1. The document discusses service science and its focus on service systems and value co-creation. 2. It outlines foundational premises of service science including the configuration of resources and calculation of value from multiple stakeholder perspectives. 3. Future directions discussed include challenges of local optimization not equaling global optimization and real-world problems not equating to single discipline problems.

1. Service Science: Progress & Directions Working Together to Build a Smarter Planet Dr. James (“Jim”) C. Spohrer [email_address] Innovation Champion and Director, IBM University Programs WW IJCSS Taipei, Taiwan, May 26th, 2011

2. IBM operates in 170 countries around the globe IBM has 425,000 employees worldwide 2010 Financials Revenue - $ 99.9B Net Income - $ 14.8B EPS - $ 11.52 Net Cash - $11.7B 21% of IBM’s revenue in growth market countries; growing at 13% in late 2010 Number 1 in patent generation for 18 consecutive years ; 5,896 US patents awarded in 2010 More than 40% of IBM’s workforce conducts business away from an office 5 Nobel Laureates 9 time winner of the President’s National Medal of Technology & Innovation - latest award for Blue Gene Supercomputer “ Let’s Build a Smarter Planet" The Smartest Machine On Earth 100 Years of Business & Innovation

3. Outline Progress: What we know about service systems Stimulus: Service Growth & Product-Service Systems The World & IBM Response: Service Science & Innovation Priorities Cambridge University Report, UK Royal Society Report, Arizona State University Report, Handbook of Service Science, Open Service Innovation, etc. Better Premises: Service systems premises (distill what we know) Directions: Regional Innovation Ecosystems (Smarter Planet) Stimulus : In general, local optimization does not equal global optimizations Response: Holistic Service Systems & Entity Architecture (SOA) Quality of Life: Our growing dependence on networks of interconnected product-service systems Local optimization does not equal global optimization Local problems can cascade into global significance Global competition for talent (“people vote with feet”) Better Tools : CAD Tool+ for Regional Innovation Ecosystems How to visualize Service Science? Systems & Discipline Knowledge What kind of tool(s)? Global, Real-time, CAD Where is the “Real Science”? Evolution of hierarchical complexity

4. 42% 64 33 3 1.4 Germany 37% 26 11 63 2.1 Bangladesh 19% 20 10 70 1.6 Nigeria 45% 67 28 5 2.2 Japan 64% 69 21 10 2.4 Russia 61% 66 14 20 3.0 Brazil 34% 39 16 45 3.5 Indonesia 23% 76 23 1 5.1 U.S. 35% 23 17 60 14.4 India 142% 29 22 49 25.7 China 40yr Service Growth S % G % A % Labor % WW Nation World’s Large Labor Forces A = Agriculture, G = Goods, S = Service 2010 2010 CIA Handbook, International Labor Organization Note: Pakistan, Vietnam, and Mexico now larger LF than Germany US shift to service jobs (A) Agriculture: Value from harvesting nature (G) Goods: Value from making products (S) Service: Value from IT augmented workers in smarter systems that create benefits for customers and sustainably improve quality of life. Service Growth: The World

5. Rethinking “Product-Service Systems” F B Service System Entity Product-Service-System B F SSE B F SSE B F SSE B F SSE B F SSE B F SSE B F SSE B F SSE B F SSE B F SSE B F F F B B Service Business Product Business Front-Stage Marketing/Customer Focus Back-Stage Operations/Provider Focus Based on Levitt, T (1972) Production-line approach to service. HBR. e.g., IBM e.g., Citibank “ Everybody is in service... Something is wrong… The industrial world has changed faster than our taxonomies.”.

6. High Tech Car Factory as a Product-Service System http://www.youtube.com/watch?v=nd5WGLWNllA

7. Service Growth: IBM B2B Service Projects: IT (data center, call centers) & business process outsourcing/reengineering, systems integration, organizational change, etc. What do IBM Service Professionals Do? Run things on behalf of customers, help Transform customers to adopt best practices, and Innovate with customers. Revenue Growth by Segment Also, see Chesbrough’s “Real Men Have Fabs” article – service strategy for manufacturers

8. Stakeholder Priorities Education Research Business Government Service Systems Customer-provider interactions that enable value cocreation Dynamic configurations of resources: people, technologies, organisations and information Increasing scale, complexity and connectedness of service systems B2B, B2C, C2C, B2G, G2C, G2G service networks Service Science To discover the underlying principles of complex service systems Systematically create, scale and improve systems Foundations laid by existing disciplines Progress in academic studies and practical tools Gaps in knowledge and skills Develop programmes & qualifications Service Innovation Growth in service GDP and jobs Service quality & productivity Environmental friendly & sustainable Urbanisation & aging population Globalisation & technology drivers Opportunities for businesses, governments and individuals Skills & Mindset Knowledge & Tools Employment & Collaboration Policies & Investment Develop and improve service innovation roadmaps, leading to a doubling of investment in service education and research by 2015 Encourage an interdisciplinary approach The white paper offers a starting point to - Priorities: Succeeding through Service Innovation - A Framework for Progress ( http://www.ifm.eng.cam.ac.uk/ssme/ ) Source: Workshop and Global Survey of Service Research Leaders (IfM & IBM 2008) Glossary of definitions, history and outlook of service research, global trends, and ongoing debate 1. Emerging demand 2. Define the domain 3. Vision and gaps 4. Bridge the gaps 5. Call for actions

