ISSIP Service Innovation Weekly Speaker Series Pres 110_Steven Alter Jan 27 2016

1. Integrated, Operational Perspective on Service and Service Systems
Steven Alter, University of San Francisco, Jan. 2016
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A nagging issue at the core of service science is lack of a single, universal definition
of service that is useful across all service contexts. Table 1 shows a selection of
published service definitions, all of which are useful in some contexts but not in
others. Here is a simple, dictionary-like definition that applies almost everywhere:
A service is an act or group of acts performed to produce or facilitate
outcomes for the benefit of others.
This definition supports different portrayals of service that are especially relevant to
particular service situations. For example, many IT groups like to portray service as
outcomes governed by service level agreements, the hospitality industry focuses
more on interactions and value co-creation, and computer scientists emphasize
totally automated services such as web services. Also notice that the definition of
service implies that almost every economic activity (including the creation or
modification of physical things) can be viewed as a service regardless of whether it is
directed inside a firm or to external customers.
BP1. Many valid portrayals of service from a single definition Why should anyone care about this integrated,
operational perspective?
An integrated, operational perspective on service and service systems should be useful to
anyone who wants to analyze, design, implement, or evaluate services or service systems.
This perspective is also relevant to marketing and competitive analysis because realistic
value propositions need to be implemented through realistic operational systems.
This perspective should help in resolving debates about isolated concepts such as the
definition of service, definition of service system, and nature and importance of service
interactions, co-production of services, value co-creation, and value propositions. Debates
about isolated topics ido not provide an integrated approach for understanding operational
systems that actually produce services. This perspective should also help in visualizing the
areas where SDL, service dominant logic (often cited as the core of service science),
applies most directly and areas where it is not as pertinent.
What does this perspective cover?
This perspective covers any service or service system:
--- Simple or complex
--- Sociotechnical or automated
--- One-time or repetitive
--- For benefit of external customers or for internal customers within the enterprise
--- Involving economic exchange or quite distant from economic exchange
--- Barely interactive with customers or highly interactive with customers
--- Within one organization or crossing multiple organizations (e.g., supply chains)
Examples of such services and service systems: haircuts, gardening services, medical
care, transportation, education, package delivery, consulting, Web services, network
maintenance, architectural design, process outsourcing, bug fixes, customer support,
software customization, traffic control, water supply, and public safety services.
Five Basic Premises (BPs)
Five basic premises are relevant to almost all services and service systems. :
BP1. Many valid portrayals of service from a single definition.. Services are acts or
groups of acts performed to facilitate or produce outcomes for the benefit of others. That
definition supports specific portrayals that are especially relevant to specific situations.
BP2: Visualizing services as product/services. The distinction between product and
service is ineffective for describing or fulfilling customer needs. Most offerings to internal
and external customers often combine characteristics associated with products in everyday
conversation and characteristics associated with services. The concept product/service is
useful for practical analysis, design, implementation, or evaluation of services and service
systems. It leads to positioning a product/service in relation to multiple design dimensions.
BP3: Focusing on responsibilities, visibility, and value capture. Implementing and
operating service systems that produce product/services requires design decisions related
to responsibilities, visibility, and value capture. Relevant decisions include the division of
responsibilities between providers and customers, the visibility or invisibility of specific
information or activities to providers and customers, and the capture of value by providers
and customers across all service interactions and related activities.
BP4: Recognizing operational variability and noncompliance by providers and
customers. A realistic, operational view of services and service systems needs to consider
variability of every aspect of a service system and the possibility of noncompliance with
expectations and/or specifications for activities of both providers and customers.
BP5. Treating service systems as work systems. Non-improvised services are produced
by service systems that are work systems. Work system theory can be used for
understanding and improving services and service systems. A work system metamodel is
useful for understanding various definitions of service along with taken-for-granted concepts
such as service interaction, service modularity, co-production, and value co-creation.
