Service Growth:Hidden wealth, too often overlooked and misunderstood

…Or how service growth leads to the need for more T-shaped professionals, who can innovate complex

technological, business, and societal systems, and help build a smarter planet

instrumented + interconnected + intelligent (http://www.ibm.com/think)

Service Growth

• Part One: Facts: Hidden wealth

• Part Two: Education: Where we can start

• Part Three: Vision: Where we can go

37%

23%

40%

SERVICES

SYSTEMSAND FINANCING

SOFTWARE0

20

40

60

80

100

1982 1988 1994 1998 2004 2006 2007

Year

Rev

enu

e ($

B) Services

Software

Systems

Financing

IBM’s Business: Service-driven come back

2007 Pretax Income Mix Revenue Growth by Segment

Gerstner decidesto grow service

B2B Service Projects: IT (data center, call centers) & business process outsourcing/reengineering, systems integration, organizational change, etc.

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

20092009

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…

Service

Material

Information& Organization

11%

9%

30%

50%

Product

-Based on Uday Karmarkar, UCLA(Apte & Karmarkar, 2006)

US Gross Domestic Product

US GDP shift to service innovation: Hidden wealth (intangibles)

service = value cocreation = value from knowledge-based interactions of entities

Service Innovation Framework – Ten Types

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

Distribution of Educational Degrees in IBM (2004)

Services Software & Systems Research

Business

Social ScienceHumanities

Arts

ScienceEngineering

ScienceEngineering

Social ScienceHumanities

Arts

Business

ScienceEngineering

Changing Nature of Work: Increasing demand for expert thinking and complex communication

ICT tools augment human performance in these two key areas

-10

-5

0

5

10

15

1969 1974 1979 1984 1989 1994 1999

Levy, F, & Murnane, R. J. (2004). The New Division of Labor:How Computers Are Creating the Next Job Market. Princeton University Press.

Based on U.S. Department of Labor’ Dictionary of Occupational Titles (DOT)

Expert Thinking

Complex Communication

Routine Manual

Non-routine Manual

Routine Cognitive

Increasing usage of descriptive terms

Need for T-Shaped Professionals: ICT-enabled deep expert-thinking and broad complex-communications

Science and Engineering

Math and Operations Research

Computer Science & Info. Systems

Industrial and Systems Engineering

Business and Management

Economics and Social Sciences

Business Anthropology and Design

Organizational Change & Learning

Broad

Dee

p

Broad across many…

Deep in at least one…

IBM SSME Website: How to create T-shaped people?

http://www.ibm.com/developerworks/spaces/ssme

How can SSME help us build a smarter planet?

Smart traffic systems

Smart water management

Smart energy grids

Smart healthcare

Smart food systems

Intelligent oil field technologies

Smart regions

Smart weather

Smart countries

Smart supply chains

Smart cities

Smart retail

SSME is the study of complex business and societal systems that serve customers…our world today is a diverse ecology of service systems interacting; we depend on them for life as we know it

More than ever before, quality-of-life is a function of quality-of-service from these interconnected systemshttp://www.ibm.com/think

UK Royal Society (July, 2009 – royalsociety.org)

Hidden Wealth: Science in Service Sector Innovation

• In the UK, 82% of STEM graduates find jobs in the service sector, and help drive a lot of innovation

– Financial Services– Business Services– Healthcare Services

• Technology underlies many “transformative” service innovations for business and society

• Open innovation is key

• 27 recommendations toincrease STEM-driven service innovations with afocus on design to integrate disciplines

Industry-University Knowledge Transfer Partnerships (KTP)

StakeholderPriorities

Education

Research

Business

Government

StakeholderPriorities

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 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 existingdisciplines

Progress in academic studies and practical tools

Gaps in knowledge and skills

Service Science

To discover the underlying principles of complex service systems

Systematically create, scale and improve systems

Foundations laid by existingdisciplines

Progress in academic studies and practical tools

Gaps in knowledge and skills

Develop programmes & qualifications

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

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

Skills& Mindset

Knowledge& Tools

Knowledge& Tools

Employment& Collaboration

Employment& Collaboration

Policies & Investment

Policies & Investment

Develop and improve service innovation roadmaps, leading to a doubling of investment in service education and research by 2015

Develop and improve service innovation roadmaps, leading to a doubling of investment in service education and research by 2015