9. UK Royal Society Report (2009) http://royalsociety.org/Hidden-wealth-The-contribution-of-science-to-service-sector-innovation/

10. Priorities: Research Framework for the Science of Service (2010) Source: Global Survey of Service Research Leaders (Ostrom et al 2010) Pervasive Force: Leveraging Technology to Advance Service Strategy Priorities Execution Priorities Fostering Service Infusion and Growth Improving Well-Being through Transformative Service Creating and Maintaining a Service Culture Stimulating Service Innovation Enhancing Service Design Optimizing Service Networks and Value Chains Effectively Branding and Selling Services Enhancing the Service Experience through Cocreation Measuring and Optimizing the Value of Service Development Priorities

11. Service Dominant Logic (SDL): Beneficial Worldview Service is the application of competences for the benefit of another entity Service is exchanged for service Value is always co-created Goods are one appliance for delivery of outcomes All economies are service economies All businesses are service businesses Vargo, S. L. & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing, 68 , 1 – 17. “ People do not really want a ¾” drill, they really want a ¾” hole.” - Leavitt Resource Integrator/Beneficiary (“Firm”) Resource Integrator/Beneficiary (“Customer”) Value Co-creation Value Configuration Density

12. Conceptual Framework Resources: People, Technology, Information, Organizations Stakeholders: Customers, Providers, Authorities, Competitors Measures: Quality, Productivity, Compliance, Sustainable Innovation Access Rights: Own, Lease, Shared, Privileged Ecology (Populations & Diversity) Entities (Service Systems) Interactions (Service Networks) Outcomes (Value Changes) Value Proposition (Offers/Reconfig/Incentives/Risks) Governance Mechanism (Rules/Constraints/Penalties/Risks) Access Rights (Relationships) Measures (Rankings of Entities) Resources (Roles in Processes, Specialization) Stakeholders (Valuation Perspectives) win-win lose-lose win-lose lose-win Identity (Aspirations/Lifecycle/Risks) Reputation (Opportunities/Variety/Risks ) prefer sustainable non-zero-sum outcomes

13. Service system entities configure four types of resources First foundational premise of service science: Service system entities dynamically configure four types of resources Resources are the building blocks of entity architectures Named resources are: Physical or Not-Physical Physicist resolve disputes Named resources have: Rights or No Rights Judges resolve disputes Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ. . Formal service systems can contract Informal service systems can promise/commit Trends & Countertrends (Evolve and Balance): Informal <> Formal Social <> Economic Political <> Legal Routine Cognitive Labor <> Information Technology Routine Physical Labor <> Mechanical Technology Transportation (Atoms) <> Communication (Bits) Qualitative (Tacit) <> Quantitative (Explicit) Physical Not-Physical Rights No-Rights 2. Technology/ Environment 4.. Shared Information 1. People 3. Organizations

14. Service system entities calculate value from multiple stakeholder perspectives Second foundational premise of service science Service system entities calculate value from multiple stakeholder perspectives Value propositions are the building blocks of service networks A value propositions can be viewed as a request from one service system to another to run an algorithm (the value proposition) from the perspectives of multiple stakeholders according to culturally determined value principles. The four primary stakeholder perspectives are: customer, provider, authority, and competitor Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ. . Value propositions coordinate & motivate resource access Model of competitor: Does it put us ahead? Can we stay ahead? Does it differentiate us from the competition? Will we? (invest to make it so) Strategic Sustainable Innovation (Market share) 4.Competitor (Substitute) Model of authority: Is it legal? Does it compromise our integrity in any way? Does it create a moral hazard? May we? (offer and deliver it) Regulated Compliance (Taxes and Fines) 3.Authority Model of self: Does it play to our strengths? Can we deliver it profitably to customers? Can we continue to improve? Can we? (deliver it) Cost Plus Productivity (Profit) 2.Provider Model of customer: Do customers want it? Is there a market? How large? Growth rate? Should we? (offer it) Value Based Quality (Revenue) 1.Customer Value Proposition Reasoning Basic Questions Pricing Decision Measure Impacted Stakeholder Perspective (the players)

15. Service system entities reconfigure access rights to resources by mutually agreed to value propositions Third foundational premise of service science Service system entities reconfigure access rights to resources by mutually agreed to value propositions Access rights are the building blocks of the service ecology (culture and information) Access rights Access to resources that are owned outright (i.e., property) Access to resource that are leased/contracted for (i.e., rental car, home ownership via mortgage, insurance policies, etc.) Shared access (i.e., roads, web information, air, etc.) Privileged access (i.e., personal thoughts, inalienable kinship relationships, etc.) service = value-cocreation B2B B2C B2G G2C G2B G2G C2C C2B C2G *** provider resources Owned Outright Leased/Contract Shared Access Privileged Access customer resources Owned Outright Leased/Contract Shared Access Privileged Access OO SA PA LC OO LC SA PA S A P C Competitor Provider Customer Authority value-proposition change-experience dynamic-configurations (substitute) time

