Ssmed india 20080128

Service Research and Innovation | Almaden Research Center © 2007 IBM Corporation
1
Almaden Service Research Overview
Jim Spohrer
Almaden Service Research
January 28th, 2007
Service Science,
Management,
Engineering, and
Design Emerging

IBM Service Research
© 2007 IBM Corporation2 Service Research and Innovation | Almaden Research Center
What kinds of things are we investing in
to innovate (build, scale, improve)?
Antiquity Weapons & Defense
– Military Engineering
1852 Buildings, Roads & Bridges
– Civil Engineering (ASCE)
1880 Steam Engines & Machinery
– Mechanical Engineering (ASME)
1884 Electric Grid & Circuits
– Electrical Engineering (AIEE/IEEE)
1907 Better Farms & Crops
– Agriculture & Biological Engineering
(ASAE/ASABE)
1908 Fuels, Fertilizers,etc.
– Chemical Engineering (AICE)
1948 Better Factories & Automation
– Industrial Engineering (ASIE/IIE)
1948 Computers
– Computing Machinery (ACM)
1954 Power Plants
– Nuclear Engineering (ANS)
1955 Sustainable Construction
– Environmental Engineering (AAEE)
1963 Jets and Rockets
– Aerospace Engineering (AIAA)
1968 Medical Instruments
– Biomedical Engineering (BMES)
1985 Better Plants & Animals
– Genetic Technologists (AGT)
1992 Financial Instruments
– Financial Engineering (IAFE)
1993 Applications & Web Sites
– Software Engineering (JCESEP)
2007 Better Service Systems & Service
– Service Research & Innovation Initiative
(SRII)
– Service Science, Management, and
Engineering (SSME)
– Service Enterprise Engineering (SEE)
– Service Systems Engineering (SSE)

3
SSME: Service Science, Management, and Engineering
IBM Research © 2007 IBM Corporation
To nations, innovation sustains skilled employment/export growth
1800- England Industrial Revolution
1850- Germany Chemical Revolution
1900- USA Electrical & Information Revolution
1950- Japan Quality Innovation: Product Revolution
1990- Finland Mobile Communication Revolution
2000- China Cost Innovation: Product Revolution
2000- India Cost Innovation: Service Revolution
? ? The Next Innovation & Revolution
Sustainable growth depends on innovation via
regional government, industry, academic collaboration.

© 2005 IBM Corporation4 Service Research and Innovation | Almaden Research Center © 2007 IBM Corporation
Nation Labor
%
A
%
G
%
S
%
Service
Growth
China 21.0 50 15 35 191%
India 17.0 60 17 23 28%
U.S. 4.8 3 27 70 21%
Indonesia 3.9 45 16 39 35%
Brazil 3.0 23 24 53 20%
Russia 2.5 12 23 65 38%
Japan 2.4 5 25 70 40%
Nigeria 2.2 70 10 20 30%
Bangladesh 2.2 63 11 26 30%
Germany 1.4 3 33 64 44%
Ten Nations
Total 50% of World Wide Labor
A = Agriculture, G = Goods, S = Services 1980-2005
PC Age
2005
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
Economic Change…
International Labor Organization
US Employment History & Trends

Service Scientists Innovate Service Systems
 Service Systems
Worldview
 Population Entities:
Service Systems
 Interactions:
Value Propositions
 Outcomes:
Value-Cocreation or
Disputes
Service Scientists
Entrepreneur+
Architect+
Engineer
Consultant+
Manager+
Mathematician
CREATE SCALE IMPROVE
SERVICE SYSTEMS
INNOVATIONS

Global Change and SSME
In 2006 the service sector’s share of
global employment overtook agric.
for the first time, increasing from
39.5% to 40%. Agric.decreased
from 39.7% to 38.7%. The industry
sector accounted for 21.3% of total
employment.
- International Labour Organization
Germany $87M
Innovation with
Services
EU $100M
NESSI pending
China 5 Yr Plan
Modern Services
Japan $30M
Service
Productivity
US $4M+
NSF SEE
HR 2272/1106
. . . And More!
(>$300M total)Related activities to date
- ACM, IEEE, INFORMS, SRII SIGs
- 130 Programs, 44 Countries
- Over 100 conference and journal papers
- >100 Press, >10,000 Web site mentions
- IBM – 500 Service Researchers WW
What is SSME really
-- Focus on systematic service innovation
-- Emerging discipline & professions
-- Research area

Impact: IBM’s Component Business Model/Service Systems
Business Service Components
Work Practices & Processes
Technical Architecture
Nations, Industries, Components-
Measure (KPIs)IEEE Computer, Jan 2007

Impact: Business Insights Solutions/BISON
Valium
(Trade Name)
Diazepam
(Generic Name)
CAS # 439-14-5
(Chemical ID #)
Valium>149 “names”
Also New Book: Mining the Talk, Spangler & Kreulen
Courtesy of
Jean Paul Jacob, IBM

Impact: Intelligent Document Gateway Solutions
 Process
 Digitization
 Business Logic

Impact: Call Centers – Agent Services
Solutions that put it all together
 Components
 Analytics
 Processes
 Dashboard
 Performance

Service Science Lab: Design, Improve, Innovate
service system, value proposition, governance mechanisms
 Service Systems
 Real World
 Sensor augments
 Semantic augments
 Virtual World
 Design servicescape
 Rehearsals
 Simulated World
 Design exploration
 Service systems CAD
“We expect a production increase of 5–10 percent
with Intelligent Oilfield," Jonathan Krome, IBM.
Jacob Hall
“IBM's Traffic Prediction Tool predicted traffic flows …
…results were well above the target accuracy
of 85 percent,” Teresa Lim IBM
Courtesy of
Jean Paul Jacob, IBM

Why understanding service innovation matters to IBM
Fundamental Service Science Challenge:
Scaling & learning curves are different for IT manufacturing and IT services
How to invest to make progress (efficiency, effectiveness and sustainable growth)?

Service System
1. People
2. Technology
3. Shared Information
4. Organizations
connected by value propositionsComputational System
More transistors, more powerful More win-win interactions, more value
What would a service science breakthrough look like? How
about a Moore’s Law of Service Systems? Why not?

0 25 50 100 125 150
Automobile
75
Years
50
100
Telephone
Electricity
Radio
Television
VCR
PC
Cellular
Internet
%Adoption
Question: What limits sustainable growth rates?
(new knowledge to new value for populations)
 Supply:
Invention
 Demand:
Customer
adoption
 Service
system
growth
 Access
 Laws
 Skills
 ROI

SSMED – T-shaped professionals are adaptive innovators
Social Science
(People)
Management
(Business)
Engineering
(Technology)
Core
Field of
Study
Interactional Expertise Across Other Fields
Tower of Babel
“Biggest problem in business
is people don’t know how to
talk to other people in the
language they understand.”
Charles Holliday, CEO Dupont
Based on slides by Jean Paul Jacob, IBM
Across industries
Across cultures
Across functions
Across disciplines
=
More experienced
More adaptive
More collaborative
Designed together

IBM Service Research
© 2007 IBM Corporation17 Service Research and Innovation | Almaden Research Center
“Service science is just ___<name your discipline>____”
OR/IE
MS
CS/AI
Multiagent Systems
Economics & Law
Game Theory
MIS Anthropology
& Psychology
General Systems
Theory
A Service
System is
Complex
Service
Operations
Marketing
Management
Quality
Supply Chain
Human Factors
Design
Innovation
Engineering
Systems
Computing
Economics
Arts
Science
Information
Science
(i-schools)
Organization
Theory

