11/20 Seminar Topic: SSME by IBM

© Copyright IBM Corporation 2008

IBM Greater China Group

Service Science – Enabler of Taiwan’s Next MiracleWhy, What, How

CC FanSenior Managing ConsultantIBM, Global Business [email protected]+886 935264538

2



“ Service” Does Matter ….Europe NESSI (2005)

Networked European Software and Service Initiative

Japan SPRING (2007)Service Productivity & Innovation for Growth

http://www.service-js.jp/cms/index.php

3



Agenda

The Why -- Industry Trends

The What – Services, SSME, from conceptual to practical

The How – - SSME -- Start with multi-disciplinary approach and evolve- Practicality and Innovation

Service Innovation Opportunities in Taiwan

4



Global Economy –Service is becoming the leading sector

Economy Structure: - Service is becoming the leading

sector of the economy

Source: UNCTAD, Statistical databases on-line Global Trade: - Services represent 20% of total

world trade- Exports of commercial services

increase rapidly

Structural Shifts - Percentage of GDP (World)

9.9 7.4 4.3 3.6

42.1 38.632.9 30.5

48 54 62.8 65.9

0%

20%

40%

60%

80%

100%

1973 1983 1993 2003

agriculture industry services

5



Economic Structure in Taiwan –Taiwan is shifting to knowledge economy

Source: http://www.dgbas.gov.tw/

Manufacturing age (1966~1986)- From agriculture to labor intensive

manufacturing, and then to capital intensive manufacturing

Post-manufacturing age(1987~2000)- Capital & technology intensive industry

(e.g. electronics & information technology)

Knowledge economy (2000~current)- Intelligent capital

73.6

47.4

57.0

70.5

46.8 46.146.4

47.5

24.6

47.139.4

27.6

41.7

34.530.0

21.3

46.2

5.5 3.6 1.9

23.3

12.2

32.3

6.31.8

0

20

40

60

80

1951 1957 1963 1969 1975 1981 1987 1993 1999 2005

Year

GDP

(

％

)

Service

Industry

Agriculture

The Shift of Economic Structure

1950 1960 1970 1980 1990 2000

5000

10000

15000

GNP(US Dollar) Taiwan Economy Ages

Manufacturing

Post-manufacturing

Knowledge economy

1973

1980

1986

http://images.google.com.tw/imgres?imgurl=http://192.192.159.187/9taiwan/c0703.files/image077.jpg&imgrefurl=http://192.192.159.187/9taiwan/c0703.htm&usg=__bpN2DqTgu2TpYbIjPmTHpctomS8=&h=274&w=199&sz=7&hl=zh-TW&start=15&um=1&tbnid=L_N_9JcIYEWmSM:&tbnh=113&tbnw=82&prev=/images%3Fq%3D%25E6%2596%25B0%25E7%25AB%25B9%25E7%25A7%2591%25E5%25AD%25B8%25E5%259C%2592%25E5%258D%2580%26um%3D1%26hl%3Dzh-TW%26sa%3DN

6



Service Sector in Taiwan –There is still room for improvement

Less contribution to economic growth- Although the service accounts for more

than 70% of GDP, but the contribution rate to the economic growth is similar to industry sector .

Low added value- While developed countries are making

significant improvements in creating higher added value in service sector, there is only minor change in Taiwan

Service sector still has room for improvement,What to do?

0.00% -0.07% -0.13% 0.09% -0.04%

2.01%

1.13%1.85% 2.10%

2.79%2.37%

3.68%

2.44% 2.70% 2.95%

0.09%

2.54%2.54%

-1%

0%

1%

2%

3%

4%

2002

2003 2004 2005 2006 2007農業製造業服務業

對 GDP 成長的貢獻率

$0

$10

$20

$30

$40

$50

$60

$70

$80

2000 2001 2002 2003

芬蘭新加坡愛爾蘭日本韓國荷蘭英國美國台灣單位：千美元 / 每就業人

口

台灣 2003 年水準

主要國家之服務業附加價值生產力比較

7



Value Distribution: Services from Value Chain Perspectives The case of iPod iPod : a global popular consumer electronics, launched by Apple in 2002

Move up value chain for higher value (e.g., R&D, Marketing, After-sale

Services, Financial Services, etc.)