Portrayal Definition
acts for
others
“an act or performance that one party can offer to another that is essentially intangible
and does not result in the ownership of anything.” (Kotler and Keller 2006, p. 402)
acts for
others
“value-creating support to another party’s practices” (Grönroos 2011, p. 285)
acts for
others
the “application of skills and knowledge (operant resources) for the benefit of another
party” (Vargo and Lusch 2008, p. 6)
outcomes “a change in the condition of a person, or a good belonging to some economic entity,
brought about as a result of some other economic entity, with the approval of the first
person or economic entity.” (Hill 1977, p. 318)
outcomes “an essentially intangible set of benefits provided by one party to another.” (Clerc and
Niessink, 2004 p. 104)
outcomes “A means of delivering value to Customers by facilitating Outcomes Customers want to
achieve without the ownership of specific Costs and Risks.” (ITIL 2011, p. 66)
guaranteed
outcome
“Services are guaranteed sets of outcomes and experiences, delivered across particular
places, times, and platforms, by the processing or rendering of customer assets; or the
provisioning of valued resources.” (Iqbal 2014)
interaction “a time-perishable, intangible experience performed for a customer acting in the role of
a co-producer.” (Fitzsimmons and Fitzsimmons 2006, p.4)
response to
request
“intangible activities customized to the individual request of known clients.” (Pine and
Gilmore 1999, p.8)
response to
request
situations in which “the customer provides significant inputs into the production
process.” (Sampson and Froehle 2006, p. 331)
value co-
creation
Foundational premise #6 in the 2008 version of S-D logic says “The customer is always
a co-creator of value.” (Vargo and Lusch 2008)
basis of
exchange
Foundational premises #1 and #2 of S-D logic say “Service is the fundamental basis of
exchange.” and “Indirect exchange masks the fundamental basis of exchange.” (Vargo
and Lusch 2008).
software
entity that
encapsulates
functionality
A service “is generally implemented as a course-grained, discoverable software entity
that exists as a single instance and interacts with applications and other services through
a loosely coupled (often asynchronous), message-based communication model.” (Brown
et al. 2005) “The component that consumes business services offered by another
business component is oblivious to how the provider created the business service.”
(Cherbakov et al. 2005)
software
entity that
encapsulates
functionality
“Services constitute encapsulated and exposed functionality drawing from core artifacts,
e.g., those related to business processes, applications, objects, and resources. ... Whereas
business process activities are said to be orchestrated across collaborating resources,
service capabilities are delivered to consumers by providers. ... They provide
functionality aimed at delivering value to consumers in terms of expected outcomes,
subject to delivery constraints, e.g., availability, pricing, copyright or disclaimers. In
doing so, they alleviate consumers with ownership of resources, costs or risks.” (Oberle
et al. 2013, p. 158)
BP5. Treating service systems as work systems
.
Figure 3: Three Components of Work System Theory
1) Definition of work system: a system in which human participants
and/or machines perform work (processes and activities) using information,
technology, and other resources to produce specific product/services for
specific internal and/or external customers.
2) Work system framework: a static view of a work system as it exists
during a particular time interval when it retains its identity and integrity even
though it may change slightly through small adaptations, workarounds, and
personnel changes. This framework identifies nine elements of even a
basic understanding of a work system
3 Work system lifecycle model: a dynamic view of how work systems
change over time through a combination of planned and unplanned
change. The planned changes occur through projects with initiation,
development, and implementation phases. The unplanned changes occur
through adaptations and workarounds.
Non-improvised services are produced by service systems that can be
viewed as work systems. The concept of work system has been used for
decades by sociotechnical practitioners and researchers. The operational
view of services and service systems is based on work system theory – WST
(Alter, 2013), which contains three components shown on the right:
WST is the basis of the work system method (WSM),a systems analysis
method in which the system of interest is a work system. Different versions of
WSM have been used by many hundreds of MBA and Executive MBA
students in the USA, India, China, and Vietnam. WSM first identifies the work
system that has main problems or opportunities that launched an analysis.
The “as is” work system is summarized based on the work system framework
(on the right). The analysis focuses on measures of performance, key
incidents, structural flaws, responsibilities of providers and customers, value
capture, and other issues. The product of WSM is a proposed "to be" work
system whose performance should be better than the existing work system.
