturing value. So SSME – Services Sciences, Management, and Engineering – seeks a science of services that creates new knowledge, and then applies it to create new value and capture portions for the investors and providers of those service innovations (new services or improved old services). Often a service innovation when applied to one’s own business looks like a process improvement, but when applied to a client’s business looks like a service offering.
  • Progress as of 3Q 2005 500+ references to SSME and “Service as a Science” in magazines, newspapers, blogs, etc. including Harvard Business Review Feb issues – “:Breakthrough Ideas for 2005” 20+ IBM Shared University Research (SUR) awards for SSME related projects 12+ university, government, industry workshops on SSME 10+ IBM SSME faculty awards 7+ programs and papers on SSME sponsored by IBM, including best paper awards in “Journal of Service Research” and “Frontiers in Services” conference The launch of an SSME website and blog: http://www.research.ibm.com/ssme/ http://www.ibm.com/developerworks/blogs/ssme Conferences and meetings with academics (~8 data days, faculty speakers) 10+ ambassador volunteers linked to schools 10+ Proposals received and acted upon Academic initiative SSME course outline – 3 modules ~ complete
  • This is the outline of the course we are developing for IBM’s Academic Initiative. It is a bit of a smorgasboard, and each of these modules could easily be its own course.
  • ORMS = Operations Research and Management Science
  • This is a proposal by North Carolina State University to develop a services track for their MBA program. It is being developed in consultation with IBM, and was inspired by SSME. They are also incorporating several of these courses in a cross-school masters degree in computer networking --- adding a service component to create more marketable skill set.
  • Others agree. Prof. Henry Chesbrough has written about a new science of services, and Harvard Business Review has included this in its annual roundup of breakthrough ideas, which appeared in their Feb issue. _________________________________________________________________________________
  • We created a service science reading list, that provides an good introduction to services for would-be service scientist. IBM is increasingly working with universities, governments, and other businesses, including our competitors in services, to work together towards more emphasis on developing systematic approaches to service innovation. We invite others to join with us in drawing attention to this need, especially as it relates to improving global development. IBM recently hosted a series of events around the world to create a Global Innovation Outlook (www.ibm.com/gio) with stakeholders in government, healthcare, and those concerned with work/life balance. _________________________________________________________________________________ References - Agar, Michael (2004) An Anthropological Problem, A Complex System. Human Organization. Vol. 63. No. 4. 2004. Pp. 411-418. Arthur, W. Brian (1996) Increasing returns and the new world of business. Harvard Business Review . 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Institute for the Future. Menlo Park, CA. URL: http://www.iftf.org - Engelbart, Douglas C. (1963) A Conceptual Framework for the Augmentation of Man's Intellect. by Douglas C. Engelbart, "Vistas in Information Handling," Howerton and Weeks [Ed.], Spartan Books, Washington, D. C., 1963, pp. 1-29 (AUGMENT,133183,). Republished with articles No. 6, 21, and. 23 below in "Computer Supported Cooperative Work: A Book of Readings," Irene Greif [Ed.], Morgan Kaufmann Publishers, Inc., San Mateo, CA, 1988, pp. 35-65. Also republished in "Organization and Groupware," T. Nishigaki [Ed.], NTT Publishing, 1992. - Engelbrecht, Hans-Jurgen (1997) A comparison and critical assessment of Porat and Rubin’s information economy and Wallis and North’s transaction sector . Information Economics and Policy. 9(4). Pages 271-290. December. - Fitzsimmons, James A. and Mona J. Fitzsimmons (2001) Service management: Operations, strategy, and information technology. Third edition. 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  • Source Robert Hunt, Philadelphia Federal Reserve Bank
  • Problem is that academic silos (schools of social science, schools of management, schools of engineering) create specialists that then have to learn a common language to collaborate to do excellent service innovation – service innovation often requires an integration of technology, business, organizational-social, and demand innovations. We see the need for speaking a common language across discipline boundaries in our own service business at IBM – where in order to sell a client a technology capability, the client demands to understand the return on investment business case, the organizational change case to deploy the new capabilities and reengineered business process, as well as increasingly being preferring innovations that grow revenues (increase their client demands) over incremental efficiency improvements. _________________________________________________________________________________
  • However all the definitions share a common underlying concept… pay for performance in which client and provider coproduce value. The performance can range from high talent performance to high tech performance, but the notion of coproduction of value is always present. For example, a student does not get the benefit of the service, unless they do the studying that the teacher assigns And, a patient does not get the benefit of the service, unless they do the exercise, diet, medications that the doctor assigns And, a business does not get the benefit of the service, unless they do the reorganizations, training, adoption of new processes that the business consultant recommends. _________________________________________________________________________________
  • One of the challenges in understanding service innovation, employment, and export opportunities – is the sheer diversity of the service sector. From government & security, health & education, financial & insurance, professional & business, information & communication, retail & wholesale, leisure & hospitality, and transportation & utilities - are there any unifying principles that cut across services? -------------------------------- High skill = worker responsible for own performance; difficulty of learning, difficulty of positioning to be considered for small number of opportunities Semi-autonomous = usually firm or organization specific skills, bureaucratic incentives (pay, promotion) Unrationalized labor intensive = low wages, work not yet susceptible to machine pacing or quality monitoring Tightly constrained = narrowly defined, undemanding in terms of skills, production paced by machine, customer, or flow of work
  • Herzenberg at al (1998) confirmed that about 70% of US jobs from 1979 to 1996 were high-skill autonomous and semi-autonomous jobs, and most of the growth was in the high skill area. One way to think about this is to note that about 95% of all business executives and research scientists that have every lived are alive today. --------------------------- Stephen A. Herzenberg, John A. Alic, Howard Wial (1998) New rules for a new economy. Employment and opportunity in postindustrial America. Cornell University Press.
  • More recently, the US Bureau of Labor Statistics (2005) has projected that professional and business services will be the fastest growing area for jobs in the US until about 2014. ----- US Bureau of Labor Statistics (2005) URL: http://www.bls.gov/opub/ooq/2005/winter/art03.pdf
  • This chart by Uday Karmarkar does a nice job of visualizing the fastest growing section of the US economy, which is information services. _________________________________________________________________________________ Breakdown of the four quadrants in the US economy And this does not even count the informational part of the material manufacturing and service sectors! Plus: the employment figures are even more slanted towards the information and service components The biggest sector is Information Services sector More to the point, this is the way all developed economies will look in the future . How does ICT affect all these sectors? Different, but some common basic economic drivers
  • As more of the economies of the world shift into services, more of their R&D expenditures can be seen as growth in service sector R&D. --------------------------------------------------------------- http://office.itep.re.kr/upload/english/ publication/1-4Jerry_ sheehan _OECD. ppt Slide 8 From: Government Support to Business R&D: Policies, Programmes and Challenges for Evaluation Jerry Sheehan OECD Science & Technology Policy Division International Symposium on National Research and Development Evaluation - Strategy and its Impact on Government R&D Investment Seoul, 20 October 2004
  • However, there is evidence that R&D in services is less closely linked to service sector innovation – a better understanding of how to link R&D investment to systematic service innovation that delivers business results is needed. --------------------------------- http://office.itep.re.kr/upload/english/ publication/1-4Jerry_ sheehan _OECD. ppt Slide 8 From: Government Support to Business R&D: Policies, Programmes and Challenges for Evaluation Jerry Sheehan OECD Science & Technology Policy Division International Symposium on National Research and Development Evaluation - Strategy and its Impact on Government R&D Investment Seoul, 20 October 2004
  • And finally – innovation policy has been slow to adapt to the needs of the service sector… even though the service sector accounts for a growing share of the output and employment in OECD economies. www.wb-infokiosk.org/bp.php?url=http:/ /www. oecd wash.org/PDFILES%2Fsti_outlook2004_wash.pdf
  • Sources: Jobs - http://www.bls.gov/news.release/ecopro.t01.htm GDP - http://www.bea.gov/bea/industry/gpotables/gpo_action.cfm?anon=40580&table_id=2920&format_type=0 CAGR - http://www.investopedia.com/calculator/CAGR.aspx Nations – http://www.nationmaster.com IT Spend by Industry – Gartner IT Spend by Industry Report (December 2003) Gartner: $2.1T is the WW IT Spend from Gartner Dataquest Industry Practice IT spending report for hardware, software, internal services, external services, telecommunication equipment and telcom services in the verical market IT spending report, based on spending across 14 vertical markets, 43 sub-vertical markets, seven regions, and 40 countries. Thus, the Gartner number of $2.1T includes spending as part of the full $40T WW GDP, not just the spending in the $19.6T SG&A portion of the WW GDP. I will include a column for BPTS portion of IT spend ($1.4T, that is 2/3 of the overall number) and a column for non-BPTS portion of IT spend ($0.7T, this is 1/3 of the overall number) -- this will be an estimate across all industries.
