Moving from B2X to B2X2Y Value Propositions in Service System Networks

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Presented at 1st International Conference on Human Side of Service Engineering (HSSE), San Francisco, 24 July, 2012.

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Moving from B2X to B2X2Y Value Propositions in Service System Networks

  1. 1. Moving from B2X to B2X2Y Value Propositions inService System Networks Stephen K. Kwan, Peter Hottum, and Cheryl A. Kieliszewski 1st International Conference on Human Side of Service Engineering, HSSE 2012 San Francisco, 24 July, 2012SAN JOSÉ STATE UNIVERSITY (SJSU) & KARLSRUHE INSTITUTE OF TECHNOLOGY (KIT) & IBM www.sjsu.edu www.kit.edu www.ibm.com
  2. 2. Agenda 1 Introduction 2 Value Propositions in Service System Networks 3 Model for Value Propositions based on B2X2Y scenarios 4 Outlook: Concept of loss-less derivations of Value Propositions 5 Further Research and Limitations2 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  3. 3. Several Service Systems with their entities spanning a Service System Network “Service System Worldview” Service System A Service Customer Provider service interactions Service Experience Service System B Service System C Service System E Service System D Service System F Source: Kwan & Min (2008): An Evolutionary Framework of Service Systems.3 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  4. 4. In Service Systems Value is co-created through Value Propositions Service System Community Value Service Value Customer Value Partners Provider Service Experience  Traditional B2B and B2C Value Propositions for service offerings are premised on the service provider convincing the business or consumer customers that they will receive superior value at certain cost in a competitive environment  Business environments become more global and complex, so that Service Providers often have to construct a Network of Partners and/or Contractors to fulfill the service obligations as promised by their Value Propositions  Customers in turn share service value with their Community through their own social Value Propositions Representation is an extract from: Kwan & Min (2008): An Evolutionary Framework of Service Systems.4 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  5. 5. An Example from an Industrial Scale Service Provider Provider Customer (B) (C) offers accepts Delivers service VP SLA Value Service Proposition Level Agreement Contract Partner (P) 250,000 Employees delivering services Source: Anand, K. et al. (2012) “Value Driven Approach for Services Design”.5 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  6. 6. A provider should look beyond his customers in service constellations Provider’s Value System       Customer’s  Value System  Provider       His Customer’s  Value System ★ Customer ★ ★ ★ ★ ★ Looking more closely on four scenarios: ★ ★  Outsourcing Customer’s  Channel Partners Customer  Outcome-based Contracting Opportunities for  Extending Customer Value Value Co-Creation6 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  7. 7. The variety of Value Propositions is diverse Maslow’s Hierarchy Of Needs Service Provider Society Hedonic Stakeholders Spiritual Community Cultural Corporal Employees Emotional Intellectual Stockholders Familial…. Partners A point in this 3-D space is a potential Customers Value Proposition e.g. Service Provider / Society / Environmental7 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  8. 8. Our approach is based on a formalized model of Value Propositions  Source: Kwan & Müller-Gorchs (2011). Constructing Effective Value Propositions for Stakeholders in Service System Networks.8 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  9. 9. Each Value Proposition is based on a set of these attributes VPj = [SE,B,C,P,Q,Sc,R,M]j ** Expected ** Performance Service Experience Metrics Benefits Stakeholder Roles Costs Quality will will will Probability Schema for Data do not do of Success for +$ do Exchange9 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  10. 10. 1 Business Model – Outsourcing VPc for the customer Service Experience [ SE ] [B] [C] [P] [ Q ] [ Sc ] [ R ] [ M ] is composed of a set of Service Components [ S0 … SN ] that are delivered over time as a series of Service Episodes [ Se0 … SeK ] ? VPp from the partner/subcontractor Often is the Low cost provider = SLA?  The success of such service system networks depends on the alignment of Value Propositions  They have to deliver the service obligations to the customers as promised  If the linkages among provider, customer and partners are broken, the customers will likely be dissatisfied with the level and quality of service10 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  11. 11. 1 scenario: banking - outsourcing service call center  Partner / Outsourcer provides service to the VPc customer of the bank based on contract Provider Customer with the bank. (B) (C)  Value Proposition: “I will do this for your customers….” or the bank issues an RFP of the form: “Do this for my customers…”  Often there is a disconnect with the bank’s Provider (B) Customer (C) customers due to misalignment of value propositions and/or loss of linkage. VPp Partner (P) equals to Partner Provider Customer (P) (B) (C) service11 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  12. 