16. Service system entities interact to create ten types of outcomes Four possible outcomes from a two player game ISPAR generalizes to ten possible outcomes win-win: 1,2,3 lose-lose: 5,6, 7, maybe 4,8,10 lose-win: 9, maybe 8, 10 win-lose: maybe 4 lose-win (coercion) win-win (value-cocreation) lose-lose (co-destruction) win-lose (loss-lead) Win Lose Provider Lose Win Customer ISPAR descriptive model

17. Service system entities learn to systematically exploit info & tech March, J.G. (1991) Exploration and exploitation in organizational learning. Organizational Science. 2(1).71-87. Sanford, L.S. (2006) Let go to grow: Escaping the commodity trap. Prentice Hall. New York, NY. L Learning Systems (“Choice & Change”) Exploitation (James March) Exploration (James March) Run/Practice-Reduce (IBM) Transform/Follow (IBM) Innovate/Lead (IBM) Operations Costs Maintenance Costs Incidence Planning & Response Costs (Insure) Incremental Radical Super-Radical Internal External Interactions “ To be the best, learn from the rest” “ Double monetize, internal win and ‘sell’ to external” “ Try to operate inside the comfort zone”

18. Routine Manual and Routine Cognitive Jobs Go Away.. Levy, F, & Murnane, R. J. (2004). The New Division of Labor: How Computers Are Creating the Next Job Market. Princeton University Press. Based on U.S. Department of Labor’ Dictionary of Occupational Titles (DOT) Expert Thinking (deep) Complex Communication (broad) Routine Manual Non-routine Manual Routine Cognitive Increasing usage of job descriptive terms

19. Service system entities are physical-symbol systems Service is value cocreation. Service system entities reason about value. Value cocreation is a kind of joint activity. Joint activity depends on communication and grounding. Reasoning about value and communication are (often) effective symbolic processes.

20. Summary Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ. . 5. Exploit information & technology 6. Physical-Symbol Systems Physical Not-Physical Rights No-Rights 2. Technology 4.. Shared Information 1. People 3. Organizations 1. Dynamically configure resources Model of competitor: Does it put us ahead? Will we? Strategic Sustainable Innovation 4.Competitor Model of authority: Is it legal? May we? Regulated Compliance 3.Authority Model of self: Does it play to our strengths? Can we? Cost Plus Productivity 2.Provider Model of customer: Do customers want it? Should we? Value Based Quality 1.Customer Reasoning Questions Pricing Measure Impacted Stakeholder Perspective 2. Value from stakeholder perspectives S A P C 3. Reconfigure access rights 4. Ten types of outcomes (ISPAR)

21. Future Directions: Two big challenges 1. In general, O L ≠ O G In general, Local Optimization does not equal Global Optimization In nested, networked, complex human systems, careless local optimizations can degrade overall performance. However, perhaps for some entity architectures and rules the odds of global optimization from appropriate local optimizations can be increased. In this respect, are some entity architectures (Є N ) better than others? 2. In general, P RW ≠ P SD or P SS or P SC In general, A Real-World Problem does not equal a Single Discipline, System, or Culture Problem In nested, networked, complex human systems, solving a real-world problem only rarely equates to solving a single-discipline, single-system, or a single-culture problem. However, perhaps for an important set of real-world problems, some frameworks are better integrated across disciplines, systems, and cultures, and so do a better job generating valid, actionable recommendations for stakeholders. In this respect, are some frameworks (F N ) better than others? Spohrer, J, P Pichiocchi, C Bassano (2011) Three frameworks for service research: exploring multilevel governance in nested, networked systems . Naples Service Forum, Capri, Italy. Source: Roughgarden, 2005. A B C upper (x) = 1 C lower (y) = y x = % drivers on upper road y = % drivers on lower road where x + y = 1 Expected commute time = x*C U (x) + y*C L (y) E(y) = (1-y)*1+y*y E(Selfish, y=1) = 0*1+1*1 = 1.0 hour E(Random, y=0.5) =0.5*1+0.5*0.5 = 0.75 hours

22. Approach to second challenge: T-shaped people & SSME+D SSME+D = Service Science, Management, Engineering + Design Many disciplines (understanding & communications) Many systems (understanding & communications) Deep in one discipline (analytic thinking & problem solving) Deep in one system (analytic thinking & problem solving) Many team-oriented service projects completed (resume: outcomes, accomplishments & awards)

23. What is a Service System? What is Service Science? …customers just name <your favorite provider> …researchers just name <your favorite discipline> Economics & Law Design/ Cognitive Science Systems Engineering Operations Computer Science/ Artificial Intelligence Marketing “ a service system is a human-made system to improve customer-provider interactions, or value-cocreation” “ service science is the interdisciplinary study of service systems & value-cocreation”