Encourage an interdisciplinary approach

Encourage an interdisciplinary approach

The white paper offers a starting point to -

The white paper offers a starting point to -

“Succeeding through Service Innovation” Whitepaper: A Framework for Progress(http://www.ifm.eng.cam.ac.uk/ssme/)

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

2009 UK Royal Academy Report extends a 2008 UK Cambridge Report

The Good News: Global Action

• More and more nations are creating service innovation roadmaps (SIR) reports…– Finland, Netherlands,

Taiwan, UK, Ireland, Australia, South Korea, Philippines, Singapore, Germany, Egypt, Thailand, Vietnam, etc.

• More and more faculty are starting service science-related courses– Over 475 courses/programs

in 55 nations

Finland’s Tekes

http://www.tekes.fi/en/annualreview2008/funding.html

The Bad News: Myths Persist

Myth Reality Reference(s)…Productivity is stagnant in service sector

Augmenting human and organizational performance with technology innovations, making hidden information accessible, or incentive alignment strategies are three of many ways to increases service sector performance

Baumol (post 2000)

Service sector jobs are low skill and low pay

Service sector leads in the creation of new high skill and high pay jobs

Herzenberg, Alic, Wial

Service sector is all labor, and little technology

Service sector is extremely knowledge and technology intensive

Royal Society Report

STEM (Science Technology Engineering and Math) graduates cannot find good jobs in the service sector

Service sector hires most STEM graduates in developed economies to improve and innovate service

Royal Society Report

Service quality is subjective and resists systematic improvement

Service quality can be scientifically studied and improved; Intimately, connected to accurate service productivity measurement

Schneider & Bowen; Gadrey & Gallouj

Service sector is too diverse to be studied systematically

There are just four broad types of service based on resource types; Service transforms entities or their property

Spohrer & Maglio; Hill

• Fitzsimmons & Fitzsimmons– Graduate Students– Schools of Engineering

• Teboul– Undergraduates– Schools of Business– Busy execs (4 hour read)

• Ricketts– Practitioners– Manufacturers In Transition

• And 200 other books…– Zeithaml, Bitner, Gremler; 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.

Reaching the Goal: How Managers Improve

a Services Business Using Goldratt’s

Theory of ConstraintsBy John Ricketts, IBM

Service Management:Operations, Strategy,

and Information Technology

By Fitzsimmons and Fitzsimmons, UTexas

Service Is Front Stage:Positioning services for

value advantageBy James Teboul, INSEAD

To learn more…

For details: http://www.cob.sjsu.edu/ssme/refmenu.asp

http://www.ibm.com/think

Where we can start on Monday… our education systems.

Changing Nature of STEM Education

STEM2D

Natural

Sciences

Social

Sciences

Technology

(physical)

Technology

(social)

Engineering Environment, Economics & Law

Mathematics Management

STEM

Science

Technology

Engineering

Mathematics

Teach as a single integrated transdiscipline(2D = 2-Design improved SP service systems)

Teach as four disciplines

Study confirms effectiveness of challenge-based learningdesigning and implementing improvements to real-world systems

(http://www.nmc.org/pdf/Challenge-Based-Learning.pdf)

“…by the end of their respective projects 80% of participating students reported that they had made a difference in their schoolsor communities by addressing their challenge.”

Help transform K-12 STEM Education

“Imagine a better service system, and use STEM language to explain why it is better”STEM = Science, Technology, Engineering, and Mathematics

See Challenge-Based Learning: http://www.nmc.org/news/nmc/nmc-study-confirms-effectiveness-challenge-based-learning

• Challenge-based SSME Design of SP Service Systems

– K - Transportation

– 1 - Water & Waste Management

– 2 - Food & Global Supply Chain

– 3 - Energy & Electric Grid

– 4 - Info & Comm Tech (ICT) Infrastructure

– 5 - Buildings & Construction

– 6 - Banking & Finance

– 7 - Retail & Hospitality

– 8 - Healthcare

– 9 - Education (including Universities)

– 10 - Government (Cities)

– 11 - Government (Regions/States)

– 12 - Government (Nations)

– Higher Ed – Specific Service Systems

– Professional Life – Specific Service Systems

Smarter Planet (SP)Service Systems:

Quality of Life (QoL)depends directly on

Quality of Service (QoS)

