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Swiss Instittute of Service Science, Bern Switzerland, Feb 28, 2011

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  • Service Science has been evolving. IBM launched SSME (Service Science Management Engineering) in 2004, working with university, industry, and government partners around the world – this talk presents a service science update. Reference content from this presentation as: Spohrer, JC (2011) Presentation: Service Science Progress & Directions. SISS (Swiss Institute of Service Science, Bern Switzerland, Feb 28, 2011. Permission to redistribute granted upon request to
  • This talk will covers three topics: A stimulus, a response, and an evolution Stimulus: Service Growth (for the World and IBM) Response: Service Science Priorities (from the Cambridge University report and the Arizona State University report) Evolution: Service science for a Smarter Planet – tries to answer a series of questions - What is smarter planet - What improves quality-of-life - What is a service system? What is service science? - What’s the skills goal? - Where are projects happening? - Where is the science? Today, at IBM we are applying service science to help build a Smarter Planet, one that is instrumented, interconnected, and intelligent through better decision-making from improved analytics and models of complex service system networks. We are working together with government, academics, and industry partners to build Smarter Cities in a growing number of developed and emerging nations around the world.
  • Over the last two hundred years, the US has shifted from agriculture to manufacturing to service jobs, as dominant. The growth in service jobs parallels the growth of the information economy, and many of the jobs are knowledge-intensive, including finance, health, education, government, B2B, etc. Developed and emerging markets are seeing the same shift – this is a global trend. What was clear was that all developed and emerging market nations where shifting to service economies due to increasing use of technology in manufacturing and agriculture (productivity increases), and increasing use of information technology in traditional service areas, including utilities, building maintenance, retail & hospitality, finance, health, education, and government – making the service sector more knowledge-intensive and requiring more technical skills. As well as more outsourcing, leading to more B2B service. In the back-up slides we introduce the concept of product-service-systems to better understand the way the global economies are evolving… ServicesOLD= Not Natural or Manufactured Products (Negative) ServiceNEW = Applying Knowledge/Resources to Benefit Customers/Stakeholders (Positive) Why does outsourcing the jobs or changing the business model (e.g., leasing, mass-customizaton) cause the category to change? It shouldn’t, modern farms and factories are service systems too… See the following papers… Vargo & Lusch (2004) Evolving to a New Dominant Logic for Marketing. Journal of Marketing. Tien & Berg (2006) On Services Research and Education. Journal of Systems Science and Systems Engineering. Two ways the Firm can think about the world: Firm – can I think of things my customers want to own, and how can I make and sell those things. Firm – can I think of ongoing relationships/interactions with my customers and their stakeholders, and how can I establish and continuously improve those interactions in a win-win manner Fact: Service growth in “national economies” All nations are experiencing a macro-economic shift from value in producing physical things (agriculture and goods) to value from apply capabilities for the benefit of others (services). Observation: Service sector is where the job growth is, not only in the US but around the world. Implication: Most science and engineering and management jobs will be in the service sector. For example, Kenneth Smith of H.B.Maynard (one of the oldest and most prestigious industrial engineering consulting firms) said - “Historically, most of our business at H.B. Maynard was manufacturing, today roughly 80% is in the retail sector…” So why do we still train most scientist and engineers for manufacturing age jobs? Could this be part of the reason that in most US engineering schools only 50% of entering engineering students graduate with an engineering degree? The service sector is the fastest growing segment of global economies. In the US, in 1800 90% of people were worked on farms, and today less than 3% of workers are employed in agriculture. Goods, or manufacturing of physical products, peaked in the US in the mid-1950’s and has been decreasing ever since due to automation and off shoring. However, services, especially complex information and business services, as we will see is where the growth is. But the growth in the service sector jobs is not just in the developed countries, it is also happening in the developing countries. In fact, the International Labor Organization, reports that 2006 was the first time in human history that more people worker in the service sector than in agriculture world wide. 40% in service sector, 39.7% in agriculture, and 21.3% in manufacturing, with the growth coming by moving people from agriculture to services – this represents the largest labor force migration in human history. 1970 estimates % of service in labor force (change to 2005/2009 est) China 12 +17 142% India 17 +6 35% US 62 +14 23% Indonesia 29 +10 34% Brazil 41 +25 61% Russia 42 +27 64% Japan 48 +19 45% Nigeria 16 +3 19% Bangledesh 19 +7 37% Germany 45 +19 42%
  • DeepQA: Incremental Progress in Precision and Confidence 6/2007-11/2010
  • IBM has seen its service revenue grow, and lead the growth of IBM in the last two decades. In the last two decades the growth was B2B, in the coming decade it will be B2G service growth – powered in part by shared service across government and cloud computing… Fact: Service growth in “manufacturing” businesses 2008 GTS 40 (39.2) GBS 20 (19.6) SWG 22 (22.1) S&T 20 (19.2) FIN 2 (2.6) Total 103.6B Profit 45.6% 2010 GTS 38.2B GBS 18.2B -> 56.4B HW 18.0B SW 22.5B FIN 2.2B -> 42.7B Source:
  • Sources
  • Researchers at University of Cambridge hosted industry and academic service researchers to create a framework for service innovation success… The framework is outlined in five columns – service innovation is the priority, we need to study service systems and networks, we call this study service science, and multiple stakeholders have to align to advance service science, and double investment in service research and education by 2015. You can read the complete report at the following URL: To ensure we are making progress, we need to see how much government, academia, and industry are investing in service research and innovation. IfM and IBM (2008). Succeeding through service innovation: A service perspective for education, research, business and government. Cambridge, UK: University of Cambridge Institute for Manufacturing.
  • Researchers at Arizona State University in the US recently surveyed service researchers from around the world to create a research priorities framework for service science. You can read the executive summary at the following website: You can read the complete article in the Journal of Service Research… Ostrom, AL, MJ Bitner, SW Brown, KA Burkhard, M Goul, V Smith-Daniels, H Demirkan, E Rabinovich (2010) Moving Forward and Making a Difference: Research Priorities for the Science of Service. Journal of Service Research. 13(1). 4-36.
  • Nations (~100) States/Provinces (~1000) Cities/Regions (~10,000) Educational Institutions (~100,000) Healthcare Institutions (~100,000) Other Enterprises (~10,000,000) Largest 2000 >50% GDP WW Families/Households (~1B) Persons (~10B) Balance/Improve Quality of Life, generation after generation GDP/Capita Quality of Service Customer Experience Quality of Jobs Employee Experience Quality of Investment-Opportunities Owner Experience Entrepreneurial Experience Sustainability GDP/Energy-Unit % Fossil % Renewable GDP/Mass-Unit % New Inputs % Recycled Inputs
  • Also, more and more product businesses, those in both manufacturing, mining, agriculture, are increasingly part of value networks and service chains that require thinking about service innovation. All businesses have both a front-stage (direct customer contact) and a back-stage (no-direct customer contact)… so the distinction between product businesses and service businesses is disappearing, and more and more people talk about product-service-systems or service-system-entities. The point is simply that as more of the world lives in cities, and as more product businesses see themselves as product-service-systems, the trend towards service is inexorable, and cannot be ignored in research and education. Academia has begun to study service both from a front-stage customer-interaction focus as well as a back-stage operational efficiciency focus. Service innovation and design impact both front-stage and back-stage, because when value chains and networks form, front-stage and back-stage are relative terms. The focus is on people, their capabilities (skills and competencies), their tools, and who and what they interact with most in value creation networks. Human-Capabilities-Tools- and-Interactions in Value Creation Networks Managers and Engineers from both Service and Product Businesses seeking to improve their business performance Academic Researchers from many disciplines and schools seeking funding, data sets, and access for both empirical studies and action research (design and interventions) to advance scientific knowledge and publish results in top journals Policy Makers and Concerned Citizens seeking to improve the performance of their governments and societal institutions Quality-of-Life including Quality of service to customers Quality of jobs to employees Quality of investment opportunities to stakeholders Sustainable Innovation People, Planet,Profits Should We, Can We, May We, Will We Surprisingly to some, the service science community includes managers and engineers from both service busineses and product businesses. Service businesses can learn a lot about operational efficiency from product businesses, and product businesses can learn a lot about customer value from service businesses. This is because as Harvard’s Theordore Leavitt observed in his famous 1974 paper, all businesses include some amount of front stage activities (direct customer contact) and some amount of back stage activities (no direct customer contact). In traditional service firms, the front stage dominates and in traditional product companies the back stage dominates, in terms of number of employees. In addition to Managers and Engineers from both Service and Produce Businesses, the service science commnuity also includes academic researchers from many disciplines and schools, including engineering schools, management schools, social science schools, and information schools. Furthermore, the service science community is not restricted to for-profit businesses and academics, the community also include government policy makers and concerned citizens seeking to improve the performance of government institutions and diverse types of non-profit organizations.
