1. Constructing Effective Value Propositions for Stakeholders in Service System Networks Dr. Stephen K. Kwan Professor, Service Science Management Information Systems College of Business Administration San José State University, CA, USA http://www.sjsu.edu/ssme Contact: stephen.kwan@sjsu.edu MercèMüller-Gorchs Karlsruhe Service Research Institute Karlsruhe Institute of Technology Karlsruhe, Germany Presented at the Service System Modeling Workshop Manchester Business School, September 20th, 2011, Manchester, UK. Download these slides at: http://www.slideshare.net/StephenKwan

2. Service System Worldview1 Service Provider Customer Service Experience 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. Kwan & Müller-Gorchs 2011 2

3. Service System Worldview Employees & Stockholders Community Service Provider Customer Service Experience Partners Competition Service System Society Kwan & Müller-Gorchs 2011 3

4. Value Co-Creation Through Value Propositions Value Employees & Stockholders Community Service Provider Customer Value Value Value Service Experience Partners Competition Service System Governance Society Kwan & Müller-Gorchs 2011 4

5. Stages in Customer Empowerment in Value Co-Creation Stage 1: Value Chain Value Proposition Customer Service Provider Focal Relationship Service Experience 5 Kwan, S. K. & Yuan, S. T. ”Customer-Driven Value Co-Creation in Service Networks”, to appear 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 & Müller-Gorchs 2011 5

6. Customer Driven Service Value Network Value Proposition Service Provider Customer Focal Relationship Value Proposition Value Proposition Provider Partner Network Customer’s Social Network Service Experience Kwan & Müller-Gorchs 2011 6

7. 7 Kwan & Müller-Gorchs 2011 Value Systems and Value Dimensions Provider’s Value System            Opportunities for Value Co-Creation     Customer’s Value System ★ ★ ★ ★ ★ ★ ★ ★ His Customer’s Value System

8. Variety of Value Propositions Maslow’s Hierarchy Of Needs Value Dimensions Service Provider Society Community Employees Stockholders Partners Customers Intrinsic Hedonic Spiritual Corporal Emotional Intellectual Social Societal Environmental Political Stakeholders Economic A point in this 3-D space is a Potential Value Proposition 1 2 4 3 Stages of Customer Empowerment Kwan & Müller-Gorchs 2011 8

9. Kwan & Müller-Gorchs 2011 Maslow’s Hierarchy of Needs Disposable Income & Desire for Services Needs vs. Wants 9

10. 10 Kwan & Müller-Gorchs 2011 Foundational Premises of Service Dominant Logic Microeconomic Considerations

11. 11 Kwan & Müller-Gorchs 2011 Constructing a Value Proposition The Customer have a lot of VP’s to choose from Quality Probability of Success Costs Benefits Service Experience

12. 12 Kwan & Müller-Gorchs 2011 A Customer’s Choice of Service A Service Provider’s Promised Value: Based on the Customer’s own expectations A Customer’ Choice Function:

13. 13 Kwan & Müller-Gorchs 2011 A Customer’s Realization of Value A Customer’s Realized Value: Co-Production Service Process Co-Creation of Value Service Provider and His Partners’ Contributions Customer’s Contributions

14. 14 Kwan & Müller-Gorchs 2011 Constructing Value Propositions: Customers and Service Providers Connecting Components of a Value Proposition to a Service Provider’s KPI’s through Feedback

15. 15 Kwan 2011 Value Proposition Model (VPM) Starting with the Service System Service Provider Customer Service Experience

16. 16 Kwan 2011 VPM – a common example Service Provider Customer Value Proposition Customer Service Experience Service Experience Customer Service Experience

17. 17 Kwan 2011 VPM – individuals and community Service Provider Customer Value Proposition Community/ Social Network Customer A Shared Experience Service Experience Service Experience Customer Service Experience

18. 18 Kwan 2011 VPM – individuals and Facebook community Service Provider Customer Value Proposition Community/ Social Network Customer A Shared Experience Service Experience Service Experience Customer Service Experience

19. 19 Kwan 2011 VPM – service provider partners Service Provider Customer Value Proposition Customer Service Experience Service Experience Service Experience Service Experience Vendor Value Proposition

20. 20 Kwan 2011 VPM – partner’s acquistion of customer Service Provider Customer Customer Service Experience Service Experience Service Experience Service Experience Vendor Service Experience

21. 21 Kwan 2011 Example 1 of 4 Service Provider Customer Customer Service Experience Service Experience Service Experience Service Experience Vendor

22. 22 Kwan 2011 Example 2 of 4 Service Provider Customer Customer Service Experience Service Experience Service Experience Service Experience Service Experience Vendor Vendor Service Experience

23. 23 Kwan 2011 Example 3 of 4 Service Provider Customer Customer Service Experience Service Experience Service Experience Service Experience Service Experience Vendor Vendor Service Experience