Succeeding through Service Innovation
Service systems are
dynamic value co-creation
configurations of people,
technology, organizations,
and shared information (such
as language, laws, measures,
models, etc.), connected
internally and externally by
value propositions, with
governance mechanism for
dispute resolution.
http://www.ifm.eng.cam.ac.uk/ssme/

19
ProductivityProductivity
SustainableSustainable
InnovationInnovation
RegulatoryRegulatory
ComplianceCompliance
N
a t i o n s
N
a t i o n s
MeasuresMeasures
of Front Stage (direct customer interactions) and Back Stage (supporting activities)of Front Stage (direct customer interactions) and Back Stage (supporting activities)
Components of Businesses, Government Agencies, Non-Profits, etc.Components of Businesses, Government Agencies, Non-Profits, etc.
I n d u s t r i e s
I n d u s t r i e s
QualityQuality
The world consists of service systems interacting,
allowing many thousands of possible
Service Science Lab projects
Courtesy of
Steve Kwan, SJSU

20
San José State University
Developing aDeveloping a
Service Science, ManagementService Science, Management
and Engineering (SSME)and Engineering (SSME)
Program at SJSUProgram at SJSU
Prepared for discussion at Frontiers in Service ConferencePrepared for discussion at Frontiers in Service Conference
October 4-7th, 2007October 4-7th, 2007
Stephen K. Kwan, Ph.D.Stephen K. Kwan, Ph.D.
Professor, MISProfessor, MIS
College of BusinessCollege of Business
Lou Freund, Ph.D.Lou Freund, Ph.D.
Chair, Industrial &Chair, Industrial &
Systems EngineeringSystems Engineering
College of EngineeringCollege of Engineeringkwan_s@cob.sjsu.edukwan_s@cob.sjsu.edu
408-924-3514408-924-3514

21
http://www.usnews.com/usnews/edu/grad/articles/brief/gbeng_brief_2.php

22
http://www.ilo.org/public/english/region/asro/bangkok/public/releases/yr2007/pr07_02sa.ht
m

23
Industrial & Systems Engineering 142 / 242Industrial & Systems Engineering 142 / 242
“Service Engineering and Management”
• Introduction to services / experiential economy and role of systemsIntroduction to services / experiential economy and role of systems
engineeringengineering
• Goal: Introduce students to applications of ISE concepts andGoal: Introduce students to applications of ISE concepts and
methodologies in the services environmentmethodologies in the services environment
• Text: Service Management –Text: Service Management – Fitzsimmons and FitzsimmonsFitzsimmons and Fitzsimmons, McGraw-, McGraw-
HillHill
• Cases to illustrate concepts and strategiesCases to illustrate concepts and strategies
• Guest speakersGuest speakers
• Teaching experience will form basis for future program designTeaching experience will form basis for future program design
Offered Fall 2007
Offered Fall 2007
MBA 297DMBA 297D
“Service Systems Management”
To Be Offered Spring 2008
To Be Offered Spring 2008
Grad
Undergrad

24
Integrating the Curriculum with a SharedIntegrating the Curriculum with a Shared Service Systems LabService Systems Lab
What are the Characteristics of a Service Systems Lab?What are the Characteristics of a Service Systems Lab?
(as compared to a Manufacturing Systems Lab(as compared to a Manufacturing Systems Lab ↓↓ ))

25
What are the Characteristics of a Service Systems Lab?What are the Characteristics of a Service Systems Lab?
(Computer Lecture Lab is(Computer Lecture Lab is notnot a Service Systems Laba Service Systems Lab ↓↓ ))

26
Service Science Lab Layout
Characteristics of aCharacteristics of a
Service Science LabService Science Lab
Physical World
Simulated World
Virtual World

Service Research and Innovation | Almaden Research Center © 2007 IBM Corporation
28
Service Research to Improve/Innovate Service Systems:
Entities (service systems),
Interactions (value propositions),
Outcomes (value co-creation or disputes/governance mechanisms)
Jim Spohrer
Almaden Service Research
December 3, 2007
Service Science,
Management,
Engineering, and
Design Emerging

© 2005 IBM Corporation
29 Service Education, Research, and Innovation | Almaden Research Center © 2007 IBM Corporation
US News – Smart Choices Graduate Engineering
 ENVIRONMENTAL ENGINEERING
It's a growing field, and engineers are
needed to clean up existing pollution
problems and prevent future ones.
 SERVICE SCIENCE, MANAGEMENT,
AND ENGINEERING (SSME)
This emerging discipline is getting a big
push from industry, including IBM and
Hewlett-Packard. SSME combines
engineering, computer science,
economics, and management to improve
the service sector.
http://www.usnews.com/usnews/edu/grad/articles/brief/gbeng_brief_2.php

The U.S. National Innovation Investment Act
 US House and Senate voted to approve on August 2nd,,
2007; President has signed.
 SEC. 1005. STUDY OF SERVICE SCIENCE.
 (a) Sense of Congress- It is the sense of Congress that, in order to strengthen the
competitiveness of United States enterprises and institutions and to prepare the people of
the United States for high-wage, high-skill employment, the Federal Government should
better understand and respond strategically to the emerging management and learning
discipline known as service science.
 (b) Study- Not later than 270 days after the date of enactment of this Act, the Director of the
Office of Science and Technology Policy, through the National Academy of Sciences, shall
conduct a study and report to Congress regarding how the Federal Government should
support, through research, education, and training, the emerging management and learning
discipline known as service science.
 (c) Outside Resources- In conducting the study under subsection (b), the National Academy
of Sciences shall consult with leaders from 2- and 4-year institutions of higher education, as
defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)), leaders
from corporations, and other relevant parties.
 (d) Service Science Defined- In this section, the term `service science' means curricula,
training, and research programs that are designed to teach individuals to apply scientific,
engineering, and management disciplines that integrate elements of computer science,
operations research, industrial engineering, business strategy, management sciences, and
social and legal sciences, in order to encourage innovation in how organizations create
value for customers and shareholders that could not be achieved through such disciplines
working in isolation.

Almaden Services Research
© 2007 IBM Corporation31 Service Science
Service Research and Innovation Initiative
http://www.thesrii.org/

32 Service Science | Almaden Research Center © 2007 IBM Corporation
What is science?
 Data (Observation)
 Model (Theory)
 Analytics (Testing Validity)
 Take Action (Utility)
 Scientific Method (Standards of Rigor)
 Scientific Community (Body of Knowledge)
 Scientific Instrumentation (Tools & Math)
 Value of Science (Professional Relevance)
Mature Emerging

Summary: What should a service scientist know?
 I. Theoretical & Practical Foundations
1. Service Concepts & Questions
2. Service Tools & Methods
 II. Disciplines & Interactional Expertise
3. History: Service Economics & Law (Evolution)
4. Service Marketing & Quality Measure
5. Service Operations & Productivity Measure
6. Service Governance & Compliance Measure
7. Service Design & Innovation Measure
8. Service Anthropology & People Resources
9. Service Engineering & Technology Resources
10. Service Computing & Information Resources
11. Service Sourcing & Organization Resources
12. Future: Management & Strategy (Investment)
 III. Professions & Contributory Expertise
13. Service Mindset & Entrepreneurship
14. Service Science & Leadership
Service systems are dynamic
value co-creation
technology, organizations, and
shared information (such as
language, laws, measures,
models, etc.), connected
internally and externally by
value propositions, with
governance mechanisms for
dispute resolution.