  • The evolution of service science is to apply service science to create a Smarter Planet. What is smarter planet? A smarter planet is built out of many harmonized smarter systems, systems that are instrumented, interconnected, and intelligent (data, models, and analytics software are used to make better decisions) The world is instrumented meaning everything has computers, cameras, gps or other sensors – cars, stop lights, signs, roads, hospitals, retail stores, rivers, bridges, etc.. The world is getting more and more interconnected. If we could capture the right data and analyze it, we can make our planet smarter. IBM has been working on cleaning up pollution in Galway Bay, Ireland. The marine scientists told the IBMers that the mussels in the water close their shells when something bad enters the water. So IBM put sensors in some of the mussels and connected the sensors to an alert system and visualization system. When a pollutant enters the water, the mussels shut their shells, the sensors sends an alert and water management officials begin to take action to clean it up. Over time, they realize that a particular ship may be coming into the bay every other Tuesday, causing the problem, and they can go after the ship company to not drop pollutants or to find another way to rid of waste. This optimization takes place with other causes of the pollutants.
  • Korsten, P. and Seider, C. (2010) The world’s US$4 trillion challenge: Using a system-of-systems approach to build a smarter planet. IBM Institute for Business Value. The IBM report concluded that our planet can be viewed as a complex, dynamic, highly interconnected $54 trillion system of systems…. Some of you recognize that $54 trillion number is 100% if the WW 2008 GDP, and because GDP does not capture all the value (both gray and black market, as well as many types of value created by families and communities that is not part of formal economic exchange) the real value is much higher – but still $54 trillion per year is a very large number. The US economy is about 20-25% of the total. Also the top 2000 publically traded companies in the world, have annual revenues that are nearly 50% of this amount. So while it is a large number, it is possible to estimate the contribution made by individual nations and individual large businesses – and most importantly it is possible to see how complex and interconnected these systems are. But what about the waste or inefficiencies in these systems…
  • Korsten, P. and Seider, C. (2010) The world’s US$4 trillion challenge: Using a system-of-systems approach to build a smarter planet. IBM Institute for Business Value. The 480 economists surveyed estimate that all the systems carry inefficientes of up to $15 trillion, of which $4 trillion could be eliminated… The title of this IBM Business Value report is in fact “The World’s $4 Trillion Challenge: Using a system of systems approach to build a smarter planet.” One implication of this report since cities are where most of the population of the world is concentrated, is that some number of cities have over $1B in annual waste and inefficiencies that can be eliminated. This report is required reading for everyone in cities and universities around the world, who are interested in partnering together to first (1) estimate and develop ways of measuring the inefficiencies, and then (2) create actions plans that can compete for funding and other resources to make needed changes. As the systems reduce waste and expand capabilities for measuring inefficiencies, the systems become smarter systems and quality of life is improved thru modern service… And the good news is that every day there are more and more success stories being created. For example, the 2009 IBM Annual Report contains a map of the world….
  • What improves quality of life? Service system innovations. Every day we are customers of 13 types of service systems. If any of them fail, we have a “bad day” (Katrina New Orleans) I have been to two service science related conferences recently, one in Japan on Service Design and one in Portugal on Service Marketing… the papers from the proceedings of the conferences mapped onto all of these types of service systems… The numbers in yellow: 61 papers Service Design (Japan) / 75 papers Service Marketing (Portugal) / 78 Papers Service-Oriented Computing (US) Number in yellow Fist number: Service Design Conference, Japan 2 nd International Service Innovation Design Conference (ISIDC 2010), Future University Hakodate, Japan Second number Service Marketing Conference, Portugal, AMA SERVSIG at U Porto, Portugal Numbers in yellow: Number of AMA ServSIG 2010 abstracts that study each type of service system… ( Of 132 total abstracts… 10 studies all types of service systems 19 could not be classified In a moment we will look at definitions of quality of life, but for the moment, consider that everyday we all depend on 13 systems to have a relatively high quality of life, and if any one of these systems goes out or stops providing good service, then our quality of life suffers…. Transportation, Water, Food, Energy, Information, Buildings, Retail, Banking & Financial Services (like credit cards), Healthcare, Education, and Government at the City, State, and National levels…. Volcanic ash, hurricanes, earthquakes, snow storms, floods are some of the types of natural disasters that impact the operation of these service systems – but human made challenges like budget crises, bank failures, terrorism, wars, etc. can also impact the operation of these 13 all important service systems. Moreover, even when these systems are operating normally – we humans may not be satisfied with the quality of service or the quality of jobs in these systems. We want both the quality of service and the quality of jobs in these systems to get better year over year, ideally, but sometimes, like healthcare and education, the cost of maintaining existing quality levels seems to be a challenge as costs continue to rise… why is that “smarter” or sustainable innovation, which continuously reduces waste, and expands the capabilities of these systems is so hard to achieve? Can we truly achieve smarter systems and modern service? A number of organizations are asking these questions – and before looking at how these questions are being formalized into grand challenge questions for society – let’s look at what an IBM report concluded after surveying about 400 economists…. ==================== Quality of life for the average citizen (voter) depends on the quality of service and quality of jobs in 13 basic systems….. Local progress (from the perspective of the average citizen or voter) can be defined for our purposes as (quality of service & jobs) + returns (the provider, which is really the investor perspective, the risk taker in provisioning the service) + security (the authority or government perspective on the cost of maintaining order, and dealing with rules and rule violations) + smarter (or the first derivative – does all this get better over time – parents often talk about wanting to help create a better world for their children - sustainable innovation, means reducing waste, being good stewards of the planet, and expanding our capabilities to do things better and respond to challenges and outlier events better)…. Without putting too fine a point on it, most of the really important grand challenges in business and society relate to improving quality of life. Quality of life is a function of both quality of service from systems and quality of opportunities (or jobs) in systems. We have identified 13 systems that fit into three major categories – systems that focus on basic things people need, systems that focus on people’s activities and development, and systems that focus on governing. IBM’s Institute for Business Value has identified a $4 trillion challenge that can be addressed by using a system of systems approach. Employment data… 2008 A. 3+0.4+0.5+8.9+1.4+2.0=16.2 B. C.13.1+1.8=14.9 Total 150,932 (100%) Transportation (Transportation and Warehousing 4,505 (3%)) Water & Waste (Utilities 560 (0.4%)) Food & Manufacturing (Mining 717 (0.5%), Manufacturing 13,431 (8.9%), Agriculture, Forestry, Fishing 2,098 (1.4%)) Energy & Electricity Information (Information 2,997 (2%)) Construction (Construction 7,215 (4.8%)) Retail & Hospitality (Wholesale Trade 5,964 (4.0%), Retail Trade 15,356 (10.2%), Leisure and hospitality 13,459 (8.9%)) Financial & Banking/Business & Consulting (Financial activities 8,146 (5.4%), Professional and business services 17,778 (11.8%), Other services 6,333 (4.2%)) Healthcare (Healthcare and social assistance 15,819 (10.5%) Education (Educational services 3,037 (2%), Self-employed and unpaid family 9,313 (6.2%), Secondary jobs self-employed and unpaid family 1,524 (1.0%)) City Gov State Gov (State and local government 19,735 (13.1%)) Federal Gov (Federal government 2,764 (1.8%))
  • And the NAE’s Engineering Grand Challenge problems include – making solar energy economical – which fits into category 4. Smarter Energy… there are at least two NAE grand challenges that related to 10. Smarter Education systems – Advance personalized learning and Engineer the tools of scientific discovery… one might also want to include enhance virtual reality and reverse engineer the brain – and I included those under 5. Smarter Information systems… the point is that solving any one of these 14 NAE grand challenge problems has the potential to have significant impact on one or more of the 13 systems that we all depend on every day for quality of life… And so now would be a good time to say a little bit more about the component measurements and the challenges of defining quality of life…
  • The reasonable questions: What is a service system? What is service science? A service system is a human-made system to improve customer-provider interactions, or value-cocreation. As a customer, who is your favorite service provider? Don’t have one – well that is one reason we need service science : - ) More seriously service systems can be very complex… Because service systems are so complex, many different disciplines study different aspects of them… you can think of marketing as study the trunk of the elephant (the customer) and operations as studying the tale (the provider), design and psychology the user experience, computer science the information systems part, systems engineering some aspects of the engineered parts of the system, and economics other aspects of the value creation, not studied by the systems engineers… in fact many people say “Service science is just <and then they name their favorite discipline>” Service Science is the study of service systems and value cocreation…. including routine and non-routine, direct and indirect, customer and provider interactions that achieve value-cocreation outcomes for all stakeholders Economics Service 1 = economic activities that are not agriculture or manufacturing Service 3 = a transformation that one economic entity performs with the permission of a second entity, that transforms the second entity or a possession of the second entity Service 4 = an exchange between economic entities that does not transfer ownership of a physical thing. Service Science Service 2 = human-made value-cocreation phenomena, specifically a mutually beneficial outcome proposed, agreed to, and realized by two or more service system entities interacting. Service system entities can be people, businesses, nations, and any other economic entities with legal rights, such as the ability to own property, enter into binding contracts, etc. Quantifiable measures associated with service system entity interactions over the life-time of the entity, include quality, productivity, compliance, and sustainable innovation measures. Service system entities configure four types of resources, accessible by four types of access rights, and reason about four types of stakeholders when designing value-cocreation interactions, and evaluating them via their processes of valuing. Both collaboration and competition can both be/not be forms of value-cocreation, depending on context Operations Service 5 = a production process that requires inputs from a customer entity Computer Science Service 6 = a modular capability that can be computationally accessed and composed with others Systems Engineering Service 7 = a system (with inputs, outputs, capacity limits, and performance characteristics) which is interconnected with other systems that may seek to access its capabilities to create benefits, and in which local optimization of the system interactions may not lead to global performance improvements Design and Psychology Service 8 = an experience of a customer entity that results from that customer entity interacting with provider entities’ offerings Marketing Service 9 = the application of competence (e.g., resources, skills, capabilities) for the benefit of another entity Service 10 = a customer-provider interaction that creates mutual benefits
