IBM Service Science & Innovation Community of Practice 3/6/2012

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]

Presented to theIBM Service Science & Innovation Community of Practice

March 6th, 2012

Download these slides at: http://www.slideshare.net/StephenKwan

Constructing Effective Value Propositions for Stakeholders in Service System Networks1

1Kwan, S.K., Muller-Gorchs, M. (2011). "Constructing Effective Value Propositions for Stakeholders in Service System Networks,” Proceedings of SIGSVC Workshop. Sprouts: Working Papers on Information Systems, 11(160). http://sprouts.aisnet.org/11-160

http://creativecommons.org/licenses/by-nc-sa/3.0/us/

2Kwan 2012

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.

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

4

A Service System Network

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ServiceSystem A

ServiceSystem B

ServiceSystem C

ServiceSystem D

ServiceSystem E

ServiceSystem F

Service Interactions

5

A Service Supply Chain

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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


Service System Worldview

7

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


Value

Value

Governance

Value

8

Value

Value Co-Creation Through Value Propositions

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Customer

ServiceExperience

ServiceProvider

Stage 1: Value Chain

FocalRelationship

Value Proposition

Stages in Customer Empowermentin Value Co-Creation1

1 Kwan, S. K. & Yuan, S. T. ”Customer-Driven Value Co-Creation in Service Networks”, 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.

Stage 3 – Improved Value Chain

Customer’sSocial

Network

Customer

ServiceExperience

ServiceProvider

Value Proposition

FocalRelationship

Value Proposition

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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

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

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Intrinsic

Maslow’sHierarchyOf Needs

13

HedonicSpiritualCulturalCorporal

EmotionalIntellectualFamilial….

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Maslow’s Hierarchy of Needs

Disposable Income &Desire forServices

Needsvs.

Wants

15

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


ServiceExperience

Customer

ServiceExperience

Customer

A SharedExperience

Community/Social

Network

Value Proposition

VPM – individuals and Facebook community

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ServiceExperience


ServiceExperience

Customer

Value Proposition

ServiceExperience

Vendor

ValueProposition

ServiceExperience

VPM – service provider partners

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ServiceExperience


ServiceExperience

Customer

ServiceExperience

Vendor

ServiceExperience

ServiceExperience

VPM – partner’s acquistion of customer

Customer Acquisition Strategy

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… leveraging the connections among its

850 million users…

Ads produced $31.5 billion in revenue in

2011…

Those ads will say the user’s friends likes the brand,

adding a social context that Facebook says will make the ads 80% more likely to be

remembered.

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ServiceExperience


ServiceExperience

Customer

ServiceExperience

Vendor

ServiceExperience

Example 1 of 4

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ServiceExperience


ServiceExperience

Customer

ServiceExperience

Vendor

ServiceExperience

ServiceExperience

VendorService

Experience

Example 2 of 4

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ServiceExperience


ServiceExperience

Customer

ServiceExperience

Vendor

ServiceExperience

ServiceExperience

VendorService

Experience

Example 3 of 4

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Cost of acquiring subscribers:2099 $2.522011 $5.23

Example 3 of 4 (continued)

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ServiceExperience


ServiceExperience

Customer

ServiceExperience

Vendor

ServiceExperience

ServiceExperience

Example 4 of 4

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Foundational Premises of Service Dominant Logic

MicroeconomicConsiderations

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Customer’s Value System

Provider’s Value System

Opportunities forValue Co-Creation

His Customer’s Value System

★

★

★★★★★

★

Value Systems and Value Dimensions

FP8

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

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Intrinsic

Maslow’sHierarchyOf Needs

30

HedonicSpiritualCulturalCorporal

EmotionalIntellectualFamilial….

FP10

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Constructing a Value Proposition

Metrics

Rules (of behavior)

Schema (for data interchange)

Quality

Probability of Success

Costs

Benefits

Service Experience

The Customer have a lot of VP’s to choose from.

FP7

Accepted Value Proposition = Service Level Agreement?