Source: Apple, annual report 2002 - 2005

Revenue

$105 (35%)

$120 (40%)

$45 (15%)

$29 (10%)

$ 299

Design, Marketing Apple Company, US

ManufacturingIn Japan

Distributor&Retailer

FoundryIn Taiwan

iPod Revenue(Million $)

0

1000

2000

3000

4000

5000

2002 2003 2004 2005

R&D

DesignProcurementManufactureDistribution

Financial Service

After-sale service

Marketing

Value Chain

Value

8



New Opportunities: Emerging, Small to Big The example of US tax return preparation from India

Large demand from U.S.- Low cost: India’s cost is about 10% of U.S.- 24 hours service: time-region difference

Many India companies established for U.S. tax preparation- Low investment ： with software, only basic accounting knowledge is required- Job opportunity ： about 70,000 graduates every year- Convenience ： SOHO (Small Office/Home Office)

Service volume ：- 25,000 orders in 2003- 100,000 orders in 2004- 400,000 orders in 2005

U.S. tax payer U.S. Tax service company India accountant

W-2, W-4, 1099, bonuses, and stock statements

Tax calculation

English advantage Low investment Low dependency on

natural resources

9



The Bottom Line

The services economy is huge and diverse Technology has been the equalizer – “The World is Flat” Ample room for (services) innovation Do we have the right mindset? Do we have the people with the right training? What should be the roles of

- Government ?- Education Institutes ?- Industries ?

Will the focus of Services discipline generate the similar growth of Computer Industry by the Computer Science discipline?

10



Agenda





11



Definition of Service (Wikipedia)

A service is the diametrically opposed non-material counter piece of a physical good. A service provision comprises a sequence of activities that does not result in ownership of the outcome, and this is what fundamentally differentiates it from furnishing someone with physical goods.

Source: IBM ASR SSME Chart

Front stage[MOT]

Direct interaction withemployees, machines, other customers, etc.

Customers withdemands

Back stageEmployees, machines,

technology.

Customers are satisfied with solutions or transformed

Materials, components,data

Finished products, information, know-how

A service system

12



2 Types of Services

Who services whom? Two types of work

- Something one can do by himself Cooking, cleaning, Maintain own computer A company does all the operations by itself

- Something one can NOT do by himself Rub one’s back, self surgery

- Something one can do, but can not do ‘well’ Move heavy items, trim tall trees, IT management

- Something one can do, but others do not trust Account auditing

- Something one can do, but ‘awkward’ to do or manage Diagnostics Relationship baggage

13



Internal vs. External Services

Internal Services - By mission – through management designation- Management – activity targets, feedback, internal surveys

Services to external ‘customers’- By contract

Explicit contract —SLA, measurable Implicit contract – Common expectation

- Management – delivery acceptance, survey and feedback from customers

14



What is SSME about?

To enable services economyTo articulate services disciplineTo train service oriented talents

15



Services Oriented talents – 1. Talents and jobs of service industries

Teachers

Accountants, statisticians, analysts, money managers

Doctors, nurses, lawyers, beauticians, hair cutters

Decorators, cleaners

Tour guides, food service personnel

Consultants

IT specialists, architects

etc.

16



Services Oriented talents –2. Talents who can build and improve services industries Domain Knowledge (IT Example)

- Design- Systems Engineer- Application Development

Architecting, Design, coding, testing, deployment- Usability experts- System Maintenance- Product specialization- Solution and/or application knowledge- Specialization like networks, security, etc- Maintenance- Connecting business with IT, Enterprise Architecture- Project Management

Services Management Expertise- Services personnel HR- Knowledge based systems- General business management- Ecosystem management

Services Innovation

17



What is in SSME ? –SSME = Service Sciences, Management, and Engineering

Is there a “Service Science” ? I can understand Management, what do you mean by Services

Engineering?

SSME = Service Sciences, Management, and Engineering

Business Models &

Processes

Science &

Technology

People&

Culture

SSME

18



People Factors: Customer Behavior, Customer Psychology, Service Environment, Self-Service and Customer Experiences

People Factors: Organization Theory, Incentive Theory & Effectiveness, Service Environment & Quality, Interaction with Tools

The System of Services –Like Circuits, Services can be Complex Systems　

Optimization & Analysis- Operations Research- Game Theory- System Engineering- ...