  • How to visualize service science? The systems-disciplines matrix… SSMED or service science, for short, provides a transdisciplinary framework for organizing student learning around 13 systems areas and 13 specialized academic discipline areas. We have already discussed the 13 systems areas, and the three groups (flows, human activity, and governing)… the discipline areas are organized into four areas that deal with stakeholders, resources, change, and value creation. If we have time, I have included some back-up slides that describes service science in the next level of detail. However, to understand the transdisciplinary framework, one just needs to appreciate that discipline areas such as marketing, operations, public policy, strategy, psychology, industrial engineering, computer science, organizational science, economics, statistics, and others can be applied to any of the 13 types of systems. Service science provides a transdisciplinary framework to organize problem sets and exercises that help students in any of these disciplines become better T-shaped professionals, and ready for teamwork on multidisciplinary teams working to improve any type of service system. As existing disciplines graduate more students who are T-shaped, and have exposure to service science, the world becomes better prepared to solve grand challenge problems and create smarter systems that deliver modern service. Especially, where students have had the opportunity to work as part of an urban innovation center that links their university with real-world problems in their urban environment – they will have important experiences to help them contribute to solving grand challenge problems. ================================================ SSMED (Service Science, Management, Engineering and Design) Systems change over their life cycle… what is inside become outside and vice versa In the course of the lifecycle… systems are merged and divested (fusion and fission) systems are insourced and outsourced (leased/contracted relations) systems are input and output (owner ship relations) SSMED standard should ensure people know 13 systems and 13 disciplines/professions (the key is knowing them all to the right level to be able to communicate and problem-solve effectively) Multidisciplinary teams – solve problems that require discipline knowledge Interdisciplinary teams – solve harder problems, because they create new knowledge in between disciplines Transdisciplinary teams – solve very hard problems, because the people know discipline and system knowledge Ross Dawson says “Collaboration drives everything” in his talk about the future of universities…
  • What is the skills goal? T-shaped professional, ready for T-eamwork… T-shaped people are ready for T-eamwork – they are excellent communicators, with real world experience, and deep (or specialized) in at least one discipline and systems area, but with good team work skills interacting with others who are deep in other disciplines and systems areas. Also, T-shaped professionals also make excellent entrepreneurs, able to innovate with others to create new technology, business, and societal innovations. T-shaped people are adaptive innovators, and well prepared for life-long learning in case they need to become deep in some new area… they are better prepared than I-shaped people, who lack the breadth. Therefore, IBM and other public and private organizations are looking to hire more of this new kind of skills and experience profile – one that is both broad and deep.. These organizations have been collaborating with universities around the world to establish a new area of study known as service science, management, engineering, and design (SSMED) – to prepare computer scientists, MBAs, industrial engineers, operations research, management of information systems, systems engineers, and students of many other discipline areas – to understand better how to work on multidisciplinary teams and attack the grand challenge problems associated with improving service systems…
  • Where are the opportunities? Everywhere! IBM 2009 Annual Report – survey of smarter planet projects around the world…. But how do we involve universities more? How do we weave a “total solution” that includes universities in smarter city projects? What is the role of the university in creating a smarter city? In the continuous improvement of quality of life in cities? And aren’t universities really mini-cities within cities? … and on this Map of the World, in the 2009 IBM Annual report one can see a sampling of IBM Smarter Planet engagements around the world… working to improve the complete spectrum of system of systems… often with a focus on one system in one city… such as smarter energy in venezula or smarter medical research for healthcare in the US… some of these engagements include a partnership between the cities and universities – but much more opportunity exists… to help focus cities and universities, among others, on these opportunities… IBM and other organizations have begun to identify grand challenge problems…. For example, if you look at the IBM Smarter Planet website….
  • In conclusion, let’s consider the big picture – starting with the big bang…. and evolution of the earth, life on earth, human life, cities, universities, and the modern world…: Many people still ask -- where is the science in the “Service Science?” One answer is that the science is hidden away in each of the component disciplines that study service systems, scientifically from their particular perspective… However, the big picture answer is “Ecology” - Ecology is the study of the abundance and distribution of entities (populations of things) in an environment… and how the entities interact with each other and their environment over successive generations of entities. The natural sciences (increasingly interdisciplinary) study the left side, using physics, chemistry, and biology Service science (originated as interdisciplinary) studies the right side, using history, economics, management, engineering, design, etc. Service science is still a young area, but from the growth of service in nations and businesses to the opportunity to apply service science to build a smarter planet, innovate service systems, and improve quality of life… it is an emerging science with bright future, and yes… it will continue to evolve : - ) Most people think of ecology in terms of living organisms, like plants and animals in a natural environment. However, the concept of ecology is more general and can be applied to entities as diverse as the populations of types of atoms in stars to the types of businesses in a national economy. I want to start my talk today on “service,” by first thinking broadly about ecologies of entities and their interactions. Eventually, we will get to human-made service system entities and human-made value-cocreation mechanisms… but for today, let’s really start at the very beginning – the big bang. About 14B years ago (indicated by the top of this purple bar), our universe started with a big bang. And through a process of known as fusion, stars turned populations of lighter atoms like hydrogen into heavier atoms like helium, and when stars of a certain size have done all the fusion they could, they would start slowing down, and eventually collapse rapidly, go nova, explode and send heavier atoms out into the universe, and eventually new stars form, and the process repeats over and over, creating stars with different populations of types of atoms, including heavier and heavier elments. So where did our sun and the earth come from…. Eventually after about ten billion years in the ecology of stars and atoms within stars, a very important star formed our sun (the yellow on the left) – and there were plenty of iron and nickel atoms swirling about as our sun formed, and began to burn 4.5B years ago, and the Earth formed about 4.3B years ago (the blue on the left)… In less than a billion years, the early earth evolved a remarkable ecology of complex molecules, including amino acids, and after less than a billion years, an ecology of bacteria took hold on early earth (the bright green on the left). The ecology of single cell bacteria flourished and after another billion years of interactions between the bacteria, the first multicellular organisms formed, and soon the ecology of sponges (the light blue on the left) and other multi-cellular entities began to spread out across the earth. Then after nearly two billion years, a type of division of labor between the cells in multicelluar organism lead to entities with cells acting as neurons in the first clams (the red on the left), and these neurons allowed the clams to open and close at the right time. After only 200 million years, tribolites appeared the first organisms with dense neural structures that could be called brains appeared (the black on the left), and then after about 300 million years, multicelluar organisms as complex as bees appeared (the olive on the left), and these were social insects, with division of labor among individuals in a population, with queens, drones, worker bees. So 200 million years ago, over 13B years after the big bang, the ecology of living entities is well established on planet earth, including social entities with brains and division of labor between individuals in a population…. Living in colonies that some have compared to human cities – where thousands of individuals live in close proximity and divide up the work that needs to be done to help the colony survive through many, many generations of individuals that come and go. Bees are still hear today. And their wingless cousins, called ants, have taken division of labor to incredible levels of complexity in ant cities in nearly every ecological niche on the planet, except under water. Now let’s look at the human ecology,and the formation of service system entities and value-cocreation mechanisms, a small portion of which is represented by the colored bar on the right. Recall bees appeared about 200 million years ago, a small but noticeable fraction of the age of the universe. Now take 1% of this little olive slice, which is 2 million years… that is how long people have been on earth, just one percent of this little olive slice here. What did people do in most of that 2million years? Basically, they spread out to every corner of the planet, and changed their skin color, eye colors, and hair colors, they spread out and became diverse with many different appearances and languages. It took most of that 200 millions just to spread out and cover most of the planet with people. When there was no more room to spread out the density of people in regions went up…. Now take 1% of that 2million years of human history which basically involved spreading out to every corner of the planet and becoming more diverse, recall ecology is the study of abundance and distribution and types of interactions, and 1% of that 2million years is just 20,000 years, and now divide that in half and that represents 10,000 years. The bar on the right represents 10,000 years or just 500 generations of people, if a generation is about 20 years. 