Service Science and Smarter Planet discussion

1. Service Science: Progress & Directions Working Together to Build a Smarter Planet Dr. James (“Jim”) C. Spohrer [email_address] Innovation Champion and Director, IBM University Programs WW Cisco Talk Santa Clara, CA, US, April 18th, 2011

4. IBM Centennial – 100 Years of Innovation! (Smarter Tools) IBM Centennial Film: 100 People & 100 Years http: // www.youtube.com/watch?v=39jtNUGgmd4

5. Watson and Jeopardy! (Even Smarter Tools)

6. 42% 64 33 3 1.4 Germany 37% 26 11 63 2.1 Bangladesh 19% 20 10 70 1.6 Nigeria 45% 67 28 5 2.2 Japan 64% 69 21 10 2.4 Russia 61% 66 14 20 3.0 Brazil 34% 39 16 45 3.5 Indonesia 23% 76 23 1 5.1 U.S. 35% 23 17 60 14.4 India 142% 29 22 49 25.7 China 40yr Service Growth S % G % A % Labor % WW Nation World’s Large Labor Forces A = Agriculture, G = Goods, S = Service 2010 2010 CIA Handbook, International Labor Organization Note: 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 IT augmented workers in smarter systems that create benefits for customers and sustainably improve quality of life. Service Growth: The World

7. Service Growth: IBM B2B Service Projects: IT (data center, call centers) & business process outsourcing/reengineering, systems integration, organizational change, etc. What do IBM Service Professionals Do? Run things on behalf of customers, help Transform customers to adopt best practices, and Innovate with customers. Revenue Growth by Segment

8. Stakeholder Priorities 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 Science To discover the underlying principles of complex service systems Systematically create, scale and improve systems Foundations laid by existing disciplines Progress in academic studies and practical tools Gaps in knowledge and skills 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 Skills & Mindset Knowledge & Tools Employment & Collaboration Policies & Investment Develop and improve service innovation roadmaps, leading to a doubling of investment in service education and research by 2015 Encourage an interdisciplinary approach The white paper offers a starting point to - Priorities: Succeeding through Service Innovation - A Framework for Progress ( http://www.ifm.eng.cam.ac.uk/ssme/ ) Source: Workshop and Global Survey of Service Research Leaders (IfM & IBM 2008) 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

9. UK Royal Society Report (2009) http://royalsociety.org/Hidden-wealth-The-contribution-of-science-to-service-sector-innovation/

10. Priorities: Research Framework for the Science of Service (2010) Source: Global Survey of Service Research Leaders (Ostrom et al 2010) Pervasive Force: Leveraging Technology to Advance Service Strategy Priorities Execution Priorities Fostering Service Infusion and Growth Improving Well-Being through Transformative Service Creating and Maintaining a Service Culture Stimulating Service Innovation Enhancing Service Design Optimizing Service Networks and Value Chains Effectively Branding and Selling Services Enhancing the Service Experience through Cocreation Measuring and Optimizing the Value of Service Development Priorities

11. Factory as a Product-Service System http://www.youtube.com/watch?v=nd5WGLWNllA

12. Rethinking “Product-Service Systems” F B Service System Entity Product-Service-System B F SSE B F SSE B F SSE B F SSE B F SSE B F SSE B F SSE B F SSE B F SSE B F SSE B F F F B B Service Business Product Business Front-Stage Marketing/Customer Focus Back-Stage Operations/Provider Focus Based on Levitt, T (1972) Production-line approach to service. HBR. e.g., IBM e.g., Citibank “ Everybody is in service... Something is wrong… The industrial world has changed faster than our taxonomies.”.