The SystemOf

Services

New technologies- Web Services- Grid- Autonomic Computing- …

Enablement (Architecture)- Business Architecture- IT Architecture- Data Architecture- Performance Architecture- …

Model- Service Operation Model- Service Delivery Model- Service Capability Model- ...

19



Services Science –Modeling, Applied Math, Behavior Science…

Are there theorems? Patterns? How to describe a service system?

- Modeling? Applied Math -- Optimization

- Linear Programming- Integer Programming, - Heuristics- Stochastic optimization

‘Services’ is people associated- Psychology- Behavior Science

A lot of grand challenges

20



Exemplar ModelCutting Corners and Working Overtime: Quality Erosion in the Service IndustryBy Rogelio Oliva • John D. StermanHarvard Business School, Morgan Hall T87, Boston, Massachusetts

21



Example of Mathematical Model

Service Delivery [Customer orders (so) accumulate in a backlog (B)until they are processed.]

Service Capacity [Effective service capacity (c) is determined by adjusting the total labor force (L) by the effects of personnel experience (e) and fatigue (f )]

Employee Responses [Work pressure (w), a measureof the balance between service demand and capacity,is defined as the gap between required service capacityand effective service capacity as a fraction of currentcapacity,]

Service Quality [The satisfaction or quality customers experience (q) is a nonlinear function of the performance gap—the normalized difference between the time allocated per order (T) and customers’ expectations (Zeithaml et al. 1990)]

Partial Model Estimation: The estimation minimizes the sum of squared errors between simulated and actual time per order given the structure of the model and driven by the data for actual service capacity (SC) and customer orders (CO)

22



What are the mental states or perception of services receiver of services?

Affected by internal and external environment One’s experience is important

- Is Tokyo a first class or second class city?- Is Beijing a first class or second class city?- Is New York City a first class or second class city?

Individual’s behaviors- Selective, preferential, greedy- May or may not be influenced

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Services Engineering

Industry specific Quantitative Systematic Process orientation, Factory orientation,

standardize- Service Processes- Services Personnel

Enabled by Information Technology

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Services Management

What to Manage?- Manage Services?- Manage Service personnel?- Manage Service content?- Manage Service providing Systems?- Manage Service recepients?- Manage expectations from recipients?- Manage the Brand of Services?

Manage Services- Quality of Services- Cost of Services- Risk of Services- Value of Services- Ecosystem, supply and demand chain of

services

Each can be a good Topic for deep study

25



Agenda





26



挑戰你…

你有八枚硬幣 , 其中一枚比較輕 . 請用天平秤出較輕的一枚 , 而且只能秤二次 !!!

27



Industry Response –SRII - Service Research & Innovation Initiative

http://www.emc.com/

http://www.xerox.com/go/xrx/template/013.jsp?Xcntry=USA&Xlang=en_US

http://www.unisys.com/

http://www.ucla.edu/

http://www.asu.edu/

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Worldwide institutes begin to develop SSME initiatives

Departments

UC BerkeleyCarnegie Mellon UniversityGeorgia Institute of TechnologyMassachusetts Institute of

TechnologyPenn State University

Researchcenters

Rensselaer Polytechnic Institute

University of MarylandNorth Carolina State UniversityArizona State University Fraunhofer InstituteKarlstads Universitet

200 Universities in 42 Countries Teaching SSME Courses

99 Degree or certificate programs in 31 Countries- 14 Undergraduate degrees (technical

and MIS) E.g Michigan Tech Univ., Singapore Mgmt Univ.

- 85 Graduate degrees and concentrations (25 technical, 25 MIS, 38 Business) E.g.: Carnegie Mellon, Helsinki Polytech, Peking

U, Portland State U, Rochester IT, RMIT, Scuola Sant’Anna, Steven Inst, U del Salvador, U Bridgeport, U Buffalo, U Exeter, U Manchester, U Trento, Karlstads U, North Carolina State U

20 Research Centers for Service Excellence

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School Discipline Evolution & Revision Selection & Aggregation

Transformation & Integration

School ofManagement

Marketing Service Marketing

Service &

Solutions E

xcellence Centers

(Information S

cience & Technology M

anagement)