500 generations ago humans built the first cities, prior to this there were no cities so the roughly 100M people spread out around the world 0% lived in cities, but about 500 generations ago the first cities formed, and division of labor and human-made service interactions based on division of labor took off – this is our human big bang – the explosion of division of labor in cities. Cities were the big bang for service scientists, because that is when the diversity of specialized roles and division of labor, which is at the heart of a knowledge-based service economy really begins to take off... So cities are the first really important type of human-made service system entities for service scientists to study, the people living in the city, the urban dwellers or citizens are both customers of and providers of service to each other, and division of labor is the first really important type of human-made value-cocreation mechanism for service scientists to study. (Note families are a very important type of service system entity, arguably more important than cities and certainly much older – however, family structure is more an evolution of primate family structure – and so in a sense is less of a human-made service system entity and more of an inherited service system entity… however, in the early cities often the trades were handed down father to son, and mother to daughter as early service businesses were often family run enterprises in which the children participated – so families specialized and the family names often reflect those specialization – for example, much later in England we get the family names like smith, mason, taylor, cooper, etc.) So to a service scientist, we are very excited about cities as important types of service system entities, and division of labor as an important type of value-cocreation mechanism, and all this really takes off in a big way just 500 generations ago when the world population was just getting to around 100M people spread out all around the world – so 10,000 years about about 1% of the worlds population was living in early versions of cities. It wasn’t until 1900 that 10% of the world’s then nearly 2B people lived in cities, and just this last decade that 50% of the worlds 6B people lived in cities, and by 2050 75% of the worlds projected 10B population will be urban dwellers. If there is a human-made service system that we need to design right, it is cities. It should be noted that the growth of what economist call the service sector, parallels almost exactly the growth of urban population size and increased division-of-labor opportunities that cities enable – so in a very real sense SERVICE GROWTH IS CITY GROWTH OR URBAN POPULATION GROWTH… in the last decade service jobs passed agriculture jobs for the first time, and urban dwellers passed rural dwellers for the first time. But I am starting to get ahead of myself, let’s look at how the human-made ecology of service system entities and value-cocreation mechanisms evolved over the last 10,000 years or 500 generations. The population of artifacts with written language on them takes off about 6000 years ago or about 300 generations ago (the yellow bar on the right). Expertise with symbols helped certain professions form – and the first computers were people writing and processing symbols - scribes were required, another division of labor – so the service of reading and writing, which had a limited market at first began to emerge to help keep better records. Scribes were in many ways the first computers, writing and reading back symbols – and could remember more and more accurately than anyone else. Written laws (blue on right) that govern human behavior in cities takes off about 5000 years ago – including laws about property rights, and punishment for crimes. Shortly there after, coins become quite common as the first type of standard monetary and weight measurement system (green on right). So legal and economic infrastructure for future service system entities come along about 5000 years ago, or 250 generations ago, with perhaps 2% of the population living in cities…. (historical footnote: Paper money notes don’t come along much until around about 1400 years ago – bank notes, so use of coins is significantly older than paper money, and paper money really required banks as service system entities before paper money could succeed.). About 50 generations ago, we get the emergence of another one of the great types of service system entities – namely universities (light blue line) – students are the customers, as well as the employers that need the students. Universities help feed the division of labor in cities that needed specialized skills, including the research discipline skills needed to deepen bodies of knowledge in particular discipline areas. The red line indicates the population of printing presses taking off in the world, and hence the number of books and newspapers. This was only about 500 years or 25 generations ago. Now university faculty and students could more easily get books, and cities began to expand as the world’s population grew, and more cities had universities as well. The black line indicates the beginning of the industrial revolution about 200 years ago, the sream engine, railroads, telegraph and proliferation of the next great type of service system entity – the manufacturing businesses - that benefited from standard parts, technological advances and scale economies, and required professional managers and engineers. About 100 years ago, universities began adding business schools to keep up with the demand for specialized business management skills, and many new engineering disciplines including civil engineering, mechanical engineering, chemical engineering, and electrical engineering, fuel specialization and division of labor. By 1900, just over 100 years ago, or 5 generations ago 10% of the worlds population, or about 200 million people were living in cities and many of those cities had universities or were starting universities. Again fueling specialization, division of labor, and the growth of service as a component of the economy measured by traditional economists. Finally, just 60 years ago or 3 generations ago, the electronic semiconductor transistor was developed (indicated by the olive colored line on the right), and the information age took off, and many information intensive service activities could now benefit from computers to improve technology (e.g., accounting) and many other areas. So to recap, cities are one of the oldest and most important type of service system and universities are an important and old type of service system, as well as many types of businesses. Service science is the study of service system entities, their abundance and distribution, and their interactions. Division of labor is one of the most important types of value cocreation mechanisms, and people often need specialized skills to fill roles in service systems. Service science like ecology studies entities and their interactions over successive generations. New types of human-made service system entities and value-cocreation mechanisms continue to form, like wikipedia and peer production systems. Age of Unvierse (Wikipedia) The age of the universe is the time elapsed between the Big Bang and the present day. Current theory and observations suggest that the universe is 13.75 ±0.17 billion years old. [1] Age of Sun The Sun was formed about 4.57 billion years ago when a hydrogen molecular cloud collapsed. [85] Solar formation is dated in two ways: the Sun's current main sequence age, determined using computer models of stellar evolution and nucleocosmochronology , is thought to be about 4.57 billion years. [86] This is in close accord with the radiometric date of the oldest Solar System material, at 4.567 billion years ago. [87] [88] Age of Earth The age of the Earth is around 4.54 billion years (4.54 × 109 years ± 1%). [1] [2] [3] This age has been determined by radiometric age dating of meteorite material and is consistent with the ages of the oldest-known terrestrial and lunar samples . The Sun , in comparison, is about 4.57 billion years old , about 30 million years older. Age of Bacteria (Uni-cellular life) The ancestors of modern bacteria were single-celled microorganisms that were the first forms of life to develop on earth, about 4 billion years ago. For about 3 billion years, all organisms were microscopic, and bacteria and archaea were the dominant forms of life. [22] [23] Although bacterial fossils exist, such as stromatolites , their lack of distinctive morphology prevents them from being used to examine the history of bacterial evolution, or to date the time of origin of a particular bacterial species. However, gene sequences can be used to reconstruct the bacterial phylogeny , and these studies indicate that bacteria diverged first from the archaeal/eukaryotic lineage. [24] The most recent common ancestor of bacteria and archaea was probably a hyperthermophile that lived about 2.5 billion–3.2 billion years ago. [25] [26] Cities (Wikipedia) Early cities developed in a number of regions of the ancient world. Mesopotamia can claim the earliest cities, particularly Eridu, Uruk, and Ur. After Mesopotamia, this culture arose in Syria and Anatolia, as shown by the city of Çatalhöyük (7500-5700BC). Writing (Wikipedia) Writing is an extension of human language across time and space. Writing most likely began as a consequence of political expansion in ancient cultures, which needed reliable means for transmitting information, maintaining financial accounts, keeping historical records, and similar activities. Around the 4th millennium BC, the complexity of trade and administration outgrew the power of memory, and writing became a more dependable method of recording and presenting transactions in a permanent form [2] . In both Mesoamerica and Ancient Egypt writing may have evolved through calendrics and a political necessity for recording historical and environmental events. Written Law (Wikipedia) The history of law is closely connected to the development of civilization . Ancient Egyptian law, dating as far back as 3000 BC, contained a civil code that was probably broken into twelve books. It was based on the concept of Ma'at , characterised by tradition, rhetorical speech, social equality and impartiality. [81] [82] By the 22nd century BC, the ancient Sumerian ruler Ur- Nammu had formulated the first law code , which consisted of casuistic statements ("if ... then ..."). Around 1760 BC, King Hammurabi further developed Babylonian law , by codifying and inscribing it in stone. Hammurabi placed several copies of his law code throughout the kingdom of Babylon as stelae , for the entire public to see; this became known as the Codex Hammurabi . The most intact copy of these stelae was discovered in the 19th century by British Assyriologists, and has since been fully transliterated and translated into various languages, including English, German, and French. [83] Money (Wikipedia) Many cultures around the world eventually developed the use of commodity money . The shekel was originally both a unit of currency and a unit of weight. [10] . The first usage of the term came from Mesopotamia circa 3000 BC. Societies in the Americas, Asia, Africa and Australia used shell money – usually, the shell of the money cowry ( Cypraea moneta ) were used. According to Herodotus , and most modern scholars, the Lydians were the first people to introduce the use of gold and silver coin . [11] It is thought that these first stamped coins were minted around 650–600 BC. [12] Universities (Wikipedia) Prior to their formal establishment, many medieval universities were run for hundreds of years as Christian cathedral schools or monastic schools ( Scholae monasticae ), in which monks and nuns taught classes; evidence of these immediate forerunners of the later university at many places dates back to the 6th century AD. [7] The first universities were the University of Bologna (1088), the University of Paris (c. 1150, later associated with the Sorbonne ), the University of Oxford (1167), the University of Palencia (1208), the University of Cambridge (1209), the University of Salamanca (1218), the University of Montpellier (1220), the University of Padua (1222), the University of Naples Federico II (1224), the University of Toulouse (1229). [8] [9] Printing and Books (Wikipedia) Johannes Gutenberg's work on the printing press began in approximately 1436 when he partnered with Andreas Dritzehn—a man he had previously instructed in gem-cutting—and Andreas Heilmann, owner of a paper mill. [34] However, it was not until a 1439 lawsuit against Gutenberg that an official record exists; witnesses' testimony discussed Gutenberg's types, an inventory of metals (including lead), and his type molds. [34]
  • The world view is that of an ecology of service-system-entities. Ecology is the study of the populations of entities, and their interactions with each other and the environment Types of Service System Entities, Interactions, and Outcomes is what a service scientist studies. Service systems include: Person, Family/Household, Business, Citiy, Nation, University, Hospital, Call-Center, Data-Center, etc. – any legal entity that can own property and be sued We see that Resources (People, Technology, Information, Organizations) and Stakeholder (Customers, Providers, Authorities, Competitors) are part of the conceptual framework for service science.
