Chinese University of Hong Kong Visit 8/2/2011

Dr. Stephen K. KwanProfessor, Service Science

Management Information SystemsCollege of Business AdministrationSan José State University, CA, USA

http://www.sjsu.edu/ssme

Contact: [email protected]

Prepared for Visitors from Chinese University of Hong Kong

August 2nd, 2011

Service Systems, Value Propositions,and Service Innovation

2Kwan 2010 2

42%6433 3 1.4Germany

37%261163 2.1Bangladesh

19%201070 1.6Nigeria

45%6728 5 2.2Japan

64%692110 2.4Russia

61%661420 3.0Brazil

34%391645 3.5Indonesia

23%7623 1 5.1U.S.

35%23176014.4India

142%29224925.7China

40yr Service

Growth

S

%

G

%

A

%

Labor

%

Nation

World’s Large Labor ForcesA = Agriculture, G = Goods, S = Service

20102010

The largest labor force migration in human history is underway, driven by global communications, business and technology growth, urbanization and

regional variations in labor and infrastructure costs and capabilities.

CIA Handbook, International Labor OrganizationNote: 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 enhancing the

capabilities of people and their ability to interconnect and co-create value

Changing nature of work - away from farms and factories…

Employment Change

Numeric change in wage-salary employment by industry sector, projected 2004-14(Thousands)

Professional and business service 4566

Healthcare and social assistance 4303

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现代服务的创新

In its 11th Five-Year Plan, China had targeted an increase of the service sector’s output to 43.3% of GDP by 2010, up from 40.3% in 2005

Innovation in Modern Services

In its 12th Five-Year Plan, China had targeted an increase of the service sector’s value-added

output to 47.3% of GDP by 2015, up 4%.

4Kwan 2010http://www-03.ibm.com/press/us/en/attachment/25091.wss?fileId=ATTACH_FILE1&fileName=Podcast%20interview%20with%20SFSU.mp3

Skills for the 21st Century

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Some Definitions

Service Science is short for Service Science, Management, Engineering and Design (SSMED1).

Service Science is concerned with the study of Service Systems.cf. Computer Science is concerned with the study of Computer Systems.

Service Systems are man-made complex systems designed to improve the quality of life by co-creating value through value propositions among the stake-holders.

1 Spohrer, J., Kwan, S.K. “Service Science, Management, Engineering, and Design (SSMED): An Emerging Discipline – Outline and References”, International Journal of Information Systems in the Service Sector, 1(3), 2009.

6

“Service Science is just ___<name your discipline>____”

OR/IEMS

CS/AIMultiagent Systems

Economics & LawGame Theory

MIS Anthropology& Psychology

OrganizationTheory

A ServiceSystem is Complex

ServiceOperationsMarketing

ManagementQuality

Supply ChainHuman Factors

DesignInnovation

EngineeringSystems

ComputingEconomics

ArtsScience

InformationScience

(i-schools)

GeneralSystemsTheory

Service Science is a Big Tent(for every variety of disciplines)

ServiceExperience

ServiceProvider

Customer

A Service System and Its Entities

1Kwan, S. K. & Min, J. H. (2008) “An Evolutionary Framework of Service Systems”. Presented at the International Conference on Service Science, Beijing, China, April 17-18.

Service System Worldview1

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ServiceSystem A

ServiceSystem B

ServiceSystem C

ServiceSystem D

ServiceSystem E

ServiceSystem F

Service Interactions

8

A Service System Network

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ServiceSystem A

ServiceSystem B

ServiceSystem C

ServiceSystem D

ServiceSystem E

ServiceSystem F

Service Interactions

9

A Service Supply Chain

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Example: Purchases from Amazon.com

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Amazon.comBookcloseout_us

nengland4

theBookGrinder

Customer

USPS

USPS

USPS

USPS

“transparent”service provider

Not being evaluated?

