1 service, service systems and services innovation dr. yuhong yan jan, 2008
TRANSCRIPT
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Service, Service Systems and Services Innovation
Dr. Yuhong Yan
Jan, 2008
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Big Picture … SSME
Science & Engineering
Business Administration
and Management
Social Sciences
Global Economy& Markets
BusinessInnovation
TechnologyInnovation
Social-OrganizationalInnovation
DemandInnovation
SSME = Service Science, Management, and Engineering
Knowledge sources driving service innovations…From IBM Almaden Service Research
© Copyright IBM Corporation 2006, 2007. All rights reserved.
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Unit objectives• Attain a comprehensive definition of services
– Give context to the study of services– Discuss history and early definitions of
services– Discuss differences between products and
services
• Recognize modern thinking behind services dominant logic of economic exchanges
• Slides are modified from the IBM Almaden open course on SSME
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The Evolution of Economies
Source: 2004 IBM study, based on national labor data
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Percent employment in service jobs
1980 1987 1993 1999
USA 67.1 71 74.3 80.4
Canada 67.2 70.8 74.8 73.9
Japan 54.5 58.1 59.9 72.4
France 56.9 63.6 66.4 70.8
Italy 48.7 57.7 60.2 61.1
China 13.1 17.8 21.2 26.4
(United Nations, 1999, p. ??)
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What are some everyday services?
• Transportation– Trains, planes, delivery
• Hospitality– Hotels, restaurants
• Infrastructure– Communications, electricity, water
• Government– Police, fire, mail
• Financial– Banking, investments
• Entertainment– Television, movies, concerts
• Professional Services– Doctors, lawyers, skilled craftspeople, project
management, education
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Case Study: IBM
Major Divestiture /Exit
DRAM 1999
Global Network 1999
Flat Panel Displays 2001
HDD 2002
PCs 2005
5 Year Performance Trend Prior to Exit
Revenue Declining
Profit Impact Eroding
Cash Flow Significant CapEx
From Patricia Murphy, “IBM Business Prospective 2006”
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IBM’s Portfolio Action: Acquire High Value Capabilities
From Patricia Murphy, “IBM Business Prospective 2006”
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IBM: From Commodity to Higher Values
From Patricia Murphy, “IBM Business Prospective 2006”
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The main businesses in IBM
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The Three Main Businesses in IBM
Excludes 2Q restructuring charges and PCs reclassified for 2006 segmentation changes
From Patricia Murphy, “IBM Business Prospective 2006”
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Service Market Opportunity
From Patricia Murphy, “IBM Business Prospective 2006”
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IBM Services Profile
From Patricia Murphy, “IBM Business Prospective 2006”
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IBM Software Profile
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Services
• (from IBM):A service is a provider/client interaction that creates and
captures value.
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Service Science, Management and Engineering
Science & Engineering
Business Administration
and Management
Social Sciences
Global Economy& Markets
BusinessInnovation
TechnologyInnovation
Social-OrganizationalInnovation
DemandInnovation
SSME = Service Sciences, Management, and Engineering
Knowledge sources driving service innovations…
From IBM Almaden Service Research© Copyright IBM Corporation 2006, 2007. All rights reserved.
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SSME Timeline
SSME Launched
2004
EstablishAwareness 2004-2006
Adoption 2006-2008
Embed 2008-2010
Graduates and practice2010 and beyond
Plan Mobilize Execute Reinforce
White papers Initial
discussions with university partners
Workshops Press articles Web sites Awareness in
academia, industry, gov’t
Early adopters SSME Summit
Broadened awareness
SSME curriculum development
Cross-industry SSME focus and buy-in
Joint research projects/awards
Case studies developed
SSME tools and programs growing
Service systems as complex systems
Government and foundation funding
SSME graduates Industry training Industry hiring plans
Better trained workforce +Service innovation +Sales impact +Client satisfaction +Productivity +Efficiency +Learning speed on
engagements
Key
Act
ivit
ies/
Met
rics
Results
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What are some everyday services?
• Transportation– Trains, planes, delivery
• Hospitality– Hotels, restaurants
• Infrastructure– Communications, electricity, water
• Government– Police, fire, mail
• Financial– Banking, investments
• Entertainment– Television, movies, concerts
• Professional Services– Doctors, lawyers, skilled craftspeople, project
management, education
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The Definitions of Service
• Service is the use of human resources for the benefit of another party (Vargo, 2006).
• A service is a provider/client interaction that creates and captures value (IBM, 2006).
• A service is a change in the condition of a person or a good belonging to some economic entity, brought about as the result of the activity of some other economic entity, with the approval of the first person or economic entity (Ted Hill, 1977).