35
Component Business Model to Help Decompose Your Business
Experience and Know-how from Thousands of Client Engagements
 70+ maps supporting 17 industries
 23 enhanced with key performance
indicators (KPI)
 Over 2,000 trained CBM specialists
armed with the CBM tool
 30 CBM patents filed
 CBM tool license available to clients
Component Business Modeling tool 2.0
Integrates with WebSphere Business Modeler
Presentation to Gartner in October 2007, by R. Leblanc

36
Integrating Component Business Models with Industry
Process Models
+ =
IBM is bringing together its Business Process Management Center of
Excellence (BPM CoE), IBM Research, and the Global Business Solution
Center (GBSC) to map Component Business Models (CBM) to Industry
Process Models
Component Business
Models (CBM) and Tool
Industry Process Models in
WBM, built by BPM CoE,
leveraging APQC’s Process
Classification Framework
Result: business transformation
engagements delivered more quickly,
through more industry-specific
insights and more powerful CBM Tool
Presentation to Forrester in November 2007, by T. Rosamilia

37
Creating New Industries
• “History teaches us that we have hugely underestimated
capacity to create new industries and recreate existing
ones. In fact, the half century old Standard Industrial
Classification (SIC) system published by the US Census
was replaced in 1997 by the North American Industry
Classification Standard (NAICS) system. The new
system expanded the ten SIC industry sectors into
twenty sectors to reflect the emerging realities of new
industry territories. The services sector under the old
system, for example, is now expanded into seven
business sectors ranging from information to healthcare
and social assistance.”
• Kim, W. Chan and Renee Mauborgne (2005) Blue Ocean Strategy: How to Create
Uncontested Market Space and Make the Competition Irrelevant. Harvard Business
School Press. Boston, MA.

“Everybody is in service.” – Theodore Leavitt, 1972
 “This idea that any manufacturing or
service delivery involves activities in
both the front stage and the back
stage was expressed by Theodore
Leavitt as early as 1972. ‘There are
no such things as service industries.
There are only industries whose
service components are greater or
lesser than those of other industries.
Everybody is in service.’” (Pp. 14-15);
“Every activity, therefore, consists of
both an interaction (the service
aspect) and a material transformation
(the product aspect).” (Pg 19)
Teboul, James (2006)
Service Is Front Stage:
Positioning Services for
Value Advantage,
INSEAD Business Press,
Palgrave MacMillan.

Communications of the ACM, July 2006

Complex Systems
“The goal of science is to make the wonderful and complex understandable and
simple – but not less wonderful.” – Herb Simon, Sciences of the Artificial
 A. Informal Service Systems
 B. Formal Service Systems
 1. Social Systems
 Human Systems
 2. Political Systems
 Governed Systems
 Value Systems
 3. Economics Systems
 4. Legal Systems
 5. Organizational Systems
 Managed Systems
 6. Information Systems
 Linguistic Systems
 Mathematical Systems
 7. Engineered Systems
 Technological Systems
 Designed Systems
 8. Ecological Systems
 Evolved Systems
A.
B.
1.
2.
3.
4.
5.
6.
7.
8.

University of California –
Berkeley
 SSME certificate program
Michigan Technical University –
Houghton
 Engineering degree specialization
Virginia Tech
 Center focused on service systems
A glance at 3
SSME Programs
Universities taking action and testing the water

http://ssme.berkeley.edu/index.php
University of California - Berkeley
Certificate in SSME
Born of CITRIS, a center created to
support service research and the
development of SSME program at
UC Berkeley
Blend of services theory and
pragmatic learning
Awarded to UC Berkeley graduate
students in the schools of
Business, Engineering, or
Information
Requirements
 Two required core courses
 The Information and Services Economy
 Information and Business Architecture
 SSME lecture series

Michigan Technical University
http://www.sse.mtu.edu/
 Service Systems Engineering (SSE)
 Developed new engineering curriculum devoted entirely
to and especially for industries within the service sector
 The emphasis on design and operation of service
processes and systems for industry, academic and
government enterprises
 Focus on Engineering rather than Business
 Engineering methodology for design, operation, & problem
solving
 Emphasis on process over product—not tied to manufacturing
or mechanical engineering legacy
 Emphasis on people and human behavior
 Focus on customer interaction with service processes and
systems
 Degree specialization
 Housed in the School of Engineering – BSE (Bachelor of
Science in Engineering Degree)
 Curriculum Elements
 General Education (28 credits)
 Basic Math & Science (32 credits)
 Engineering Fundamentals (28 credits)
 Specific Engineering Emphasis (Service Sector Core – 27
credits)
 Technical Electives (Service Sector Electives – 9 credits)

Virginia Tech
Center for Service Science, Quality and Innovation
 Coordinates research, instruction and outreach activities
for the design, improvement and innovation of service
systems
 SSQI promotes a systematic approach to service design
that combines an understanding of business processes,
customer needs and emerging technologies
 It seeks to develop measures of effectiveness for
service systems and improve those systems through
quality initiatives and innovation
 Research Projects
 Designing a Sustainable Performance
Management System for the Hospitality Industry
 Consolidated Disaster Recovery and Planning
Services for the United States Department of
Defense
 Collaborative Education as a Service: The Living
in the Knowledge Society Initiative
http://www.ssqi.pamplin.vt.edu/

“The IBM SSME Palisades event was the biggest and most diverse
gathering ever in support of service education.” – Roland Rust
What IBM is doing… www.thesrii.org

47
http://www.nytimes.com/2006/04/18/business/18services.html
Stay tuned!
The
Journey
Continues

49
SSME: Growing Body of Knowledge about Service
Economics and Social Science
Management
Engineering
Smith
1750 1800 1850 1900 1950 2000
100%
75%
50%
25%
Marx Clark
Percentage of labor force in service sector: US (blue) and World (green)
Argyris
Glushko
Alter
Bryson et alMilgrom
& 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
StermanGanz, Weinhardt, Rouse
Tiene & Berg, Carley
Herzenberg, Alic&Wial
Taylor Deming
Bastiat

50
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

51
Journal and Conference

52
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

53
How to invest to make progress?
Service System (Value Creating System)
1. People (division of labor, multi-tasking)
2. Technology
3. Value Propositions Connecting
Internal and External Service Systems
4. Shared Information (language, laws, measures)Computational System
Moore’s Law
Higher density transistor
configurations
Normann’s Law?
Higher density value co-creation
configurations
Reframing Business: When the Map Changes the Landscape
Richard Normann

Service Science Concepts
 Service activity defined
 The application of knowledge &
competence for the benefit of another
(win-win value co-creation)
 Service systems
 Dynamic value co-creation
configurations of resources (people,
technology, organizations, and shared
information)
 Improve measures: quality, productivity,
regulatory compliance, sustainable
innovation
 Value propositions
 Formal service system: legal contract
 Informal service system: relationship
 Governance mechanisms
 Dispute resolution/bounded coercion
 Authoritative decisions & parametersIEEE Computer, Jan 2007

56
A service system is a type of
complex system
“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, IBM VP Innovation (Oct. 9, 2006)