  • Sources: A sampling of the emergence of academic programs on the practice and theory of services businesses: 1980-1984 1984 Wharton, UPenn, USA 1984 Arizona State University 1985-1989 1989 UT Austin, TX, USA 1990-1994 1991 Warwick Business School, UK 1993 Cornell University, USA 1995-1999 1995 Brigham Young University, Utah 1996 London School of Business, UK 1997 U. of Auckland, New Zealand 1998 Rio de Janeiro, Brazil 1998 Nanyang Polytechnic, Singapore 1999 University of Karlstad, Sweden 2000-2002 2000 Cranfield School of Management, UK 2000 Service Engineering, Technion, Israel 2001 University of Maryland, USA 2001 Emory University, Atlanta, GA, USA 2002 University of Calgary, Canada 2002 Service Management, Hanken, Finland 2002 Nankai University, PR China 2003-2004 2003 University of Buckingham, UK 2003 CSU, Northridge,USA 2003 University of Calgary, Canada 2004 U. Western Ontario, Canada 2004 San Jose State University, CA USA 2004 City Univesity of Hong Kong 2004 DePaul University, USA
  • IBM used to sell products and service them for free …

Spohrer and Maglio Yorktown 20061020 v2 Spohrer and Maglio Yorktown 20061020 v2 Presentation Transcript

  • Service Science, Management, and Engineering (SSME): An Emerging Multidiscipline Jim Spohrer Paul Maglio Almaden Services Research (ASR) Title slide
  • Thanks
    • Wendy Murphy
    • Liba Svobodova
    • Kazuyoshi Hidaka
    • Hong CAI
    • Claudio Pinhanez
    • Doug Riecken
    • Dan Connors
    • Iris Ginzburg
    • Guruduth S Banavar
    • Corrina Shulze
    • Dianne Fodell
    • Sharon McFadden
    • Lilian S Wu
    • Diem Ho
    • J Michael Loughran
    • Sara Delekta Galligan
    • ASR team
    • And many more…
    • Nick Donofrio
    • Paul Horn
    • Irving Wladawsky-Berger
    • Stu Feldman
    • Robert Morris
    • Thomas Li
    • Mark Dean
    • Benda Dietrich
    • Manoj Kumar
    • Gina Poole
    • Susan Tuttle
    • Taffy Kingscott
    • Ed Bevan
    • Greg Golden
    • George Pohle
    • Alan Yamamoto
    • And many more…
    • Paul F Van Droogenbroeck
    • Jyrki Koskinen
    • Erwin Jung
    • Dirk Siegel
    • Anja Kremer
    • Pini Burtman
    • Carla Milan
    • Will Peachey
    • Katerina Frolovicheva
    • Attila Suhajda
    • Jeongtae Nam
    • Andre Braga/Brazil/IBM
    • Edgar Polanco Gomez
    • Matt Berry
    • And many more…
  • Phase I: “Call to Action” (2004-2006) “The SSME Palisades event was the biggest and most diverse gathering ever in support of service education.” – Roland Rust, U. Maryland (Oct. 15, 2006)
  • SSME is an emerging multidiscipline (frontier field) “ Need I-shaped, T-shaped, π -shaped people… “ – Stuart Feldman (Oct. 6, 2006) Business and Management Science and Engineering Economics and Social Sciences Math and Operations Research Computer Science & Info. Systems Industrial and Systems Engineering Business Anthropology Organizational Change & Learning
  • More T-shaped People to work in, study, and innovate service systems Social Science (People) Management (Business) Engineering (Technology)
  • SSME : Growing Body of Knowledge about Service Economics and Social Science Management Engineering Smith 100% 75% 50% 25% Marx Clark Percentage of labor force in service sector: US (blue) and World (green) Argyris Glushko Alter Bryson et al Milgrom & Roberts Jaikumar & Bohn March & Simon Lusch & Vargo Berry (1999), Teboul (2006) Fisk, Grove, & John (2000) .Davis Fitzsimmons & Fitzsimmons (2001) Grönroos (2000), Sampson (2000) Hoffman & Bateson (2002) Lovelock & Wright  (2001) Zeithaml & Bitner (2003) Hesket, Sasser, & Hart, Rust, Ramirez Pine & Gilmore, Schneider, Chase Murmann, Seabright, Latour, Sen Cohen & Zysman, Triplett & Bosworth, Abbott, Baumol, Hill, Gadrey & Gallouj Sterman Ganz, Weinhardt, Rouse Tiene & Berg, Carley Herzenberg, Alic&Wial Taylor Deming Bastiat 2000 1950 1900 1850 1800 1750
  • Communications of the ACM, July 2006
  •  
  • Textbooks
    • Berry (1999)
    • Chase, Jacobs, Aquilano
    • Davis
    • Fisk, Grove, & John (2000)
    • Fitzsimmons & Fitzsimmons (2001)
    • Grönroos (2000)
    • Hoffman & Bateson (2002)
    • Lovelock & Wright  (2001)
    • Sampson (2000)
    • Teboul (2006)
    • Zeithaml & Bitner (2003)
    Service Management: Operations, Strategy, and Information Technologies by James Fitzsimmons and Mona Fitzsimmons
  • Journal and Conference
  • 2007 October 4 - 7 At San Francisco’s Westin St Francis 16 th Annual AMA Frontiers in Service Conference
  • On what foundational logic, could we build a science of service?
    • Defines service as the application of competencies for the benefit of another entity and sees mutual service provision, rather than the exchange of goods, as the foundational logic
    • This new paradigm is service-oriented, customer-oriented, relationship-focused, and knowledge-based
    The Service-Dominant Logic of Marketing: Dialog, Debate, and Directions by Robert F. Lusch and Stephen L. Vargo
  • On what theory of economics, could we build a science of service?
    • Firms: Viewed as historically situated combiners of heterogeneous and imperfectly mobile resources under conditions of imperfect and costly to obtain information, towards the primary objective of superior financial performance.
    • Resources: Viewed as tangible and intangible entities available to the firm that enable it to produce efficiently and/or effectively a market offering that has value for some market segment(s).
    A General Theory of Competition : Resources, Competences, Productivity, Economic Growth (Marketing for a New Century) by Shelby D. (Dean) Hunt
  • How do new professions arise?
    • In The System of Professions Andrew Abbott explores central questions about the role of professions in modern life: Why should there be occupational groups controlling expert knowledge? Where and why did groups such as law and medicine achieve their power? Will professionalism spread throughout the occupational world? While most inquiries in this field study one profession at a time, Abbott here considers the system of professions as a whole. Through comparative and historical study of the professions in nineteenth- and twentieth-century England, France, and America, Abbott builds a general theory of how and why professionals evolve.
    The System of Professions: An Essay on the Division of Expert Labor by Andrew Abbott
  • How do new professions and new disciplines coevolve with government institutions?
    • Emergence of German dye industry, German mid-19 th Century
    • Emergence of chemistry as an academic discipline
    • Emergence of patent protection in the new area of chemical processes and formula
    • Emergence of new relationships connecting firms, academic institutions, government agencies, and clients
    • Demonstrates needed coevolution of firms, technology, and national institutions
    • Took England and US over 70 years to catch up!!!
    Knowledge and Competitive Advantage : The Coevolution of Firms, Technology, and National Institutions by Johann Peter Murmann
  • How does the service economy and the innovation economy relate?
    • “… modern economies are both service economies and economies of innovation. Paradoxically, they are not regarded as economies of innovation in services, that is as economies in which service firms' innovation efforts are proportional to their contribution from the major economic aggregates. It is as if service and innovation were two parallel universes that coexist in blissful ignorance of each other.”
    • Gallouj, F. (2002). Innovation in the Service Economy: The New Wealth of Nations. Cheltenham UK: Edward Elgar.