Example: Purchases from Amazon.com

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Example from Dan Pritchett

Example: Quality of Service Supply Chain

ServiceExperience

ServiceProvider

Customer

Society

Community

Competition

Partners

Service System

Employees &Stockholders

Service System Worldview

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ServiceExperience

ServiceProvider

Customer

Society

Community

Competition

Partners

Employees &Stockholders

Service System Worldview

14

MarketSegmentation

ServiceConceptRealized

CustomerFlow &ServiceDelivery

OperatingStrategy

FacilityLocation& Design

Capacity& Manpower

Planning,Training

CompetitiveStrategy

SocialNetworking

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Service ManagementFitzsimmons & Fitzsimmons

ServiceExperience

ServiceProvider

Customer

Society

Community

Competition

Partners

Service System

Employees &Stockholders

Value

Value

Governance

Value

15

Value

Value Co-Creation Through Value Propositions

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InformationTechnology

Platform

Service Provider’s Back Stage Support

BackStage

Processes

FrontStage

ProcessesFront Stage

Service Computing(e.g., SOA)

Service Systems, Computing, and IT Services1

1 Kwan, S. K. & Hefley, B., “Service Systems”, 2008.

ITSM – Management of the Processesand Infrastructure of IT Services

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From:

To:

Formulation of Value = Benefit / Cost

To:

Customer Value = (Results + Process Quality ) / (Price + Customer Access Costs)

Heskett et all 1997

Harvey 2005

Better Off

18

Customer

ServiceExperience

ServiceProvider

Stage 1: Value Chain

FocalRelationship

Value Proposition

Stages in Customer Empowermentin Value Co-Creation

5 Kwan, S. K. & Yuan, S. T. ”Customer-Driven Value Co-Creation in Service Networks”, to appear in Demirkan, H., Spohrer, J.C. and Krishna, V. ed., The Science of Service Systems, volume in Service Science: Research and Innovation (SSRI) in the Service Economy series, Springer, 2010.

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Stage 2: Traditional Service Value Network

Customer

ServiceExperience

ServiceProvider

Value Proposition

Provider PartnerNetwork

FocalRelationship

Value Proposition

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cf. ICT-enabled service networks,mobile applications, etc.

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Service System/Network1. People 2. Technology3. Shared Information4. Organizations

connected by value propositions

Example of Service Value Network

from Jim Spohrer

Stage 3 – Improved Value Chain

Customer’sSocial

Network

Customer

ServiceExperience

ServiceProvider

Value Proposition

FocalRelationship

Value Proposition

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Product Placements

Ad’s and “Buy Me”

TV Programs

Their Friends

Target Audience

Example of Customer DrivenService Value Network

Illustration from: Vascellaro, J. A. “Video’s New Friends”, The Wall Street Journal, February 28, 2008.

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Taking Advantage of Social Networks

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Stage 4: Customer Driven Service Value Network

Customer’sSocial

Network

Customer

ServiceExperience

ServiceProvider

Value Proposition

FocalRelationship

Value Proposition

Provider PartnerNetwork

Value Proposition

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cf. “Resource Integrators” in Service Dominant Logic literature

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Stages of Customer Empowerment

12

34

Sta

keho

lder

s

Service Provider

Society

Community

Employees

Stockholders

Partners

Customers

A point in this 3-D space is a Potential Value

Proposition

Value Dimensions

Variety of Value Propositions

Econom

icE

nvironmental

Societal

SocialP

olitical

Hedonic

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Intrinsic

Maslow’sHierarchyOf Needs

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Maslow’s Hierarchy of Needs

Disposable Income &Desire forServices

Needsvs.

Wants

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Value Propositions can also be bi-directional

Service Provider

Society

Community

Employees

Stockholders

Partners

Customers

Ser

vice

Pro

vide

r

Soc

iety

Com

mun

ity

Em

ploy

ees

Sto

ckho

lder

s

Par

tner

s

Cus

tom

ers

?