57
Building tools & organizations – accelerating growth of capabilities
Billion Years Ago Natural Processes
12 Big Bang (EMST)
11.5 Milky Way (Atoms)
8 Sun (Energy)
4.5 Earth (Molecules)
3.5 Bacteria (Cell)
2.5 Sponge (Body)
0.7 Clams (Nerves)
0.5 Trilobites (Brains)
0.2 Bees (Swarms)
0.065 Mass Extinctions
0.002 Humans
Tools & Clans
Coevolution
Generations Ago Human Processes
100,000 Speech
750 Agriculture
500 Writing
400 Libraries
40 Universities
24 Printing
16 Accurate Clocks
5 Telephone
4 Radio
3 Television
2 Computer
1 Internet/e-Mail
0 GPS, CD, WDM
Global Brain: The Evolution of
Mass Mind from the Big Bang
to the 21st Century
by Howard Bloom
Nonzero : The Logic
of Human Destiny
by Robert Wright

58
Progression of phenomena: Emergence of Complex Systems
h
Physical System
Physics
Chemical System
Chemistry
Biological System
Biology
Human System
Anthropology
Service System
Service Science
Culture
People with
mental models
Language
Trust
Tools &
Technology
Organizations
And
Institutions
Value Co-Creation
(Service)
Things That Make Us Smart by Donald A. Norman

59
How did the service systems come to be?
0
20
40
60
80
100
120
2
00
00
00
Y
A200
00
Y
A1
00
00
Y
A200
0
Y
A
1
80
0
185
0
1
90
0
1
95
0
2
00
0
205
0
Services (Info)
Services (Other)
Industry (Goods)
Agriculture
Hunter-Gatherer
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

60
10,000 years ago – Agriculture & Cities
 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

61
200 years ago – Railroads/Telegraphs & Businesses
EffectsofAgriculture,
ColonialExpansion&Economics,
ScientificMethod,Industrialization
&Politics,Education,Healthcare&
InformationTechnologies,etc.
The Visible Hand: The Managerial Revolution in American Business
by Alfred Dupont Chandler
Riseofthemodernmanagerialfirm

63
The purpose of Service Systems is Value Co-creation
(North’s economic institutions, Barnard’s cooperative systems, Trist’s sociotechnical
systems, Engelbart’s augmentation systems, Normann’s value creation systems,
Malone’s coordination science, Flores, Williamson TCE/NIE/Contracting, etc.)
 Provider and client interact to co-
create value
 Value is achieving desired
change or the prevention/undoing
of unwanted change
 Changes can be physical, mental,
or social
 Value is in the eye of the
beholder, and may include
complex subjective intangibles,
bartered – knowledge intensive
trust matters
transaction costs matter
 Boundary of service experience
in space and time may be
complex
Lose-win
(coercion)
Win-win
(co-creation)
Lose-Lose
(co-destruction)
Win-Lose
(loss lead)
Client
Provider

Another perspective of service… systems of relationships
 Customers and providers co-
create value in and through their
interactions with one another
 Many services require the
participation of a customer
 hair stylist – client
 doctor – patient
 teacher – student
 IT service provider – business
client
 Relationships matter!
“… the important distinction is that
the relationship has become a
resource in itself… thus the
returns have now more to do with
extending the scope, content and
process of the relationship.”
Bryson, Daniels and Warf – from Service Worlds
A. Service Provider
• Individual
• Organization
• Public or Private
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, goods and material systems
• Information, codified knowledge
B. Service Client
• Individual
• Organization
Forms of
Ownership Relationship
(B on C)
Forms of
Service Relationship
(A & B co-create value)
Forms of
Responsibility Relationship
(A on C)
Forms of
Service Interventions
(A on C, B on C)
- Based on Gadrey (2002)

65
Complexity 1: So many types of service jobs/industries
People Business
Products Information
enable develop enable transform
design
operate &
maintain
create utilize
Industrial services Information services
Business services
Consumer services
Non-market services

66
Complexity 2: So many academic disciplines…
People Business
Products &
Nature
Information
Schools of
Science & Engineering Information Schools
Schools of
Business Management
Schools of
Social Science

67
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”

68
Families
 "The family is the natural and fundamental
group unit of society and is entitled to
protection by society and the State".
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

69
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

70
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

71
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

72
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

73
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

74
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

75
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

77
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

78
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

79
How do new professions and new disciplines coevolve with
government institutions?
 Emergence of German dye industry, German mid-19th
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

80
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

81
Shared Information: Reasoning about Knowledge
 Formalization of shared mental models of the world
- Model of social world as multiple agents with shared knowledge/information,
interacting based on that knowledge
 Common Knowledge Defined (everyone knows…)
 Distributed Knowledge (collectively we know…)
 “Muddy Children Problem”
 Percentage Total Info: Less in memory, more on line
Reasoning About Knowledge
by Ronald Fagin, Joseph Y. Halpern,
Yoram Moses, Moshe Y. Vardi

82

84
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?

85
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.

86
Law and Economics
 Problem: Almost any
business strategy or societal
policy change will be viewed
negatively by some
stakeholder
 Pareto Efficiency
Can anyone be improved,
without making someone
else worse off?
 Kaldor-Hicks Efficiency
Can anyone be improved,
such that anyone made
worse off can be
adequately compensated
for their lose?

Understanding service systems
 Service Science
 Service science is the systematic
study of service and service
systems
 SSME
 SSME is a discipline that brings
together scientific understanding,
engineering principles, and
management practices to design,
create, and deliver service systems
 Service
 A service is an act in which providers
and clients co-create value
 Service System
 Value co-creation configurations of
integrated resources: people,
organizations, shared information and
technology

88
 Service systems are dynamic value co-
creation configurations of people,
technology, organizations, and shared
information (such as language, laws,
measures) connected internally and
externally by value propositions, with
governance mechanisms for dispute
resolution.
 Service systems are designed
computer systems
 Service systems evolve
linguistic and social systems
 Service systems have scale-emergent
properties
economic systems

89
Herbert A. Simon – Gets my vote as the first service scientist
 http://en.wikipedia.org/wiki/Herbert_Simon
 “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)
The Sciences of the Artificial
by Herbert A. Simon

Engineering Service Science | Teleconference | November 6,, 2007
Service Science, Management, and Engineering (SSME):
A Next Frontier in Education,
Employment, Innovation, and
Economic Growth
Presented by Dr. Jim Spohrer
Director, Service Research
IBM Almaden Research Center, San Jose, CA
spohrer@us.ibm.com

Global Labor Shift to Service Activities
In 2006 the service sector’s
share of global employment
overtook agriculture for the
first time, increasing from
39.5% to 40%. Agriculture
decreased from 39.7% to
38.7%. The industry sector
accounted for 21.3% of total
employment.
- International Labour Organization
http://www.ilo.org/public/english/region/asro/
bangkok/public/releases/yr2007/pr07_02sa.
htm

Growing demand for new, complex information and
organization (business & societal) service systems….
Services
Material
Information
& Organization
11%
9%
30%
50%
Products
-Based on Uday Karmarkar, UCLA
(Apte & Karmarkar, 2006)
US Gross Domestic Product

Projected U.S. service employment growth, 2004 - 2014
US Bureau of Labor Statistics.
http://www.bls.gov/opub/ooq/2005/winter/art03.pdf
“Service-providing industries
are projected to account for
most job growth, generating
almost 19 million new jobs
between 2004 and 2014.
This is due, in part, to
increased demand for
services and the difficulty of
automating service tasks.”

Projected change in US employment, 2004 - 2014
US Bureau of Labor Statistics.
http://www.bls.gov/opub/ooq/2005/winter/art03.pdf
“... accounted for more than 20 million jobs.”
“Employment in professional and business services is
projected to increase by nearly 4.6 million jobs.
Growth in this sector is led by providers of
administrative support services and consulting
services.”