  • Nations (~100) States/Provinces (~1000) Cities/Regions (~10,000) Educational Institutions (~100,000) Healthcare Institutions (~100,000) Other Enterprises (~10,000,000) Largest 2000 >50% GDP WW Families/Households (~1B) Persons (~10B) Balance/Improve Quality of Life, generation after generation GDP/Capita Quality of Service Customer Experience Quality of Jobs Employee Experience Quality of Investment-Opportunities Owner Experience Entrepreneurial Experience Sustainability GDP/Energy-Unit % Fossil % Renewable GDP/Mass-Unit % New Inputs % Recycled Inputs
  • … cities are a system of systems with dense population, which creates challenges and opportunities and even the potential for many new types of careers… some statistics… Demographic change: During the first decade of the 21 st century, for the first time in history, more than 50% of the world’s population live in cities and the urban population of all nations continues to grow. For developed nations, the urban population has reached 70% and continues to increase. Challenges: The negative impacts of urbanization are well known from traffic congestion, housing, clean water, and energy shortages, pollution, waste disposal costs, pandemic risks, high school drop-out rates, tax burden, and environmental stress (noise, lights at night, carcinogens, toxins, etc.). Opportunity: Cities may be the key building blocks for a sustainable planet, where innovations can quickly scale to impact the lives of millions of people. While technology will not be a panacea, rapidly advancing technology will offer new opportunities for efficiencies. Cities provide opportunities to more rapidly deploy and scale up advanced technologies to benefit the people living in a region. Careers: As urban sustainability and innovation projects increase in quantity, attractive long-term career paths will open up for students properly prepared. Examples: More US cities are adopting climate change action plans. PlaNYC (released 2007) has a focus initiatives that apply technology to reduce waste and continuously improve a long-term sustainability and quality of life roadmap for the city. In October 2009, 30 new initiatives to grow New York City’s green economy were announced by the mayor’s office, including an urban technology innovation center to promote smart building best practices and develop NYC’s green tech workforce. Without putting too fine a point on it, most of the really important grand challenges in business and society relate to improving quality of life. Quality of life is a function of both quality of service from systems and quality of opportunities (or jobs) in systems. We have identified 13 systems that fit into three major categories – systems that focus on basic things people need, systems that focus on people’s activities and development, and systems that focus on governing. IBM’s Institute for Business Value has identified a $4 trillion challenge that can be addressed by using a system of systems approach.
  • A growing number of cities are partnering with their local universities to address their grand challenge problems and to improve quality of life through investments in smarter systems and modern service… To understand how universities can respond and help cities, it is important to understand that universities are mini-cities (system of systems) – with their own operations and challenges. Cities are important building blocks in nations. Universities are important building blocks in cities.
  • Source: Building Luxury Hotels IBM Case Study: St. Regis Hotel Shanghai Only Intelligent Building among 33 five stars hotels in the region Designed at 5.1% energy cost to revenue, now at 4.9% ... all other 5 star hotels average 8% 40% reduced energy cost / revenue vs. other 5 Star hotels
  • Talk about US being off the chart with 23% WW GDP and 30% of Top Ranked University in WW Top 500, China and other large population emerging markets rising rapidly, and US moving down towards the rest of the pack…. 2004-2009: Relative Change China (+3,+2), US (-3.5,-5) Graph based on data from Source: Analysis: Antonio Fischetto and Giovanna Lella (URome, Italy) students visiting IBM Almaden Dynamic graphy based on Swiss students work: US is still “off the chart” – China projected to be “off the chart” in less than 10 years: US % of WW Top-Ranked Universities: 30,3 % US % of WW GDP: 23,3 % Correlating Nation’s (2004) % of WW GDP to % of WW Top-Ranked Universities US is literally “off the chart” – but including US make high correlation even higher: US % of WW Top-Ranked Universities: 33,865 % US % of WW GDP: 28,365 %
  • Of course, this is a case of universities, their staff, faculty, and students acting locally. In a sense, the cities are a living lab for the universities as they establish relevant projects and some create urban innovation centers… to help measure the waste in exisitng systems, and try to create smarter systems with more capabilities including provisioning and delivering modern service. As the list of cities with major populations indicates, the opportunity to create innovations that impact the lives of millions of people is a real opportunity for universities that can establish the right partnership with their host city…
  • This world map shows the population growth per hour projected through 2015 in some of the fastest growing cities with populations over one million people. Source: Urban Age
  • Question: How can we maintain a high quality of life when population is increasing, flat, decreasing? Understand “service system scaling” will be a key part of the answer… Source of UN chart is Wikipedia “World Population” World population from 1800 to 2100, based on UN 2004 projections (red, orange, green) and US Census Bureau historical estimates (black). The human population “carrying capacity” of planet Earth depends on the ecology of service systems we can collectively create and maintain…. Especially important building blocks to get right are cities and universities – we call these tightly-coupled holistic service systems, and argue for their importance as a topic of research in the emerging area known as service science… The carrying capacity of a biological species in an environment is the population size of the species that the environment can sustain indefinitely, given the food, habitat, water and other necessities available in the environment. For the human population, more complex variables such as sanitation and medical care are sometimes considered as part of the necessary establishment. As population density increases, birth rate often decreases and death rate typically increases. Permission to re-distribute granted by Jim Spohrer – please request via email (
  • Permission to re-distribute granted by Jim Spohrer – please request via email ( This talk provided a concise introduction to SSME+D evolving, and applying Service Science to build a Smarter Planet… Reference content from this presentation as: Spohrer, JC (2010) Presentation: SSME+D (for Design) Evolving: Update on Service Science Progress & Directions. Event. Place. Date. Permission to redistribute granted upon request to But I want to end by sharing some relevant quotes… The first you may have seen on TV or heard on the radio – it is from IBM – Instrumented, Interconnected, Intellient – Let’s build a smarter planet (more on this one shortly) Second, If we are going to build a smarter planet, let’s start by building smarter cities, (as we will see cities turn out to be ideal building blocks to get right for a number of reasons) And if we focus on cities, then the quote from the Foundation Metropolitan paints the right picture, cities learning from cities learning from cities… The next is probably the best known quote in the group “think global, act local” (we will revisit this important thought) Since all the major cities of the world have one or more universities, the next quote is of interest “the future is born in universities” And two more well known quotes about the future – the best way to predict the future is to build it, and the future is already here… it is just not evenly distributed. The next quote is an important one for discipline specialists at universities to keep in mind – real-world problems may not respect discipline boundaries (so be on guard for myopic solutions that appear too good to be true, they often are!)… Because if we are not careful, today’s problems may come from yesterday’s solutions… And since we cannot anticipate all risks or quickly resolve them once we notice them, we should probably never forget what HG Wells said - that history is a race between education and catastrophe… In a world of accelerating change, this last statement also serves as a reminder that the pace of real innovation in education is a good target for study in terms of smarter systems and modern service…
  • Both individual people and institutions/organizations are learning… this is the vision of the educational continuum…
  • Example mission: Your city’s water usage has increased at twice the rate of population growth, and supplies are becoming tested (and possibly polluted by human activity); your municipality is losing as much as 40% of its water supply through leaky infrastructure; and your energy costs are steadily increasing. You must institute a Water Management System so you have accurate real-time data to make decisions on delivering the highest water quality in most economical way.