24. How to visualize service science? The Systems-Disciplines Matrix disciplines systems Systems that focus on flows of things Systems that govern Systems that support people’s activities transportation & supply chain water & waste food & products energy & electricity building & construction healthcare & family retail & hospitality banking & finance ICT & cloud education &work city secure state scale nation laws social sciences behavioral sciences management sciences political sciences learning sciences cognitive sciences system sciences information sciences organization sciences decision sciences run professions transform professions innovate professions e.g., econ & law e.g., marketing e.g., operations e.g., public policy e.g., game theory and strategy e.g., psychology e.g., industrial eng. e.g., computer sci e.g., knowledge mgmt e.g., stats & design e.g., knowledge worker e.g., consultant e.g., entrepreneur stakeholders Customer Provider Authority Competitors resources People Technology Information Organizations change History (Data Analytics) Future (Roadmap) value Run Transform (Copy) Innovate (Invent) Starting Point 1: The Stakeholders (As-Is) Starting Point 2: Their Resources (As-Is) Change Potential: Thinking (Has-Been & Might-Become) Value Realization: Doing (To-Be)

25. Job Roles: IBM Building Smarter Enterprises & A Smarter Planet https://jobs3.netmedia1.com/cp/find.ibm.jobs/location/ 1. Consultant (trusted advisor to customer) a value proposition to address problems or opportunities and enhance value co-creation relationships 2. Sales a signed contract that defines work, outcomes, solution, rewards and risks for all parties 4. Project Manager (often with co-PM from customer side) a detailed project plan that balances time, costs, skills availability, and other resources, as well as adaptive realization of plan 3. Architect (systems engineer, IT & enterprise architect) An elegant solution design that satisfies functional and non-functional constraints across the system life-cycle 5. Specialists (systems engineer, Research, engineer, Industry specialist, application, technician, data, analyst, professional, agent) a compelling working system (leading-edge prototype systems from Research) ~10% ~10% ~5% ~5% ~45% 6. Enterprise Operations Administrative Services, Other, Marketing & Communications Finance, Supply Chain, Manufacturing, Human Resources, Legal, General Executive Management ~25% IBM Employees ~10% Consultant ~10% Sales ~5% Architect ~5% Project Manager ~45% Specialists ~25% Enterprise Operations Project Mix From 90-10 to 80-20: B2B – Business to Business B2G – Business to Government

26. Approach to first challenge: Smarter Planet & SSME+D INSTRUMENTED We now have the ability to measure, sense and see the exact condition of practically everything. INTERCONNECTED People, systems and objects can communicate and interact with each other in entirely new ways. INTELLIGENT We can respond to changes quickly and accurately, and get better results by predicting and optimizing for future events. IT NETWORKS WORKFORCE PRODUCTS SUPPLY CHAIN COMMUNICATIONS TRANSPORTATION BUILDINGS

27. Our planet is a complex, dynamic, highly interconnected $54 Trillion system-of-systems (OECD-based analysis) Communication $ 3.96 Tn Transportation $ 6.95 Tn Leisure / Recreation / Clothing $ 7.80 Tn Healthcare $ 4.27 Tn Food $ 4.89 Tn Infrastructure $ 12.54 Tn Govt. & Safety $ 5.21 Tn Finance $ 4.58 Tn Electricity $ 2.94 Tn Education $ 1.36 Tn Water $ 0.13 Tn Global system-of-systems $54 Trillion (100% of WW 2008 GDP) Same Industry Business Support IT Systems Energy Resources Machinery Materials Trade Legend for system inputs Note: 1. Size of bubbles represents systems’ economic values 2. Arrows represent the strength of systems’ interaction Source: IBV analysis based on OECD This chart shows ‘systems‘ (not ‘industries‘)  Our planet is a complex system-of-systems 1 Tn

28. Economists estimate, that all systems carry inefficiencies of up to $15 Tn, of which $4 Tn could be eliminated How to read the chart: For example, the Healthcare system‘s value is $4,270B. It carries an estimated inefficiency of 42%. From that level of 42% inefficiency, economists estimate that ~34% can be eliminated (= 34% x 42%).  We now have the capabilities to manage a system-of-systems planet Source: IBM economists survey 2009; n= 480 Global economic value of $4 Trillion 7% of WW 2008 GDP Improvement potential $15 Trillion 28% of WW 2008 GDP Inefficiencies $54 Trillion 100% of WW 2008 GDP System-of-systems System inefficiency as % of total economic value Improvement potential as % of system inefficiency Education 1,360 Building & Transport Infrastructure 12,540 Healthcare 4,270 Government & Safety 5,210 Electricity 2,940 Financial 4,580 Food & Water 4,890 Transportation (Goods & Passenger) 6,950 Leisure / Recreation / Clothing 7,800 Communication 3,960 Analysis of inefficiencies in the planet‘s system-of-systems Note: Size of the bubble indicate absolute value of the system in USD Billions 42% 34% This chart shows ‘systems‘ (not ‘industries‘)