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Vargo’s Service Dominant View
• Three primary notions
1. Co-creation of value
2. Relationships
3. Service provisioning
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Provider-Client relationship
• Provider– An entity (person, business, or institution) that makes
preparations to meet a need– An entity that serves
• Client– An entity (person, business, or institution) that
engages the service of another– An entity being served
• Some general relationship characteristics are that the client– Participates in the service process (also known as the
service engagement)– Co-produces the value – The quality of service delivered depends on customers
preferences, requirements, and expectations
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Lovelock’s service Matrix
Degree of labor intensitythe ratio of labor cost to capital cost
Degree of interaction and customizationability of the client to affect specialization
(Adapted from Lovelock (1983) and Fitzsimmons & Fitzsimmons (2003))
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Recipients of the service
What is the service acting
upon and how is it doing it?
PeopleProcessing
PossessionsProcessing
TangibleActions
Service is aimed at people’s
physical body
Service is aimed at material items
IntangibleActions
Service is aimed at people’s
psyche
Service is aimed at intangible
asset
(Adapted from The Nature of the Service Act, Lovelock, 1983, p. 15)
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Nature of services act matrix
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Client relationship matrix
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Availability of services matrix
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Service demand variation matrix
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Service delivery matrix
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Distinguishing services from goodsInseparability Services are created and consumed at the same time Services cannot be inventoried Demand fluctuations cannot be solved by inventory processes Quality control cannot be achieved before consumption
Heterogeneity From the client’s perspective, there is typically a wide variation in service
offerings Personalization of services increases their heterogeneous nature Perceived quality-of-service varies from one client to the next
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Distinguishing services from goodsIntangibility Services are ideas and concepts that are part of a process The client typically relies on the service providers’ reputation and the trust
they have with them to help predict quality-of-service and make service choices
Regulations and governance are means to assuring some acceptable level of quality-of-service (e.g. Sarbenes-Oxley for the financial services sector)
Perishability Any service capacity that goes unused is perished Services cannot be stored so that when not used to maximum capacity the
service provider is losing opportunities Service capability estimation and planning are key aspects for service
management
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Current services thinking
• A service is a provider-to-client interaction that creates and captures value while sharing risks
• Services are value that can be rented
• Services are the application of specialized competences (skills and knowledge)
• Services are autonomous, platform independent, business functions
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Service SystemSocio-technological System
Any number of elements, interconnections, attributes, and stakeholders interacting to satisfy the request of a known client and create value
Combination of natural and manufactured systems
Interaction elements between sociological and mechanical aspects
Humans, Processes, and Goods
Customization activity
Co-productive interaction between the provider and client
Economic transaction and creation of value
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Model of Unified Services Theory
(Sampson, 2004, p. 6)
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Open-Systems View of Service Operations
(Fitzsimmons & Fitzsimmons, 2006, p. 30)
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Service-Profit Triangle
Frontline employee Customer
Firm
Product and process formulation
Low turnoverProductivity
Loyalty
High-quality internal services and good internal management
Revenue growth and profitability
Relationship
Value of service provided
(Teboul, 2005, p. 33).
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How is value created?Management
Gaining a Customer Keeping the Customer
Pre-Production Services
• Good and Service Design
• Supplier Services
• Purchasing Services
• Contract Negotiations
• Financing
• Good and Service Guarantees
• Consulting Services
• Education/Training Services
• Sales/Marketing Services
Production Process
• Create the Good or Service
• Process Type and Capability
• Good and Service Characteristics/Features
• Price/Cost, Quality, Time, Safety, Flexibility, Innovation and Learning, market and Financial Performance
• Value and Productivity
Post-Production Services
• Servicing Loans/Financing
• Installation, Maintenance, and Field Repair Services
• Transportation Services
• Warranty/Claims Services
• Training Services
• Postsale Visits and Services
• Consulting and Technical Services
• Recycle and Remanufacture
• Warehouse/Inventory Management
Synchronized Information and Feedback Loops
Value Creation
(Collier and Evans, 2005, p. 45)
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Productivity
Labor productivity = (Output / Labor input*)
*Where labor input = people or hours
Multi-factor productivity = (Output / Labor input**)
**Where labor input = expanded to include multiple forms
Version 1.0
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Measurement of services
ProcessResource levelsRiskSocial capitalVariabilityWaste
Value
Labor + CapitalCohesivenessComplexityCorrectionEfficiencyOptimizationRisk
Revenue
•Price•Flexibility•Competitiveness
•Service outcomes•Availability•Quality•Value•Variability•Accessibility
•Experience•Prestige•Satisfaction
Out
put
Inpu
t CapabilityCapacityCost
~==
•Adaptability•Innovation•Focus•Interchangeability
Productivity
EmployeesTotal Cost
Version 1.0
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Summary of Services and Service Systems
• The nature of the services• The difference of services versus goods• How value is generated in a service system• How to measure a service