Shown below is version #6 of a work system metamodel that reinterprets the
elements of the work system framework in more detail. The work system
framework is good for thinking about the work system’s scope at the
beginning of an analysis. The metamodel fills in many details that are needed
to specify how the work system will actually operate. That level of detail is
essential for specifying business processes and related software.
Unfortunately the metamodel’s level of detail involves so many boxes and
arrows that it is too complex to show to most business professionals.
Nonetheless, aspects of the metamodel provide an operational view of many
service science concepts. Parts of the metamodel are explained in a small
font on the lower right. Below are implications for key service concepts.
Enterprises and value constellations consist of work systems.
Work systems always contain at least one activity. They may contain one or more business processes if a set of
activities is sufficiently interrelated and sequential to qualify as a process.
Activities use resources to produce one or more product/services from activity that may be used as a resource for
subsequent activities and/or may contribute to a product/service offering. A product/service offering may combine
multiple product/services from activities. Thus, only some of the product/services from activities are included in
product/service offerings that are received or used by customer work systems, and hence by customers.
Product/service offerings may or may not be governed by a service level agreement that is a type of commitment.
Formal service level agreements are essential in some situations, especially for service offerings defined through
extensive negotiations, but are unnecessary in other situations.
Customer work systems create value for customers using their own resources plus product/service offerings
produced by the provider work system.
Resources used by an activity may include human resources (participants), informational resources,
technological resources, and other resources. The metamodel includes specific types within each resource type to
minimize the likelihood of omissions in an analysis.
Activities are performed by actor roles.
Actor roles can be performed by three types of entities, noncustomer participants, customer participants, and
automated agents. In medicine, a doctor is a noncustomer participant, the patient is a customer participant, and
software that automatically identifies drug interactions is an automated agent.
The outcome of activities that use human resources (participants) depends on attributes of those participants, such
as knowledge/expertise, skills/capabilities, performance metrics, and motives.
Technological resources used in an activity may include tools used directly by participants (e.g., a truck) or an
automated service that operates autonomously after being launched (e.g., a search engine).
Informational resources may include many types of informational entities such as transaction records, plans,
forecasts, goals, guidelines, rules, structures, commitments and other information such as documents, video,
images, messages, and even conversations.
Other resources used by an activity may include physical entities; time; resources from the environment such as
organizational culture, laws, standards, regulations, and policies; and resources from shared infrastructure
including shared human resources, shared informational resources, and shared technical resources.
Both the work system and customer work system may interact with other work systems with positive and/or
negative impacts on the operation of either work system.
Almost every economic activity can be viewed as a service by the definition
above. Distinguishing strictly between products and services is rarely useful
when analyzing or design service systems. It is more useful to think in terms of
product/services that might combine characteristics often associated with
products or with services in everyday conversations. That bypasses confusions
that occur when activities usually described as services lack characteristics
often associated with services, such as intangibility, heterogeneity
(customization), inseparability (consumption as production occurs), and
perishability. For example, it is easy to identify services that are not intangible
(e.g., fixing the foundation of a client’s house), are not customized (e.g.,
transportation on a subway), are not consumed as produced (e.g., creation of a
contract that will remain in force for years), and are not perishable (e.g.,
education, which ideally should last a lifetime).
Those examples illustrate why focusing on yes/no distinctions is less useful
than recognizing and using multiple design dimensions, such as the extent to
which the customer receives value from things versus actions, the extent to
which an offering is standardized versus customized, and the extent to which an
activity results in ownership of something. To illustrate this point, Table 2
positions five different medical services quite differently along as set of design
dimensions even though all five would typically be viewed as services.
Characteristics of some of the medical service examples contradict definitions
of service in Table 1. For example, an artificial hip’s recipient becomes the
owner of an expensive physical object (the surgically implanted prosthesis) that
obviously is not intangible, is not consumed as it is produced, and is much more
than an experience. Many aspects of vaccinations at a public health clinic are
quite product-like because they are standardized, transactional rather than
relational, involve transfer of ownership (of the vaccine dose), and
accommodate little customer discretion.