29. What improves Quality-of-Life? Product-Service System Innovations A. Systems that focus on flow of things that humans need (~15%*) 1. Transportation & supply chain 2. Water & waste recycling/Climate & Environment 3. Food & products manufacturing 4. Energy & electricity grid/Clean Tech 5. Information and Communication Technologies (ICT access) B. Systems that focus on human activity and development (~70%*) 6. Buildings & construction (smart spaces) (5%*) 7. Retail & hospitality/Media & entertainment/Tourism & sports (23%*) 8. Banking & finance/Business & consulting (wealthy) (21%*) 9. Healthcare & family life (healthy) (10%*) 10. Education & work life/Professions & entrepreneurship (wise) (9%*) C. Systems that focus on human governance - security and opportunity (~15%*) 11. Cities & security for families and professionals (property tax) 12. States /regions & commercial development opportunities/investments (sales tax) 13. Nations /NGOs & citizens rights/rules/incentives/policies/laws (income tax) 20/10/10 0/19/0 2/7/4 2/1/1 7/6/1 1/1/0 5/17/27 1/0/2 24/24/1 2/20/24 7/10/3 5/2/2 3/3/1 0/0/0 1/2/2 Quality of Life = Quality of Service + Quality of Jobs + Quality of Investment-Opportunities * = US Labor % in 2009. “ 61 Service Design 2010 (Japan) / 75 Service Marketing 2010 (Portugal)/78 Service-Oriented Computing 2010 (US)”

30. Regional Innovation Ecosystems & Holistic Service Systems http://www.service-science.info/archives/1056 Examples: Nations, States, Cities, Universities, Luxury Hotels, Cruise Ships, Households Subsystems: Transportation, Water, Food, Energy, Communications, Buildings, Retail, Finance, Health, Education, Governance, etc. Definition: A service system that can support its primary populations, independent of all external service systems, for some period of time, longer than a month if necessary, and in some cases, indefinitely Balance independence with interdependence, without becoming overly dependent For-profits Non-profits Start-Ups ~25-50% of start-ups are new IT-enabled service offerings SaaS PaaS IaaS http://www.thesrii.org Largest? Smallest? Nation State/Province City/Region Hospital Medical Research University Colleges K-12 Luxury Resort Hotels Family (household ) Person (professional )

31. Corning: A Day Made of Glass http://www.youtube.com/watch?v=6Cf7IL_eZ38

32. Luxury Hotels as Holistic Service Systems: All the systems http://www.youtube.com/watch?v=Hm7MeZlS5fo

33. A. Flow of things 1. Transportation : Traffic congestion; accidents and injury 2. Water : Access to clean water; waste disposal costs 3. Food : Safety of food supply; toxins in toys, products, etc. 4. Energy : Energy shortage, pollution 5. Information : Equitable access to info and comm resources B. Human activity & development 6. Buildings : Inefficient buildings, environmental stress (noise, etc.) 7. Retail : Access to recreational resources 8. Banking : Boom and bust business cycles, investment bubbles 9. Healthcare : Pandemic threats; cost of healthcare 10. Education : High school drop out rate; cost of education C. Governing 11. Cities : Security and tax burden 12. States : Infrastructure maintenance and tax burden 13. Nations : Justice system overburdened and tax burden Cities as Holistic Service Systems: All the systems Example: Singapore Example: Songdo (~$35B/~8yrs) Population Challenges Careers Opportunities

34. Universities as Holistic Service Systems: All the systems A. Flow of things 1. Transportation : Traffic congestion; parking shortages. 2. Water : Access costs; reduce waste 3. Food : Safety; reduce waste. 4. Energy : Access costs; reduce waste 5. Information : Cost of keeping up best practices. B. Human activity & development 6. Buildings : Housing shortages; Inefficient buildings 7. Retail : Access and boundaries. Marketing. 8. Banking : Endowment growth; Cost controls 9. Healthcare : Pandemic threat. Operations. 10. Education : Cost of keeping up best practices.. C. Governing 11. Cities : Town & gown relationship. 12. States : Development partnerships.. 13. Nations : Compliance and alignment.

35. Universities & Regional Innovation Ecosystems (Data) % GDP and % Top-500-Universities Strong Correlation (2009 Data): National GDP and University Rankings http://www.upload-it.fr/files/1513639149/graph.html

36. University Trend: More Locally Connected Research Centers University sub-systems Disciplines in Schools (circles) Innovation Centers (squares) E.g., CMU Website (2009) “ Research Centers: where it all happens – to solve real-world problems” Disciplines in Schools Award degrees Single-discipline focus Research discipline problems Innovation Centers (ICs) Industry/government sponsors Multi-disciplinary teams Research real-world systems D D D D D D Engineering School Social Sciences, Humanities Professional Studies Business School water & waste transportation health energy/grid e-government Science & Mathematics I-School Design food & supply chain

37. University & Regional Innovation Ecosystems (Why?) School of Public Policy School of Engineering School of Business Mngmnt School of Medicine School of Education School of Architecture School of Urban Planning School of Hospitality School of Information School of Science & Arts University: The Heart of Regional Innovation Ecosystems Incubator & Start-Ups $ Cities & Public Safety Government Service to Individuals & Institutions Education Transportation Energy ICT (Computing & Communications) Retail & Hospitality Food & Products Health Building Finance University: The Heart of Regional Innovation Ecosystems

38. Accelerating Regional Innovation: Universities as “Living Labs” for Host Cities UNIVERSITIES: Research Centers & Real-World Systems CITIES/METRO REGIONS: Universities Key to Long-Term Economic Development