Service Education, Research, and Innovation
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. … [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.”
National Academy of Engineering (2003). "The Impact of
Academic Research on Industrial Performance"
“Our economy is increasingly
dependent on services, yet our
innovation processes remain
oriented to products.”
Stefan Thomke
from Harvard Business Review, April 2003
“Services dominate economic
activity in developed economies,
and yet understanding of
innovation in this sector remains
very limited…… At this early stage,
academic research about
innovation in services is not well
defined.”
Henry Chesbrough
from Financial Times, October 2004
“Services is an understudied field”
Matthew Realff, Director, NSF SSE Program
from NY Times article April 18, 2006
Academia Dissects the Service Sector, but Is It
a Science? - Steve Lohr

97
What students should realize…
S&E Bachelors
1/12 S&E doctoral
1/3 Prof (Bus, Law, Med)
1/3 Other non-S&E degree
1/3 Managers
1/3 Sales
1/12 K-12 Educators
1/12 Healthcare
1/12 Gov & social service
1/24 Communication/Art
1/24 Operate tech
½ more education
½ job leading to…
3/12 S&E masters
Approx. based on Regets, “What do people do after
earning a science and engineering bachelor’s degree?”

98
What industry wants from the academy…
(based on informal email survey of IBM colleagues *)
 Depth (deep discipline knowledge and problem solving expertise)
- Strong professional affiliation, conferences, publications
 Breadth (multidisciplinary vocabulary & appreciation of value)
 Practical Experience (Internships, completed projects, patents)
- Ability to use tools of trade effectively
 Communications (multidisciplinary vocabulary, value propositions)
 Teaming (multidisciplinary vocabulary & appreciation, interpersonal)
 Project Management (schedules, deadlines, budgets, resources)
 People Management (leadership, motivation, cultural, diversity)
 Strategic Planning (market, competition, opportunity insights)
 Problem solving via informatics/computation
 Problem solving via social networks/open forums
 Flexible, adaptive, and entrepreneurial (idea to deployment)
 Produced on demand (custom designed to meet business need)
* Note the informal survey was of IBM Research professional 3/21/07

99
Validation of employers expressed strong preference in
Teitelbaum’s “A New Science Degree to Meet Industry Needs”
 Broad understanding of relevant disciplines at the graduate level and
sufficient flexibility in their research interests to move smoothly from
one research project to another as business opportunities emerge
 Capabilities and experience in the kind of interdisciplinary teamwork
that prevails in corporate R&D
 Skills in computational approaches
 Skills in project management that maximize prospects for on-time
completion
 The ability to communicate the importance of research projects to
nonspecialist corporate managers
 The basic business skills needed to function in a large enterprise
Professional Science Master (PSM) is
very much in the right direction from industry perspective

100
Systemic Problems: What we need to solve…
 Lack of large scale data collection about people’s educational and
professional trajectories across complete lifespan
what are the transition probabilities between different job/professional roles
 Ad hoc mechanisms for
tuning academy service efforts to industry needs and opportunities
transforming curricula to stay in touch with latest advances in discipline
knowledge (faculty and research interests)
exploiting e-learning systems for continuous improvement
industry and project experience to complement classroom education
projecting future needs
 No continuous improvement mechanism to year over year decrease the
amount of time it takes to educate students on standard content
 Too much emphasis on preparing for a job, and too little emphasis on
preparing to be an innovator and entrepreneur

101
Relationship of Service Science to Existing Academic Areas:
The center balances three key factors
Technology & Information
Business
& Value
People
& Organizations
5
1
9 2527
14
28
10
26
24
8
4
1. Service Engineering
2. Service Operations
3. Service Management
4. Service Marketing
5. Social Complexity
6. Agent-based comput-
ational economics
7. Computational
Organization Theory
14. Computer &
Information Sciences
15. Management of
Innovation
16. Organization Theory
17. Operations Research
18. Systems Engineering
19. Management Science
20. Game Theory
21. Industrial Engineering
22. Marketing
23. Managerial
Psychology
236
7
11
12
13
15
16
17
18
19
20
21
22
23
1990-2004
1960-1990
1900-1960
Before 1900
8. Management of
Technology
9. Experimental
Economics
10. AI & Games
11. Management of
Information Systems
12. Computer Supported
Collab. Work (CSCW)
13. Human Capital
Management
24. Business
Administration (MBA)
25. Economics
26. Law
27. Sociology
28. Education

“Succeeding through Service Innovation”
Recommendations:
 Education (expertise for 21st
Century, SSMED)
 Research (agenda, integration and service systems)
 Business (increase awareness, investment, data)
 Government (increase awareness, investment, data)
Current reality: disciplines tend to concentrate on
particular resources categories and discipline-specific
research agendas and language.
Desired reality: Integrated systems and experience design
approach with shared concepts and tools.

104
Engineering Professional Organizations
1852 Civil Engineering
1880 Mechanical Engineering
1884 Electrical Engineering
1907 Agriculture & Biological
Engineering
1908 Chemical Engineering
1948 Industrial Engineering
1954 Nuclear Engineering
1955 Environmental Engineering
1963 Aerospace Engineering
1968 Biomedical Engineering
1985 Genetic Technologists
1992 Financial Engineering
1993 Software Engineering
2007 Service Systems Engineering
Service Science, Management, and
Engineering (SSME))

105
Michigan Tech Service Systems Engineering
Undergraduate Major (http://www.sse.mtu.edu/)
 128 semesters credits:
 22 University defined General Education
 15 Mathematics
 Calculus with Technology I&II,
 Elementary Linear Algebra,
 Elementary Differential Equations,
 Engineering Statistics
 11 Science
 General Chemistry,
 Physics I,
 Intro to Psychology
 26 Engineering Core
 Computer Science I,
 Engineering Analysis and Problem Solving,
 Modeling & Design,
 Statics & Strength of Materials,
 Circuits and Instrumentation,
 Thermodynamics & Fluid Mechanics,
 Multidisciplinary Senior Project
 15 Business/Economics
 Accounting I,
Fnance, (this should touch on Financial Engineering)
 IS/IT Management
 Strategic Leadership,
 Economic Decision Analysis
 29 Service Systems Engineering
 World of Service Systems Engineering ()
 Service System Design
 Web Based Services
 Human Interaction in Service Systems
 Operations of Service Systems ()
 Optimization and Adaptive Decision Making
 Project Planning and Management
 Managing Risk
 Simulation
 Quality Engineering
 09 Electives

106
Can there really be a science of service?
“Wherever there are phenomena, there can be a science to describe
and explain those phenomena. Thus, the simplest (and correct)
answer to “What is botany?” is, “Botany is the study of plants.” And
zoology is the study of animals, astronomy the study of stars, and so
on. Phenomena breed sciences.”
- Newell, A., Perlis, A. & Simon, H. A. (1967).
Computer Science, Science, 157, 1373-1374.

107
Possible Objections… to Computer Science
 Only natural phenomena breed sciences
 The term “computer” is not well defined
 Computer Science is the study of algorithms, not computers
 Computers are instruments, not phenomena
 Computer Science is a branch of another science
 Computers belong to engineering, not science
- Newell, Perlis, & Simon (1967)

108
Possible Objections… to Service Science
 Only natural phenomena breed sciences
 The term “service” is not well defined
 Service Science is the study of work, not services
 Services are performances, not phenomena
 Service Science is a branch of another science
 Services belong to engineering (or management), not science
- with apologies to Newell, Perlis, & Simon (1967)

109
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 from systematic service
innovations
Productivity, quality, compliance, innovation, and learning curves
Better measurement systems, models of business-clients-competitors,
and theory of value proposition evolution between service systems,
theory of investment, entrepreneurship, and institution formation
 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!