Systemsthat govern

Systemsthat enable

healthy, wealthy,and wise people

Systemsthat move, store,harvest, process

Universities as “knowledge batteries” that power up regionsthey obtain, store, and provide needed knowledge to improve regions

• Knowledge of Systemsin Centers

– Industry/government sponsors

– Multi-disciplinary teams

– Research real-world systems

– E.g., CMU Website (2009)• “Research Centers:

where it all happens – to solve real-world problems”

• Knowledge of Disciplines in Schools

– Award degrees, create professionals

– Single-discipline focus

– Research key discipline problems

D

D

D

D

D

D

Engine

ering

Schoo

l

Social

Scie

nces

,

Human

ities

BusinessSchool

Sciences & Math

water & waste transportation

health energy/grid

e-government

I-School

Design

food & supply chain

Global SSME Design Lab Network• Annual

GlobalChallenges

– Example Transportation– Congestion Challenge– http://www.itsa.org/challenge/

• Best IdeasCould CreateNew Businesses

• Potential TelepresencePlay-offs with VCs for Advice

ProductivityProductivity

SustainableSustainableInnovationInnovation

RegulatoryRegulatoryComplianceCompliance

N a t i o n s

N a t i o n s I n d u s t

r i e s

I n d u s t

r i e s

QualityQuality

Two Half-day SSME Design Lab Network Virtual Summits:

West – August 11, 2009 – 16 Academic Leaders from 8 Universities in 6 locations

East – August 14, 2009 – 15 Academic Leaders from 7 Universities in 7 locations

Help establish SSME Design Lab Networks

www.caiso.com

Real (Instrumened) WorldVirtual World

Simulated World

Mathematical World

Focus:SP Service Systems =

complex systemsthat serve customers,increasingly enabled

by advanced ICT(www.thesrii.org)

Universities as “Living Labs”: Future comes alive here

Urban serving research university “tries out” innovationsthat could improve the host city

Other citieswith urban serving

research universities insideconnect

andshare

innovations

Run Transform Innovate

Smarter Universities, Cities, Regions, Nations, Planet

Growing Connections BetweenUniversities and Cities

-Transportation-Water & Waste Management

-Food & Supply Chains-ICT Infrastructure

-Energy/Electric Grid-Banking & Financial-Retail & Hospitality

-Buildings & Construction-Healthcare-Education

-Government (City, State, Nation)

Growing Connections BetweenDeveloped and Emerging Nations

- Different GDP/Capita opportunities-Different GDP/Energy opportunities

University researchers have personal interest in as well as

privileged access to local service system information

Developed MarketNations

(> $20K GDP/Capita)

Emerging MarketNations

(< $20K GDP/Capita)

>2B people intop 3000 cities,with about 5000universities

World as asystem of systems

Other Structures:Businesses, Non-Profits, Families

Many businessescould not operatewithout the STEM

graduates of universities.

Smarter Universities, Cities, Regions, Nations, Planet

Growing Connections BetweenUniversities and Cities

-Transportation-Water & Waste Management

-Food & Supply Chains-ICT Infrastructure

-Energy/Electric Grid-Banking & Financial-Retail & Hospitality

-Buildings & Construction-Healthcare-Education

-Government (City, State, Nation)

Growing Connections BetweenDeveloped and Emerging Nations

- Different GDP/Capita opportunities-Different GDP/Energy opportunities

University researchers have personal interest in as well as

privileged access to local service system information

Developed MarketNations

(> $20K GDP/Capita)

Emerging MarketNations

(< $20K GDP/Capita)

http://www.ibm.com/think

The vision – getting to “smarter” = adaptive and continuously improving

Continuous Improvement: Run-Transform-InnovateHow service system entities learn and change

• Service System Entities– Individuals

• Families– Enterprises

• Businesses• Non-profits

– Regional Entities• Universities• Cities• States/Provinces• Nations

• Learning & Change– Run = use existing

knowledge or standard practices (use)

– Transform = adopt a new best practice (copy)

– Innovate = create a new best practice (invent)

Transform

Innovate

Invest in each Invest in each type of changetype of change

Run

March, J.G.  (1991)  Exploration and exploitation in organizational learning.  Organizational Science. 2(1).71-87.

exploitexplore

Our Vision – A Moore’s Law for service system improvementsas service system become increasingly enabled by ICT advances

Computational System

More switches, more powerfulRequires investment roadmap

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

connected by value propositions

More ICT-enable service systems, more valueRequires investment roadmap

Most Wanted: A CAD for service systems(CAD = Computer Aided Design Tool)

CBM: Component Business Model

WBM and RUP: Work Practices & Processes

SOA: Technical Service-Oriented Architecture

Key Performance Indicators (KPIs)IBM IBV: Component Business ModelsIEEE Computer, Jan 2007

Service Projects and Job Categories at IBMHow much might more T-shaped professionals (with CAD tools) improve business results?