39. Universities connect information flows between other HSS, cities, states, nations World as System of Systems World (light blue - largest) Nations (green - large) Regions (dark blue - medium) Cities (yellow - small) Universities (red - smallest) Cities as System of Systems Transportation & Supply Chain Water & Waste Recycling Food & Products ((Nano) Energy & Electricity Information /ICT & Cloud (Info) Buildings & Construction Retail & Hospitality/Media & Entertainment Banking & Finance Healthcare & Family (Bio) Education & Professions (Cogno) Government (City, State, Nation) Nations: Innovation Opportunities GDP/Capita (level and growth rate) Energy/Capita (fossil and renewable) IBM UP WW: Tandem Awards: Increasing university linkages (knowledge exchange interactions) Developed Market Nations (> $20K GDP/Capita) Emerging Market Nations (< $20K GDP/Capita)

40. Need tool: Global Service Ecology Simulator, Dashboard, CAD Tool 2000 2010 2020 2030 Log Entities 6 9 12 15 Projected Simulation Capability Earth Simulator Universe Simulation Brain Simulation Heart Simulation Global Service Ecology Simulation – 2016? Every decade both HPC and PC platforms increase complex simulation capabilities by 1000x. - HPC: (2000 10 6 ), (2010 10 9 ), (2020 10 12 ), (2030 10 15 ) … - PC: (2000 10 3 ), (2010 10 6 ), (2020 10 9 ), (2030 10 12 ) …

41. Growing Importance of HPC to Universities HPC = High Performance Computing (2006 NSF Data) Average NSF funding: $30,354,000 Average NSF funding: $7,781,000 95 of Top NSF-funded Universities with HPC 98 of Top NSF-funded Universities w/out HPC With HPC Without HPC Journal of Information Technology, Volume 10, Issue 2 (accepted) www.jiti.net

42. Smarter = Sustainable Innovation (reduce waste, expand capabilities) Computational System Building Smarter Technologies Requires investment roadmap Service Systems: Stakeholders & Resources 1. People 2. Technology 3. Shared Information 4. Organizations connected by win-win value propositions Building Smarter Universities & Cities Requires investment roadmap

43. The Future of the University 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. Maglio, P., Srinivasan, S., Kreulen, J.T., Spohrer, J. (2006), Service systems, service scientists, SSME, and innovation. Communications of the ACM, 49(7), 81-85.

44. Time ECOLOGY 14B Big Bang (Natural World) 10K Cities (Human-Made World) Sun writing (symbols and scribes) Earth written laws bacteria (uni-cell life) sponges (multi-cell life) money (coins) universities clams (neurons) trilobites (brains) printing press (books) steam engine Where is the “Real Science”? In the interdisciplinary sciences that study the natural and human-made worlds… Unraveling the mystery of evolving hierarchical-complexity in new populations… To discover the world’s structures and mechanisms for computing non-zero-sum Value-CoCreation (VCC) Architectures & Holistic Service Systems (HSS) 200M bees (social division-of-labor) 60 transistor

45. Urban-Age.Net Currently, the world’s top 30 cities generate 80% of the world’s wealth. The Urban Age For the first time in history more than 50% the earth’s population live in cities - by 2050 it will be 75% The Endless City

46. Edu-Impact.Com: Growing Importance of Universities with Large, Growing Endowments “ When we combined the impact of Harvard’s direct spending on payroll, purchasing and construction – the indirect impact of University spending – and the direct and indirect impact of off-campus spending by Harvard students – we can estimate that Harvard directly and indirectly accounted for nearly $4.8 billion in economic activity in the Boston area in fiscal year 2008, and more than 44,000 jobs.”

47. World Population & Product-Service System Scaling

48. Thank-You! Questions? Dr. James (“Jim”) C. Spohrer Director, IBM University Programs (IBM UP) WW spohrer@us.ibm.com “ Instrumented, Interconnected, Intelligent – Let’s build a Smarter Planet.” – IBM “ If we are going to build a smarter planet, let’s start by building smarter cities” – CityForward.org “ Universities are major employers in cities and key to urban sustainability.” – Coalition of USU “ Cities learning from cities learning from cities.” – Fundacion Metropoli “ The future is already here… It is just not evenly distributed.” – Gibson “ The best way to predict the future is to create it/invent it.” – Moliere/Kay “ Real-world problems may not/refuse to respect discipline boundaries.” – Popper/Spohrer “ Today’s problems may come from yesterday’s solutions.” – Senge “ History is a race between education and catastrophe.” – H.G. Wells “ The future is born in universities.” – Kurilov “ Think global, act local.” – Geddes

49. Priority 1: Urban Sustainability & Service Innovation Centers A. Research: Holistic Modeling & Analytics of Service Systems Modeling and simulating cities will push state-of-the-art capabilities for planning interventions in complex system of service systems Includes maturity models of cities, their analytics capabilities, and city-university interactions Provides an interdisciplinary integration point for many other university research centers that study one specialized type of system Real-world data and advanced analytic tools are increasingly available B. Education: STEM (Science Tech Engineering Math) Pipeline & LLL City simulation and intervention planning tools can engage high school students and build STEM skills of the human-made world (service systems) Role-playing games can prepare students for real-world projects LLL = Life Long Learning C. Entrepreneurship: Job Creation City modeling and intervention planning tools can engage university students and build entrepreneurial skills Grand challenge competitions can lead to new enterprises