13. Product-Service Systems as Learning Systems L Linda Sanford, IBM “Let Go To Grow” March, J.G. (1991) Exploration and exploitation in organizational learning. Organizational Science. 2(1).71-87. Learning Systems (“Choice & Change”) Exploitation (James March) Exploration (James March) Run/Practice-Reduce (IBM) Transform/Follow (IBM) Innovate/Lead (IBM) Operations Costs Maintenance Costs Incidence Planning & Response Costs (Insure) Incremental Radical Super-Radical Internal External Interactions “ To be the best, learn from the rest” “ Double monetize, internal win and ‘sell’ to external” “ Try to operate inside the comfort zone”

14. What is Smarter Planet? Harmonized smarter product-service systems. INSTRUMENTED We now have the ability to measure, sense and see the exact condition of practically everything. INTERCONNECTED People, systems and objects can communicate and interact with each other in entirely new ways. INTELLIGENT We can respond to changes quickly and accurately, and get better results by predicting and optimizing for future events. IT NETWORKS WORKFORCE PRODUCTS SUPPLY CHAIN COMMUNICATIONS TRANSPORTATION BUILDINGS

15. Our planet is a complex, dynamic, highly interconnected $54 Trillion system-of-systems (OECD-based analysis) Communication $ 3.96 Tn Transportation $ 6.95 Tn Leisure / Recreation / Clothing $ 7.80 Tn Healthcare $ 4.27 Tn Food $ 4.89 Tn Infrastructure $ 12.54 Tn Govt. & Safety $ 5.21 Tn Finance $ 4.58 Tn Electricity $ 2.94 Tn Education $ 1.36 Tn Water $ 0.13 Tn Global system-of-systems $54 Trillion (100% of WW 2008 GDP) Same Industry Business Support IT Systems Energy Resources Machinery Materials Trade Legend for system inputs Note: 1. Size of bubbles represents systems’ economic values 2. Arrows represent the strength of systems’ interaction Source: IBV analysis based on OECD This chart shows ‘systems‘ (not ‘industries‘)  Our planet is a complex system-of-systems 1 Tn

16. Economists estimate, that all systems carry inefficiencies of up to $15 Tn, of which $4 Tn could be eliminated How to read the chart: For example, the Healthcare system‘s value is $4,270B. It carries an estimated inefficiency of 42%. From that level of 42% inefficiency, economists estimate that ~34% can be eliminated (= 34% x 42%).  We now have the capabilities to manage a system-of-systems planet Source: IBM economists survey 2009; n= 480 Global economic value of $4 Trillion 7% of WW 2008 GDP Improvement potential $15 Trillion 28% of WW 2008 GDP Inefficiencies $54 Trillion 100% of WW 2008 GDP System-of-systems System inefficiency as % of total economic value Improvement potential as % of system inefficiency Education 1,360 Building & Transport Infrastructure 12,540 Healthcare 4,270 Government & Safety 5,210 Electricity 2,940 Financial 4,580 Food & Water 4,890 Transportation (Goods & Passenger) 6,950 Leisure / Recreation / Clothing 7,800 Communication 3,960 Analysis of inefficiencies in the planet‘s system-of-systems Note: Size of the bubble indicate absolute value of the system in USD Billions 42% 34% This chart shows ‘systems‘ (not ‘industries‘)

29. Universities & Regional Innovation Ecosystems (Data) % GDP and % Top-500-Universities Strong Correlation (2009 Data): National GDP and University Rankings http://www.upload-it.fr/files/1513639149/graph.html

31. Example: San Jose, California (USA)

32. Regional Innovation Ecosystems: NY State Top Employers (Healthy, Frugal, Wealthy, Innovative, Wealthy, Wise…)

33. Edu-Impact.Com: Growing Importance of Universities with Large, Growing Endowments “ When we combined the impact of Harvard’s direct spending on payroll, purchasing and construction – the indirect impact of University spending – and the direct and indirect impact of off-campus spending by Harvard students – we can estimate that Harvard directly and indirectly accounted for nearly $4.8 billion in economic activity in the Boston area in fiscal year 2008, and more than 44,000 jobs.”