  • The mission of the Urban Service Systems Sustainability and Innovation Centers will be to increase understanding in three areas that can have a direct impact on quality of life in cities…. Holistic modeling, STEM Education Pipeline, and Entrepreneurship & Job Creation…. Area of Future Growth: Holistic Modeling and Analytics for Cities (Urban Service System Sustainability and Innovation Centers) Improve Input for this area: STEM (Science Technology Engineering and Mathematics) Education Pipeline, and Improve Output for this area: Jobs & Entrepreneurship Regarding quality of living and quality of infrastructure, Boston rated #33 in both rankings for 2009... What would it take to get Boston into the #1 position in both rankings? Also, of interest - ranking by population... For truly large cities, Japan seems to do best in quality of living and quality of infrastructure.... Mercer evaluates local living conditions in all the 420 cities it surveys worldwide. Living conditions are analysed according to 39 factors, grouped in 10 categories: Political and social environment (political stability, crime, law enforcement, etc) Economic environment (currency exchange regulations, banking services, etc) Socio-cultural environment (censorship, limitations on personal freedom, etc) Health and sanitation (medical supplies and services, infectious diseases, sewage, waste disposal, air pollution, etc) Schools and education (standard and availability of international schools, etc) Public services and transportation (electricity, water, public transport, traffic congestion, etc) Recreation (restaurants, theatres, cinemas, sports and leisure, etc) Consumer goods (availability of food/daily consumption items, cars, etc) Housing (housing, household appliances, furniture, maintenance services, etc) Natural environment (climate, record of natural disasters)
  • Teaching Service Science – start with who is the audience? Graduate students, from engineering, business, social sciences, information school, etc? Undergraduate students majoring in engineering, business, social sciences, information science, etc.? Business practitioners in manufacturing businesses, traditional service businesses, non-profits, government agencies? Service Science Reading List – Many textbooks and reference-textbooks included:
  • Resource Integrator = Service-Systems = Product-Service-System A service system entity can be a person, a business, or a government entity. A service system has to have rights and be able to own property – either the focal person or focal group (role fillers) in case of an organization. Think of an individual person like a sole proprietorship, with all the resources that are part of the legal entity.
  • Self-service or value-creation: When an entity achieves an outcome, some change in the world that is desired and that they worked to create – then the entity has created value for itself. Service or value-cocreation: When an entity achieved an outcome, some change in the world that is desired and they worked to create, but could not have done without the help or the resources of another entity, that willing provided the help or resource in exchange for benefits – then value-cocreation has occurred. Value-cocreation is not a zero-sum game, where for one entity to gain another entity must lose (e.g., not the case that for me to get +3, you have to get -3, so in the end it is a total of zero (0) together) Value-cocreation is a positive-sum game, where both entities can and do gain (e.g., the case that I can get +3 and you can get +4, so in the end it is a total of +7 together).
  • Types of service interactions: Direct: Service with direct customer-provider interaction, a patient visiting a doctor for an exam Indirect: Service with indirect access, a patient emails their doctor, and the doctor responds to the email Self: Self-service with the customer in the role of the employee, for example, pumping gas at a gas station (using the stations equipment), or taking one’s own blood pressure at home, using a blood pressure machine provided by the doctor’s office
  • Four key types of resources: People – example, a doctor or a nurse Technology – example, a computer or car, but can also be the environment, such as an agricultural-field or a coal-mine Organizations – example, IBM or a university like MIT or a government like the national government of Germany Shared Information – example, could be language, laws, measures, etc.
  • Four Key Stakeholder Perspectives: P = Provider C = Customer A = Authority S = Substitute (Competitor)
  • Four key types of access rights: Owned Outright – buying a car or a house Leased/Contract – renting a car or hotel room Shared Access – a bus or sleep-over-at-the-aquarium Privileged Access – a government vehicle assigned to you or living in the governor’s mansion
  • The three premises of service science deal with resources, stakeholders, and access rights. Four Key Stakeholder Perspectives: P = Provider C = Customer A = Authority S = Substitute (Competitor) Reference content from this presentation as: Spohrer, JC (2010) Presentation: SSME+D (for Design) Evolving: Update on Service Science Progress & Directions. Event. Place. Date. Permission to redistribute granted upon request to
  • Siss 20110228 v4

    1. 1. Service Science Progress & Directions Working Together to Build a Smarter Planet Dr. James (“Jim”) C. Spohrer Innovation Champion, Director, University Progams [email_address] SISS (Swiss Institute of Service Science Bern Switzerland, Feb 28, 2011
    2. 2. Outline <ul><li>Stimulus: Service Growth </li></ul><ul><ul><li>The World </li></ul></ul><ul><ul><li>IBM </li></ul></ul><ul><li>Response: Service Science Priorities </li></ul><ul><ul><li>Cambridge University Report </li></ul></ul><ul><ul><li>Arizona State University Report </li></ul></ul><ul><li>World View: Networks of Entities Interacting </li></ul><ul><ul><li>Service Dominant Logic (Vargo & Lusch) </li></ul></ul><ul><ul><li>Service Science (Spohrer & Maglio) </li></ul></ul><ul><ul><li>Service Network Theory (Gummesson) </li></ul></ul><ul><li>Evolution: Service Science for a Smarter Planet </li></ul><ul><ul><li>What is Smarter Planet? </li></ul></ul><ul><ul><li>What improves Quality-of-Life? </li></ul></ul><ul><ul><li>What is a Service System? Service Science? </li></ul></ul><ul><ul><li>How to visualize Service Science? </li></ul></ul><ul><ul><li>What’s the Skills Goal? </li></ul></ul><ul><ul><li>Where are the Opportunities? </li></ul></ul><ul><ul><li>Where is the “Real Science” in Service Science? </li></ul></ul><ul><ul><li>What are Holistic Service Systems? </li></ul></ul><ul><ul><li>Why are they so important for accelerating innovation? </li></ul></ul>
    3. 3. 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
    4. 4. Baseline 12/2007 8/2008 5/2009 10/2009 11/2010 12/2008 PBS Nova (2/9/11): “The Smartest Machine on Earth?” 5/2008 4/2010 Precision
    5. 5. 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
    6. 6. IBM operates in 170 countries around the globe IBM has 426,000 employees worldwide <ul><li>2010 Financials </li></ul><ul><li>Revenue - $ 99.9B </li></ul><ul><li>Net Income - $ 14.8B </li></ul><ul><li>EPS - $ 11.52 </li></ul><ul><li>Net Cash - $11.7B </li></ul>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 Smarter Planet 9 time winner of the President’s National Medal of Technology & Innovation - latest award for Blue Gene Supercomputer
    7. 7. 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 ( ) 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
    8. 8. Priorities: Research Framework for the Science of Service 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
    9. 9. Service-Dominant Logic (Vargo & Lusch) <ul><li>Service is the application of competences for the benefit of another entity </li></ul><ul><li>Service is exchanged for service </li></ul><ul><li>Value is always co-created </li></ul><ul><li>Goods are appliances for delivery </li></ul><ul><li>All economies are service economies </li></ul><ul><li>All businesses are service businesses </li></ul>Resource Integrator/Beneficiary (“Firm”) Resource Integrator/Beneficiary (“Customer”) Value Co-creation Value Configuration Density
    10. 10. Service Science (Spohrer & Maglio) <ul><li>Service system entities dynamically configure (transform) four types of resources </li></ul><ul><li>Service system entities calculate value from multiple stakeholder perspectives </li></ul><ul><li>Service system entities reconfigure access rights to resources by mutually agreed to value propositions </li></ul>Nation State/Province City/Region Educational Institution Healthcare Institution Other Enterprises (job roles) Family (household ) Person (professional )
    11. 11. Service Network Theory (Gummesson) 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.”.
