This document summarizes a research paper that applies drama theory to explain collaborative value creation in service innovation. It outlines the paper's introduction, definitions of key concepts like service innovation and value creation, and a case study of a buyer-seller relationship in the marine industry. The summary then describes how drama theory is used to analyze the relationship's evolution from a traditional transactional model to one of collaboration through three phases: 1) traditional transactions, 2) initial cooperation, and 3) stable value co-creation partnerships. The conclusion suggests further case studies could provide more insights into collaborative value creation processes across industries.

1. Collaborative Value Creation in
Service Innovation:
Service Innovation:
An Application of Drama Theory
Yuanita Handayati and Togar M. Simatupang
School of Business and Management
Bandung Institute of Technology
d f h l
July 2010

2. Outline
• Introduction
t oduct o
• Service innovation
• Value creation
Value creation
• A case study: A Buyer and Seller Dyad in the
Marine Industryy
• Drama theory approach
• Collaborative value creation in service innovation:
an application of drama theory
• Conclusion
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3. Introduction
• Service innovation is now as important as technology
innovation influenced by globalization, demographic
changes and technology development
• Value creation for customers, employees, and investors
Value creation for customers, employees, and investors
are the purpose of any organization
• To create value in service innovation, all of the
stakeholders should collaborate each other. Each
stakeholders should collaborate each other Each
parties cannot depend only on rationality but also have
to consider the influence of emotions and hidden
agenda.
agenda
• Drama theory approach can be used to explain the
process of collaboration
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4. Service Innovation
Service Innovation
• Service innovation is a new service development which
involves changes in the process of delivering existing
services or the generation of new services (Leiponen,
2005))
• Corsten in Borovac et al. (2009) mentions that the basic
characteristics of service interactions are integrity and
immateriality
• Vermeuten and van der Aa (2003) argue that service
innovations have two categories: replication of
innovation and the new roles for the customer. Both
innovation and the new roles for the customer Both
categories describe the role of customer in service
innovation as a co‐producer.
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5. Value Creation
Value Creation
• Role of customer
Role of customer
– In the traditional system, customer only
contributes on the exchange process
contributes on the exchange process
– In the new system, customer interact with the
firm or provider for value co creation, where
firm or provider for value co‐creation, where
collaboration and partnership between buyer and
seller is needed
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6. Classes of Value Creation
Classes of Value Creation
• Based on Ueda (2008), value creation can be
Based on Ueda (2008), value creation can be
classified into three classes:
Class I – Problem with complete For the purpose of
description maximizing the value, it is
Class II – Problem with incomplete
Class II – Problem with incomplete
important to pay attention to
environment description
Class III – Problem with incomplete the Class III value creation
specification problem 6

