ibm service science & innovation community of practice 3/6/2012
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Dr. Stephen K. KwanProfessor, Service Science
Management Information SystemsCollege of Business AdministrationSan José State University, CA, USA
http://www.sjsu.edu/ssme
Contact: stephen.kwan@sjsu.edu
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
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
Kwan 2012
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ServiceSystem A
ServiceSystem B
ServiceSystem C
ServiceSystem D
ServiceSystem E
ServiceSystem F
Service Interactions
5
A Service Supply Chain
Kwan 2012
ServiceExperience
ServiceProvider
Customer
Society
Community
Competition
Partners
Service System
Employees &Stockholders
Service System Worldview
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ServiceExperience
ServiceProvider
Customer
Society
Community
Competition
Partners
Employees &Stockholders
Service System Worldview
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MarketSegmentation
ServiceConceptRealized
CustomerFlow &ServiceDelivery
OperatingStrategy
FacilityLocation& Design
Capacity& Manpower
Planning,Training
CompetitiveStrategy
SocialNetworking
Kwan 2012
Service ManagementFitzsimmons & Fitzsimmons
ServiceExperience
ServiceProvider
Customer
Society
Community
Competition
Partners
Service System
Employees &Stockholders
Value
Value
Governance
Value
8
Value
Value Co-Creation Through Value Propositions
Kwan 2012
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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.
Kwan 2012
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Stage 2: Traditional Service Value Network
Customer
ServiceExperience
ServiceProvider
Value Proposition
Provider PartnerNetwork
FocalRelationship
Value Proposition
Kwan 2012
cf. ICT-enabled service networks,mobile applications, etc.
Stage 3 – Improved Value Chain
Customer’sSocial
Network
Customer
ServiceExperience
ServiceProvider
Value Proposition
FocalRelationship
Value Proposition
Kwan 2012
Stage 4: Customer Driven Service Value Network
Customer’sSocial
Network
Customer
ServiceExperience
ServiceProvider
Value Proposition
FocalRelationship
Value Proposition
Provider PartnerNetwork
Value Proposition
Kwan 2012
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
Kwan 2012
Intrinsic
Maslow’sHierarchyOf Needs
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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
?
Kwan 2012
Partners
Service Provider
Customers
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ServiceExperience
ServiceProvider
Customer
Value Proposition Model (VPM)Starting with the Service System
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ServiceExperience
ServiceProvider
Customer
ServiceExperience
Customer
ServiceExperience
Customer
Value Proposition
VPM – a common example
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ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Customer
A SharedExperience
Community/Social
Network
Value Proposition
VPM – individuals and community
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ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Customer
A SharedExperience
Community/Social
Network
Value Proposition
VPM – individuals and Facebook community
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ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
Value Proposition
ServiceExperience
Vendor
ValueProposition
ServiceExperience
VPM – service provider partners
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ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Vendor
ServiceExperience
ServiceExperience
VPM – partner’s acquistion of customer
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
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Vendor
ServiceExperience
Example 1 of 4
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ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Vendor
ServiceExperience
ServiceExperience
VendorService
Experience
Example 2 of 4
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ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Vendor
ServiceExperience
ServiceExperience
VendorService
Experience
Example 3 of 4
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Cost of acquiring subscribers:2099 $2.522011 $5.23
Example 3 of 4 (continued)
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ServiceExperience
ServiceProviderCustomer
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
Kwan 2012
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
38Kwan 2012
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
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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
43Kwan 2012
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
© Cockayne and Carleton
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
© Cockayne and Carleton
ProcessChainNetworkDiagram
Dr. Stephen K. KwanProfessor, Service Science
Management Information SystemsCollege of Business AdministrationSan José State University, CA, USA
http://www.sjsu.edu/ssme
Contact: stephen.kwan@sjsu.edu
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
Kwan 2012 47
Example of Value PropositionA Class Syllabus (1)
Kwan 2011 48
Example of Value PropositionA Class Syllabus (2)
One of many MIS Electives
offered in Fall 2011
3 Credit Hours$$
CourseDescription
Course -Learning
Objectives
Kwan 2011 49
Example of Value PropositionA Class Syllabus (3)
Reputation &Accreditation
“Powering Silicon Valley”
Prerequisites &Required Texts
Kwan 2011 50
Example of Value PropositionA Class Syllabus (4)
Required Texts,Rules &Policies
ClassProcedure
Kwan 2012 51
Example of Value PropositionA Class Syllabus (5)
Grading Criteria
Student Evaluations
(Faculty KPI)
Kwan 2011 52
Example of Value PropositionA Class Syllabus (6)
Service Episodes
Service Components
Guest Lecture(Partner)
Kwan 2012 53
Kwan 2011 54
EnvironmentalValue
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