    Productivity, Innovation and Knowledge in Services by Jean Gadrey and Faiz Gallouj
  • Why is SSME so important? Top Ten Nations by Labor Force Size (about 50% of world labor in just 10 nations) A = Agriculture , G = Goods , S = Services >50% (S) services, >33% (S) services 2004 2004 United States The largest labor force migration in human history is underway, driven by global communications, business and technology growth, urbanization and low cost labor. (A) Agriculture: Value from harvesting nature (G) Goods: Value from making products (S) Services: Value from enhancing the capabilities of things (customizing, distributing, etc.) and interactions between things Because the world is becoming a service system. 44 64 33 3 1.4 Germany 30 26 11 63 2.2 Banglad. 30 20 10 70 2.2 Nigeria 40 70 25 5 2.4 Japan 38 65 23 12 2.5 Russia 20 53 24 23 3.0 Brazil 35 39 16 45 3.9 Indonesia 21 70 27 3 4.8 U.S. 28 23 17 60 17.0 India 191 35 15 50 21.0 China 25 yr % delta S % S % G % A % WW Labor Nation
  • Why does IBM care? Our ability to hire needed talent and innovate Now IBM is working with academics and government to establish Service Science Need to hire Computer Scientists Need to hire Service Scientists PhD’s & Masters in U.S. IGS and IBM Research IBM played a role in establishing Computer Science Philosophers (Boolean Logic) Mathematicians Electrical Engineers Physicists Computer Science
  • Berkeley SSME Certificate Program http://ssme.berkeley.edu/
  • NCSU SSME Curriculum for MBA http://www.mgt.ncsu.edu/news/2006/mba_ssme.php
  • Service Science at ASU http://wpcarey.asu.edu/csl/
  • http://www.nytimes.com/2006/04/18/business/18services.html
  • Phase II: “The Science” (2007-2009) “ People-Oriented, Services-Intensive, Market-Facing Complex Systems – complex systems and services – are very similar areas around which we are framing the very complicated problems of business and societal systems that we are trying to understand.” – Irving Wladawsky-Berger (Oct. 9, 2006)
  • Many disciplines study some aspect of service systems
    • Operations Research and Industrial Engineering
      • But need more realistic models of people
    • Computer Science and Electrical Engineering
      • But need software and systems that adaptively change with business strategy
    • Economics and Business Strategy
      • But need better models of scaling and innovation
    • Law and Political Economy
      • But need better models of innovation (is passing a law innovation?)
    • Complex Systems and Systems Engineering
      • But need better models of robustness and fragility (sustainability)
    • Service systems are value coproduction configurations of people, technology, internal and external service systems (connected by value propositions), and shared information (language, laws, measures, models, etc.)
      • Examples: People, families, cities, businesses, nations, global economy, etc.
  • What is science?
    • Data – the language of nature (empirical framework) – this is what academics want!
    • Model – measurable quantities and relationships (theoretical framework)
    • Analytics – fit data to model, explain variance (analytical framework)
    • Take Action – interact with world and iterate (engineering and design frameworks)
      • Can we create Computer-Aided Design (CAD) for service systems?
  • Under what conditions do value propositions exist between service systems to justify service for service exchanges?
    • Case 1 – complementary superior performance
      • Costs
      • A = 1 4, B = 3 2
      • Self Service
      • A: 10 + 40 = 50
      • B: 30 + 20 = 50
      • Over produce best by one and exchange
      • A: 11 + 36 = 47
      • B: 27 + 22 = 49
    • Case 2 – one with strictly superior performance, namely A
      • Costs
      • A = 1 2, B = 4 3
      • Self Service
      • A: 10 + 20 = 30
      • B: 40 + 30 = 70
      • Over produce best by one and exchange
      • A: 11 + 18 = 29
      • B: 36 + 33 = 69
    • Assume service system A and B (imagine two people, family-clans, cities, nations, or businesses) each produce two same kinds of service, each have demand for ten performances of the services each day, and each have different costs of producing the services for self-service consumption
    • Surprisingly, in Case 2, it still makes sense to exchange service for service as well!
    • Of course, this ignores transaction costs associated with the exchange…
    • What happens when the cost decreases with experience/learning/innovations?
    • What about trading the skill to perform a service, rather than simply performances?
  • Under what conditions are compliance laws innovative in a service system of selfish optimizers?
    • Pigou’s Example
      • A population of commuters must drive from point A to point B. There are two roads. The first road always takes one hour. The second road takes time proportional to the amount of traffic (all = 1). If everyone takes the second road, the time is one hour. All drivers take the second road, it is never worse than one hour, and maybe better.
    • Braess’s Paradox
      • Two roads with composed of two parts. First road has constant one hour plus one hour max if congested. Second road has one hour max if congested plus one hour. Traffic splits so everyone gets from point A to point B in 90 minutes. However, by adding a zero cost interchange connecting the two midpoints, now everyone takes the two connected congested routes, and now every takes 120 minutes!
    A B C(x) = 1 C(x) = x A law that mandates odd and even license plates take different routes on different days, if backed up with sampling and tickets/fines, could yield better results.
  • Baumol and Oulton – R&D Services (Primus Inter Parus)
    • Circa 1960: Imagine an economy with two sectors (manufacturing and services). Technology for labor substitutions increase productivity at a steady pace in the “progressive” sector, and the “stagnant” or “asymptotically stagnant” sector absorbs the labor from the other.
    • Circa 2002: Now imagine that the asymptotically stagnant sector is R&D (primus inter parus). Oulton (Bank of England) suggests that R&D which produces information is not a final result, but is actually input to the progressive sector. So as long as R&D productivity gains are slightly positive, the economy as a whole does not stagnate!
      • Let, y i = the output of sector I, Li = the primary input quantity used by sector I, where L 1 + L 2 = L (constant), Pi = the price of the sector’s output, G i = the growth rate of the productivity of the primary input used directly by sector I (with 0 < G 1 < G 2 , so that sector 1 is the relatively stagnant sector, w primary input price
      • Y 1 = F 1 (L 1 , t), Y 2 = F 2 (y 1 , L 2 , t)
    • Data (Fano): In US, between 1921 and 1938 industrial research personnel rose by 300%. Laboratories rose from fewer than 300 in 1920 to over 1600 in 1931, and more than 2,200 in 1938.
  • If time permits…
    • Call centers as exemplar service systems
      • Balance productivity and quality
      • Balance compliance and innovation
    • Service innovation, beyond cost cutting (e.g., global sourcing, automation)
      • How to grow when markets don’t
      • Blue ocean strategies
    • Simple service system ecology simulator
      • Measures up, same, down, indeterminate
      • Population of measurement makers and users
      • Examples prices, salaries, success rates, etc.
  • How will we know when we have succeeded?
    • A textbook that is used in service science and complex systems courses around the world
      • Data from variety of service systems (e.g., call center), models, analytics, action research plans and case studies of service systems
    • Payoff in business and societal results (better measurement systems, models of business-clients-competitors, and theory of value proposition evolution between service systems)
    • Perhaps even a Moore’s like law or investment road map for predictable service system capability growth (we’ve even had a few people starting to propose some)
  • REST IS BACKUP Contact Jim Spohrer ( [email_address] ) Paul Maglio ( [email_address] ) Wendy Murphy ( [email_address] )
  • But what about service innovation?
    • What is service innovation?
      • Increase margins of delivering existing service offerings – cut costs
      • Create new kinds of high value service offerings – grow revenue
      • Improve skilled labor productivity in creating and delivering service…
      • But how to do these things?
      • We can hire physicists and computer scientist to innovate
      • But who do you hire to do service innovation?
    • Easy to name technology innovations
    • Bit harder, but can name business innovations
    • What about social-organizational innovation?
    • How about client-driven demand innovation?
    • What should a service scientist learn to know these things?
  • IBM Perspective on Services: Business & IT Strategic Outsourcing & IT Hardware, Software & Services Application Management Business Transformation Outsourcing Business Consulting Services & Project-based Systems Integration 2003: 50 of 3000 of 320,000 2006: 550 of 3200 of 340,000
  • 2007 Services Area Strategies 1. Business Value 2. Services Software Engineering 3. Services Management and Products 5. Services Information For C&SI, BTO Applications Primarily for AS For ITD, SO/BTO Delivery, SPLs 4. Services Optimization SSME – Service Science, Management and Engineering
  • What would service scientists actually do?
    • Service scientist own the body of knowledge around service system problem solving
    • Service scientists identify a service system that needs improvement
    • Service scientists identify the stakeholders their concerns and perceived opportunities
    • Service scientists envision augmentations (additional new service systems) or reconfigurations (of old service systems components) that best address all problems and opportunities
      • Identify year-over-year improvement trajectories
      • Identify incentives to change (ROI, leadership, laws)
  • Example: Are there “scale laws” of service innovation – year-over-year compounding effects?
    • Problems
      • Input: Student quality
      • Process: Faculty motivation
      • Output: Industry fit
    • Augmentations
      • A: - 20% eLearning certification
      • B. +10% Faculty interest tuning
      • C. +10% On-the-job skills tuning
    Year 1: 20% Year 2: 20% Year 3: 20% Year N: 20% . . . . . . . . After a decade the course may look quite different Service systems are learning systems: productivity, quality, etc.
  • Herb Simon: “The first service scientist?”
    • “Herbert Simon (1916-2001), in the course of a long and distinguished career in the social and behavioral sciences, made lasting contributions to many disciplines, including economics, psychology, computer science, and artificial intelligence. In 1978 he was awarded the Nobel Prize in economics for his research into the decision-making process within economic organizations. His well-known book The Sciences of the Artificial addresses the implications of the decision-making and problem-solving processes for the social sciences. “
    Models of a Man : Essays in Memory of Herbert A. Simon by Mie Augier (Editor), James G. March (Editor)
  • National Academy of Engineering, 2003
    • “ The studies suggest that services industries represent a significant source of opportunity for university-industry interaction. Services account for more than 80 percent of the U.S. gross domestic product, employ a large and growing share of the science and engineering workforce, and are the primary users of information technology. In most manufacturing industries, service functions (such as logistics, distribution, and customer service) are now leading areas of competitive advantage. Innovation and increased productivity in the services infrastructure (e.g., finance, transportation, communication, health care) have an enormous impact on productivity and performance in all other segments of the economy. Nevertheless, the academic research enterprise has not focused on or been organized to meet the needs of service businesses. Major challenges to services industries that could be taken up by universities include: (1) the adaptation and application of systems and industrial engineering concepts, methodologies, and quality-control processes to service functions and businesses; (2) the integration of technological research and social science, management, and policy research; and the (3) the education and training of engineering and science graduates prepared to deal with management, policy, and social issues.”