7. A Case Study
A Case Study
• Using case study adopted from Forsström (2005). A Buyer
and Seller Dyad in the Marine Industry.
• The seller is a diesel engine supplier for ships and power
plants world‐wide. The buyer is a cruise ship owner and
operator.
• Due to the great amount of communication and
coordination between the Seller and the Buyer, and to the
facts that the Buyer is considered a strategically important
customer for the Seller, and that there has been a decision
to develop a collaboration between the companies, the
Seller has tailor‐made its organization towards the Buyer in
S ll h t il d it i ti t d th B i
order to improve and smoothen the handling of the
relationship with the customer.
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8. A Case Study (cont…)
A Case Study (cont…)
• Starting with 1970‐1990 describing the more traditional
buying‐selling years of the relationship. The Seller was
supplying engines to the shipyard where the Buyer´s ships
were built.
• Further into the pre‐partnership years of the 1990’s when
events started moving towards increased cooperation
before the first cooperation agreement in 1999.
• After that describing the years during the first five–year
cooperation agreement. More specifically 2003 when the
discussions about a renewed cooperation agreement
started and 2004 when there was intensive work done in
t t d d 2004 h th i t i kd i
both organizations to get the partnership working better
for the next five year period.
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9. A Case Study (cont…)
A Case Study (cont…)
• The underlying idea of a partnership between
e u de y g dea o a pa t e s p bet ee
two companies is that there is something to gain
from cooperating in the long run by pursuing a
high‐involvement strategy, instead of working
h h l d f k
short sightedly to optimize each transaction. The
logic is that the parties need each other s
logic is that the parties need each other’s
resources, and high‐involvement is seen to be the
best way to make use of the resources i.e. the
y
trade off between benefits and sacrifices of
involvement is positive.
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10. Drama Theory Approach
Drama Theory Approach
• Drama Theory is employed in this research as a methodology in modeling, analysis, and
understanding the strategic conflict that takes place during value creation in service innovation. It
explains how a buyer and a seller with different objectives interacting each other and analyzes how
a buyer s and a seller s framework can be changed to the other framework. It also helps both
a buyer’s and a seller’s framework can be changed to the other framework It also helps both
parties to collaborate and achieve the experience environment in value creation by eliminating the
buyer’s and seller’s dilemmas.
• In drama theory, conflict dynamic can be illustrated by drama. As a drama, drama theory also
consists of several episode (Howard, 1996)
We assumed that the actors
(buyer and seller) already had
same perception about the
problem, and had a common
framework or common
reference frame. So that we
start the drama theory
start the drama theory
approach from build up
phase.
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11. Collaborative value creation in service
innovation: an application of drama theory
i i li i fd h
• The process of value creation to be value‐co
The process of value creation to be value co
creation will be described into three parts
1. Traditional system of value creation
1 Traditional system of value creation
2. Pre‐partnership
2 P hi
2. Stable value co‐creation
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12. Traditional system of value creation
(1 t h )
( st phase)
• In the early step of business,
seller and buyer try to s t b
restrict their relationship
restrict their relationship
only in traditional buying seller
and selling relationship that sell the product in the highest price
only consist of transactional
only consist of transactional refuse buyer to buy the product ?
activities. Seller try to
buyer
maximize profit by sell the
product in the highest price
d h h h buy the product in the cheapest price
and buyer try to buy the find another seller to buy the product
product for the cheapest
product for the cheapest
price.
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13. Initial value co‐creation/
pre‐partnership (2nd phase)
h ( d h )
• The characteristic of traditional transactional
The characteristic of traditional transactional
view makes seller hard to compete with
competitor in term of price. Therefore, along
with the improvement in buyer and seller
relationship, there is a willingness from seller
to establish long term relationship with buyer
bli h l l i hi i h b
because seller realizes the benefits that can be
gained by create the collaboration with buyer.
gained by create the collaboration with buyer
In this part buyer still has a critical influence in
this relationship.
this relationship
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14. Initial value co‐creation/
pre‐partnership (2nd phase)
h ( d h )
s t b
seller
Propose service and maintenance ((give technical or additional information about the product)
offer discount ? ?
buyer
Buy product from seller ? ?
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15. The collaboration phase (3rd phase)
The collaboration phase (3
• After knowing each other
characteristic and they have adapted s t b
each other, and it will create seller
interdependency, which activity of avoid price discussion
each party can influence or to be
h fl b give excellent service
influenced by other party. offer discounts
• Along with the cooperation provide pro-active technical information
agreement and the partnership, seller
d h hi ll buyer
and buyer set a point of view that buy product from seller
collaboration is the most economically willing to give additional cost in order to get technical information
efficient way to achieve cost saving in
efficient way to achieve cost saving in follow seller recommendations
the long run.
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16. Conclusion
• By using drama theory approach, the process of value creation
collaboration in service innovation of “A B
ll b ti i i i ti f “A Buyer and Seller Dyad in
d S ll D d i
the Marine Industry” case study can be described into three parts:
1. The traditional view of transaction in which both buyer and seller try
to maximize their own profit. Both parties face several dillemas,
to maximize their own profit. Both parties face several dillemas,
such as rejection and threat dillema.
2. The second part describes the paradigm shift of buyer and seller
partnership, seller has a willingness to start the long term
relationship and realizes that it can gain more profit if the
relationship and realizes that it can gain more profit if the
collaboration in value creation with buyer can be achieved.
However, in the second part there is still doubt and lack of trust of
both parties to implement their options and it leads to trust and
cooperation dillema.
cooperation dillema
3. The third part all of dillemas can be eliminated because both parties
have established long term relationship succesfully and have known
each other characteristics.
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17. Further Study
Further Study
• It is suggested to carry out another case study
It is suggested to carry out another case study
to describe the collaborative value creation in
service innovation such as in retail or creative
industry. After that we can compare the
situation in the different case study, to have a
wider knowledge about collaborative value
id k l d b ll b i l
creation in service innovation and the
illustration of value creation collaboration
illustration of value creation collaboration
process in service innovation can be described
more details.
more details
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