    12. 12. Evolution: Service Science for a Smarter Planet What is Smarter Planet? Harmonized smarter systems. 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 WORKFORCE MANUFACTURING SUPPLY CHAIN CUSTOMERS TRANSPORTATION FACILITIES
    13. 13. 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
    14. 14. 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‘)
    15. 15. What improves Quality-of-Life? Service System Innovations <ul><li>A. Systems that focus on flow of things that humans need (~15%*) </li></ul><ul><ul><li>1. Transportation & supply chain </li></ul></ul><ul><ul><li>2. Water & waste recycling/Climate & Environment </li></ul></ul><ul><ul><li>3. Food & products manufacturing </li></ul></ul><ul><ul><li>4. Energy & electricity grid/Clean Tech </li></ul></ul><ul><ul><li>5. Information and Communication Technologies (ICT access) </li></ul></ul><ul><li>B. Systems that focus on human activity and development (~70%*) </li></ul><ul><ul><li>6. Buildings & construction (smart spaces) (5%*) </li></ul></ul><ul><ul><li>7. Retail & hospitality/Media & entertainment/Tourism & sports (23%*) </li></ul></ul><ul><ul><li>8. Banking & finance/Business & consulting (wealthy) (21%*) </li></ul></ul><ul><ul><li>9. Healthcare & family life (healthy) (10%*) </li></ul></ul><ul><ul><li>10. Education & work life/Professions & entrepreneurship (wise) (9%*) </li></ul></ul><ul><li>C. Systems that focus on human governance - security and opportunity (~15%*) </li></ul><ul><ul><li>11. Cities & security for families and professionals (property tax) </li></ul></ul><ul><ul><li>12. States /regions & commercial development opportunities/investments (sales tax) </li></ul></ul><ul><ul><li>13. Nations /NGOs & citizens rights/rules/incentives/policies/laws (income tax) </li></ul></ul>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)”
    16. 16. NAE’s Engineering Grand Challenges <ul><li>A. Systems that focus on flow of things humans need </li></ul><ul><ul><li>1. Transportation & Supply Chain </li></ul></ul><ul><ul><li>Restore and enhance urban infrastructure </li></ul></ul><ul><ul><li>2. Water & Waste/Climate & Green tech </li></ul></ul><ul><ul><li>Provide access to clear water </li></ul></ul><ul><ul><li>3. Food & Products </li></ul></ul><ul><ul><li>Manager nitrogen cycle </li></ul></ul><ul><ul><li>4. Energy & Electricity </li></ul></ul><ul><ul><li>Make solar energy economical </li></ul></ul><ul><ul><li>Provide energy from fusion </li></ul></ul><ul><ul><li>Develop carbon sequestration methods </li></ul></ul><ul><ul><li>5. Information & Communication Technology </li></ul></ul><ul><ul><li>Enhance virtual reality </li></ul></ul><ul><ul><li>Secure cyberspace </li></ul></ul><ul><ul><li>Reverse engineer the brain </li></ul></ul><ul><li>B. Systems that focus on human activity & development </li></ul><ul><ul><li>6. Buildings & Construction (smart spaces) </li></ul></ul><ul><ul><li>Restore and enhance urban infrastructure </li></ul></ul><ul><ul><li>7. Retail & Hospitality/Media & Entertainment (tourism) </li></ul></ul><ul><ul><li>Enhance virtual reality </li></ul></ul><ul><ul><li>8. Banking & Finance/Business & Consulting </li></ul></ul><ul><ul><li>9. Healthcare & Family Life </li></ul></ul><ul><ul><li>Advance health informatics </li></ul></ul><ul><ul><li>Engineer better medicines </li></ul></ul><ul><ul><li>Reverse engineer the brain </li></ul></ul><ul><ul><li>10. Education & Work Life/Jobs & Entrepreneurship </li></ul></ul><ul><ul><li>Advance personalized learning </li></ul></ul><ul><ul><li>Engineer the tools of scientific discovery </li></ul></ul><ul><li>C. Systems that focus on human governance </li></ul><ul><ul><li>11. City & Security </li></ul></ul><ul><ul><li>Restore and improve urban infrastructure </li></ul></ul><ul><ul><li>Secure cyberspace </li></ul></ul><ul><ul><li>Prevent nuclear terror </li></ul></ul><ul><ul><li>12. State /Region & Development </li></ul></ul><ul><ul><li>13. Nation & Rights </li></ul></ul>
    17. 17. 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 between stakeholders” “ service science is the interdisciplinary study of service systems & value-cocreation”
    18. 18. 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 Stackholders (As-Is) Starting Point 2: Their Resources (As-Is) Change Potential: Thinking (Has-Been & Might-Become) Value Realization: Doing (To-Be)
    19. 19. What is the skills goal? T-Shaped professionals, ready for T-eamwork! 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)
    20. 20. Where are the opportunities? Everywhere!
    21. 21. 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) tribolites (brains) printing press (books) steam engine Where is the “Real Science” in Service Science? In the sciences of the natural and human-made worlds… Evolving hierarchical-complexity of populations of things 200M bees (social division-of-labor) 60 transistor
    22. 22. Service System Ecology: Conceptual Framework <ul><li>Resources: People, Technology, Information, Organizations </li></ul><ul><li>Stakeholders: Customers, Providers, Authorities, Competitors </li></ul><ul><li>Measures: Quality, Productivity, Compliance, Sustainable Innovation </li></ul><ul><li>Access Rights: Own, Lease, Shared, Privileged </li></ul>Ecology (Populations & Diversity) Entities (Service Systems) Interactions (Service Networks) Outcomes (Value Changes) Value Proposition (Offers/Risks/Incentives) Governance Mechanism (Rules/Constraints/Penalties) Access Rights (Relationships) Measures (Rankings of Entities) Resources (Roles in Processes) Stakeholders (Valuation Perspectives) win-win lose-lose win-lose lose-win Identity (Aspirations/Lifecycle) Reputation (Opportunities/Variety)
    23. 23. Holistic Service Systems <ul><li>Examples: Nations, States, Cities, Universities, Luxury Hotels, Cruise Ships, Households </li></ul><ul><li>Subsystems: Transportation, Water, Food, Energy, Communications, Buildings, Retail, Finance, Health, Education, Governance, etc. </li></ul><ul><li>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 </li></ul><ul><li>Balance independence with interdependence, without becoming overly dependent </li></ul>Nation State/Province City/Region University Hospital Luxury Resort Hotels Family (household ) Person (professional )
    24. 24. <ul><li>A. Flow of things </li></ul><ul><ul><li>1. Transportation : Traffic congestion; accidents and injury </li></ul></ul><ul><ul><li>2. Water : Access to clean water; waste disposal costs </li></ul></ul><ul><ul><li>3. Food : Safety of food supply; toxins in toys, products, etc. </li></ul></ul><ul><ul><li>4. Energy : Energy shortage, pollution </li></ul></ul><ul><ul><li>5. Information : Equitable access to info and comm resources </li></ul></ul><ul><li>B. Human activity & development </li></ul><ul><ul><li>6. Buildings : Inefficient buildings, environmental stress (noise, etc.) </li></ul></ul><ul><ul><li>7. Retail : Access to recreational resources </li></ul></ul><ul><ul><li>8. Banking : Boom and bust business cycles, investment bubbles </li></ul></ul><ul><ul><li>9. Healthcare : Pandemic threats; cost of healthcare </li></ul></ul><ul><ul><li>10. Education : High school drop out rate; cost of education </li></ul></ul><ul><li>C. Governing </li></ul><ul><ul><li>11. Cities : Security and tax burden </li></ul></ul><ul><ul><li>12. States : Infrastructure maintenance and tax burden </li></ul></ul><ul><ul><li>13. Nations : Justice system overburdened and tax burden </li></ul></ul>Cities as Holistic Service Systems: All the systems Example: Singapore Population Challenges Careers Opportunities
    25. 25. Universities as Holistic Service Systems: All the systems <ul><li>A. Flow of things </li></ul><ul><ul><li>1. Transportation : Traffic congestion; parking shortages. </li></ul></ul><ul><ul><li>2. Water : Access costs; reduce waste </li></ul></ul><ul><ul><li>3. Food : Safety; reduce waste. </li></ul></ul><ul><ul><li>4. Energy : Access costs; reduce waste </li></ul></ul><ul><ul><li>5. Information : Cost of keeping up best practices. </li></ul></ul><ul><li>B. Human activity & development </li></ul><ul><ul><li>6. Buildings : Housing shortages; Inefficient buildings </li></ul></ul><ul><ul><li>7. Retail : Access and boundaries. Marketing. </li></ul></ul><ul><ul><li>8. Banking : Endowment growth; Cost controls </li></ul></ul><ul><ul><li>9. Healthcare : Pandemic threat. Operations. </li></ul></ul><ul><ul><li>10. Education : Cost of keeping up best practices.. </li></ul></ul><ul><li>C. Governing </li></ul><ul><ul><li>11. Cities : Town & gown relationship. </li></ul></ul><ul><ul><li>12. States : Development partnerships.. </li></ul></ul><ul><ul><li>13. Nations : Compliance and alignment. </li></ul></ul>
    26. 26. Luxury Hotels as Holistic Service Systems: All the systems
    27. 27. Why Universities Matter: % GDP and % Top 500 Strong Correlation (2009 Data): National GDP and University Rankings
    28. 28. Accelerating Innovation: Create Ideal or Reference Models UNIVERSITIES: Research Centers & Real-World Systems CITIES/METRO REGIONS: Universities Key to Long-Term Economic Development
    29. 29. Edu-Impact.Com “ 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.”