BP2. Visualizing services as product/services
More product-like <<-------------------------------------->> More service-like
Customer value from things that
the customer receives
-------E-------------D-A------------CB- Customer value from provider
actions
Customer value from things that
the customer uses
--------E--------- D-A -------------C—B Value from experience that
the provider co-produces
Production of value by the
provider
-----------D-------C---A-E------------B- Co-production of value by the
provider and customer
Standardized, scripted
interactions and products
-E-D-------------C-----------------AB— Customized, non-scripted
interactions and products
Value from tangible features of
whatever the provider produces
-D-A-B------------C-----E--------------- Value from intangible features
of whatever the provider
produces
Transferred to customer and
used later
---E-------------------------A---D----BC Consumed by customer
during production
Produced by provider with little
or no co-production
----D-E-----------------C---------A---B- Customer plays extensive role
in co-production
Transfer of ownership ------AD------------E--------------BC— Non-transfer of ownership
Transaction-based interactions -EDC----------------------A-----------B- Relationship-based
interactions
Interactions not concerned with
the customer’s emotional state
-----E----------D---C---------------AB- Interactions concerned with
the customer’s emotional state
Examples:
A = surgery to install an artificial hip
B= extended courses of physical therapy for recovery from serious injuries
C = pre-employment physical exams
D = vaccinations provided at a public health clinic
E = standardized, web-based wellness course provided by a vendor for employees of a
university
Table 2. Placement of Five Hypothetical Medical Product/Services
across Multiple Design Dimensions (Alter 2012, p. 28)
BP3. Focusing on responsibilities, visibility, and value capture
Table 1. Portrayals of Service Implied by Different
Published Definitions of Service
Implementing and operating service systems that produce product/services
requires design decisions related to responsibilities, visibility, and value capture.
Figure 2 shows a service value chain framework that emphasizes those topics.
The service value chain framework depicts generic activities and responsibilities
of both service providers and customers. These activities and responsibilities
may occur before, during, and after delivery of a specific product/service to a
specific customer. The framework’s bilateral form is based on the common
observation that services tend to be co-produced by service providers and
service consumers.
That framework incorporates typical categories of service activities and
responsibilities, such as negotiating commitments, performing set-up prior to
instances of service delivery, handling service requests, fulfilling service
requests, and performing follow-up. Other aspects of the framework represent
important service design issues such as the governance of service instances by
service level agreements, the form and frequency of service encounters, the
distinction between front-stage vs. back-stage activities, and the importance of
value capture by both customer and provider. It addresses responsibilities,
visibility, and value capture in the following ways:
Responsibilities. Understanding the production of product/services requires
attention to activities and responsibilities of both service providers and service
customers. This is equally true regardless of whether the customers are internal
or external to the enterprise. There are many situations such as medical care or
custom software development in which inadequate performance by either
providers or customers undermine the best efforts of the other party.
Visibility. The extent of mutual visibility for providers and customers across the
activities in the service life cycle is a fundamental design decision. For example,
a software developer’s customer might be quite concerned about exactly how the
software was tested. Conversely, a doctor might want more visibility about the
extent to which a patient actually follows medical advice. The vertical lines inside
of the service delivery and service consumption rectangles separate the things
that are visible versus invisible to the provider and customer. Service encounters
are mutually visible, while other activities may or may not be mutually visible.
Figure 1. Different Portrayals of Service
Figure 2. Service Value Chain Framework Illustrating
Relevance of Responsibilities, Visibility, and Value Capture
Value capture. The value capture indications on both sides
of the framework say that that both customers and
providers capture value and that value capture occurs
throughout the service life cycle. For example, both the
customer and the provider usually value the experience of
dealing with service partners who are easy to work with and
who meet their commitments
Operational variability and noncompliance with expectations and/or specifications for activities
of both providers and customer often affect or even undermine real world outcomes of service
processes and business models. Sources of variability include factors such as human error,
accidents, unanticipated interactions with other systems, and noncompliance with process
specifications. Noncompliance may result from any combination of inadequate training,
inadequate execution, exception conditions, adaptations, workarounds, and attempts to
bypass processes for personal benefit.
Table 3 identifies a number of possibly surprising ways in which compliance with rules and
expectations is sometimes detrimental and noncompliance is sometimes beneficial. In other
words, realistic description, analysis, design, or implementation of product/services and
service systems needs to account for operational variability and compliance and
noncompliance by both providers and customers.
