Transformation toward design driven firms

1. TRANSFORMATION
TOWARD DESIGN
DRIVEN FIRMS
Y. SAWATANI, A. HASEGAWA, T. KASHINO & M.
GOTO

2. AGENDA
▸Definition & Research Questions
▸Current Situations & Related Theories
▸Service economy, Complexity, IT
▸Research Methods
▸Case Studies
▸Findings
2

3. DEFINITION
▸Service is value co-creation interaction that is beneficial
changes that result from communication, planning, or other
purposeful interactions between distinct entities (Vargo and
Lusch 2004, 2007; Spohrer and Maglio 2010)
▸A service system is dynamic configurations of resources
that include one or more persons, and evolve complex
structures and interaction patterns (Spohrer and Maglio
2010, Sawatani et al. 2007)
▸An initiator is an actor who creates a new service system
3

4. RESEARCH QUESTIONS
1. Why and How a service system transforms? (not focus of
the paper, IASDR 2017)
2. Who is an initiator of the transformation? (focus of the paper)
3. What kinds of capability does an initiator have? (focus of the
paper)
4

5. CURRENT SITUATIONS & RELATED
THEORIES
▸Service Economy
▸Innovation & design focus: a Product -> a Service system
▸Complexity
▸Internal factors: Elements are related, difficult to disassemble them
▸External factors: Boundary of the service system becomes
ambiguous
▸ Progress of information technology
▸General purpose technology creates a new service system
5

6. SERVICE ECONOMY
INNOVATION AND DESIGN FOCUS
1950 - 1970 - 1980 - 1990 - 2000 -
Source of
innovation
Technology
Technology
push model
(Bush 1945),
Dosi 1982),
Rothwell
1992,1994)
Chain-linked
model (1970-
Kline and
Rosenberg
1986),
Gate keeper
(Allen 1977)
Mode 1 & Mode 2
(Gibbons, et al.
1994),
Service innovation
(Sundbo 1994,
Edvardssin and
Olsson 1996,
Gallouj 1998)
Open Innovation
(Chesbrough 2003),
Service Science,
Management,
Engineering and Design
(2004-)Non-
technology
(market)
Market pull
model
(Schmookler
1966, Scherer
1982)
User
innovation
von Hippel
(1988)
Design focus
Industrial products (William Morris, Bauhaus, Post modern, IDEO,
d.school)
Service products (Shostack 1984,
Bitner 1992, Erlhoff, Merger, Manzini
1997), Interaction (Holmlid 2007)
Service Systems
PSS (Morelli 2002),
Service system (The
Science of Service
Systems 2011)
6

7. SERVICE ECONOMY
SERVICE SYSTEM (REF: SPOHRER AND MAGLIO 2009)
Ecology
Elements
Interaction
(Network)
Value proposition
based interactions
Stakeholders
Metrics
Resources
Access rights
Governance
mechanism based
interactions
Outcomes
Win-Win
Win-Lose
Lose-Win
Lose-Lose
People
Organization
Information
Technology
7

8. COMPLEXITY
INTERNAL FACTORS: PERSON LEVEL
▸Marketing theory focuses on consumer behavior
▸value co-creation with customers (Vargo and Lusch 2004,
2007)
▸Analyze provider-customer dyad interactions
▸Extended to a service system (Akaka and Vargo 2015;
Maglio and Spohrer 2013)
8

9. COMPLEXITY
INTERNAL FACTORS: (TRADITIONAL)
ORGANIZATIONAL LEVEL
▸Organization theory focuses on organization behavior (OB)
▸Contingency theory based OB
▸Bolman and Deal (2013) identifies four types of
organization frame
▸Structural, Human Resource, Political and Symbolic
frame, analyzing motivation, goal setting, communication
and decision making process
9