What is service? Service = value co-creation outcome
(via interacting service systems)
 Residual (not product)
 Non-ownership
 An Act/Performance
 Intangible products
 IHIP characteristics
Intangible
Heterogeneous
Inseparable
Perishable
 Rental/Access
 Customer contact
 Customer-provider
interactions (*)
 Transformation
 Apply competence to
benefit another
 What: Entities, interactions, outcomes
Customer-provider interactions that co-
create value in a mutually agreed to manner
(value propositions)
Win-win square in prisoner’s dilemma
(game theory)
Governance for disputes;
Reputations & contracts for safeguarding
 How: Value co-creation
Division of labor & organizations
(with trust, reputation, governance)
Ricardo’s law of association or comparative
advantage (economics)
Learning or experience curves
Technology substitution/augmentationBased on Sampson, POMS 2007

Worldview: Service systems emerging, reconfiguring, interacting
to (normatively) co-create value as judged by stakeholders/roleholders
 Dynamic, emerging
populations of
service systems…
 New types (creation)
 New instances
 Life cycles
 Reconfiguring resources and…
 Owned resources
Accessed resources
 Resources with rights
and/or as property
 Can be inputs (+/-IHIP) to
production processes
 Interacting to (normatively)
co-create value
 Value propositions
 Relationships
Goal Integrate: Lovelock & Gummesson, Sampson & Froehle,
Vargo & Lusch, as well as Chase, Bitner, Rust, and many
other pioneers, etc. (Ricardo, Pigou&Braess, Williamson)
ISPAR descriptive (normative) model

113
Category Change Direction
Efficiency Communication and Transportation Costs = - + ?
Efficiency Transaction Costs
(Trust, Coase, North, etc.)
= - + ?
Effectiveness World Model Fidelity
(sense, store, compute, etc.)
= - + ?
Effectiveness Number of Services Accessible = - + ?
Effectiveness Capabilities/Skills of People
(learning curves)
= - + ?
Efficiency &
Effectiveness
Time Costs/Quality of Experience
(waste, boredom, stress, etc.)
= - + ?
Versatility &
Sustainability
Innovation Rates
(versus compliance rates)
= - + ?
Versatility &
Sustainability
Self Sufficiency
(versus interconnectedness)
= - + ?
All Number of People
(professions, salaries, ages, diversity, etc.)
= - + ?
How do service systems learn and evolve?

Quadruple Loop Learning of Service Systems
Invest
Relationships Goals Plans Actions
Development
(World
Model
Validity)
Versatility
Deeper
(Ecology)
Sustainability
Differentiate
(Exploration)
Effectiveness
Delivery
(Exploitation)
Efficiency
Outcomes
(Expectation)
Evaluation
Adapting to the world of shareholders, customers, competitors, and employees.
123
4
Performance,
Health & Cost
Measures
Relevance
& Value
Measures
Reputation
& Trust
Measures
Risk
& Reward
Measures
Rationality
& Maturity
Measures

115
Modern service systems tend to give rise to top ten lists…
(a kind of shared information; intangible value = reputation/brand)
 People – Fortune: Most wealthy, Fellows, etc.
 Families – Local Communities: Mother of the year
 Cities – Newsweek: Most livable cities
 Nations – OECD: Quality of life
 Universities – Business Week: Top B-Schools
 Businesses – Business Week: Best employers
 And more Hospitals, Call Centers, Data Centers, etc.

SSMED: Service Science, Management, Engineering & Design
 Operations Research and Industrial Engineering
 More realistic models of people
 Computer Science and Electrical Engineering, Information
Systems
 Software and systems that adaptively change with business
strategy
 Economics and Business Strategy, Service Management and
Operations
 Better models of scaling and innovation
 Law and Political Economy
 Better models of social innovation – in what way is passing a law
innovation
 Complex Systems and Systems Engineering
 Better model of robustness and fragility of service systems
(sustainability)
Service systems are
dynamic value co-creation
technology, organizations,
and shared information (such
as language, laws, measures,
models, etc.) connected by
value propositions with
governance mechanism for
dispute resolution.
Still feels like a foreign language to you?
This is a multidisciplinary approach in
understanding, defining, designing, improving, and
innovating service systems

118
Service
 Service is value co-creation
Value change is the motive for interaction
Co-creation is the method, not doing it alone (self service)
Motive & Method: Have someone else do something (or allow or enable
something) so you don’t have to do it yourself, and be deprived of the
benefit of the other – what is the value add of the other? what is the cost of
the other? what are the alternatives?
 Value is complex
Context dependent judgment (update mental models of world)
Made by a person or group of people
Sometimes formalized into an explicit measurable quantity

119
So, service is…
Invest for improved mutual performance
in which client and provider coproduce value
 High talent (Person Power)
Knowledge-intensive business services (business performance transformation
services) (e.g., chef’s, concert musicians)
 High tech (Technology Power)
Environment designed to allow average performer to provide a superior
performance, including self service and eventually a utility (average cook with
great cook book and kitchen; average musician with a synthesizer)
 Highly organized & motivated (Value Proposition Power)
Businesses, markets, government services, institutions
Networks of partner both internal and external coordinating performance
 Highly coordinated (Shared Information Power)
Language, laws, measures (including KPI, prices), explicit models, etc.

120
Service System
A service system has the capability to
interact with another service system to co-
create value
Some example service systems:
- Person (smallest)
- Business (1 person to 1 million people)
- Nation (1 million to billions of people)

121
Service System
 A type of complex system that can evolve & learn
Can nucleate around a person (an entrepreneur, prime mover)
Can grow more intelligent (adapt to/transform environment)
Can disappear (become maladapted to environment)
 A value coproduction configuration of
- People (division of labor, multitasking)
- Technology
- Value propositions connecting internal and external service systems
- Shared information (language, laws, measures, etc.)

122
Some Sample Service Systems
 Universities
 Hospitals
 Call Centers
 Data Centers
 Families
 Cities
 Nations
North, Econom
ic
Institutions
Barnard, Cooperative
system
s
Norm
ann, Value
Creation
System
s

123
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

125
The challenge – need shared vocabulary and understanding of
what a service system is – a type of complex adaptive system
 Operations Research and Industrial Engineering
More realistic models of people
 Computer Science and Electrical Engineering, Information Systems
Software and systems that adaptively/autonomously change with business strategy
 Economics and Business Strategy, Service Management & Operations
Better models of scaling and innovation to improve economic efficiency
 Law and Political Economy
Better models of social innovation – in what way is passing a law innovation
 Complex Systems and Systems Engineering
Better model of robustness and fragility of service systems (sustainability)
 Service systems are dynamic value co-creation configurations of people,
technology, organizations, and shared information (language, laws, measures,
models, etc.) connected by value propositions, with governance mechanisms
for dispute resolution
Examples: People, families, cities, businesses, nations, global economy, etc.