Services S

ciences, Managem

ent, and Engineering (S

SM

E) and S

olutions E

ngineering

Operations Service Operations

Accounting Service Accounting (Activity-Based Costing)

Contracts & Negotiations Service Sourcing (eSourcing)

Management Science Service Management

Management of Technology Management of Innovation

School of Engineering and Science

Operations Research Service Operations

Industrial & Systems Engineering Service Engineering

Computer Science Service Computing, Web Services, SOA

School of Social Sciences

Economics Institutional EconomicsExperimental Economics

Psychology Labor Psychology(Human Capital Mgmt)

Anthropology Business Anthropology

Organization Theory

Professional Schools

Medical School, Law School, Education School, Hotel & Restaurant School, Media & Communications, etc.

SSME curriculum Design –There are different approaches to design SSME courses

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Example: SSME at North Carolina State University

MBA Concentration in SSME MS Concentration in SSMERequired

Services Management

Consulting

Business Relationship Management

Required

Services Management

Management of Technology

Managing People in the High-Tech

Environment

Process Analysis and Design

Requirements and Electives

in Electrical Engineering or

Computer Science Masters ProgramsElective options

Market Analytics

Marketing Strategy

Supplier Relations

Choose one of the following

Market Analytics

Marketing Research

Marketing Strategy

Project Management

Supplier Relations

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Services Innovation

The Service Industry is transforming- More IT enabled service

24 hour online healthcare service (U.S. and India’s doctors) Distance education E-banking Mobile payment

- Cross-industry integration Transportation intelligent card Integrated financial service

Provides better service quality Provides effects beyond expectation Provides solutions for difficult problems Provides new types of services or new paradigms of services

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1. Ri Sheng Chang Exchange Bank(日昇昌票號 )From Fabrics to Exchange Banking

Source: http://www.pingyaotrip.com/pyenglish/index.asp

(High Risk!!)

Fabrics Shop A

Fabrics Shop B

Goods flowLocation A Location B

Physical money flow

Bank A Bank B

Withdraw/Deposit Money

Withdraw/Deposit Money

Virtual Money flow

Exchange Shop(around 1823)

A Real Story from historic China (Qing Dynasty)

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Identify the problem/opportunity

(High risk in physical money flow)

Build a possible/pioneer solution

(Fineness grades)

Predict results from early work if deployed

with a larger scale

(First tested among friends & relatives)

Large-scale deployment

(Branches over almost all the trading

cities)

The same clerk for all the exchange note writing in each shop

Watermark paper

1. Ri Sheng Chang Exchange Bank Service Oriented Innovation

Seal to prevent tampering : Ri Sheng Chang Ji

Very complicated micro engraving containing secret key to prevent forgery

Dealer’s

endorsement

Secret Key Twelve months: 謹防假票冒取，勿忘細視書章 Thirty Days: 堪笑世情薄，天道最公平，昧必圖自利，陰謀害他人，善惡終有報，到頭必分明 1—10: 趙氏連城璧，由來天下傳 10 thousand, Thousand, Hundred, Ten ( 兩 : a unit of weight (50 grams)): 國寶流通章善璧流 12 月 21 日 , 500 兩

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2. IBM –IBM has transformed from manufacturer into service provider

55%

25%

20%

SYSTEM AND FINANCING

SOFTWARE

SERVICES

2007 年 IBM營收比重

27%56%

17%

SYSTEM AND FINANCING SOFTWARE

SERVICES

1993 年IBM營收比重

34

IT Maintenance ServicesIT Maintenance Services IT Server Room IT Server Room OutsourcingOutsourcing

R&D Services R&D Services (FOAK, ODIS)(FOAK, ODIS)

Application MaintenanceApplication MaintenanceServiceService

Business ConsultingBusiness ConsultingServices (GBS)Services (GBS)

Business TransformationBusiness Transformation Outsourcing ServicesOutsourcing Services

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Standard

Solutions

Repeatable engagements

Consulting and systems integration

2. IBM –R&D services is setup to align R&D to market demand

Vision and invention

Science and basic research

Supports product development for IBM

brands or OEMs

Global Technology Outlook (GTO)

"Bleeding edge"