10. COMPLEXITY
FOUR INTERPRETATIONS OF ORGANIZATIONAL
PROCESSES (BOLMA & DEAL 2013)
Process
Structural
Frame
Human Resource
Frame
Political Frame Symbolic Frame
Motivation
Economic
incentives
Growth and self-
actualization
Coercion,
manipulation, and
seduction
Symbols and
celebrations
Goal
setting
Keep
organization
headed in the
right direction
Open
communications
and keep people
committed to
goals
Provide
opportunity for
individuals and
groups to express
interests
Develop
symbols and
shared values
Communic
ation
Transmit facts
and information
Exchange
information,
needs, and
feelings
Influence or
manipulate others
Tell stories
Decision
making
Rational
sequence to
produce correct
decision
Open process to
produce
commitment
Opportunity to
gain or exercise
power
Ritual to confirm
values and
provide
opportunities for
bonding
10

11. COMPLEXITY
INTERNAL FACTORS: UNDER COMPLEX
ENVIRONMENT
▸leadership theory as a visionary leader in a complex environment
▸Transformational leadership (Lowe, K. B., et al. 1996)
▸Innovation theory: R&D management -> open innovation
▸Design or "design thinking”: Creating new user experience (Brown
2008; Martin 2009; Won 2009; Gruber, De Leon, George and
Thompson 2015)
▸Global firms such as IBM, GE, P&G, and SAP have been
exploiting “design" as a tool for innovation
11

12. COMPLEXITY
DESIGN THINKING
▸“a discipline that uses the designer’s sensibility and methods
to match people’s needs with what is technologically feasible
and what a viable business strategy can convert into
customer value and market opportunity” Tim Brown (2009)
▸Economic value vs. Human-centered approach (Norman
2013)
▸Design thinking for service system: Service design
12

13. Design Thinking Institute(c) Takanori Kashino
Influence of Design Thinking on New IT Service/Product
Development:
Proposed Theoretical Model
Business
Unit
Customer
Orientation
Superordinat
e Identity
Group IND
Intrinsic
Motivation
Observing
Skill
New Product
Differentiation
Performance
Design
Thinking
IND
An inductive grounded theory study
Interviews with 19 professionals;
Engineers, Designers

14. Design Thinking Institute(c) Takanori Kashino
Influence of Design Thinking on New IT Service/Product
Development:
Structural Equation Modeling
Customer
Orientation
Superordinat
e Identity
Intrinsic
Motivation
Observing
Skill
New Product
Differentiation
Performance
Design
Thinking
.391***
n=123, ***p<0.001, ** p<0.01
χ2 =309.43, p<0.001, IFI=0.95,
CFI=0.95, SRMR=0.06, RMSEA=0.05
.515***
.641***
.631***
.504***
.262**
Business
Unit
Group INDIND

15. Design Thinking Institute(c) Takanori Kashino
Analysis
Level
Design
Scope
Business unit
Group / IND
Business Model
IT Service/Product
Micro
Macro
Nation / State
More than two
organizations
Policy
Alliance
Nation strategy
(Mazzucato, 2015)
Value creation, capture
(Lansiti & Levien, 2004)
OrganizationOrganizationMeso
Structure, Leadership
(O’Reilly & Tushman, 2016)
Experienced value
(Pine & Gilmore, 1998)
Development process
(Brown & Eisenhardt, 1995)
Related Research

16. RESEARCH QUESTIONS
1. Why and How a service system transforms? (not focus of
the paper, IASDR 2017)
2. Who is an initiator of the transformation? (focus of the paper)
3. What kinds of capability does an initiator have? (focus of the
paper)
16

17. METHOD
SERVICE SYSTEM FRAMEWORK
Context:External Factors(Politics, Economy, Society, Technology)
Macro view
(Societal)
Meso view
(Organizational)
Micro view
(Actor interaction)
Service System
Customer
Platform
Time
Service System’
Creator
Customer
Platform
Time’
Context:Internal Factors
Context:Internal
Factors
17
Configuration