126
Four area model of anthropology…
People
Organizations
Technology
& Nature
Shared
Information
Archeology
(material artifacts & configurations)
Linguistic Anthropology
(language as social action)
Cultural Anthropology
(link social organization, including families,
to cultural models and embodiments)
Physical Anthropology
(human biology & cultural practices)

127
Complexity: So many definitions of service…
People
Organ-
izations
Technology
& Nature
Shared
Information
External Internal
Language, laws, measures, contracts, etc
Connected by
Value Propositions
Model as
complex systems
Service = value co-creation = entities apply knowledge/competence for mutual benefit
Service System: A value dynamic value co-creation configuration of people,
technology, organizations, and shared information (language, laws, measures,
contracts, etc.) connected by value propositions, with governance mechanisms for
dispute resolution.

128
Complexity: No unique, fundamental problems…
People
Organ-
izations
Technology
& Nature
Shared
Information
External Internal
Language, laws, metrics,
standards, culture, etc.
Connected by
Value Propositions
Model as
complex systems
What are the origins, types, and evolutionary patterns of service systems?
How are service systems similar to/different from other types of complex systems?
Are service systems the most complex type of complex system? How to invest?
How are competences transferred from one service system to another?

129
IBM Service Research Agenda
 Service Design & Marketing
Modeling & Simulation, Complex Systems, New Value Propositions
 Service Optimization & Management
Efficiency, Risk Management & Key Performance Indicators (KPIs)
 Service Delivery & Operations
Productivity & Versatility
 Service Information & Quality
Compliance, Effectiveness, Sustainability
Human Capability Augmentation, New Measures & Regulations
 Service Software Engineering
Agile & Process Automation, Industrialization of Service, Self Service
 Service Science, Management, and Engineering (SSME)
Service systems foundations

What makes SSME hard is that it is multidisciplinary…
 A service system is a dynamic value co-creation configuration of
resources (people, technology, organizations, and shared information)
 Service system are designed (Artificial) and evolve (Natural)
 So a service system is a complex socio-technical system
 Innovation requires investments that impact people, technology,
organizations, and shared information resources
Science &
Engineering
Business &
Management
Social & Cognitive
Sciences
Economics
& Markets
Business
Innovation
Technology
Innovation
Social
Innovation
Demand
Innovation

SSMED – T-shaped professionals are adaptive innovators
Social Science
(People)
Management
(Business)
Engineering
(Technology)
Core
Field of
Study
Interactional Expertise Across Other Fields
Tower of Babel
“Biggest problem in business
is people don’t know how to
talk to other people in the
language they understand.”
Charles Holliday, CEO Dupont
Based on slides by Jean Paul Jacob, IBM
Across industries
Across cultures
Across functions
Across disciplines
=
More experienced
More adaptive
More collaborative
Designed together

133
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)

134
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.

135
One last service system surprise… R&D service sector…
 Baumol and Oulton – Progessive and symptotically stagnant sectors of economies
 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, yi = the output of sector I, Li = the primary input quantity used by sector I, where L1 + L2 =
L (constant), Pi = the price of the sector’s output, Gi = the growth rate of the productivity
of the primary input used directly by sector I (with 0 < G1 < G2, so that sector 1 is the
relatively stagnant sector, w primary input price
Y1 = F1(L1, t), Y2 = F2(y1, L2, t)
• Surprise: Data from 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.
R&D grew most rapidly in US during the time centered around the great depression!

136
New skills are needed
 All national economies are shifting to services – service systems are an important type of complex
system
major industrialized nations are >75% services, developing nations are close behind – growth increasingly depends on
service innovation at multiple scales - person, family, city, firm, nation
credit cards are a simple example of service innovation, requiring integrated business, technology, and social-organizational
change to be successful
drivers: outsourcing, globalization, internet, self-service - Wipro, IBM, EDS, eBay, Amazon, Google
 New workforce skills are needed - to better study, manage, and engineer service systems
study benefits from a combination of business, organization, technology skills – soft skills enhance hard skills – more
organizational transparency and data sharing by industry would help greatly
new profession (like service scientist) needed, and new tool (service system ecology simulator)
 Educational system is slowly shifting toward services
service management, operations, marketing, and engineering courses and programs exist - study of complex systems
seeks to integrate
Research universities should increase number of grant proposals focused on service systems
new multidiscipline (like SSME) needed, to integrate and break down silos – industry must hire them
 National systems are slowly shifting policy towards service innovation
bootstrapping investment in research and education through targeted programs
focusing attention on intellectual property protection for service innovation
new innovation policy and metrics needed (government role in creating historical data sets)

UC Merced: Minor in Service Science

MGMT 150/COGS 152: What will you read?
 Fitzsimmons, J. A. & Fitzsimmons, M. J. (2005).
Service management: Operations, strategy, and
information technology (4th Edition), Irwin/McGraw-
Hill. (Chapters 1, 2, 5, 6, 15).
 Glushko, R. J. & McGrath, T. (2005). Document
engineering: Analyzing and designing documents for
business informatics and web services. MIT Press.
(Chapters 1, 4).
 Herzenberg, S., Alic, J., & Wial, H. (1998). New rules
for a new economy: Employment and opportunity in
postindustrial america. Cornell University Press.
(Chapter 5).
 Lovelock, C. & Wirtz, J. (2007). Service marketing:
People, technology and strategy (6th Edition).
Pearson/Prentice Hall. (Chapters 1, 2, 4, 8, 10; and
Cases 4, 14, and 16).
 Spangler, S. & Kreulen, J. (2007). Mining the talk:
Unlocking the business value in unstructured
information. IBM Press. (Chapters 1, 2).
 Teboul, J. (2006). Service is front stage: Positioning
services for value advantage. Insead Business Press.

MGMT 150/COGS 152: What will you learn?
You will learn about service. You will learn what
service is, why it is different from other sectors and
other jobs, and why it is important. You will learn
about problems in service, such as measuring
performance, increasing quality, and creating
innovation. You will learn how some have recently
begun to study service from a variety of different
perspectives – including social sciences, cognitive
science, management, engineering, and others – to
address these problems. You will learn how
interdisciplinary research might be effective in
studying and understanding service. In the end, you
will be able to have an informed and intelligent
conversation about the nature of service, how to think
about measurement in service, and how to increase
innovation in service. And you will be (at least a little
more) ready for the workforce you are about to enter.

SSME: Sample of University Activities 2007
 SSME-influence
 147 institutions
– 154 courses, programs,
and degrees established
(32 countries)
– 53 planning courses,
programs, degrees
 9 centers, seminars, or
groups established

http://www.ibm.com/university/ssme

IBM’s SSME Course Materials
http://www.almaden.ibm.com/asr/SSME/coursematerials/

Service systems are dynamic value
co-creation configurations of
resources – people, technology,
organizations, and shared
information – connected internally
and externally by value
propositions, with governance
mechanisms for resolving disputes.
Provider
Transformation Target
Client
OwnershipResponsibility
Service system science?
Spohrer, J., Maglio, P. P., Bailey, J. & Gruhl, D. (2007). Steps
toward a science of service systems. Computer, 40, 71-77.

Service system relationships
 Service providers and clients co-
produce value in and through their
interactions with one another
 Many services require the participation
of the receiver of the service
 hair stylist – client
 doctor – patient
 teacher – student
 IT service provider – business client
 Relationships matter!
“… the important distinction is that the
relationship has become a resource in
itself… thus the returns have now more
to do with extending the scope, content
and process of the relationship.”
Bryson, J. R., Daniels, P. W., & Warf, B.
(2004). Service worlds: People,
organisations, and technologies. New York:
Routledge/Taylor & Francis
A. Service Provider
• Individual
• Organization
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, goods and material systems
• Information, codified knowledge
B. Service Client
• Individual
• Organization
Forms of
Ownership Relationship
(B on C)
Forms of
(A & B co-create value)
Forms of
Responsibility Relationship
(A on C)
Forms of
(A on C, B on C)
Gadrey, J. (2002). The misuse of productivity concepts in services: Lessons from a comparison between
France and the United States. In J. Gadrey & F. Gallouj (Eds). Productivity, Innovation, and Knowledge in
Services: New Economic and Socio-economic Approaches. Cheltenham UK: Edward Elgar, pp. 26 – 53.