First-of-a-Kind (FOAK) Projects -

building new prototype solutions

Leading-edge innovation

Application of mathematics, science

and fresh thinking

Solving complex or difficult problems

Application of invention to produce innovative solutions for clients

On the horizon2 to 10 years to practical application

Tomorrow's technology today Business as usual

ODIS

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IGSM

2. IBM –Methodology helps to reduce delivery cycle and improve quality

再運用

Solution/Offering Engagement Models

WP

WP WP

WP

WP WP

WP

WP

WP

WP

WP

WP

WP WP

WP

WP WP

WP

WP

WP

WP

WP

WP

WP WP

WP

WP WP

WP

WP

WP

WP

WP

WP

WP WP

WP

WP WP

WP

WP

WP

WP

WP

WP

WP WP

WP

WP WP

WP

WP

WP

WP

WP

WP

WP WP

WP

WP WP

WP

WP

WP

WP

WP

Existing Engagement Models / Work products

Business & Organization Application & Architecture Infrastructure/IT Mgmt Strat

Outsourcing/Operations Engagement

WP WP WP WP

WP

WP WP

WP

WP

WP

WP WP

WP

WP WP

WP

WP

WP

WP WP

WP WP

WP WP

WP WP

WP

WP

WP WP

WP

WP

WP

WP

WP

Common Method Repository

Customize

Improve & Build

Intellectual Capital

Optimization

Reuse

Harvesting

Hardening

Engagement Specific Instance (Project

Teamroom)

Project Schedulers

Engagement Support Environment (ESE)

37



除了平時定期管控專案進度外, IBM 會依據主要影響專案成功的七項指標檢視目前專案進度狀況. 以下是專案進度報告之範例:

Manage integrated

project plan

Integrated ProjectPlan Status Report

• 專案關係人的承諾 • 商業利益實現 • 工作進度時程的掌握• 專案團隊執行成效• 專案範圍實現與管理• 專案風險的控制• 組織效益的實現

紅燈 : 緊急狀況 , 必須立刻採取緊急改善對應措施黃燈 : 警示 , 必須進行改善行動綠燈 : 正常狀況 , 專案依計畫進行

專案進度報告 (xx年 XX月

Actions

Scope

Team

Ris

ksWork and

ScheduleBusiness

Benefits

Sta

keho

lder

sDeli

very

Organ

izatio

nBe

nefits

IBM使用 Notes系統執行專案進度報告

2. IBM –7 Key Report is used to track project status

38



Agenda





39



For Service Vendors –1. Focus on specific sub-sectors

編號業別 2006年（現況） 2009年（量目標）1 流通 1.批發零售產值： 2.2兆元

2.批發零售就業人數： 176萬人1.批發零售產值： 2.6兆元2.批發零售就業人數： 183萬人

2 金融 1.產值： 1.2兆元2.就業人數： 40.6萬人

1.產值： 1.5兆元2.就業人數： 42萬人

3 醫療 1. 產值： 6,962.1 億元2. 受雇人員： 21.4 萬人 1. 產值： 7,724 億元

2. 受雇人員： 24.2 萬人

4 觀光觀光總收入： 3,800 億元旅客人數：境外市場： 352 萬人次國民旅遊市場： 0.53 億旅次 #

觀光總收入： 4,483 億元旅客人數：境外市場： 520 萬人次 ( 含第 1 類大陸觀光客 ) 國民旅遊市場： 1.2 億旅次

5 電信總產值 3,770 億元 *1. 行動 2,202 億元2.Internet 及加值 494 億元3. 電路出租 268 億元4. 國際 258 億元

總產值 4,300 億元1. 行動 2,607 億元2.Internet 及加值 717 億元3. 電路出租 307 億元4. 國際 260 億元

資訊1. 營業額： 2,386 億元2.CMMI 認證家數累計 50 家，全球排名

第 93. 出口： 325 億元

1. 營業額： 3,180 億元2.CMMI 認證家數累計 85 家，全球排名第 53. 出口： 640 億元

40



服務業科技化以新科技應用到服務業，如金融、電信、物流、觀光休閒等，提供創新服務。案例推動 RFID應用及擴散，建立農產品、食品流通履歷、健康醫療照護系統以及航空貨運物流及保安先導應用。