50. PetCities = Petri-Dish Cities Citizen Population: 10 billion people in total Hierarchical Scales: 10 continents with 10 nations with 10 states with 10 cities each PetCities: Each city has 8 apartment buildings (orange) with 125 floors Apartments: Each floor has 1000 citizens, grouped into four 250-citizen neighborhoods In-Use Occupied De-construction Re-construction water food energy communications buildings retail finance health education family governance sports transportation open space

51. Fun: CityOne Game to Learn “CityInvesting” Serious Game to teach problem solving for real issues in key industries, helping companies to learn how to work smarter. Energy, Water, Banking, Retail http://www.ibm.com/cityone

52. Population growth per hour in major cities

53. Example: San Jose, California (USA)

54. Regional Innovation Ecosystems: NY State Top Employers (Healthy, Frugal, Wealthy, Innovative, Wealthy, Wise…)

55. Understanding the Human-Made World See Paul Romer’s Charter Cities Video: http://www.ted.com/talks/paul_romer.html Also see: Symbolic Species, Deacon Company of Strangers, Seabright Sciences of the Artificial, Simon

56. Well Being Index January 10, 2011 By Mark Whitehouse at [email_address] One approach is to enhance GDP with other objective factors such as inequality, leisure and life expectancy. In a paper presented Saturday at the American Economic Association meeting, Stanford economists Peter Klenow and Charles Jones found that doing so can make a big difference. Making everybody work 120 hours a week could radically boost a country's GDP per capita, but it wouldn't make people happier. Removing pollution limits could boost GDP per hour worked, but wouldn't necessarily lead to a world we'd want to live in.

57. Why 13 types of service systems? K-12 STEM and the human-made world “ Imagine a better service system, and use STEM language to explain why it is better” STEM = Science, Technology, Engineering, and Mathematics See NAE K-12 engineering report: http://www.nap.edu/catalog.php?record_id=12635 See Challenge-Based Learning: http://www.nmc.org/news/nmc/nmc-study-confirms-effectiveness-challenge-based-learning Challenge-based Project to Design Improved Service Systems K - Transportation & Supply Chain 1 - Water & Waste Recycling 2 - Food & Products (Nano) 3 - Energy & Electric Grid 4 – Information /ICT & Cloud (Info) 5 - Buildings & Construction 6 – Retail & Hospitality/Media & Entertainment (tourism) 7 – Banking & Finance/Business & Consulting 8 – Healthcare & Family Life (Bio) 9 - Education & Work Life/Jobs & Entrepreneurship (Cogno) 10 – City (Government) 11 – State /Region (Government) 12 – Nation (Government) Higher Ed – T-shaped teamwork, deep & broad education Professional Life – T-shaped teamwork, series of projects Systems that focus on Governing Systems that focus on Human Activities and Development Systems that focus on Flow of things

58. NAE’s Engineering Grand Challenges A. Systems that focus on flow of things humans need 1. Transportation & Supply Chain Restore and enhance urban infrastructure 2. Water & Waste/Climate & Green tech Provide access to clear water 3. Food & Products Manager nitrogen cycle 4. Energy & Electricity Make solar energy economical Provide energy from fusion Develop carbon sequestration methods 5. Information & Communication Technology Enhance virtual reality Secure cyberspace Reverse engineer the brain B. Systems that focus on human activity & development 6. Buildings & Construction (smart spaces) Restore and enhance urban infrastructure 7. Retail & Hospitality/Media & Entertainment (tourism) Enhance virtual reality 8. Banking & Finance/Business & Consulting 9. Healthcare & Family Life Advance health informatics Engineer better medicines Reverse engineer the brain 10. Education & Work Life/Jobs & Entrepreneurship Advance personalized learning Engineer the tools of scientific discovery C. Systems that focus on human governance 11. City & Security Restore and improve urban infrastructure Secure cyberspace Prevent nuclear terror 12. State /Region & Development 13. Nation & Rights

59. Where are the opportunities? Everywhere!

60. Vision for the Educational Continuum: Individuals & Institutions Learning The Educational Continuum http://www-935.ibm.com/services/us/gbs/bus/html/education-for-a-smarter-planet.html Any Device Learning TECHNOLOGY IMMERSION PERSONAL LEARNING PATHS Student-Centered Processes KNOWLEDGE SKILLS Learning Communities GLOBAL INTEGRATION Services Specialization ECONOMIC ALIGNMENT Systemic View of Education Intelligent Aligned Data Outcomes Insight Instrumented Student-centric Integrated Assessment Interconnected Shared Services Interoperable Processes Continuing Education Higher Education Secondary School Primary School Workforce Skills Individuals Learning Continuum Institutions Learning Continuum Economic Sustainability

61. People “ All the information workers observed experienced a high level of fragmentation in the execution of their activities. People averaged about three minutes on a task and about two minutes on any electronic device or paper document before switching tasks.” Gloria Mark and Victor M. Gonzalez, authors of “Research on Multi-tasking in the Workplace”

62. Families &quot;The family is the natural and fundamental group unit of society and is entitled to protection by society and the State&quot;. Article 16(3) of the Universal Declaration of Human Rights “Developing a Family Mission Statement” Stephen R. Covey, author of The 7 Habits of Highly Effective Families “In the agricultural age, work-life-and-family blended seamlessly.” IBM GIO 1.0