Interactions are key
Johnson, B., Manyika, J., & Yee, L. (2005). The next
revolution in interactions. McKinsey Quarterly, 4, 20-33.
 As more 21st
century companies
come to specialize in core
activities and outsource the rest,
they have greater need for workers
who can interact with other
companies, their customers, and
their suppliers.
 The traditional organization, where
a few top managers coordinate the
pyramid below them, is being
upended.
 Raising the productivity of
employees whose jobs can’t be
automated is the next great
performance challenge – and the
stakes are high.
 Companies that get that right will
build complex talent-based
competitive advantages that
competitors won’t be able to
duplicate easily – if at all.

Paul Maglio’s approach to service (system) science
 Study coordination among
individuals, groups, and
technology
communication, information,
action, and interaction
 Understand impact of
individuals, groups, and
technology
connect business impact with
action
 Innovate to support
coordination and impact
technologies, learning,
organizations, other structures
other
4%
gui
21%
instant
messenger
16%
phone
36%
web
3%
command line
11%
email
4%
face to face
5%
What do System Administrators Do?
Tools don’t address their real activities
Barrett, R., Haber, E., Kandogan, E., Maglio, P. P., Prabaker, M., &
Takayama, L. A. (2004). Field studies of computer system administrators:
Analysis of system management tools and practices. In Proceedings of the
Conference on Computer-Supported Collaborative Work (CSCW 2004).

Field Studies of IT Service Delivery
 Web Hosting, Data Management, Operating System,
Security, and Storage
 14 Visits, 5 sites
 Surveys (~ 100 people)
 Observations (~ 50 days)
 Video (~ 300 hours)
 Interviews (~ 30 people)
 Diary (~ 10 months)
 Qualitative and quantitative analysis
Data Management
Poughkeepsie
3 Days
Web Hosting
Boulder
3 Days + 1 Eve
Web Hosting
Southbury
1 Week
Web Hosting
Southbury
1 Week
Data Management
Charlotte
3 Days
Web Hosting
Boulder
1 Week
Storage
Boulder
3 Days
Security
Urbana
1 Week
Operating system
Boulder
3 Days
Security
Urbana
3 Days

The Microstructure of Service Work
Aral, S., Brynjolfsson, E. & Van Alstyne, M. (2006). Information, Technology, and Information Worker Productivity: Task Level Evidence.
In Proceedings of the Twenty-seventh International Conference on Information Systems, Milwaukee, WI.
 Study of work practices and info technology use of individuals
– at a large “head hunting” firm over 5 years
 Findings
– info technology use correlated with increased revenue
– info technology use correlated with decreased project completion time
– asynchronous info activities (email, DB use) increased multitasking
– synchronous info activities (meetings, phone) decreased multitasking
– structure of individual’s communication network correlates with performance

“Succeeding through Service Innovation”
Four resource clusters:
 business and organizations (schools of
management)
 technology (schools of science and engineering)
 people (schools of social science and humanities)
 information (schools of information)
Current reality: disciplines tend to concentrate on
particular resources and discipline-specific research
agendas
Desired reality: service is a system of integrated parts and
requires and integrated approach for understanding

Approaches to bridging knowledge and skills gaps
 “Focus is to teach individuals to apply scientific,
engineering, and management disciplines that integrate
[multiple disciplinary] elements to encourage
innovation…”
 ‘Super’ multi-disciplinary: embraces all appropriate,
but as yet not agreed, disciplines and functions.
 Multi-disciplinary: embraces elements of the major
disciplines and functions.
 Inter-disciplinary: activity that attempts to unite
various areas based on trans-disciplinary (or cross-
disciplinary) collaboration.
 With the notion of accepting existing barriers to
integration—overcoming through acceptance instead
of removal of radical change

SSME for the 21st
century
20th
Century
Factory
Trade
Problem Solver
Science, Technology, Engineering, Math (STEM)
21st
Century
Service System
Value Proposition
Adaptive Integrator
Service Science, Management, & Engineering (SSME)

Service Science: Discipline Classification System, v 0.3
A. General
1. Service Sciences Education
2. Research in Service Sciences
3. Service Sciences Policy
4. History of Services
5. Miscellaneous
A. Service Foundations
1. Service Theory
2. Service Philosophy
3. Economics of Services
4. Theoretical Models of Services
5. Mathematical Models of Services
6. Service Complexity Theory
7. Service Innovation Theory
8. Service Foundations Education
A. Service Engineering
1. Service Engineering Theory
3. Service Standards
4. Service Optimization
5. Service Systems Engineering
6. Service Supply Chains
7. Service Engineering Management
8. Service Systems Performance
9. Assetization of Services
10. New Services Engineering
11. Service Engineering Education
D. Services Computing
1. Services Computing Theory
2. Services Computing Standards
3. Service Information Systems
4. Service-Oriented Architecture
5. Web-services
6. Business Processes Modeling
7. Quality of Services
8. Services Computing Education
D. Service Business
1. Service Marketing
3. Service Management
4. Service Lifecycle
5. Service Innovation Management
6. Service Quality
7. Human Resources Management
8. Customer Relationship Management
9. Services Sourcing
10. Services Law
11. Globalization of Services
12. Service Business Education
D. Human Aspects of Services
1. Service Systems Evolution
2. Behavioral Models of Services
3. Decision Making in Services
4. People in Service Systems
5. Organizational Change in Services
6. Measurement and Incentive in Services
7. Social Aspects of Services
8. Customer Psychology
9. Education in Human Aspects of Services
G. Service Design
1. Service Design Theory
2. Service Design Methodology
3. Service Representation
4. Aesthetics of Services
5. Design Services
6. Service Design Education
G. Service Arts
1. Service Arts Theory
2. Traditional Service Arts
3. Contemporary Service Arts
4. Service Crafts
5. History of Service Arts
6. Service Arts Education
G. Service Industries*
1. The Service Industry
2. Wholesale Trade
3. Retail Trade
4. Transportation and Warehousing
5. Information Services
6. Finance and Insurance
7. Real Estate and Rental
8. Professional and Technical Services
9. Management Services
10. Administrative and Support Services
11. Educational Services
12. Health Care and Social Assistance
13. Arts, Entertainment, and Recreation
14. Accommodation and Food Services
15. Public Administration Services
16. Spiritual and Civic Services
17. Other Service Industries
* service industries based on NAICS 07Claudio Pinhanez (pinhanez@us.ibm.com), IBM Service Research

Some Fundamental Service Questions
 What are the concepts, typologies and methodologies that might serve to bring
some order to the diversity of services particularly with a view of measuring and
evaluating results and performance?
 What are the role and social organization of knowledge and intelligence in the
production, innovation, consumption and trading of services?
 What are the role of ICTs in the development of services and the rationalization of
the processes whereby they are produced, as well as in innovation in services?
– Gadrey & Gallouj (2002). Productivity, innovation, and knowledge in services. Cheltenham, UK: Edward Elgar.

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