1. Consultant(trusted advisor to customer)

- a value proposition to addressproblems or opportunities and

enhance value co-creationrelationships

2. Sales- a signed contract that

defines work, outcomes, solution,rewards and risks

for all parties

4. Project Manager(often with co-PM from customer side)

a detailed project plan thatbalances time, costs, skills availability,

and other resources, as well asadaptive realization of plan

3. Architect(systems engineer, IT & enterprise architect)

-An elegant solution design that satisfiesfunctional and non-functional

constraints across thesystem life-cycle

5. Specialists(systems engineer, Research, engineer,

Industry specialist, application, technician, data, analyst, professional, agent)

-a compelling working system(leading-edge prototype systems

from Research)

~10%

~10% ~5%

~5%

~45%

6. Enterprise OperationsAdministrative Services, Other, Marketing & Communications

Finance, Supply Chain, Manufacturing, Human Resources, Legal,

General Executive Management

~25%

IBM Employees1. ~10% Consultant2. ~10% Sales3. ~5% Architect4. ~5% Project Manager5. ~45% Specialists6. ~25% Enterprise Operations

Externally-OrientedService Projects90% B2B – Business to Business10% B2G – Business to Government(B2G is a growing percentage)(especially “Smarter Cities” projects)

Jobs and Competencies1. Model Systems

2. Connect/capture Data

3. Analyze, Improve

4. Optimize, Automate

5. Discipline Specialists

•Water Supply

•Transportation

•Energy, Electric Grid

•Cities, Buildings

•Healthcare

•Education/Government

General

Methods

& Techniques

Specific

Technology

Run Transform Innovate

SP Service

Systems

1. Synapsense, SensorTronics

2. Infosphere Streams, ILOG, COGNOS

3. WS, Tivoli, Rational, DB2, etc.

4. BAO, Green Sigma

Cross Industry

Competencies

Industry Specific

Competencies

Jobs

Systems Engineering/Analytics/BAO/SSME

Research fuels

Specialists

Consultant

Project Manager

Sales Architect

Operations

In sum, service science 101

• Understand and improve complex business and societal systems (service systems)– Related to systems science, management, engineering, and

design (added emphasis on increasing value cocreation interactions of ICT augmented people and organizations)

– Service systems are complex systems with people inside that serve customers, and improve through better use of information (ICT + analytics = learning curves for continuous improvement)

• T-Shaped Professionals have knowledge of…– Many disciplines, deep in at least one– Many systems, deep in at least one– Many projects, award winning on at least one– And someday, a CAD tool for service system solution design

http://www.ibm.com/think

Dr. James (“Jim”) C. Spohrer Director of IBM Global University Programs since 2009, Jim founded IBM's first Service Research group in 2003 at the Almaden Research Center with a focus on STEM (Science Technology Engineering and Math) for Service Sector innovations. He led this group to attain eight times return on investment with two IBM outstanding and nine accomplishment awards. Working with service research pioneers from many academic disciplines, Jim advocates for Service Science, Management, Engineering, and Design (SSMED) as an integrative extended-STEM framework for global competency development, economic growth, and advancement of science. In 2000, Jim became the founding CTO of IBM’s first Venture Capital Relations group in Silicon Valley. In the mid 1990’s, he lead Apple Computer’s Learning Technologies group, where he was awarded DEST (Distinguished Engineer Scientist and Technologist) status. Jim received a Ph.D. in Computer Science/Artificial Intelligence from Yale University and a B.S. in Physics from MIT.