BP4. Recognizing operational
variability and noncompliance
by providers and customers
Beneficial Detrimental
Compliance Beneficial compliance
 wholehearted compliance
 halfhearted compliance
Detrimental compliance
 working-to-rule
 malicious compliance
 self-serving compliance
 thoughtless compliance
Noncompliance Beneficial noncompliance
 working around unrealistic
processes
 working around unduly restrictive
controls
 working around inadequate
hardware/software
 working around malfunctions and
temporary obstacles
 prioritizing higher goals over
process specifications
 cheating slightly to accomplish
higher priorities
Detrimental noncompliance
 accidental
noncompliance
 well-meaning but
harmful noncompliance
 fraudulent or malicious
noncompliance
Table 3. Combinations of Beneficial and
Detrimental Compliance and Noncompliance
Figure 1 shows how different portrayals
of service are related to the simple
definition above. Starting with service as
acts performed for others, the Figure
shows a path to other portrayals based
on adding concepts such interactions,
outcomes, value co-creation, economic
exchange, or automation. Notice how
totally automated services differ from
co-created services.
Customer work system. Separating out the provider work system and the
customer’s value creating work system emphasizes that customers create
value for themselves. It also raises the challenge of what to say about value
for the customer when there is no visibility of customer work systems.
Provider and customer responsibilities. Customer responsibilities appear
in two places: 1) wherever customer participants perform actor roles within
provider work systems and wherever customer activities in customer work
systems produce value for customers.
Coproduction. Coproduction occurs wherever customer participants
perform actor roles in activities within a provider’s service system. Deciding
whether something qualifies as a service because coproduction is present
would say yes to a 20-step process consisting of one customer request
followed by 19 provider activities. It is more useful to examine the extent and
form of coproduction, and ask whether more coproduction or less (i.e., less
encapsulation or more) would be preferable for providers and/or customers
Value co-creation. This occurs, at least to some extent, wherever activities
in the customer’s value creating work system coincide with activities in the
provider’s work system. The metamodel reflects the view that firms facilitate
value creation by customers through provision of human, material, and
informational resources for customer use. Value co-creation is optional since
suppliers decide whether and how to engage directly with customers’ value-
generating processes. (Grönroos 2008; 2011)
Customer experience. The customer experience is a combination of the
experience of interacting with the provider and the experience of attaining
value that is facilitated by the provider’s product/service offerings, whether or
not the provider work system is at all visible to customers at that point.
Self-service. In a self-service work system (e.g., buying books online),
customer participants use resources (such as web sites) that are made
available by a service provider to allow the customer to perform personally
beneficial activities independently without interacting with noncustomer
participants.
Value proposition. In marketing communications value propositions
sometimes are imprecise, inaccurate, exaggerated, or intentionally
misleading. Assuming that value propositions are meant to reflect operational
realities, the concept of value proposition can be treated as an attribute of a
product/service offering i.e., a statement of what the customer would have to
give up in order to receive and use the product/service offering and why that
would be a good idea.
The metamodel’s implications related to key concepts of service and service systems
What are the alternatives to this operational view?
This very large single slide summarizes an integrated, operational view of
service and service systems. Almost all service systems can be described,
analyzed, implemented, and evaluated using the ideas discussed here,
although, as is noted in the very small print at the bottom of the metamodel,
many of the ideas have goals, attributes, performance indicators, and
related principles, patterns, and generalizations that do not fit into a one
page representation.
On the other hand, lack of additional detail surely is not a genuine obstacle
for asking whether this integrated operational perspective on service and
service systems makes sense. Here are the main questions to think about:
1) Do the five basic premises suffice as the basis for an operational
understanding of services and service systems? If not, what is incorrect,
misguided, or missing?
2) Have these ideas been presented previously in a complete and cogent
form? If so, where was that done and to what extent were those ideas
accepted and used?
3) Many researchers say that service dominant logic is the basis of service
science . How does SDL provide an operational basis for understanding
and analyzing service and service systems? Does it need to be
complemented by other sets of ideas such as those explained here?
© 2016, Steven Alter, all rights reserved