    • From &quot;The Impact of Academic Research on Industrial Performance“ (ttp://newton.nap.edu/catalog/10805.html)
  • Smith: Unproductive Labour, Division of Labour
    • “ That work consists in services which perish generally in the very instant of their performance, and does not fix or realize itself in any vendible commodity which can replace the value of their wages and maintenance... It is upon this account that, in the chapter in which I treat of productive and unproductive labour …”
    • “ This great increase of the quantity of work which, in consequence of the division of labour, the same number of people are capable of performing , is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many. “
    An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith
  • Karl Marx: Productive Forces, Social and Technical Relations
    • “… maintained at the expense of the whole community.” (judge, police, tax-gatherer, religious services, schoolmaster, barber, washerman)
    • Marxian thought rests on the fundamental assumption that it is human nature to transform nature, and he calls this process of transformation &quot;labour &quot; and the capacity to transform nature “labour power.”
    • A mode of production is a specific combination of:
      • * productive forces: these include human labor power, tools, equipment, buildings and technologies, materials, and improved land
      • * social and technical relations of production: these include the property, power and control relations governing society's productive assets, often codified in law, cooperative work relations and forms of association, relations between people and the objects of their work, and the relations between social classes.
    Das Kapital (Capital: The process of the production of capital) by Karl Marx
  • Colin Clark saw the growth of services…
    • National Accounting and Services : “It was an outstanding error on Adam Smith’s part to attempt to exclude services from his definition of real national product. This exclusion… persisted in the Soviet definition of national income until Stalin’s recent pronouncement (October 1952).” (p 6)
    • Demand Innovation : “…we may judge the success of an economic system, as an economic system, by the extent to which it enables men to satisfy (without contravention of morality) their desires. It follows logically from this that we must ask ourselves: are we doing any good in laboring to provide a greater abundance of goods and services, if in the course of so doing we cause man’s desire to increase (whether directly through advertising or indirectly as a result of the general restlessness and competitiveness of the world in which they live) faster than the means of satisfying them; which is apparently what we have done in most modern communities.” (p5)
    The Conditions of Economic Progress by Colin Clark (1940, 1947, 1957 editions)
  • How did the service economy come to be? Estimations based on Porat, M. (1977) Info Economy: Definitions and Measurement Estimated world (pre-1800) and then U.S. Labor Percentages by Sector The Pursuit of Organizational Intelligence , by James G. March Exploitation vs exploration The Origin of Wealth by Eric D. Beinhocker
  • What economic variables matter in service systems?
    • Evolution of Trust: Human beings are the only species in nature to have developed an elaborate division of labor between strangers. Even something as simple as buying a shirt depends on an astonishing web of interaction and organization that spans the world. But unlike that other uniquely human attribute, language, our ability to cooperate with strangers did not evolve gradually through our prehistory. Only 10,000 years ago--a blink of an eye in evolutionary time--humans hunted in bands, were intensely suspicious of strangers, and fought those whom they could not flee. Yet since the dawn of agriculture we have refined the division of labor to the point where, today, we live and work amid strangers and depend upon millions more. Every time we travel by rail or air we entrust our lives to individuals we do not know. What institutions have made this possible?
    The Company of Strangers : A Natural History of Economic Life by Paul Seabright
  • How do service economies grow?
    • Production is measure of results or “goals achieved”
      • Production per capita (Y) as a function of output per worker (L) and capital assets per worker (K) and technology investment per worker (I)
      • Investment drives technology progress and improves the efficiency of labor; accumulates over time as capital assets
      • Today: Six billion people (L) with the capital assets created by one hundred billion people throughout history (K) and innovation investments (I) to increase efficiency of L, K, and I
    • Innovation impact will be realized in terms of…
      • More workers (L): Healthy – healthcare services
      • More capital assets (K): Wealthy – financial services, retail services, transportation services
      • More technology investment (I): Wise – education, information, financial services
    Growth Theory: An Exposition by Robert M. Solow
  • How do service economies grow? Developing nations that invest in government services, health and education services, financial and business services, transportation services, utility services, communication services, and wholesale and retail services (growth of their service economy) create large populations of service labor – removing “un-freedoms” of un-healthy, un-educated, un-safe, un-employed, etc. (see Amartya Sen, “Development as Freedom”) Financial & information Professional & business Government & Police Education & healthcare Leisure & hospitality Wholesale & retail Transportation & warehousing Utilities & communication Development as Freedom by Amartya Sen 1998 Nobel Prize Winner Economics Source: Dorothy I. Riddle (1986) Service-Led Growth. Praeger, NY Business Services Public Administration Extractive Sector Manufacturing Sector Infrastructure Services Trade Services Social/personal Services Consumer
  • Does geography matter in service system evolution?
    • People, organizations, technologies
    • Space/Geography in the economics of services
    • Consumer power in services: Client demand
    • Dynamics of knowledge value
    • Unifying themes across all service sectors
    Service Worlds: People, Organisations, Technologies by John R. Bryson , Peter W. Daniels , Barney Warf Also, see “Age of Services” By James Teboul
  • What comes after the service economy? Based on (Pine & Gilmore, 1999), Table 9-1, pg 170. The Experience Economy by B. Joseph Pine II, James H. Gilmore Capabilities (Cultural Values) Sensations Benefits Features Characteristics Factors of Demand Collaborator Guest Client Customer Market Buyer Collaborator Stager Provider Manufacturer Trader Seller Sustained over time Reveal over duration Delivered On Demand Inventory of product Stored in Bulk Method of Supply Value growth relationship Personal Custom Standard Natural Key Attribute Effectual Memorable Intangible Tangible Fungible Nature of Offering Co-create value growth Stage Deliver Make Extract Economic Function Transformation Experience Service Industrial Agrarian Economy Business Services++ Consumer Services++ Commodity Services Packaged Goods Commodity Goods Economic Offering
  • How does one measure productivity in a service economy?
    • The services industries—which include jobs ranging from flipping hamburgers to providing investment advice—can no longer be characterized, as they have in the past, as a stagnant sector marked by low productivity growth.
    • They have emerged as one of the most dynamic and innovative segments of the U.S. economy, now accounting for more than three-quarters of gross domestic product. During the 1990s, 19 million additional jobs were created in this sector, while growth was stagnant in the goods-producing sector.
    • They highlight the importance of making improvements within the U.S. statistical system to provide the more accurate and relevant measures essential for analyzing productivity and economic growth.
    Source: Amazon.com book review Productivity in the U.S. Service Sector by Jack E. Triplett and Barry Bosworth
  • Does manufacturing matter in a service economy?
    • “In today’s sophisticated technological environments, high-tech services are inextricably linked to mastery and control of manufacturing. Lose manufacturing, and you will lose your competitive edge high-tech capabilities, as well as much”
    • Upstream services help producers of products/technology
      • Typically shift to production locations
    • Downstream services help consumers of products/technology
      • Typically shift to consumer locations
    Manufacturing Matters: The Myth of the Post-Industrial Economy (1987) by Stephen S. Cohen and John Zysman
  • Four worlds of services jobs, upstream and downstream for… enable develop enable transform design operate & maintain create utilize Industrial services Information services Business services Consumer services Non-market services People Business Products Information
  • Definition of services (based on Gadrey, 2002)
    • A. Service Provider
    • Individual
    • Organization
    • Technology that
    • A is responsible for
    • C. Service Target: The reality to be
    • transformed or operated on by A,
    • for the sake of B
    • People, dimensions of
    • Business, dimensions of
    • Products, technology artifacts & env.
    • Information, codified knowledge
    • B. Service Client
    • Individual
    • Organization
    • Portion of reality owned by B
    Forms of Service Relationship Forms of Ownership Relationship (B on C) (A & B coproduce value) Forms of Responsibility Relationship (A on C) Forms of Service Interventions (A on C, B on C)
  • How do service systems improve over time?
    • Arguris: Double loop learning: Double loop learning questions the governing variables of a systems
    • Governing variables: Those dimensions that people are trying to keep within acceptable limits. Any action is likely to impact upon a number of such variables – thus any situation can trigger a trade-off among governing variables.
    • Action strategies: The moves and plans used by people to keep their governing values within the acceptable range.