Service Growth Service growth is too often overlooked and misunderstood. This talk tells the story of the growth of service (value cocreation interactions between entities) from an IBM perspective in three parts. Part one explains that service growth is hidden wealth, for IBM and the global economy, but to fully master service innovation requires overcoming myths and creating more T-shaped professionals. T-shaped professionals can help build a smarter planet. Part two explains that education is where we can start and that a new generation of adaptive innovators is needed, starting in K-12 and continuing into universities, with a focus on creating smarter cities. Part three describes a vision for the future and the need for a Computer-Aided Design (CAD) tool for T-shaped professionals to plan and implement more service innovation projects.

http://www.ibm.com/think

Backup Slides – Relation to other sciences & intro to terminology

Natural: Physics (Atoms)

Natural: Chemistry (Molecules)

Natural: Biology (Uni-Cell Organisms)

Natural: Biology (Multi-Cell Organisms)

Natural: Biology (Neural & Social Organisms)

Service: Anthropology (Informal Service System Entities)

Service: Economics & Law (Formal Service System Entities)

Service: Information (Globally Integrated Formal Service System Entities)

Sys

tem

s S

cien

ce

Exp

lain

Evo

luti

on

of

En

titi

es &

Inte

ract

ion

s

Gra

yA

rea Ser

vice

Sci

ence

Evolution of Natural Systems and Service Systems(US 7th Grade Science: How is a cell like a city? Both are a system of systems)

Ser

vice

Sci

ence

Nat

ura

l Sci

ence

Nat

ura

l Sci

ence

Service systems: Evolving complexityDynamic configurations of resources: human, technological, organizational, and information

• A. Informal Service Systems (Tacit Patterns)• B. Formal Service Systems (Explicit Symbols)

• 1. Social Systems– Human Systems/Sociotechnical Systems– Human Cultures

• 2. Technological Systems– Engineered Systems– Designed Systems

• 3. Economics Systems– Markets and Organizations– Firms or Hierarchies– Economic Institutions– Gray Markets

• 4. Legal Systems– Legislative, Judicial, Executive Separation– Norms, Sanctions, Punishments

• 5. Political Systems– Governed Systems– Value Systems

• 6. Organizational Systems– Managed Systems– Open Source Communities– Virtual Organizations

• 7. Information Systems– Linguistic Systems– Mathematical Systems– Physical Symbol Systems

• 8. Ecological and Geographic Systems– Nature’s Service and Systems– Evolved Spatial Systems

A.

B.

1.2.

3.

4.5.

6.

7.

8.

“The goal of science is to make the wonderful and complex understandable and simple – but not less wonderful.” – Herb Simon, The Sciences of the Artificial

Service systems are complex systems with people inside. – Claudio Pinhanez, IBM

Service Science:Toward A Smarter Planet

I. Foundations II. Disciplines III. Professions

Phenomenon:Value Cocreation

ResearchChallenges

Past Present FutureKnowledge Workersand other laborers

Run

Managers, Engineers,Consultants:Transform

Stakeholders & Measures

Resources &Access Rights

People & PAPsychology, DesignCognitive Science

Technology & OOIndust Systems Engineering

Systems Science

Information & SAMgmt of Info Systems

Computer & Info Science

Organizations & LCProject Mgmt/ContractsOrganization Science

Customer & QualityMarketing

Behavioral Sciences

Provider & ProductivityOperations

Management Sciences

Authority & ComplianceGovernance

Political Science

Competitor & Sust. Innov.Strategy/Game Theory

Learning Sciences

Historical Studies,Anthropology, Economics & Law, Social Sciences

Futures Studies,Mgmt of Innovation, Design,

Decision Sciences

Concepts & Questions

Scientists, Designers,Entrepreneurs:

Innovate

Tools & Methods

Work & Job CategoryEvolution

Spohrer, J. & Maglio, P. P. (2009). Service science: Toward a smarter planet. In W. Karwowski & G. Salvendy (Eds.), Introduction to service engineering.