18. METHOD
SERVICE SYSTEM FRAMEWORK: TEMPORAL
CHANGE OF EVOLUTION
Configuration
Customer Value Chain Analysis
(actor and value flow)
Internal Factors
Culture model
(human relationship)）
External Factors
PEST
(Politics, Economy, Society, Technology)
Step0Timeline Step1 Step2
Vision (Initiator)
18

19. Air事業の狙い −
• ユーザー数を増やし、エアレジを普
及させる。
• AirREGI の理念を拡張し、
店舗の業務を総合的にサポートする
「Airサービス」の基盤を構築する。
• 国内外へ更にAirサービスを拡張する
。
• 有料メニューの導入により、Airサー
ビスでのマネタイズを確立する。
RLS社の
内部要因
・
企業文化
（文化モデル）
CVCAの
特徴
−
• AirREG自体の普及を目的とした機能
提供（単独の機能提供）
• 他メディアコンテンツは、付加昨日
扱い
• リクルートライフスタイル他メディアコ
ンテンツの窓口としてのAirREGI
• AirREGIとしても、店舗サポートの幅広
い機能を提供
• 他社コンテンツもAirREGIを窓口と
して提供
外部要因
（PEST等）
Airサービス 将来Airサービス 拡充期AirREGI 導入期AirREGI 以前
起業家精神
ネットワーク環境の充実
電子マネーの普及 Apple Pay 開始
営業力の強さ（様々な業種の”店舗”とのネットワーク）
BとCをつなげ、双方の悩みを解決する
現在地
スマートフォン、iPad の普及
Eコマース化
東京オリンピックパ
ラリンピック
日本の生産性の低さ、
テクノロジーを使って
生産性を高めようという動き
定率減税
ICT化
Googleへの脅威
Airレジ チームの発足
リクルートライフスタイル生態系による、友好的なアライアンス
AirREGI生態系への他社からの友好的関与
クラウド会計の普及
SERVICE SYSTEM FRAMEWORK: Example AirREG (in Japanese) 19

20. 来店
サービス
検索
情報
メディア 力
広告料
¥
¥
AirREGI 以前（リボンモデル）
など
カスタマー 店舗
信頼
期待
文化モデル要素CVCAに文化モデル要素を追加 20

21. 来店
サービス
検索
情報
メディア 力
広告料
POS情報
Airレジ アプリ
カスタマー 店舗
¥
¥
アライアンス関係
AirREGI 導入期 モデル
アライアンス関係
（キャンペーン時には iPadも提供）
開発費¥
アライアンス関係
など
友好的
信頼
期待
文化モデル要素CVCAに文化モデル要素を追加 21

22. 来店
サービス
検索
情報
メディア 力
広告料
店舗の業務支援
サービス
・アプリ, レジドロワー
などの周辺機器
¥
¥
Air サービス拡充期 モデル（現在）
店舗の情報
・POS情報，予約状況など
カスタマー 店舗
iD
アライアンス関係
アライアンス関係
開発費¥
アライアンス関係
など
など
周辺機器購入代金
・レジドロワー，
レシートプリンターなど
¥
文化モデル要素CVCAに文化モデル要素を追加
信頼
総合力へ
の期待
友好的
友好的
期待
22

23. 来店
サービス
¥
Air サービスの将来 モデル
¥
カスタマー 店舗
XXXX
連携他社サービス
iD
などの既存コンテンツ
メディア 力
広告料
業務支援への
対価
¥
XX
連携他社
サービス
店舗の情報
・POS情報，予約状況など
周辺機器購入代金
・レジドロワー，
レシートプリンターなど
¥店舗の業務支援
サービス
・アプリ, レジドロワー
などの周辺機器
・有料メニュー
検索
情報
アライアンス関係
文化モデル要素CVCAに文化モデル要素を追加 23

24. METHOD
RESEARCH QUESTIONS & METHODS
▸Research questions
1. Who is an initiator, creating a new service system?
2. What kinds of capability does an initiator have?
▸Research methods: Case study (Yin 2003, Eisenhardt 1989)
• Snowpeak (B2C, goods, established)
• Instacart (B2C, service, start-up)
• GE (B2B, goods & service, established)
24