    • Consequences: What happens as a result of an action. These can be both intended - those actor believe will result - and unintended. In addition those consequences can be for the self, and/or for others.
    On Organizational Learning by Chris Argyris
  • Hoe can one manage service system trade-offs? Service Breakthroughs: Changing the rules of the game by James L. Heskett, W. Earl Sasser, Christopher W.L. Hart
    • From managing trade-offs (old) to creating self-reinforcing service cycle relationships (new)
    • Key measures
      • Quality of service (customer satisfaction) = service quality delivered – service expected
      • Value to customer = quality of service (results & process) / (price + acquisition costs)
      • Profit leverage = value to customer – cost to provider
      • Profitability to provider = margin x repeat usage / investment
    customer provider Increased Trials Increased Referrals Increased Repeat Usage Lower Perceived Risk Lower Acquisition Costs Increased Service Quality Improved Results from Service Greater Conformance with Expectations Increased Value Increased Volume Lower Cost of Service Increased Margins Greater Pricing Latitude Greater Investment Options in Service Results and Quality Development of Customer-Oriented Policy Investment in Technology Service Delivery Investment in Human Resources Investment in Marketing Higher Server Motivation Higher Server Satisfaction
  • Can a business be viewed as a service system?
    • “First, and most fundamentally, organizations and business strategy can be as important as technology, cost, and demand in determining a firm's success.”
    • “The study of organization is not about how berries are arranged on a tree of authority, but about how people are coordinated and motivated to get things done.”
    • “We study coordination: what needs to be coordinated, how coordination is achieved in markets and inside firms, what the alternatives are to close coordination between units, and how the pieces of the system fit together. We also study incentives and motivation: what needs to be motivated, why incentives are needed, and how they are provided by markets and firms, what alternative kinds of incentive systems are possible, and what needs to be done to make incentive systems effective.&quot;
    Economics, Organization and Management by Paul Milgrom , John Roberts
  • What can be learned from the evolution of manufacturing?
    • Process control is the coordination of machines, human labor, and the organization of work to effect the manufacture of a product.
    • Six epochs of manufacturing process control can be delineated:
      • Craft System (circa 1500)
      • English System of Manufacture (circa 1800)
      • American System of Manufacture (circa 1830)
      • Taylor System (circa 1900)
      • Statistical Process Control (circa 1950)
      • Numerical Control (circa 1965)
      • Computer Integrated Manufacturing (circa 1985)
    From Filing and Fitting to Flexible Manufacturing: A Study in the Evolution of Process Control by Roger Bohn and Ramchandran Jaikumar                           
  • Does Service System = Socio-technical System = Economic System = Work Systems Design and Evolution?
    • The Work Systems Method to organizations: * Recognizing that systems involve much more than IT * Describing and understanding systems from a business viewpoint * Analyzing and improving systems * Improving communication between business and IT professionals * Increasing the likelihood of successful implementation * Understanding the role and limitations of IT
    The Work System Method: Connecting People, Processes, and IT for Business Results by Steven Alter
  • How does technology matter in designing new web services?
    • Document Engineering: A new synthetic discipline
      • With roots in Information and Systems Analysis (Data Analysis), Electronic Publishing (Document Analysis), Organization Science (Business Process Analysis), Business Informatics (Transaction Analysis), User-Center Design (Task Analysis)
      • Design of Documents and Business Processes
      • Design of Web Services and Service Oriented Architectures
    • Related to Business Informatics– “combine the modern theory, methods, and techniques of business (i.e., organization science) and informatics (information and computing science) into one integrative programme.” (definition from Utrecht University)
    Document Engineering : Analyzing and Designing Documents for Business Informatics and Web Services by Robert J. Glushko , Tim McGrath
  • How can we formally model service systems?
    • “Accelerating economic, technological, social, and environmental change challenge managers and policy makers to learn at increasing rates, while at the same time the complexity of the systems in which we live are growing. Many of the problems we now face arise from unanticipated side effects of our own past actions.”
    • Dynamic complexity arises because systems are:
      • Dynamic, tightly coupled, governed by feedback, nonlinear, history dependent, self organizing, adaptive, counterintuitive, policy resistant, and characterized by trade-offs
    • How rapid is the change and are there any patterns in how humans deal with complexity… how do people invest their time?
    Business Dynamics: Systems Thinking and Modeling for a Complex World by John Sterman                     
  • Example Model: Oliva & Sterman (2001) Quality Erosion in Service Industry
  • Introduction to SSME
    • What is SSME?
    • Why is SSME so important?
    • Why does IBM care?
    • Who else cares?
    • What kinds of skills should a service scientist have?
    • What kinds of tools should a service scientist have?
    • What does a service scientist actually do?
    • Are there “scale laws” of service innovation?
    • Questions?
  • What is SSME? (Services Sciences, Management, and Engineering)
    • An urgent “call to action”
      • To become more systematic about innovation in services
      • Complements product and process innovation methods
      • To develop “a science of services”
    • A proposed academic discipline
      • Draws on many existing disciplines
      • Aims to integrate them into a new specialty
    • A proposed research area
      • Service systems are designed (computer systems)
      • Service systems evolve (linguistic and social systems)
      • Service systems have scale-emergent properties (economic systems)
  • What is SSME? (Services Sciences, Management, and Engineering)
    • The application of scientific, management, and engineering disciplines to tasks that one organization beneficially performs for and with another (‘services’)
      • Understand the evolution and design of service systems
      • Service systems are value coproduction configurations of people, technology, organizations, and shared information, such as physical, mathematical, and national laws
      • Make productivity, quality, compliance, sustainability, and innovation rates more predictable
      • Invest in service systems to make them into double-loop learning systems
    • Science is a way to create knowledge
    • Engineering is a way to apply knowledge and create new value
    • Management improves the process of creating and capturing value
  • Why is SSME so important?
    • Governments need to make service innovation a priority
      • GDP growth of nations increasingly depends on it
    • Businesses need to make service innovation a priority
      • Revenue and profit growth increasingly depend on it
    • Academics need to make service innovation a priority
      • Students’ futures depend on it
      • Improved education productivity and quality depends on it
      • New frontier of research with business and societal impact
  • IBM’s SSME Course Materials http://www.almaden.ibm.com/asr/SSME/coursematerials/
  • Recent Meeting on Education for Service Innovation http://www.almaden.ibm.com/asr/SSME/esi/
  • Upcoming Summit on Service Education – October 2006 http://www.almaden.ibm.com/asr/SSME/summit/
  • Who else cares?
    • Governments
      • US,European Commission, China, Japan, Germany, UK, Finland, Norway, Denmark, Sweden, Italy, Netherlands, Russia, India, Belgium, and others
      • US Department of Commerce, NSF, NIST, DARPA, VTT,etc.
    • Industry
      • IBM, Accenture, HP, EDS, CSC, Cisco, P&G, American Express, John Deere, Avaya, Oracle, and many others
    • Academics
      • ASU, PSU, NCSU, Berkeley, RPI, UCSC, Georgia Tech, Bentley, Stanford, CMU, UCLA, BYU, Yale, Harvard, MIT, Northwestern, UArizona, UMaryland, UGeorgia, UMichigan, UTexas, MichiganSU, Columbia, Oxford, Warwick, Tokyo University, Peking University, Carlsruhe, AIO, Norwegian School of Economics, Helsinki University of Technology, University of Rome La Sapienza, and many others
    • Others
      • BestServ, OECD, Institute for the Future, Bay Area Economic Forum, etc.
  • Organization Theory Services Sciences, Management, and Engineering (SSME) and Solutions Engineering Service & Solutions Excellence Centers (Information Science & Technology Management) Institutional Economics Experimental Economics Economics School of Social Sciences Labor Psychology (Human Capital Mgmt) Psychology Transformation & Integration Selection & Aggregation Evolution & Revision Discipline School Service Marketing Marketing School of Management Service Operations Operations Service Accounting (Activity-Based Costing) Accounting Service Sourcing (eSourcing) Contracts & Negotiations Service Operations Operations Research School of Engineering and Science Service Engineering Industrial & Systems Engineering Service Computing, Web Services, SOA Computer Science Information Science & Systems, Service professional schools Other Business Anthropology Anthropology Management of Innovation Management of Technology Service Management Management Science
  • What kinds of skills should a service scientist have?
    • Technology
      • Make, Verify, Deliver, Operate, plus eServices & eMarkets
    • Business
      • Propose (win-win), Finance, Market, Manage, plus eBusiness & eMarkets
    • Social-Organizational
      • Coordinate, Motivate, Govern, Learn, plus eSourcing and eMarkets
    Education in reading, writing, and arithmetic (3 R’s) enabled 19 th century innovation. Add science, technology, engineering, and mathematics (STEM) for the 20 th century. Add more info. technology, business, and social-organizational enable 21 st century, or Social-Technology-Economic-Environmental-Political (STEEP).