Service science: Types of systems & disciplines/professions

transportationwater & waste

food & supply chainenergy & electricity

building & construction

healthcarebanking & finance

retail & hospitality

ICT education city state nation

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., governance

e.g., game theory

e.g., psychology

e.g., industrial eng.

e.g., computer sci

e.g., knowledge mgmt

e.g., statistics

e.g., knowledge worker

e.g., consultant

e.g., entrepreneur

stake

holders Customer

Provider

Authority

Competitors

resources

People

Technology

Information

Organizations

time History

Future

professions

Run

Transform

Innovate

Systems that move, store, harvest, process Systems that governSystems for healthy, wealthy, wise people

Core Concept: Service is value cocreation interactions of entities

Ecology(Populations & Diversity)

Entities(Service Systems)

Interactions(Service Networks)

Outcomes(Value Changes)

Value Proposition Based Interactions

Governance Mechanism Based Interactions

Access Rights(Relationships)

Measures(Rankings)

Resources(Roles)

Stakeholders(Perspectives)

win-win

lose-lose win-lose

lose-win

Value cocreationis a possible outcome

If disputes never arose, value-proposition-based interactions would suffice.Dynamics: Also must understand how entities evolve, learn and change over time.

Diverse types of entities:businesses, cities, etc.

1.People

2.Organizations

3.Technology/Environment

4.Shared

Information

Physical Not-Physical

Rights

NoRights

Formal service systems can contractInformal service systems can promise/commit

Trends & Countertrends (evolve/augment):(feelings/patterns) Informal <> Formal (language/symbols)

(unmonitored) Social <> Economic (monitored)(leaders/personal) Political <> Legal (laws/impersonal)(human) Cognitive Labor <> Computation (machine)(human) Physical Labor <> Technology (machine)(atoms) Transportation <> Communication (bits)

(tacit) Qualitative <> Quantitative (explicit)

First foundational premise of service science:

Service system entitiesdynamically configure (access)

four types of resources.

The named resource iseither

Physicalor

Not-Physical(physicists resolve disputes)

The named resource haseither

Rightsor

No-Rights(judges resolve disputeswithin their jurisdictions)

Resources: Building blocks of entities

Second foundational premise of service science:

Service system entitiescalculate value from multiple

stakeholder perspectives

A value propositions canbe viewed as a request from

one service system to anotherto run an algorithm

(the value proposition)from the perspectives of

multiple stakeholders accordingto culturally determined

value principles.The four primary stakeholderperspectives are: customer,

provider, authority, and competitor

Stakeholder

Perspective

(the players)

Measure

Impacted

Pricing

Decision

Basic

Questions

Value

Proposition

Reasoning

1.Customer Quality

(Revenue)

Value

BasedShould we?

(offer it)

Model of customer: Do customers want it? Is there a market? How large? Growth rate?

2.Provider Productivity

(Profit)

Cost

PlusCan we?

(deliver it)

Model of self: Does it play to our strengths? Can we deliver it profitably to customers? Can we continue to improve?

3.Authority Compliance

(Taxes and

Fines)

Regulated May we?

(offer and

deliver it)

Model of authority: Is it legal? Does it compromise our integrity in any way? Does it create a moral hazard?

4.Competitor

(Substitute)

Sustainable Innovation

(Market

share)

Strategic Will we?

(invest to

make it so)

Model of competitor: Does it put us ahead? Can we stay ahead? Does it differentiate us from the competition?

Value propositions coordinate & motivate resource access

Value Propositions: Building blocks of interaction networks

• Access rights– Access to resources that are owned

outright (i.e., property)– Access to resource that are

leased/contracted for (i.e., rental car, home ownership via mortgage, insurance policies, etc.)

– Shared access (i.e., roads, web information, air, etc.)

– Privileged access (i.e., personal thoughts, inalienable kinship relationships, etc.)

service = value cocreationB2BB2CB2GG2CG2BG2GC2CC2BC2G***

provider resourcesOwned OutrightLeased/ContractShared Access

Privileged Access

customer resourcesOwned OutrightLeased/ContractShared Access

Privileged Access

OO

SA

PA

LC

OO

LC

SA

PA

S AP C

Competitor Provider Customer Authority

value-proposition change-experience dynamic-configurations

(substitute)

time

Third foundational premise of service science:

The access rights associated with resources (customer’s and provider’s)

are reconfigured by mutually agreed to value proposition

relationships

Access Rights: Building blocks of value propositions

• Four possible outcomes from a two player game

• ISPAR generalizes to ten possible outcomes

– win-win: 1,2,3– lose-lose: 5,6, 7, maybe 4,8,10– lose-win: 9, maybe 8, 10– win-lose: maybe 4