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Partners

Service Provider

Customers

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ServiceExperience

ServiceProvider

Customer

Value Proposition Model (VPM)Starting with the Service System

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ServiceExperience

ServiceProvider

Customer

ServiceExperience

Customer

ServiceExperience

Customer

Value Proposition

VPM – a common example

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ServiceExperience

ServiceProviderCustomer

ServiceExperience

Customer

ServiceExperience

Customer

A SharedExperience

Community/Social

Network

Value Proposition

VPM – individuals and community

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ServiceExperience

ServiceProviderCustomer

ServiceExperience

Customer

ServiceExperience

Customer

A SharedExperience

Community/Social

Network

Value Proposition

VPM – individuals and Facebook community

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ServiceExperience

ServiceProviderCustomer

ServiceExperience

Customer

Value Proposition

ServiceExperience

Vendor

ValueProposition

ServiceExperience

VPM – service provider partners

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ServiceExperience

ServiceProviderCustomer

ServiceExperience

Customer

ServiceExperience

Vendor

ServiceExperience

ServiceExperience

VPM – partner’s acquistion of customer

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ServiceExperience

ServiceProviderCustomer

ServiceExperience

Customer

ServiceExperience

Vendor

ServiceExperience

Example 1 of 4

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ServiceExperience

ServiceProviderCustomer

ServiceExperience

Customer

ServiceExperience

Vendor

ServiceExperience

ServiceExperience

VendorService

Experience

Example 2 of 4

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ServiceExperience

ServiceProviderCustomer

ServiceExperience

Customer

ServiceExperience

Vendor

ServiceExperience

ServiceExperience

VendorService

Experience

Example 3 of 4

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ServiceExperience

ServiceProviderCustomer

ServiceExperience

Customer

ServiceExperience

Vendor

ServiceExperience

ServiceExperience

Example 4 of 4

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Innovation

CREATINGSOMETHING

NEW

혁신創新创新革新

Innovation resides at the intersection of invention and insight, leading to the creation of social and economic value.

National Innovation Initiative

Innovation can happen anywhere on the Value Chain!

(business model, organization, environment, process, technology, etc.)

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39Kwan 2011

Some Thoughts on Innovation

“Creativity can be taught. Innovation can be learned.”

David Blakeley, Director

“Incremental Innovation vs. Radical Innovation”

Judy Estrin“Closing the Innovation Gap”

Innovation in Modern Services现代服务的创新

40Kwan 2011

Levels of Service Innovation

Radical Innovations Major Innovation: new service that customers did not

know they needed. Start-up Business: new service for underserved market. New Services for the Market Presently Served: new

services to customers of an organization.Incremental Innovations

Service Line Extensions: augmentation of existing service line.

Service Improvements: changes in service delivery process.

Style Changes: modest visible changes in appearances.

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For example, “The Ten Types of Innovation”by Larry Keeley, Doblin Inc.

42

How the Service System Framework and VPM could complement the Foresight Method applied to Services

© Cockayne and Carleton

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How the Service System Framework could complement the Foresight Method applied to Services

© Cockayne and Carleton

Service SystemThinking

Business Models &Value Propositions

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Example of how the Service System Framework could complement an Innovation Method applied to Services

UML – Use Cases

Service Blueprint

Story Boards

UI Prototyping

BPMN

etc.

MANGA textbooks

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Using the Foresight Method

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Sample Project from SJSU MBA Students

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47Kwan 2011

Teaching the method for “Service Made in ?country?”

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Service Summer 2010Karlsruhe, Germany

Dr. Stephen K. KwanProfessor, Service Science

Management Information SystemsCollege of Business AdministrationSan José State University, CA, USA

http://www.sjsu.edu/ssme

Contact: [email protected]

Service Systems, Value Propositions,and Service Innovation

End

Prepared for Visitors from Chinese University of Hong Kong

August 2nd, 2011