For Service Vendors –2. Leverage existing resources

完備服務業品質認證制度，以提升服務業經營能力及服務品質，政府推動方向如下：－協同各相關部會加強落實現有服務業品質認證制度，如資訊軟體CMMI 認證、旅館等級評鑑等；－建立或導入新的認證制度（如國際認證制度），以提升服務業經營品質。其中，對認證經濟效益認知程度較低的產業，例如物業管理等，將協調相關部會加強宣導；對於目前較欠缺服務整體評鑑之產業，例如觀光及運動休閒服務業與環保服務業，將協助相關部會導入或建立服務品質認證制度。

服務業品質認證

41



For Manufacturers --Expand into any of five different services business models

Product Centric

Professional Services

Financials & Metrics

• After sales support• Warranty services• Maintenance

Offerings

• Problem solving expertise

• Functional or technology specializations

Outsourcing/ Alliances

• Lower salary and/or infrastructure cost

• Increased flexibility• Reduced

headcount

Service Business Models

ServiceValue

Proposition

• Bundled with products

• Yearly fixed price or variable contracts

• Fixed fee contracts• Time and materials

contracts

• Multi-year, fixed contracts

Operating Model

• Integrated product/ services delivery

• No separate services organization

• Traditional leveraged engagement model

• Separate services organization

• New channels

• Headcount transfer of client

• Technology transfer or updating

• Separate organization

• New channels

Information Services

• Information based services for:

– Maintenance– Inventory Mgmt– Supply Chain– Trading

• Tiered, value-based pricing

• License fees

• Remote monitoring devices

• Networked products

Financial Services

• Financing for product purchases

• May include other financial services such as insurance, checking, loans, etc.

• Recurring, fee and asset-based revenue

• Tied to interest rates

• Separate financial services organization

• May pursue customers beyond product segment

• Data integration needed

1 2 3 2

122 2

42



Leading to the next economic miracle

1950 1960 1970 1980 1990 2000

5000

10000

15000

GNP(US Dollar)Taiwan Economy Ages

Manufacturing

Post-manufacturing

Knowledge economy

1973

1980

1986

43



Thank You!

謝謝關注

44



Where do we go from here?

What are Taiwan’s strengths and weaknesses?- Past success can be the barrier to transform

Are we moving to the two sides of the U curve fast enough? Do we have the right set of people having the services orientation?

- Do we still hear the 宰客 stories? Do we have the right set of leaders who have the deep understanding

to drive services economy? How does the Globalization trend affect Taiwan? What role should Taiwan play in global services economy?

- What is the new export?- Information and knowledge? Natural resources and culture?- Note: Taiwan is not unique

Open is the key How can we accelerate the notion of SSME to accelerate the

transformation?

45



Trend & Need - Labor force migration to services The world economy is experiencing the largest labor force migration in

history. - Driven by an environment that includes global communications, business growth and

technology innovation, services now accounts for 70 percent of the labor force in the United States and the United Kingdom.

Top Ten Labor Forces by Size (Year 2004)(WW 50% Agriculture., 10% Goods, 40% Services)

Source: U.S. Department of Labor, Bureau of Labor Statistics

% US Labor Force by Sector

(A) Agriculture:Value from harvesting nature

(S) Services:Value from enhancing, protecting, distributing, understanding, and customizing things(G) Goods:

Value from making products

46



Definition of "Services"

Note: Customer as to Service Provider is like “Yin” to “Yang”, they interact, grow with each other…

Customer

Service Provider

47



Services: Client pays provider for a performance or promise of a performance. The client and provider share responsibility for coproduction of value within the boundaries of the relationship (aspire to “win-win”).

Performance: Activities that transform the state of something.

Coproduction relationship: A relationship in which goals/work responsibilities and risks/rewards are shared, with an explicit or tacit contract defining initial/intermediate/ongoing/final states/results/effort/quality levels. External factors that might impact the relationship may or may not be enumerated. Third party partners may be involved in establishing, evaluating, and working front stage or back stage in the coproduction relationship.

Front stage activities: Sometimes called the “moments of truth” in which client and provider directly interact. Pure services are mostly front stage. Variance in the front stage is largely due to the client’s requests and actions, and provides opportunities to provide higher value services. Eliminating front stage variance can lead to standards and higher quality, but may also destroy a lot of high end value creation opportunities.