1

3

2

5 6

4

109

8

ISPAR descriptive model

lose-win(coercion)

win-win(value-cocreation)

lose-lose(co-destruction)

win-lose(loss-lead)

Win

L

ose

Pro

vide

r

Lose WinCustomer

7

Outcomes (ISPAR*): Results of entities interacting

* = Interact-Service-Propose-Agree-Realize (ISPAR)

Question: What is… Proposal(s) Reference(s)service? Non-productive labor Smith

service? Competence exchange Bastiat

optimal exchange? Comparative advantage Ricardo

cause of service growth? Lagging productivity Clark

ultimate growth result? Productivity stagnation Baumol

a model of service systems? Queuing theory; Systems dynamics; Production system

Riordon; Fitzsimmons; Oliva & Sterman; Mandelbaum; Mills & Moberg

ultimate growth result? More tech industrialization Leavitt; Quinn; Zysman

ultimate growth result? More innovation Baumol; Tiene & Berg

service marketing? IHIP, 6P’s Berry; Brown; Gronroos

service quality? GAPS; Linkage; SERVQUAL Zeithaml & Bitner; Schneider & Bowen; Parasuraman

decision of learning entities? Exploitation & Exploration March

service investment? Profit-chain; Life-time customer value;

Heskett, Sasser, Schlesinger; Rust; Strauss; Lemick

service operations? Contact; Unified; Offering Continuum; Front/Back-Stage

Chase; Johnston; Sampson; Davis; Levitt; Teboul

B2B service? Multi-stage; Architecture Bolton; Roth & Menor

service design? Customer-focus Fisk; Edvardsson

service innovation? Customer-focus Gustafson & Johnson; Miles; Gadrey & Gallouj; Van Ark & Den Hertog; Tidd & Hull

lean solutions and service? Provider-customer cocreation Womack & Jones

service? Rental; networks; offerings Lovelock; Gummesson; Roos

service? Application of competence Vargo & Lusch

Discipline Focus Reference(s)Economics Service is a category for counting

output (productivity), jobs, businesses, exports, etc.

Triplett

Marketing Service is experienced by customers as part of an offering, and dependent on many factors including customer expectations and customer contact employees behaviors, to name two factors; Service design looks at customer interactions and experiences (“moments of truth”)

Bitner

Operations Service is a production processes that becomes complex because it depends on inputs from customers

Chase; Sampson

Industrial & Systems Engineering Every service originates from a system characterized by capacity limits (often modeled with queues)

Riordin; Fitzsimmons; Mandelbaum

Operations Research Service performance depends on coordinated actions of networks of entities/resources that can be modeled and optimized like supply chains

Lee

Computer Science Components with capabilities, such as web services; Architectures of such components, service-oriented architectures

Zhang

Information Systems Service systems are work systems. Alter

Psychology Service is an experience, shaped by many factors including waiting in queues

Chase

Question: What is… Proposal(s) Reference(s)Service? Value creation systems; co-

production; value constellationsNorman & Ramirez

Could there be a science of service?

Involves technology to improve productivity and quality

IBM

Proper perspective on service? Service-Dominant Logic Vargo & Lusch

Why under-studied? Too many myths, too few facts Chesbrough & Spohrer

Why now? Economic importance, and physical, information, social progression in needed science

Maglio

A service system? Dynamic resource configurations Spohrer

Work evolution in service? Z-model Spohrer & Maglio

Needed to make progress? National service innovation roadmaps reports

IfM & IBM

Complexity of service networks? Direct and indirect actors Basole & Rouse

What progress in education? SSME and related programs Hefley & Murphy

How do service systems interact? ISPAR Maglio

What is value? Value in use Vargo

Needed discipline integration? Time, stakeholder, resources Spohrer & Kwan

Service system evolution? Run-Transform-Innovate Spohrer & Maglio

Service system scaling? Digitally Connected Scaling Hsu

The problem will local optimization? Does not lead to global optimization Ricketts

STEM for service sector innovation? Transformative technologies UK Royal Society

Response to disasters? Humanitarian service science Haselkorn

Response to globalization? Intercultural service systems Medina-Borja

T-Shaped Professionals

Many disciplines Many systems

Deep in at least one discipline

Deep in at least one system

Many team-oriented service projects completed

ICT augments human performance: problem solving (deep) and communication (broad)

Hidden Wealth: Mostly invisible service (value

cocreation) interactions between entities

OO

SA

PA

LC

OO

LC

SA

PA

S AP C

Competitor Provider Customer Authority

(substitute)

Knowledge-based Interactions: (1) Division of Labor (specialization), (2) Augmenting human and organizational performance with technology innovations to improve quantity and quality of interactions, (3) Incentive alignment and mechanism design for improved access to shared resources, (4) More diverse and capable entities create more and better opportunities (capability integration and comparative advantage), (5) Improved dispute resolution (governing authorities), (6) More challenging environment (competitors), etc.