25. 25

26. CASE STUDY
SNOWPEAK
▸Designing and selling outdoor equipment
▸“Snowpeak Way”
26

27. CASE STUDY
INSTACART
27

28. CASE STUDY
GE PREDIX
28

29. FINDINGS
IDENTIFIED INITIATOR TYPES
Firm Snowpeak Instacart GE Digital
Visionary
Leader
CEO (Business
model transforming to
direct sales)
Founders and CEO
who start up the firm.
CEO (Business
model transforming
to SW firm)
Product
Manager
Product Manager
(planning, designing,
and manufacturing
management of one
product)
Product manager
has responsibilities
to decide the product
direction.
Designer
Designer (improving
any aspects from
customers point of
views)
One of important
members in a project
29

30. TYPE OF SERVICE SYSTEM
SERVICE SYSTEM VIEWPOINTS
Complexities
Systems Simple/closed Complex/open
Jackson (System of
Systems Methodologies
(SOSM))
Interactions
Interactions Value proposition based Governance based Spohrer, et al.
Value sharing
condition
Unitary Pluralist Coercive
Jackson (System of
Systems Methodologies
(SOSM))
Scopes
System layer Micro: People
Meso:
Organization
Macro: Social
systems
S3FIRE
Layer of design
Components,
Products
(Traditional
designing)
Systems
Community (Political
and social aspects)
Jones
Ref: Spohrer, J. C., Demirkan, H., and Krishna, V., 2011, Service and Science, In H. Demirkan, J.C. Spohrer and V. Krishna, Eds. The Science of Service Systems, Springer, pp.325-358.
Sawatani, Y., Arai, T., and Murakami, T., Creating Knowledge Structure for Service Science, 2013, PICMET
Jackson, Michael C., 2003, Systems Thinking: Creative Holism for Managers, John Wiley & Sons Ltd., UK
Ueda, K., Takenaka, T., Vancza, J., and Monostori, L., 2009, Value creation and decision-making in sustainable society, CIRP Annuals, Manufacturing Technology 58, pp.681-700
Jones, C.,1992, DESIGN METHODS, John Wiley & Sons.
30

31. TYPE OF SERVICE SYSTEM
SYSTEM LAYER
▸The first layer, Micro, expresses a one to one relationship,
mainly person-to-person interactions. From business point of
views, it shows operational relationship.
▸The second layer, Meso, is for an n-to-n relationship, mainly
organizational interactions, which shows strategy and
collaborative organizational policy.
▸The third layer, Macro, is for the social system and
policymaking.
31

32. Closed system Open system
Systems with value sharing condition
Shared Conflicted
System
layer
Micro: People
Meso:
Organization
Macro: Social
systems
NEW
ECOSYSTEM
THINKINGGE instacart
REFRA
MINGsnow peak
FINDINGS
SERVICE SYSTEM TYPE
32
VISIONARY LEADER
Innovation culture embedded organization
PRODUCT MANAGER DESIGNER

33. FINDINGS
DESIGN DRIVEN COMPANY
SERVICE SYSTEM
OBJECT
PROCESS
ORGANIZATION
SERVICE SYSTEM
OBJECT
PROCESS
ORGANIZATION
EXPERIENCE
STORY STORY
EXPERIENCE
SERVICE SYSTEM
OBJECT
receiver
provider
DESIGNER

34. FUTURE RESEARCH
DESIGN DRIVEN COMPANY
BUSINESS MODEL
SERVICE SYSTEM
OBJECT
PROCESS
ORGANIZATION
AN ORGANIZATIONAL LEVEL
ATTACH・DEFENSE
WHOLE COMPANY LEVEL
ATTACK
VISIONARY LEADER
PRODUCT MANAGER
DESIGNER

35. Thank you!
35