Back stage activities: Both provider-side activities that do not directly involve the client, and client-side activities that do not directly involve the provider. Pure products are mostly back stage for providers (manufacturer). Six sigma is an effective method for eliminating unnecessary variance in the backstage, which leads from custom processes to standard processes.

Source: IBM ASR SSME Chart

48



Product company

R&D Production Sales HR

Equipment Maintenance

Payroll Processing

ApplicationDevelopment

49



Business Componentization

Example: Auto Industry

Business Administration

Corporate/LOB Strategy & Planning

Organization & Process Policies

Alliance Strategies

Human CapitalManagement

Legal & RegulatoryBusiness

PerformanceIntellectual

Property

Building/Facilities

& Equipment

IT Systems& Operations

Knowledge & Learning

Financial Management

Capital Appropriation

Planning

FinancialPlanning &Forecasting

Risk Manage-ment & Internal

Audit

Treasury

TaxManagement

Accounting & General Ledger

CostManagement

Product/ProcessPortfolio

Strategy &Planning

Research &Development

Design Rules& Policies

ProgramManagementConfigurationManagement

DesignValidation

ChangeManagement

MechanicalDesign

In-vehicleSystem Design

Process Design

Tool Design& Build

SupplyChain

Supply ChainStrategy & Planning

DemandPlanning

SupplierRelationship

Planning

Supply ChainPerformanceMonitoring

SupplierManagement

LogisticsManagement

InventoryManagement

TransportationManagement

Procurement

Marketing& SalesCustomer

RelationshipStrategySales &

PromotionPlanning

BrandManagement

RelationshipMonitoring

Demand Forecast

& Analysis

DealerManagement

CustomerRelationshipManagement

OrderManagement

LeaseManagement

Direct

Control

Execute

Production

ProductionStrategy

ProductionRules & Policies

Master ProductionPlanning

ProductionScheduling

QualityManagement

PlantOperations

MaintenanceManagement

ProductionMonitoring

Service &Aftersales

Post Vehicle Sale

Strategy

WarrantyManagement

QualityManagement

End-of-LifeVehicle

VehicleService

PartsManagement

Strategic Differentiation

Competitive ParityBasic

Strategic

52



Flexibility on a Global Scale The case of Hutchison Port Holdings (HPH)

Strength: Hong Kong based world leading port operator

- Solid experience in HK port operation

Vision: Global expansion

Replicate the efficient port operation experience through acquisition

- Methodology - Best practice- Knowledge/Skill- Talent- IT system- …

Success- No. 1 port operator with 251 piers in 43 ports

covering 21 countries

Best practice capitalization for global expansion to obtain scale of economy

Hong Kong

South Korea

Indonesia

Mainland China

ThailandMalaysia

MyanmarPakistan

OmanSaudi Arabia

Tanzania

Egypt

PolandGermanyThe Netherlands

Belgium

UK

Argentina

Bahamas

PanamaMexico

Global ExpansionGlobal Expansion

Source: Drewy Shipping Consultants Ltd. 2003

53



Cruise Ships

Was something only the very rich can enjoy.

Now cost of one-week Mexican Riviera cruise can be as low as $620/person (including all food and tips)

Integration of- Ship Building Industry- Ports and docks- Retail- Entertainment- Food and Supplies- Local excursions- Airline industries- Art

54



“Shan Xi Bank” – a wide financial networkCreate a new industry

A New Industry: Exchange Banking ( 票號 )- 30+ banks (about 400 branches) in 70+ domestic

cities- Overseas: Japan, Korea, India, Russia, Singapore,

Mongolia, etc. Promote the growth of trading in

- tea- salt- silk- textile- wine- tobacco- ship building- Chinese herb and medicine- …

In return, further grow the exchange banking- e.g. just in Ulaanbaatar, Mongolia, more than 20

shops and 1000+ Shanxi merchants at that time.

Number of Exchange Bank

0

510

15

20

2530

35

1820 1830 1840 1850 1860 1870 1880 1890 1900

Source: http://txjs.c86.cn/ljjs/5/

55



Intersection of Services Management and Services Engineering

Service Management

ServiceEngineering

Establish Industry Services standards and associated KPI

Services Optimization

56



Intersection of Services Management and Services Engineering