12. 2 scenario: CISCO - selling through channel partners  CISCO sells its products and services VPc through channel partners*. “Sell this to my customers…” Provider (B) Customer (C) Often the channel partners add value to the products and services they resell (VAR).  Problems arise when channel partners are not enthusiastic in selling certain services Provider Customer (B) (C) to the customers because they do not benefit directly from them. VPp  There is a misalignment of value Partner propositions. (P) equals to Provider Partner Customer (B) (P) (C) service* except direct sales to large customers12 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  13. 13. 3 scenario: Outcome-Based Contracting  This is based on the business model that you get paid based on how much you improve the outcome of your customer. Provider Customer’s  Customer The outcome is usually some KPI of your (B) (C) Customers (C) customer (some dimension of his value service system). This could well be what the customer needs to improve his performance to serve his own customer better. Examples  Rolls Royce’s model of “Power by the Hour”  UPS handles logistics and sales for customers  John Deere coordinates the harvesting for customers13 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  14. 14. 4 scenario: Apple – extending value beyond your customers  Apple sells products that empower the customers to connect and share value with Provider Customer Customer’s their friends and community. (B) (C) Community (C) equals to Provider Customer Customer’s (B) (C) Customers (C) service Pictures are taken from 23th WWDC (Worldwide Developers Conference) in June 2012 in San Francisco14 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  15. 15. The Value Proposition Patterns considered can be represented as… Scenario Value Proposition Common representation Outsourcing P2B2C Channel Partners B2P2C B2X2Y Outcome-based Contracting B2C2C Extending Customer Value B2C2C               B  ★ ★ ★ ★ ★ ★ X ★ ★ Y15 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  16. 16. Outlook: Derivations of Value Propositions (1)  An enterprise can be viewed as a hierarchy of Value Propositions presented to its stakeholders. Each Value Proposition at a lower (more micro) level should be derived from one at a higher (more macro) level – without loss of essential information – and vice versa.  For example: The syllabus of a course could be viewed as a Value Proposition to a student from this hierarchy: University College Department Major Concentration Course16 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  17. 17. Outlook: Derivations of Value Propositions (2)  The subcontract for third/fourth… party service provider should be derived from the original Value Proposition (then SLA) without loss of essential information.  Furthermore the experience of the customer is cumulative and the sum of experience (quality, completeness, etc.) from all the service episodes. *from Dan Pritchett17 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  18. 18. Further Research and Limitations Further Research  Within Service System Networks even more trilateral constellations between providers, partners and customers will come into existence, so the perspective of B2X2Y will help capture the complexity more extensively  More real world scenarios should be examined to demonstrate their applicability.  Develop the concept of “loss-less” derivation using the VP model. Limitations  Examples only taken from United States and Germany  Need more examples to validate18 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  19. 19. References  Anand, K., Lokku, D.S., Zope, N. R. (2012) “Value Driven Approach for Services Design”. Presented at ISSS 2012, July 15th-20th, San José, USA.  Kwan, S. K. & Min, J. H. (2008) An Evolutionary Framework of Service Systems. Presented at the International Conference on Service Science, Beijing, China, April 17th -18th .  Kwan, S. K., Muller-Gorchs, M. (2011). Constructing Effective Value Propositions for Stakeholders in Service System Networks. Proceedings of SIGSVC Workshop. Sprouts: Working Papers on Information Systems, 11(160). http://sprouts.aisnet.org/11-160  Kwan, S. K. & Yuan, S. T. (2011) Customer-Driven Value Co-Creation in Service Networks, in Demirkan, H., Spohrer, J. C. and Krishna, V. ed., The Science of Service Systems, volume in Service Science: Research and Innovation (SSRI) in the Service Economy series, Springer. Acknowledgement  This study was supported by the Karlsruhe House of Young Scientists (KHYS).19 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM
  20. 20. Contact Stephen K. Kwan, Ph.D. Peter Hottum Cheryl A. Kieliszewski, Ph.D. SJSU – Service Science, KIT - Karlsruhe Service IBM Almaden Research Management Information Systems Research Institute (KSRI) Center San José, California, USA Karlsruhe, Germany San José, California, USA stephen.kwan@sjsu.edu peter.hottum@kit.edu cher@us.ibm.com20 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University Karlsruhe Institute of Technology IBM

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