24. 24 Kwan 2011 Example 4 of 4 Service Provider Customer Customer Service Experience Service Experience Service Experience Service Experience Vendor Service Experience

25. 25 Kwan & Müller-Gorchs 2011 Example: E-Commerce Customer Amazon.com Bookcloseout_us theBookGrinder nengland4

26. VP0 SE Se0 Amazon.com SP0 S0 Se1 Bookcloseout_us SP1 SP4 S1 S4 Customer Se2 theBookGrinder SP2 S2 S5 Se3 negland4 SP3 S3 S6 26 Kwan & Müller-Gorchs 2011

27. 27 Kwan & Müller-Gorchs 2011 Example: Social Service London Borough of Sutton Service Provider Customer Safer Sutton Service Partnership LBS Community VP0 Quality of Life Improvement Service Service Experience

28. 28 Kwan & Müller-Gorchs 2011 Example: Social Service London Borough of Sutton SSPS – Coordinator Role LBS Council MPS Fairer Service Components Quality of Life Improvement Service Customer VP0 Partners LBS Community: Residents & Businesses VP1 Greener Service Components Sutton Police Partnership VP2 Safer Transport Team Safer Service Components: Prevent Assist Reduce Improve Partnership VP3 Safer Park Teams Partnership VP4 Safer Neighborhood Teams Partnership VP5 Sutton Neighborhood Watch Association Partnership

30. More on connecting VPM with Service Provider’s KPI

31. More on Quality Dimensions and Measurement

32. Integrate VPM with Service System Design

33. Integrate VPM with Service System PrototypingFramework Service System & Networks Foresight and Innovation Method Value Propositions & Service Patterns © Cockayne and Carleton 29 Kwan & Müller-Gorchs 2011

34. Constructing Effective Value Propositions for Stakeholders in Service System Networks Dr. Stephen K. Kwan Professor, Service Science Management Information Systems College of Business Administration San José State University, CA, USA http://www.sjsu.edu/ssme Contact: stephen.kwan@sjsu.edu MercèMüller-Gorchs Karlsruhe Service Research Institute Karlsruhe Institute of Technology Karlsruhe, Germany End Presented at the Service System Modeling Workshop Manchester Business School, September 20th, 2011, Manchester, UK. Download these slides at: http://www.slideshare.net/StephenKwan

35. Kwan & Müller-Gorchs 2011 31

36. 32 Stages in Customer Empowerment in Value Co-Creation Stage 1: Value Chain Value Proposition Customer Service Provider Focal Relationship Service Experience 5 Kwan, S. K. & Yuan, S. T. ”Customer-Driven Value Co-Creation in Service Networks”, to appear 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 2011

37. 33 Stage 2: Traditional Service Value Network Value Proposition Customer Service Provider Focal Relationship Provider Partner Network Service Experience Value Proposition cf. ICT-enabled service networks, mobile applications, etc. Kwan 2011

38. Stage 3 – Improved Value Chain Value Proposition Customer Service Provider Focal Relationship Value Proposition Customer’s Social Network Service Experience Kwan 2011

39. Stage 4: Customer Driven Service Value Network Value Proposition Service Provider Customer Focal Relationship Value Proposition Value Proposition Provider Partner Network Customer’s Social Network Service Experience cf. “Resource Integrators” in Service Dominant Logic literature Kwan 2011

40. 36 Kwan & Müller-Gorchs 2011 Illustration of Service Co-production Customer Service Components Co-produced by Customer Service Experience Made up of Observable or Evidential Components S1 = S2 = Service Components Co-produced by Service Provider Service Provider

41. 37 Kwan & Müller-Gorchs 2011 Illustration of Value Co-creation Customer Value / c1 V = Σ + / c2 + Value Service Provider

42. 38 Kwan & Müller-Gorchs 2011 Service Pattern 1 – Single Service Episode Customer Instantiation of the Service Experience at a particular point In time VP0 SE0 Focal Relationship Time SP0 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

43. 39 Kwan & Müller-Gorchs 2011 Pattern 2 – Continuous Service over a Period of Time Customer VP0 SE0 Time SP0

44. 40 Kwan & Müller-Gorchs 2011 Service Pattern 3 – Service in Parallel Customer VP0 Se0 Se1 Se2 Time SP2 SP1 SP0 Instantiation of the Service Experience at a particular point In time

45. 41 Kwan & Müller-Gorchs 2011 Pattern 3 – Continuous Service with Occasional Service Episodes Customer VP0 Se2 Se1 Se0 Time SP0

46. 42 Kwan & Müller-Gorchs 2011 Pattern 4 – Service provided by more than one Partner Service Providers Customer VP0 SE2 SE1 SE3 SE0 Time SP3 SP1 SP2 SP0 VP1 SE4 VP3 SE6 VP2 SE5