    30. 30. 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
    31. 31. Population growth per hour in major cities
    32. 32. <ul><li>World Population & Service System Scaling </li></ul>
    33. 33. <ul><li>Thank-You! Questions? </li></ul>Dr. James (“Jim”) C. Spohrer Director, IBM University Programs (IBM UP) WW “ 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” – “ 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
    34. 34. Vision for the Educational Continuum The Educational Continuum 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 <ul><li>Intelligent </li></ul><ul><li>Aligned Data </li></ul><ul><li>Outcomes Insight </li></ul><ul><li>Instrumented </li></ul><ul><li>Student-centric </li></ul><ul><li>Integrated Assessment </li></ul><ul><li>Interconnected </li></ul><ul><li>Shared Services </li></ul><ul><li>Interoperable Processes </li></ul>Continuing Education Higher Education Secondary School Primary School Workforce Skills Individual Learning Continuum Education System Continuum Economic Sustainability
    35. 35. Fun: Learn CityInvesting with CityOne Game Serious Game to teach problem solving for real issues in key industries, helping companies to learn how to work smarter. Energy, Water, Banking, Retail
    36. 36. Priority 1: Urban Sustainability & Service Innovation Centers <ul><li>A. Research: Holistic Modeling & Analytics of Service Systems </li></ul><ul><ul><li>Modeling and simulating cities will push state-of-the-art capabilities for planning interventions in complex system of service systems </li></ul></ul><ul><ul><li>Includes maturity models of cities, their analytics capabilities, and city-university interactions </li></ul></ul><ul><ul><li>Provides an interdisciplinary integration point for many other university research centers that study one specialized type of system </li></ul></ul><ul><ul><li>Real-world data and advanced analytic tools are increasingly available </li></ul></ul><ul><li>B. Education: STEM (Science Tech Engineering Math) Pipeline & LLL </li></ul><ul><ul><li>City simulation and intervention planning tools can engage high school students and build STEM skills of the human-made world (service systems) </li></ul></ul><ul><ul><li>Role-playing games can prepare students for real-world projects </li></ul></ul><ul><ul><li>LLL = Life Long Learning </li></ul></ul><ul><li>C. Entrepreneurship: Job Creation </li></ul><ul><ul><li>City modeling and intervention planning tools can engage university </li></ul></ul><ul><ul><li>students and build entrepreneurial skills </li></ul></ul><ul><ul><li>Grand challenge competitions can lead to new enterprises </li></ul></ul>
    37. 37. Teaching SSME+D <ul><li>Fitzsimmons & Fitzsimmons </li></ul><ul><ul><li>Graduate Students </li></ul></ul><ul><ul><li>Schools of Engineering & Businesses </li></ul></ul><ul><li>Teboul </li></ul><ul><ul><li>Undergraduates </li></ul></ul><ul><ul><li>Schools of Business & Social Sciences </li></ul></ul><ul><ul><li>Busy execs (4 hour read) </li></ul></ul><ul><li>Ricketts </li></ul><ul><ul><li>Practitioners </li></ul></ul><ul><ul><li>Manufacturers In Transition </li></ul></ul><ul><li>And 200 other books… </li></ul><ul><ul><li>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. </li></ul></ul><ul><li>URL: </li></ul><ul><li>Reaching the Goal: How Managers Improve a Services Business Using Goldratt’s Theory of Constraints </li></ul><ul><li>By John Ricketts, IBM </li></ul><ul><li>Service Management: Operations, Strategy, and Information Technology </li></ul><ul><li>By Fitzsimmons and Fitzsimmons, UTexas </li></ul><ul><li>Service Is Front Stage: Positioning services for value advantage </li></ul><ul><li>By James Teboul, INSEAD </li></ul>
    38. 38. Service-dominant logic <ul><li>Service is the application of competences for the benefit of another entity </li></ul><ul><li>Service is exchanged for service </li></ul><ul><li>Value is always co-created </li></ul><ul><li>Goods are appliances for delivery </li></ul><ul><li>All economies are service economies </li></ul><ul><li>All businesses are service businesses </li></ul>Vargo, S. L. & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing, 68 , 1 – 17. Resource Integrator/Beneficiary (“Firm”) Resource Integrator/Beneficiary (“Customer”) Value Co-creation Value Configuration Density
    39. 39. What is value ? <ul><li>Value depends on the capabilities a system has to survive and create beneficial change in its environment. </li></ul><ul><li>Taking advantage of the service another system offers means incorporating improved capabilities. </li></ul><ul><li>Value can be defined as system improvement in an environment. </li></ul><ul><li>All ways that systems work together to improve or enhance one another’s capabilities can be seen as being value creating. </li></ul>Vargo, S. L., Maglio, P. P., and Akaka, M. A. (2008). On value and value co-creation: A service systems and service logic perspective. European Management Journal , 26 (3), 145-152.
    40. 40. What is a service system? <ul><li>Service involves at least two entities applying competences and making use of individual and shared resources for mutual benefit. </li></ul><ul><li>We call such interacting entities service systems . </li></ul>Spohrer, J., Maglio, P. P., Bailey, J. & Gruhl, D. (2007). Steps toward a science of service systems. Computer, 40 , 71-77. <ul><li>A. Service Provider </li></ul><ul><li>Individual </li></ul><ul><li>Organization </li></ul><ul><li>Public or Private </li></ul><ul><li>C. Service Target: The reality to be </li></ul><ul><li>transformed or operated on by A, </li></ul><ul><li>for the sake of B </li></ul><ul><li>People, dimensions of </li></ul><ul><li>Business, dimensions of </li></ul><ul><li>Products, goods and material systems </li></ul><ul><li>Information, codified knowledge </li></ul><ul><li>B. Service Client </li></ul><ul><li>Individual </li></ul><ul><li>Organization </li></ul><ul><li>Public or Private </li></ul>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) 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.
    41. 41. Resources are the building blocks of service systems 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 <> Computation Routine Physical Labor <> Technology Transportation (Atoms) <> Communication (Bits) Qualitative (Tacit) <> Quantitative (Explicit) First foundational premise of service science Service system entities dynamically configure four types of resources The named resource is Physical or Not-Physical (physicists resolve disputes) The named resource has Rights or No-Rights (judges resolve disputes within their jurisdictions) Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ. . Physical Not-Physical Rights No-Rights 2. Technology 4.. Shared Information 1. People 3. Organizations
    42. 42. Value propositions are the building blocks of service system networks Second foundational premise of service science Service system entities calculate value from multiple stakeholder perspectives 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 Value propositions coordinate & motivate resource access Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ. . 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)
    43. 43. Access rights are the building blocks of service system ecology Third foundational premise of service science Service system entities reconfigure access rights to resources by mutually agreed to value propositions <ul><li>Access rights </li></ul><ul><ul><li>Access to resources that are owned outright (i.e., property) </li></ul></ul><ul><ul><li>Access to resource that are leased/contracted for (i.e., rental car, home ownership via mortgage, insurance policies, etc.) </li></ul></ul><ul><ul><li>Shared access (i.e., roads, web information, air, etc.) </li></ul></ul><ul><ul><li>Privileged access (i.e., personal thoughts, inalienable kinship relationships, etc.) </li></ul></ul>Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ. . 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
    44. 44. Premises of service science: What service systems do Service system entities dynamically configure (transform) four types of resources Service system entities calculate value from multiple stakeholder perspectives Service system entities reconfigure access rights to resources by mutually agreed to value propositions Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ. . S A P C Physical Not-Physical Rights No-Rights 2. Technology 4.. Shared Information 1. People 3. Organizations 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