  • What kinds of skills should a service scientist have? Academic disciplines evolving to combine technology, business, and social-organization Technology Business Social- Organizational 26 22 17 4 2 15 1 18 3 5 16 25 23 24 27 28 19 20 21 7 8 9 10 11 12 13 14 6 1990-2004 1960-1990 1900-1960 Before 1900 25. Service Marketing 26. Social Complexity 27. Agent-based compute. economics 28. Computational Organization Theory 24. Service Engineering 23. Service Ops & Mgmt 22. Inform. Sci & Sys 6. Managerial Psychology 8. Organization Theory 7. Human Capital Management (HCM) 12. Game Theory 13. Industrial Engineering 14. Marketing 15. Computer & Information Sciences 11. Management Science 10. Systems Engineering 9. Operations Research 19. Management of Information Systems 16. Management of Innovation & Tech (MoT) 17. Experimental Economics 18. AI & Games 20. Computer Supported Collab. Work (CSCW) 21. Performance Support Systems In Business & Organization 1. Education 2. Sociology 3. Law 4. Economics 5. Business Administration (MBA)
  • What kinds of tools should a service scientist have? D. Neumann, J. Maekioe, C. Weinhardt (2005): CAME - A Toolset for Configuring Electronic Markets; In: Proceedings of the ECIS 2005, Regensburg For Example: Computer-Aided Market Engineering System Trader A Trader B Operating&Monitoring Knowledge Based Market Design ( Bichler, Kersten, Strecker 2003) Market outcome Market structure Transaction object CAME (WEB) Suite (AvH and SSHRC) Market Engineering Workbench CAME Web Service CAME Web Service (Transcoop, Weinhardt, Neumann,2003) Conduct
  • Knowledge Workers Service Economy Innovation “ Innovative activity is fundamentally a service activity.” - William J. Baumol “ We are continually creating a new and novel world.” - Douglass C. North … … Education & Employment New Specialists New Industries Based on slides by Jean Paul Jacob, IBM Researcher Emeritus
  • Four worlds of services jobs, upstream and downstream for… enable develop enable transform design operate & maintain create utilize Industrial services Information services Business services Consumer services Non-market services People Business Products Information
  • Four targets of knowledge intensive service activities… people, business, products, and information Information (capital, reputation, process, laws, science) Products (technology artifacts and environment) Is Owned Business (organizations) People Has Rights Intangible Tangible
  • Definition of services (based on Gadrey, 2002)
    • A. Service Provider
    • Individual
    • Organization
    • Technology that
    • A is responsible for
    • C. Service Target: The reality to be
    • transformed or operated on by A,
    • for the sake of B
    • People, dimensions of
    • Business, dimensions of
    • Products, technology artifacts & env.
    • Information, codified knowledge
    • B. Service Client
    • Individual
    • Organization
    • Portion of reality owned by B
    Forms of Service Relationship Forms of Ownership Relationship (B on C) (A & B coproduce value) Forms of Responsibility Relationship (A on C) Forms of Service Interventions (A on C, B on C)
  • Questions? Service Science SSME Operations Research and Management Science Industrial & Systems Engineering, Control Theory Service Marketing, Operations, and Management Information Sciences and Systems Engineering Management of Technology and Innovation Computational Organization Theory Social and Cognitive Science Economics & Jurisprudence Computer Science, Distributed AI, CSCW Game Theory and Mechanism Design Theory Management of Information Systems Organization Science, Complexity Management Theory Business Informatics and Document Engineering Business Anthropology and Learning Organizations Decision Science and Knowledge Management Human Capital Management & Incentive Engineering Quality, Six Sigma, Statistics, Process Optimization Computer Aided Market Engineering Services: Value coproduction acts, promises, and relationships via sharing work, risk, information, assets, decisions, responsibility, and authority Focus on Education, Employment, Innovation, Economic Growth: Complex Business Performance Transformation Services
  • A Grand Challenge: Predictable Service Productivity Growth Global National Industry Enterprise Work System Knowledge Worker Professions Productivity Sustainability & Demand Growth & Innovation Standards & Compliance Growth & Innovation Quality & Learning Opportunity & Sustainability Issues Other Considerations Family Life, Local Community, Environment Graduates from Schools & Universities Foundations, Not-for-Profits, Research Organizations Crime, Terrorism, Cheating, Other Mischief Policies & Laws, Public Infrastructures Values, Demands, Aspirations, Wants, Needs Measurement of Sociotechnical Systems Measurement of Service Systems
  • Innovation sustains skilled employment and exports Sustainable growth depends on innovation via regional government, industry, academic collaboration. 2000- 2000- 1990- 1950- 1900- 1850- 1800- ? China India Finland Japan USA Germany England Cost Innovation: Product Revolution Future of Products & Services Exports Cost Innovation: Services Revolution Mobile Communication Revolution Quality Innovation: Product Revolution Electrical & Information Revolution Chemicals Revolution Industrial Revolution
  • Are there “scale laws” of service innovation?
    • Moore’s Law underlies much of the information technology and business capability growth over the last half century
      • Are there analogous “predictable capability doubling laws” that apply in the realm of services? If so, how might they be exploited to improve service productivity and quality in a predictable manner?
      • It seems three improvement or learning curve laws that might be applicable in services:
      • The more an activity is performed (time period doubling, demand doubling) the more opportunities there are to improve the process
      • The better an activity can be measured (sensor deployment doubling, sensor precision doubling, relevant measurement variables doubling) and modeled the more opportunities there are to improve the process
      • The more activities that depend on a common sub-step or process (doubling potential demand points), the more likely investment can be raised to improve the sub-step.
    • Example: Amazon’s Book Buying Recommendation Service Quality
      • The quality of the recommendations depends on accurate statistics – the more purchases made, the better the statistical estimates for recommendations
    • Example: Call Centers Query-Response Productivity and Quality
      • The speed and quality of call center responses can be improved significantly given accurate statistics about the kinds and number of queries that are likely to be received.
    • Example: New Service Offerings Viability (Blue Ocean Strategy)
      • The viability of new service offerings often depends on the scale (amount of demand) in adjacent market segments where service satisfaction is low enough to result in sufficient critical mass of defections to bootstrap the new offering.
    • Example: Predictable Education Gains (Student Knowledge, Teacher Satisfaction)
      • If eLearning can be used to shift 20% of routine teacher activities into automation that can be covered in half the normal time, freeing up 10% of teacher time each year to innovate and add new content or exploratory activities to the curriculum, then each year students will be learning more and teachers will have time to try new things.
  • Spohrer-Engelbart Cycle of Service System Evolution (Augmentation Systems: Bootstrapping Capability Infrastructure via Coevolution of Human System and Tool System)
    • Population Growth (Atomic Service Systems, Self Service, Multitasking)
      • Assume growing population of service systems in an environment
      • Each service system is multitasking two services based on two underlying capabilities or competences
    • Organization Growth (Outsource Service, Higher-Level Multitasking)
      • Advantage of pairs forming to trade, or forming an organization
      • Coase’s Law and Kaldor-Hicks Efficiency enabled within organization
      • Thus, a growing populations of multitasking service systems gives rise to increasingly specialized service systems, professions, markets and organizations
    • Technology Growth (Improvement, Free Time, Rise of New Goals, Multitasking)
      • Over time learning curves and efficiency leads to better competencies
      • Learning curves improve specialization and technologies used, until it is cost effective to form new service systems that provide the technology
      • Free time leads to new goals, competences, and more multi-tasking
      • As technology capability improves some service systems shift back to self service – multitasking more and using high capability technology
    • Infrastructure Growth (Fairness, New Environment, New Multitasking Goals)
      • If the service and technology become universally needed, the technology may be embedded into the environment as part of a government action to establish a new utility or national infrastructure (institution formation) to ensure fairness of access
      • Improved environment fosters population growth
  • Service Science Core Questions: How do work systems reconfigure? What role does innovation play? Can integration relationships be found across different types of work system? Collaborate (incentives) Augment (tool) Automate (self-service) Delegate (outsource) Tool System Human System Help me by doing some of it for me (custom) Help me by doing all of it for me (standard) The choice to change work practices requires answering four key questions: - Should we? (Value) - Can we? (Technology) - May we? (Governance) - Will we? (Priorities) Organize People (Socio-economic models with intentional agents) Harness Nature (Techno-scientific models with stochastic parts) 4 3 2 1 Z Collaborate (1970) Augment (1980) Delegate (2000) Automate (2010) Experts: High skill people on phones Tools: Less skill with FAQ tools Market: Lower cost geography (India) Technology: Voice response system Example: Call Centers
  • How do service systems learn and evolve? ? + - = Self Sufficiency (versus interconnectedness) Versatility & Sustainability All Versatility & Sustainability Efficiency & Effectiveness Effectiveness Effectiveness Effectiveness Efficiency Efficiency Category Number of People (professions, salaries, ages, diversity, etc.) Innovation Rates (versus compliance rates) Time Costs/Quality of Experience (waste, boredom, stress, etc.) Capabilities/Skills of People (learning curves) Number of Services Accessible World Model Fidelity (sense, store, compute, etc.) Transaction Costs (Trust, Coase, North, etc.) Communication and Transportation Costs Change ? + - = ? + - = - - - - - - Direction + + + + + + ? = ? = ? = ? = ? = ? =
  • What is SSME? (Services Sciences, Management, and Engineering)
    • The application of scientific, management, and engineering disciplines to tasks that one organization beneficially performs for and with another (‘services’)
      • Make productivity, quality, compliance, sustainability, learning rates, and innovation rates more predictable in the service sector, especially complex organization to organization services – business to business, nation to nation, organization to population
      • Services are anything of economic value that cannot be dropped on your foot – the key to service value is in actions, performed now or promised for the future. Services transform/protect or promise to transform/protect a state of the target of the service. The client may not have the skill, time, desire, or authority to perform self-service, do it themselves. Services often create mutual interdependencies.