35. Urban-Age.Net Currently, the world’s top 30 cities generate 80% of the world’s wealth. The Urban Age For the first time in history more than 50% the earth’s population live in cities - by 2050 it will be 75% The Endless City

36. Population growth per hour in major cities

39. Luxury Hotels as Holistic Service Systems: All the systems http://www.youtube.com/watch?v=Hm7MeZlS5fo

40. University & Regional Innovation Ecosystems (Why?) School of Public Policy School of Engineering School of Business Mngmnt School of Medicine School of Education School of Architecture School of Urban Planning School of Hospitality School of Information School of Science & Arts University: The Heart of Regional Innovation Ecosystems Incubator & Start-Ups $ Cities & Public Safety Government Service to Individuals & Institutions Education Transportation Energy ICT (Computing & Communications) Retail & Hospitality Food & Products Health Building Finance University: The Heart of Regional Innovation Ecosystems

41. Accelerating Regional Innovation: Universities as “Living Labs” for Host Cities UNIVERSITIES: Research Centers & Real-World Systems CITIES/METRO REGIONS: Universities Key to Long-Term Economic Development

46. What is a Service System? What is Service Science? …customers just name <your favorite provider> …researchers just name <your favorite discipline> Economics & Law Design/ Cognitive Science Systems Engineering Operations Computer Science/ Artificial Intelligence Marketing “ a service system is a human-made system to improve customer-provider interactions, or value-cocreation” “ service science is the interdisciplinary study of service systems & value-cocreation”

47. How to visualize service science? The Systems-Disciplines Matrix disciplines systems Systems that focus on flows of things Systems that govern Systems that support people’s activities transportation & supply chain water & waste food & products energy & electricity building & construction healthcare & family retail & hospitality banking & finance ICT & cloud education &work city secure state scale nation laws 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., public policy e.g., game theory and strategy e.g., psychology e.g., industrial eng. e.g., computer sci e.g., knowledge mgmt e.g., stats & design e.g., knowledge worker e.g., consultant e.g., entrepreneur stakeholders Customer Provider Authority Competitors resources People Technology Information Organizations change History (Data Analytics) Future (Roadmap) value Run Transform (Copy) Innovate (Invent) Starting Point 1: The Stakeholders (As-Is) Starting Point 2: Their Resources (As-Is) Change Potential: Thinking (Has-Been & Might-Become) Value Realization: Doing (To-Be)

48. What is the skills goal? T-Shaped professionals, ready for T-eamwork! SSME+D = Service Science, Management, Engineering + Design Many disciplines (understanding & communications) Many systems (understanding & communications) Deep in one discipline (analytic thinking & problem solving) Deep in one system (analytic thinking & problem solving) Many team-oriented service projects completed (resume: outcomes, accomplishments & awards)

49. Jobs: Expert Thinking & Complex Communications 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 (deep) Complex Communication (broad) Routine Manual Non-routine Manual Routine Cognitive Increasing usage of job descriptive terms

51. Product-Service-Solution Systems as Learning Systems L Linda Sanford, IBM “Let Go To Grow” March, J.G. (1991) Exploration and exploitation in organizational learning. Organizational Science. 2(1).71-87. Learning Systems (“Viability = Choices”) Exploitation (James March) Exploration (James March) Run/Practice-Reduce (IBM) Transform/Follow (IBM) Innovate/Lead (IBM) Operations Costs Maintenance Costs Incidence Planning & Response Costs (Insure) Incremental Radical Super-Radical Internal External Interactions “ To be the best, learn from the rest” “ Double monetize, internal win and ‘sell’ to external” “ Try to operate inside the comfort zone”

53. Smarter = Sustainable Innovation (reduce waste, expand capabilities) Computational System Building Smarter Technologies Requires investment roadmap Service Systems: Stakeholders & Resources 1. People 2. Technology 3. Shared Information 4. Organizations connected by win-win value propositions Building Smarter Universities & Cities Requires investment roadmap