= Service Com

ponents

Instantiated as

Service episodes

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A Hierarchy of Value Propositions

<VP> = <vp> | <vp> <VP>

An Service Provider’s Value Proposition can be made up of a recursive set of sub-Value Propositions that could be realized by partners.

A Service Provider can also offer different Value Propositions for a variety of Service Offerings.

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A Customer’s Choice of Service

A Customer’ Choice Function:

A Service Provider’s Promised Value:

Based on the Customer’s own

expectations

Service Components

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A Customer’s Realization of Value

A Customer’s Realized Value(value in use):

Customer’s Contributions

Service Provider andHis Partners’ Contributions

Co-Production Service Process

FP6

FP9

Degree of completion Actual Benefits Quality Assessment

+

could be more

complex

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Constructing Value Propositions:Customers and Service Providers

Connecting Components of a Value Proposition to a Service Provider’s KPI’s

through Feedback

Sc,R,Mtoo

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Amazon.comBookcloseout_us

nengland4

theBookGrinder

Customer

Example: E-Commerce

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Customer

Amazon.comSP0

Bookcloseout_usSP1

theBookGrinderSP2

negland4SP3

S0

S4

S1

S5

S2

S6

S3

Se0

Se1

Se2

Se3

SE

SP4

VP0

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Customer

SE0

SP0

Time

SE0 = Service Experience provided by SP0

SP0 = Service Provider of the Focal Relationship (the basis of the Value Proposition from Kwan & Yuan 2011)VP0 = Value Proposition offered by SP0 to Customer for SE0

FocalRelationship

VP0

Instantiationof the Service

Experience at aparticular point

In time

Service Pattern 1 – Single Service Episode

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Customer

SE0

SP0

Time

VP0

Pattern 2 – Continuous Service over a Period of Time

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Customer

Se0

SP2

Time

VP0

Se1

Se2

SP1SP0Instantiation of the Service

Experience at a particular point In time

Service Pattern 3 – Service in Parallel

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Customer

Se0

SP0

Time

Se1 Se2

VP0

Pattern 3 – Continuous Service with Occasional Service Episodes

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Customer

SE0

SP0

Time

SE1 SE2

SP1 SP2

SE4

SE5

SP3

SE6

SE3

VP1

VP2

VP3

VP0

Pattern 4 – Service provided by more than one Partner Service Providers

43

Future Directions

• More on development of Value Dimensions and Measurement• More on connecting VPM with Service Provider’s KPI• More on Quality Dimensions and Measurement• Integrate VPM with Service System Design and Prototyping

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Integrate withForesight and Innovation Method

© Cockayne and Carleton

Knowledge Managementfor Service System Design

& Engineering

Kwan 2012

Foresight and Innovation Method

Service System Framework& Service System Networks

Value Propositions& Service Patterns


44

45Kwan & Müller-Gorchs 2011 45Kwan & Müller-Gorchs 2011

Foresight and Innovation Method

BPMN

UML – Use Cases

Story Boards

UI Prototyping

Service Blueprint

MANGA

WorkSystem

Service System Framework& Service System Networks

Value Propositions& Service Patterns


ProcessChainNetworkDiagram

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]

Presented to theIBM Service Science & Innovation Community of Practice

March 6th, 2012

Download these slides at: http://www.slideshare.net/StephenKwan

Constructing Effective Value Propositions for Stakeholders in Service System Networks1

Fin

http://creativecommons.org/licenses/by-nc-sa/3.0/us/

Kwan 2012 47

Example of Value PropositionA Class Syllabus (1)

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One of many MIS Electives

offered in Fall 2011

3 Credit Hours$$

CourseDescription

Course -Learning

Objectives

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Reputation &Accreditation

“Powering Silicon Valley”

Prerequisites &Required Texts

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Required Texts,Rules &Policies

ClassProcedure

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Grading Criteria

Student Evaluations

(Faculty KPI)

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Service Episodes

Service Components

Guest Lecture(Partner)

Kwan 2012 53

Kwan 2011 54

EnvironmentalValue