      • Services are value coproduction performances and promises between clients and providers, with alternative work sharing, risk sharing, information sharing, asset sharing, and decision sharing arrangements and relationships (promises to perform now or in the future, once or repeatedly, when needed or demanded, standard or customized, satisfaction guaranteed or best effort, service levels fixed or variable)
    • Science is a way to create knowledge
    • Engineering is a way to apply knowledge and create new value
    • Business Model is a way to apply knowledge and capture value
    • Management improves the process of creating and capturing value
  • What can you do to get involved? [government]
    • Does your agency fund innovation?
    • Does your agency influence innovation policy?
    • Does your agency establish standards?
    • Does your agency deal with intellectual property?
    • Does your agency deal with economic statistics?
  • What can you do to get involved? [industry]
    • Does your business develop, sell, and/or deliver service offerings?
    • Does your business have a service innovation process?
    • Does your business use services to complement and add value to manufactured products?
    • Does your business invest in internal R&D?
    • Does your business fund university or other external R&D?
    • Does your business create case studies, success stories, white papers, or point-of-view documents about service offerings?
    • Does your business recruit service professionals? Service researchers?
    • Does your business provide feedback to schools (survey recent graduates hired) on what skills are desired to be most effective in your business?
    • Does your business procure services? eSource of services? Outsource services?
    • Does your company patent or otherwise protect intellectual property related to service innovation?
  • What can you do to get involved? [academics]
    • Do you teach courses that include or could include complex business to business service case studies?
    • Do you have responsibility for revising or creating new curriculum?
    • Do you perform research that could be published in the Journal of Service Research or other relevant journals or conferences?
    • Do you have students who could intern with business service or service research organizations? Compete for PhD fellowships in services?
    • Are you interested in industry-academic rotations?
    • Are you interested in developing tools that could enable SSME?
    • Are you interested in creating business proposals or grant proposals related to SSME and service innovation? Competing for university research awards?
    • Are you interested in participating/speaking in SSME events? Hosting one at your university?
    • Does your school already have services related courses, degrees, centers, or institutes?
    • Are you a service innovation pioneer? Are you interested in competing for a faculty award?
  • What is IBM doing to support others?
    • Publicizing a “call to action” around SSME and the need for systematic approaches to service innovation (identify IBM relationship/ambassadors)
    • Hosting and cosponsoring SSME and service innovation related events with government, industry, and academics around the world
    • IBM Faculty Awards to select service innovation pioneers
    • IBM PhD Fellowships to select services-related PhD students
    • IBM University Research (SUR) awards to select academic institutions proposing leading edge service innovation and SSME related work
    • Providing best paper awards for leading service research related journals and conferences
    • Working with government funding agencies to increase focus and establish new programs related to service innovation
    • Inviting people to contribute to an SSME blog, and share information about their SSME related efforts (http://www.research.ibm.com/ssme)
    • Working with some academic institutions to provide access to service data
    • Hiring recent graduates into IBM Global Services and IBM Research
    • Supporting curriculum development and research efforts, and much more…
  • IBM’s SSME Course Outline
    • Services – What are services?
    • Systems – Services depend on sociotechnical systems
    • Methods – Service delivery depends on methods
    • Industrialization – Services are being standardized
    • Quality – How do we ensure quality of service?
    • Components – Business processes are being modularized
    • Science – Is there a science of services?
    • Management – What is different in management of services?
    • Engineering – Can service engineering foster innovation?
    • Productivity – Why do services resist productivity gains?
    • Challenges – What are the big problems for the service economy?
    • Innovation – Can we be systematic about innovation on services?
    • Business Transformation Services & Industry Solutions
  • Mary Jo Bitner, ASU, Center for Services Leadership IBM faculty award, Service research pioneer
  • Example: Berkeley’s new ORMS undergraduate major http://www.ieor.berkeley.edu/AcademicPrograms/Ugrad/ORMS.pdf
  • Example: Berkeley SSME Certificate Program http://www.citris-uc.org/news/2006/01/25/services_science_management_and_engineering_curriculum_launched
  • Relationship Management Focus Service Innovation Focus Business Relationship Management Organizational Culture Market Analytics Process Analysis and Design Organizational Culture New Service Development Project Management Marketing Strategy Service Modeling E-Commerce Practicum Market Research Marketing Strategy Project Management Supplier Relations Electives Electives Example: Business School SSME Curriculum for MBA Services Management Consulting
  • Henry Chesbrough, Berkeley, a service science pioneer. IBM Faculty Award
  • Jim Tien and Daniel Berg, RPI IBM Faculty Award, Service research pioneers Established RPI “Service Research and Education” Center in early-90’s
  • Marietta Baba, Dean, Social Sciences, Michigan State University IBM Visiting Scholar, Spring 2005, Sociotechnical Systems Theory Pioneer
  • Service Science – Reading List
    • Motivation
      • Chesbrough (2005) Towards a new science of services. Harvard Business Review.
      • Chesbrough (2004) A failing grade for the innovation academy. Financial Times.
      • Rust (2004) A call for a wider range of services research. J. of Service Research.
      • Tien & Berg (2003) A case for service systems engineering. J. Sys. Science & Sys. Eng.
      • Rouse (2004) Embracing the enterprise. Industrial Engineer.
      • Karmarkar (2004) Will you survive the services revolution. Harvard Business Review.
    • Philosophy
      • Vargo & Lusch (2004) Evolving a new dominant logic for marketing. J. of Marketing.
    • Exemplar Model
      • Oliva & Sterman (2001) …Quality erosion in the services industry. J. of Management Science.
    • Economics
      • Bryson et al (2005) Service worlds. Routledge. London, UK.
      • Herzenberg et al (1998) New rules for a new economy. Cornell University Press. Ithaca, NY.
    • Technology
      • McAfee (2005) Will web services really transform collaboration? MIT Sloan Management Review.
    • Textbooks
      • Fitzsimmons & Fitzsimmons (2001) Service management. McGraw-Hill. New York, NY.
      • Sampson (2001) Understanding service businesses. John Wiley: New York, NY.
    • Evolution and Change: Managed, Designed, and Emergent
      • Khalil, Tarek (2000) Management of Technology. McGraw-Hill, New York, NY.
      • Nelson (2003) On the uneven evolution of human know-how. J. of Research Policy.
      • Agre (2004) An anthropological problem, a complex solution. J. of Human Organization.
      • Baba & Mejabi (1997) Socio-Technical Systems. J. of Human Factors & Industrial Egronomics.
  • Select efforts to promote service science
    • Dec. 2002: Almaden Service Research established, the first IBM Research group completely dedicated to understanding service innovations from a sociotechnical systems perspective, including enterprise transformation and industry evolution ( http://www.almaden.ibm.com/asr/ )
    • March 2003: IBM-Berkeley Day: Technology… At Your Service! ( http://www.eecs.berkeley.edu/IPRO/IBMday03/ )
    • September 2003: Coevolution of Business-Technology Innovation Symposium ( http://www.almaden.ibm.com/coevolution/ )
    • April 2004: Almaden Institute: Work in the Era of the Global, Extensible Enterprise ( http://www.almaden.ibm.com/institute/2004/ )
    • May 2004: “Architecture of On Demand” Summit: Service science: A new academic discipline? ( http://domino.research.ibm.com/comm/www_fs.nsf/pages/index.html )
    • June 2004: Paul Horn, VP IBM Research, briefs analysts on “Services as a Science”
    • September 2004: Chesbrough’s “A failing grade for the innovation academy” appears in the Financial Times ( http://news.ft.com/cms/s/9b743b2a-0e0b-11d9-97d3-00000e2511c8,dwp_uuid=6f0b3526-07e3-11d9-9673-00000e2511c8.html )
    • November 2004: IBM’s GIO focuses on service sector innovations: government, healthcare, work-life balance ( http://www.ibm.com/gio )
    • November 2004: Service Innovations for the 21 st Century Workshop ( http://www.almaden.ibm.com/asr/events/serviceinnovation/ )
    • December 2004: Samuel J. Palmisano, IBM CEO, Harvard Business Review interview discusses the important role of “values” in organizational performance, “Leading Change When Business is Good” ( http://harvardbusinessonline.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=R0412C )
    • December 2004: IBM expands academic initiatives related to service innovations, including sponsoring Tannenbaum Institute of Enterprise Transformation at Georgia Tech.