55. How do you create more lasting solutions?

56. Corning: A Day Made of Glass http://www.youtube.com/watch?v=6Cf7IL_eZ38

58. Time ECOLOGY 14B Big Bang (Natural World) 10K Cities (Human-Made World) Sun writing (symbols and scribes) Earth written laws bacteria (uni-cell life) sponges (multi-cell life) money (coins) universities clams (neurons) trilobites (brains) printing press (books) steam engine Where is the “Real Science”? In the interdisciplinary sciences that study the natural and human-made worlds… Unraveling the mystery of evolving hierarchical-complexity in new populations… To discover the world’s structures and mechanisms for computing non-zero-sum Value-CoCreation (VCC) Architectures & Holistic Service Systems (HSS) 200M bees (social division-of-labor) 60 transistor

64. Resources are the building blocks of service systems Formal service systems can contract Informal service systems can promise/commit Trends & Countertrends (Evolve and Balance): Informal <> Formal Social <> Economic Political <> Legal Routine Cognitive Labor <> Computation Routine Physical Labor <> Technology Transportation (Atoms) <> Communication (Bits) Qualitative (Tacit) <> Quantitative (Explicit) First foundational premise of service science Service system entities dynamically configure four types of resources The named resource is Physical or Not-Physical (physicists resolve disputes) The named resource has Rights or No-Rights (judges resolve disputes within their jurisdictions) Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ. . Physical Not-Physical Rights No-Rights 2. Technology 4.. Shared Information 1. People 3. Organizations

65. Value propositions are the building blocks of service system networks Second foundational premise of service science Service system entities calculate value from multiple stakeholder perspectives A value propositions can be viewed as a request from one service system to another to run an algorithm (the value proposition) from the perspectives of multiple stakeholders according to culturally determined value principles. The four primary stakeholder perspectives are: customer, provider, authority, and competitor Value propositions coordinate & motivate resource access Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ. . Model of competitor: Does it put us ahead? Can we stay ahead? Does it differentiate us from the competition? Will we? (invest to make it so) Strategic Sustainable Innovation (Market share) 4.Competitor (Substitute) Model of authority: Is it legal? Does it compromise our integrity in any way? Does it create a moral hazard? May we? (offer and deliver it) Regulated Compliance (Taxes and Fines) 3.Authority Model of self: Does it play to our strengths? Can we deliver it profitably to customers? Can we continue to improve? Can we? (deliver it) Cost Plus Productivity (Profit) 2.Provider Model of customer: Do customers want it? Is there a market? How large? Growth rate? Should we? (offer it) Value Based Quality (Revenue) 1.Customer Value Proposition Reasoning Basic Questions Pricing Decision Measure Impacted Stakeholder Perspective (the players)

67. Premises of service science: What service systems do Service system entities dynamically configure (transform) four types of resources Service system entities calculate value from multiple stakeholder perspectives Service system entities reconfigure access rights to resources by mutually agreed to value propositions Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ. . S A P C Physical Not-Physical Rights No-Rights 2. Technology 4.. Shared Information 1. People 3. Organizations Model of competitor: Does it put us ahead? Will we? Strategic Sustainable Innovation 4.Competitor Model of authority: Is it legal? May we? Regulated Compliance 3.Authority Model of self: Does it play to our strengths? Can we? Cost Plus Productivity 2.Provider Model of customer: Do customers want it? Should we? Value Based Quality 1.Customer Reasoning Questions Pricing Measure Impacted Stakeholder Perspective

68. Understanding the Human-Made World See Paul Romer’s Charter Cities Video: http://www.ted.com/talks/paul_romer.html Also see: Symbolic Species, Deacon Company of Strangers, Seabright Sciences of the Artificial, Simon

70. Where are the opportunities? Everywhere!

72. Fun: CityOne Game to Learn “CityInvesting” Serious Game to teach problem solving for real issues in key industries, helping companies to learn how to work smarter. Energy, Water, Banking, Retail http://www.ibm.com/cityone