63. Hospitals “ Modern medicine is one of those incredible works of reason: an elaborate system of specialized knowledge, technical procedures, and rules of behavior.” Paul Starr, author of The Social Transformation of American Medicine

64. Universities “ The contemporary American university is in fact a knowledge conglomerate in its extensive activities, and this role is costly to sustain.” Roger L. Geiger, author of Knowledge and Money: Research Universities and the Paradox of the Marketplace

65. Cities “ Cities are the defining artifacts of civilisation. All the achievements and failings of humanity are here… We shape the city, and then it shapes us. Today, almost half the global population lives in cities.” John Reader, author of Cities IBM Releases ``IBM and the Future of our Cities'' Podcast IBM Press Release 2005

66. Businesses “… of the 100 entities with the largest Gross National Product (GNP), about half were multi-national corporations (MNCs)… The MNCs do not exist on traditional maps.” Alfred Chandler and Bruce Mazlish, authors of Leviathans “ The corporation has evolved constantly during its long history. The MNC of the late twentieth century … were very different from the great trading enterprises of the 1700s. The type of business organization that is now emerging -- the globally integrated enterprise -- marks just as big a leap. “ Sam Palmisano, CEO IBM in Foreign Affairs

67. Call Centers “ Call Centers For Dummies helps put a value on customer relations efforts undertaken in call centers and helps managers implement new strategies for continual improvement of customer service.” Réal Bergevin, author of Call Centers For Dummies

68. Data Centers “ All data centers are unique, but they all share the same mission: to protect your company’s valuable information.” Douglas Alger, author of Build the Best Data Center Facility for Your Business

69. Nations “ Understanding economic change including everything from the rise of the Western world to the demise of the Soviet Union requires that we cast a net much broader than purely economic change because it is a result of changes in (1) the quantity and quality of human beings; (2) in the stock of human knowledge particularly as applied to human command over nature; and (3) the institutional framework that defines the deliberate incentive structure of a society.” Douglass C. North, author of Understanding the Process of Economic Change

70. What happens when you take some of the nicotine out of cigarettes?

71. How do you create more lasting solutions?

72. Pigou’s Example The Lessons We Learn Local Optimization does not equal Global Optimization Selfish behavior need not produce a socially optimal outcome “ Selfish Entities” all choose lower road, so travel time is 1 hour for them all… Entities all reason that if even one other entity takes the upper road, it will be faster to take lower road “ Random Entities” ½ choose upper and ½ choose lower, so half of travel times are 1 hour, and the other half are just 0.5 hours on the less congested lower road… Rules (laws, incentives, etc.) can produce similar results by influencing reasoned behavior From: Roughgarden, T (2005) Selfish Routing and the Price of Anarchy. MIT Press. Cambridge, MA (commuters traveling from suburb (A) to city (B) can choose “the winding upper road which take an hour” or they can choose “the highway lower road which takes time proportional to number of commuters”) . A B C upper (x) = 1 C lower (y) = y x = % drivers on upper road y = % drivers on lower road x + y = 1 Expected commute time = x*1 + y*y E(Selfish) = 1.0 hours E(Random) = 0.75 hours

73. 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)

74. 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?

75. 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.

76. How entities (service systems) learn and change over time History and future of Run-Transform-Innovate investment choices Diverse Types Persons (Individuals) Families Regional Entities Universities Hospitals Cities States/Provinces Nations Other Enterprises Businesses Non-profits Learning & Change Run = use existing knowledge or standard practices (use) Transform = adopt a new best practice (copy) Innovate = create a new best practice (invent) March, J.G. (1991) Exploration and exploitation in organizational learning. Organizational Science. 2(1).71-87. exploit explore Technology Technology Technology Technology Technology Technology Technology Technology Technology Technology Technology Technology Technology Technology Transform Innovate Invest in each type of change Ru n

77. Teaching SSME+D Fitzsimmons & Fitzsimmons Graduate Students Schools of Engineering & Businesses Teboul Undergraduates Schools of Business & Social Sciences Busy execs (4 hour read) Ricketts Practitioners Manufacturers In Transition And 200 other books… Zeithaml, Bitner, Gremler; Gronross, Chase, Jacobs, Aquilano; Davis, Heineke; Heskett, Sasser, Schlesingher; Sampson; Lovelock, Wirtz, Chew; Alter; Baldwin, Clark; Beinhocker; Berry; Bryson, Daniels, Warf; Checkland, Holwell; Cooper,Edgett; Hopp, Spearman; Womack, Jones; Johnston; Heizer, Render; Milgrom, Roberts; Norman; Pine, Gilmore; Sterman; Weinberg; Woods, Degramo; Wooldridge; Wright; etc. URL: http://www.cob.sjsu.edu/ssme/refmenu.asp Reaching the Goal: How Managers Improve a Services Business Using Goldratt’s Theory of Constraints By John Ricketts, IBM Service Management: Operations, Strategy, and Information Technology By Fitzsimmons and Fitzsimmons, UTexas Service Is Front Stage: Positioning services for value advantage By James Teboul, INSEAD