    • February 2005: Chesbrough’s “Service as a Science” in Harvard Business Review Breakthrough ideas of 2005
    • 2005 - Oxford, Warwick, Bentley, Penn State, UMaryland, ASU, NCState, Japan, China, Norway, etc.
  • One Policy Challenge: Beyond Technology Patents… Patenting Business, Social-Organizational, Demand Innovations Source: Robert M. Hunt “ You can patent that? Are patents on software and business models good for the new economy?”
  • Terms & Definitions
    • Service Science, short for Services Sciences, Management, and Engineering (SSME)
    • Definition 1: The application of scientific, management, and engineering disciplines to tasks that one organization beneficially performs for and with another (‘services’)
      • Make productivity, quality, performance, compliance, growth, and learning improvements more predictable in work sharing and risk sharing (coproduction) relationships.
    • Definition 2: The study of service systems.
      • Evolution & Design: Services systems evolve in difficult to predict ways because of naturally emergent and rationally designed path dependent interactions between economic entities, acting in the roles of clients and providers coproducing value.
      • Interactions & Value Coproduction: Service systems are made up of large numbers of interacting clients and providers coproducing value. Each economic entity is both a client and a provider. Service system dynamics are driven by the constantly shifting value of knowledge distributed among people, organizations, technological artifacts (culture), and embedded in networks or ecosystems of relationships amongst them.
      • Specialization & Coordination: One mechanism for creating value is specialization of clients and providers, which results in the need for coordination via markets, organizational hierarchies, and other mechanisms. Specialization creates efficiency. Efficiency creates profits and leisure. Profits and Leisure create investment (profits to innovation) and new demand (leisure to new aspirations).
  • So, services are… Pay for performance in which client and provider coproduce value
    • High talent performance
      • Knowledge-intensive business services (business performance transformation services) (e.g., chef’s, concert musicians)
    • High support performance
      • Environment designed to allow average performer to provide a superior performance (average cook with great cook book and kitchen; average musician with a synthesizer)
    • High tech performance
      • Computational services (e-commerce, self service – client does work)
      • Even here… talent builds, maintains, upgrades, etc. the technology
    • Routine performance (sometime High Finance)
      • This is being automated, outsourced, labor arbitrage, financial arbitrage, migrated to high talent/value sectors, or otherwise being rationalized
  • Global Services: Opportunities & Challenges
    • Opportunities
      • Globalization (Developed & Developing)
      • ICT (R)evolution (eServices & Semantics)
      • Business Performance Transformation Services (BPTS)
      • Service Entrepreneurship (SME)
    • Challenges
      • Education (Talent & Tools: High Value Jobs)
      • Innovation (Investment & Protection: High Value Exports)
      • Science (Formalization of Service Systems & Systematic Methods: Sustainable Growth)
  • What will the next new service industry be?
    • Online game worlds for business applications?
    • Google Search (less than a decade old)
    • Semantic Search?
    • Book: Blue Ocean Strategies
  • Endless Stream of Industries & Knowledge Workers… - based on Herzeberg et al, (1998). All occupations span a range, placement is representative only. subscriber, commuter guest consumer, shopper subscriber client shareholder, client, subscriber patient, student, subscriber citizen, plaintiff, defendant, inventor Client inspectors fast food worker sales counter clerks telephone operator inspectors, receptionist bank teller, check proofers data entry inspectors, data entry Tightly constrained truck driver, field force technician, machine operator maid, janitor, waiter, gardener, cook, barber sales clerk, stocker, shipping & receiving call center specialist, librarian admin. assistant, hiring specialist, door to door sales adjustors, auditor, investigators nurses aid, day care worker, ambulance driver police, firefighter, security guard Unrationalized labor intensive attendant, maintenance technician, plumber, electrician actor, performer, artist, technician buyer, high end sales technician, system administrator, journalist, writer, announcer manager, accountant, HR, PR, marketing, business dev analyst, actuary, underwriters pharmacist, nurse, teacher, technician legislator, policy researcher, patent analyst Semi-autonomous pilot, executive, engineer producer, director, proprietor, designer, star athlete performer executive, proprietor executive, engineer executive, lawyer, scientist, engineer, architect, entrepreneur broker, partner doctor, professor, dean executive, judge High skill Transportation & utilities Leisure & hospitality Retail & wholesale Information & communication Professional & business Financial & insurance Health & education Government & security
  • Service jobs are increasingly the high skill knowledge worker jobs – especially in business and information services From Herzenberg, Alic, Wial (1998) 95% of all business executives and research scientists are alive today.
    • from Herzenberg, Alic, & Wial (1998). New rules for a new economy.
    • Employment and opportunity in postindustrial America.
    • Cornell University Press.
    Executive, Scientist 40% 40% 40% 34% High-skill Autonomous Call center, Fast food 10% 4% 5% 6% Tightly Constrained Maid, child care 15% 26% 25% 25% Unrationalized Labor Intensive Admin., Manager 35% 30% 30% 35% Semi-Autonomous Admin., Manager Manufacture Service All Example 1996 1979 Type of work system
  • Projected US Service Employment Growth, 2004 - 2014 US Bureau of Labor Statistics. http://www.bls.gov/opub/ooq/2005/winter/art03.pdf
  • Information services is fastest growth Services Material Information 11% 9% 30% 50% Products Uday Karmarkar & Uday Apte: “Service industrialization in the global economy” Author of HBR article: “Will you survive the services revolution?”
  • Growing role of services Average annual growth rate of business R&D expenditure, 1990-2001 Source : OECD Science, Technology and Industry Outlook 2004 Jerry Sheehan
  • Even though R&D is less closely linked to service-sector innovation Source : OECD Science, Technology and Industry Outlook 2004 Jerry Sheehan Manufacturing Services
  • OECD Science, Technology and Industry Outlook Jerry Sheehan, OECD, 8 February 2005
    • Science, technology and innovation are receiving greater policy attention as their links to economic growth are more widely appreciated.
    • Innovation policy has been slow to adapt to the needs of the service sector, which accounts for growing share of output and employment in OECD economies.
    • Science, technology and industry are increasingly globalized, requiring further adaptation of policy to ensure benefits accrue to national economies.
  • Trend 1: Rise of the Service Economy Top Ten Labor Forces by Size (WW 50% Agriculture., 10% Goods, 40% Services) % US Labor Force by Sector (A) Agriculture : Value from harvesting nature ( S) Services: Value from enhancing, protecting, distributing, understanding, and customizing things ( G) Goods: Value from making products Service sector has rapidly grown in US (70% of labor force) Other nations are following the same pattern (urbanization, infrastructure, and business growth drive the shift) Service sector buys 80% of the $2.1T IT annual spend (worldwide) Four service industries are large and growing their IT spend rapidly to transform processes: financial and information, professional and business, retail and wholesale, and government IT spend contributes to rapid growth of productivity (GDP/Jobs) as well
  • Trend 2: Rise and Shift in Service Research Academic centers have slowly increased over the past 20 years to advance the practical and theoretical knowledge of services businesses Initially, the emphasis in service research and teaching was on B2C capacity and demand models – because underutilized capacity hurts productivity. Also demand that is simply waiting in queues may be lost or damage client satisfaction. Service places like banks, airports, hotels, etc. Part 3: Managing Service Operations Chapter 10. Forecasting Demand for Services Chapter 11. Managing Waiting Lines Chapter 12. Queuing Models and Capacity Planning Chapter 13. Managing Capacity and Demand (Excerpt from Fitzsimmons & Fitzsimmons) Increasingly over the past ten years, the new frontier of service research and teaching has shifted more and more towards B2B business process transformation models. Process re-engineering, IT productivity paradox, and other case studies highlight the need to constantly redesign work to improve productivity through multiple types of innovation (demand, business value, process, and organization) “ The biggest costs were in changing the organization. One way to think about these changes is to treat the Organizational costs as an investment in a new asset. Firms make investments over time in developing a new process, rebuilding their staff or designing a new organizational structure, and the benefits from these Investments are realized over a long period of time.” Eric Brynjolfsson, “Beyond the Productivity Paradox” Service research and practice agree that effective communication in service engagements depends on an appreciation of multiple factors: technology and process, business value and strategy, and organizational culture and people. With proper coordination between these per- spectives BPTS engagements succeed. A top adaptive work force requires people with a level of capability and familiarity in many relevant areas. BPTS = Business Process Transformation Services
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