Stakeholder Entities in Service Interactions

49

Technology immersion of today’s students

Worldwide Mobile Subscribers

0500

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2000 01 02 03 04 05 06 07 08

Mil

lio

ns

0

10

20

30

40

50

60

70

% o

f W

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d's

Po

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Innovations in the consumer marketplace are driving rapid adoption of new technologies for communication, entertainment and learning

Over 4 billion individuals now have access to mobile technologies worldwide –

representing over 60% of the population

Social networking sites, virtual worlds,and mass collaboration technologies allow crowd sourcing to gain insights

50

Vision for 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

Intelligent• Aligned Data• Outcomes Insight

Instrumented• Student-centric• Integrated Assessment

Interconnected• Shared Services• Interoperable Processes

ContinuingEducation

HigherEducation

SecondarySchool

PrimarySchool

WorkforceSkills

Individual Learning Continuum TheEducationalContinuum

Educatio

n Sys

tem Contin

uum

EconomicSustainability

Learning is changing….

Formal is a small fractionInformal is dominantSignposts show wall breaking down

“A large and growing percentage of engineers now work as contract technical experts, hiring out for a particular job at a particular company, then moving on when it is finished. They may be independent consultants or they may work for consulting firms, but either way they don't have the long-term stability that joining a traditional manufacturing firm used to provide.”

Lifelong Learning for Engineers: Riding the WhirlwindBy Ernest T. SmerdonIn The Bridge (a publication of the U.S. National Academy of Engineering)

Volume: 26, Number: 1/2 – Winter 1996

Specialists: Professional life as a series of service projects for customers

The 10 Hardest Jobs to Fill in America (6/09): #1 Engineer

1852 Civil Engineering (ASCE)1880 Mechanical Engineering (ASME)1884 Electrical Engineering (AIEE/IEEE)1907 Ag & BioEngineering (ASAE/ASABE)1908 Chemical Engineering (AICE)1948 Industrial Engineering (ASIE/IIE)1948 Computing Machinery (ACM)1954 Nuclear Engineering (ANS)1955 Environmental Engineering (AAEE)1963 Aerospace Engineering (AIAA)1963 Biomedical Engineering (BMES)1985 Genetic Technologists (AGT)1992 Financial Engineering (IAFE)1993 Software Engineering (JCESEP)2007 Service Engineering (SRII)

…Obama administration’s pledge to rebuild America’s infrastructure…Engineers are needed to build a smarter infrastructure

Short history of engineeringprofessional associations

Some paths to becoming smarter:Improving learning and performance

• Learning sciences (methods)– Better models of concepts – Better models of learners

• Learning technology (tools)– Guided learning paths– Elimination of “thrashing”

• Quantity effect (overlaps)– More you know, faster you go– Advanced organizers

• Lifelong learning (time)– Longer lives and longer careers– Keeps “learning-mode” activated

• Early learning (time)– Start earlier: Challenged-based approach– STEM-2D in K-12 (SSME Design of SP Service Systems)

• Knowledge Augments (performance time)– Technology & Infrastructure– Organizations & Others

Service science: Many disciplines and systems, deep in at least one pair

transportationwater & waste

food & supply chainenergy & electricity

building & construction

healthcarebanking & finance

retail & hospitality

ICT education city state nation

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., governance

e.g., game theory

e.g., psychology

e.g., industrial eng.

e.g., computer sci

e.g., knowledge mgmt

e.g., statistics

e.g., knowledge worker

e.g., consultant

e.g., entrepreneur

stake

holders Customer

Provider

Authority

Competitors

resources

People

Technology

Information

Organizations

time History

Future

professions

Run

Transform

Innovate

Systems that move, store, harvest, process Systems that governSystems for healthy, wealthy, wise people