2. 37% 23% 40% SERVICES SYSTEMS AND FINANCING SOFTWARE IBM’s business 2007 Pretax Income Mix Revenue Growth by Segment

3. Service sector employment In 2006 the service sector’s share of global employment overtook agriculture for the first time, increasing from 39.5% to 40%. Agriculture decreased from 39.7% to 38.7%. The industry sector accounted for 21.3% of total employment. - International Labour Organization http://www.ilo.org/public/english/region/asro/bangkok/public/releases/yr2007/pr07_02sa.htm

4. Jobs and tasks are changing 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 Complex Communication Routine Manual Non-routine Manual Routine Cognitive

6. Services are different, because they integrate… Many say that “service is just ___<see list of disciplines below>____” Most like general systems theory (abstract) and systems engineering (applied) Operations Research … Industrial Engineering Systems Engineering Organization Theory Economics & Law Multi-agent Systems Information Management Game Theory Management Science Mngmnt of Info Sys (MIS) General Systems Theory Anthropology CS/Artificial Intelligences Information Science Social Science/ Poli-Sci Cognitive Science/Psych Marketing Operations Mngmnt … Most disciplines specialize… Service science integrates Service system entities are dynamic configurations of resources… people, technology, organizations, shared information (e.g., language, laws, measures, models, processes, policies, relationships, rights, etc.) connected to other service system entities by value propositions for the purpose of value-cocreation relationships, with governance mechanisms for dispute resolution. Queuing Theory A Service System is Complex

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 - “ Succeeding through Service Innovation” Whitepaper: A Framework for Progress (http://www.ifm.eng.cam.ac.uk/ssme/) 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 Call to Create National Service Innovation Roadmaps (SIR) Reports

12. Processes vs. Work practices ENGAGE / DEAL TRANSFORM & TRANSITION DELIVER & OPERATE MANAGE PRE-SALES CONCEPT Service Cycle 1 2 3 4 5 6 8 9 Client 7

13. Work is investigative, collaborative, iterative, parallel, creative CSE Lead TSM 2 nd CSE 2 nd TSM DEM PM TSA Team C&N HR DPE PE Pricer Support Client Team Client Out-Sourcing Consultant Proposal RFP Ambiguities / Conflicts Clarification Update Client C&N, Lead TSM, DPE Assumptions Input Discover Collaborative Review Submit Update RFP The Client Client Out-Sourcing Consultant

16. Interlude 1

17. Service Science, SSME – What are we talking about? Service Science, Management, and Engineering (SSME) is a term introduced by IBM to describe Service Science, an interdisciplinary approach to the study, design, and implementation of services systems – complex systems in which specific arrangements of people and technologies take actions that provide value for others. More precisely, SSME has been defined as the application of science, management, and engineering disciplines to tasks that one organization beneficially performs for and with another.

19. Successful enterprises focus on selected areas of specialization Enterprise Optimized Process Optimized Business Unit Optimized Internally Integrated Strategically Partnered Industry Networked Internal Specialization Process Centers Silo 1 Silo 2 Silo 3 External Partner External Partner Silo 2 Silo 3 Silo 1 Silo 2 Silo 3 Silo 1 Silo 2 Silo 3 Accountability Level Business Competency Direct Control Execute Business Components “ Specialized Enterprise” External Specialization Accountability Level Business Competency Direct Control Execute Business Components Silo 1

21. CBM also models dependencies among components, thus forming an extended value-proposition ecosystem

22. A business process can be represented by reusing business services provided by business components Component Name Market Segment Planning Description To analyze segments and derive targets Component Name Business Strategy Description Define business strategy Component Name Segment Tracking Description Track target segments Business Plans Tracking Models & Targets Market Events To “Product Management” business component Product Portfolio Updates Product Portfolio Updates

24. Integrating Component Business Models with Industry Process Models + = IBM is bringing together its Business Process Management Center of Excellence (BPM CoE), IBM Research, and the Global Business Solution Center (GBSC) to map Component Business Models (CBM) to Industry Process Models Component Business Models (CBM) and Tool Industry Process Models in WBM, built by BPM CoE, leveraging APQC’s Process Classification Framework Result : business transformation engagements delivered more quickly, through more industry-specific insights and more powerful CBM Tool

26. Interlude 2

27. 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) operant operand Physical Not-Physical Rights No-Rights 2. Technology 4.. Shared Information 1. People 3. Organizations

28. 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 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)

29. Special Issue on SSME Toward a conceptual foundation for service science: Contributions from service-dominant logic R. F. Lusch, S. L. Vargo, and G. Wessels Designing a discipline in service science R. J. Glushko Service science: Catalyst for change in business school curricula M. M. Davis and I. Berdrow Service science: At the intersection of management, social, and engineering sciences R. C. Larson Complexity of service value networks: Conceptualization and empirical investigation R. C. Basole and W. B. Rouse Service system fundamentals: Work system, value chain, and life cycle S. Alter Estimating value in service systems: A case study of a repair service system N. Caswell et al. BEAM: A framework for business ecosystem analysis and modeling C. H. Tian, B. K. Ray, J. Lee, R. Cao, and W. Ding Patterns of innovation in service industries I. Miles Business services as communication patterns: A work practice approach for analyzing service encounters R. J. Clarke and A. G. Nilsson Legal research topics in user-centric services O. Pitkänen et al. Managed service paradox N. Leon and A. C. Davies Improving service delivery through integrated quality initiatives: A case study J. Hickey and J. Siegel Predicting customer choice in services using discrete choice analysis R. Verma et al.

32. http://www.ibm.com/university/ssme