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 Conference on Understanding Complex Service Systems Through Different Lenses, 22-23 September 2011, Cambridge, UK. Download these slides at: http://www.slideshare.net/StephenKwan

2. 2 Service Science is a Big Tent - A Transdiscipline Approach Service Operations Marketing Management Quality Supply Chain Human Factors Design Innovation Engineering Systems Computing Economics Arts Science “Service Science is just ___<name your discipline>____” General Systems Theory A Service System is Complex OR/IE MS Information Science (i-schools) MIS Economics & Law Game Theory Anthropology & Psychology Organization Theory CS/AI Multiagent Systems Kwan & Müller-Gorchs 2011

3. 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 3

4. Service System Worldview Employees & Stockholders Community Service Provider Customer Service Experience Partners Competition Service System Society Kwan & Müller-Gorchs 2011 4

5. 5 Kwan & Müller-Gorchs 2011 Service System Worldview Service Management Fitzsimmons & Fitzsimmons Employees & Stockholders Capacity & Manpower Planning, Training Community Service Provider Customer Facility Location & Design Service Experience Partners Social Networking Competition Competitive Strategy Service Concept Realized Customer Flow & Service Delivery Market Segmentation Operating Strategy Society 5

6. 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 6

7. Stages in Customer Empowerment in Value Co-Creation Stage 1: Value Chain Value Proposition* Customer Service Provider Focal Relationship Service Experience * Should be accompanied by a “Schema & Rules ” – behavior expectations 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 7

8. 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 8

9. 9 Kwan & Müller-Gorchs 2011 Foundational Premises of Service Dominant Logic Microeconomic Considerations

10. 10 Kwan & Müller-Gorchs 2011 Value Systems and Value Dimensions Provider’s Value System            Opportunities for Value Co-Creation     Customer’s Value System ★ ★ ★ ★ ★ ★ ★ ★ FP8 His Customer’s Value System

11. Variety of Value Propositions Maslow’s Hierarchy Of Needs Value Dimensions Service Provider Society Community Employees Stockholders Partners Customers Intrinsic Hedonic Spiritual Cultural Corporal Emotional Intellectual Familial…. 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 FP10 Kwan & Müller-Gorchs 2011 11

12. 12 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 Service Level Agreement? FP7

13. 13 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:

14. 14 Kwan & Müller-Gorchs 2011 A Customer’s Realization of Value A Customer’s Realized Value: Co-Production Service Process Co-Creation of Value FP6 Service Provider and His Partners’ Contributions Customer’s Contributions FP9

15. 15 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

16. Kwan & Müller-Gorchs 2011 Example: Social Network Service Provider Customer Customer Service Experience Service Experience Service Experience Service Experience Service Experience Vendor Vendor Service Experience 16

17. 17 Kwan & Müller-Gorchs 2011 Example: E-Commerce Customer Amazon.com Bookcloseout_us theBookGrinder nengland4

18. 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 18 Kwan & Müller-Gorchs 2011

19. 19 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

20. 20 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

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

23. More on Quality Dimensions and Measurement

24. Integrate VPM with Service System Design

25. Integrate VPM with Service System Prototyping21 Kwan & Müller-Gorchs 2011

26. Kwan & Müller-Gorchs 2011 Future Directions Foresight and Innovation Method © Cockayne and Carleton Kwan & Müller-Gorchs 2011 22

27. Kwan & Müller-Gorchs 2011 Service System Framework & Service System Networks Foresight and Innovation Method Value Propositions & Service Patterns © Cockayne and Carleton Kwan & Müller-Gorchs 2011 23

28. 24 Kwan & Müller-Gorchs 2011 Service System Framework & Service System Networks Foresight and Innovation Method © Cockayne and Carleton Process Chain Network Diagram UI Prototyping UML – Use Cases Value Propositions & Service Patterns BPMN Work System MANGA Service Blueprint Story Boards 24 Kwan & Müller-Gorchs 2011

29. 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 Conference on Understanding Complex Service Systems Through Different Lenses, 22-23 September 2011, Cambridge, UK. Download these slides at: http://www.slideshare.net/StephenKwan

30. Kwan & Müller-Gorchs 2011 Maslow’s Hierarchy of Needs Disposable Income & Desire for Services Needs vs. Wants 26

31. 27 Formulation of Value = Benefit / Cost Better Off From: Customer Value = (Results + Process Quality ) / (Price + Customer Access Costs) Heskett et all 1997 To: Harvey 2005 To: Kwan & Müller-Gorchs 2011 27

32. 28 Kwan & Müller-Gorchs 2011

33. Kwan & Müller-Gorchs 2011 29

34. 30 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

35. 31 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

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

37. 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

38. 34 Kwan 2011 Value Proposition Model (VPM) Starting with the Service System Service Provider Customer Service Experience

39. 35 Kwan 2011 VPM – a common example Service Provider Customer Value Proposition Customer Service Experience Service Experience Customer Service Experience

40. 36 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

41. 37 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

42. 38 Kwan 2011 VPM – service provider partners Service Provider Customer Value Proposition Customer Service Experience Service Experience Service Experience Service Experience Vendor Value Proposition

43. 39 Kwan 2011 VPM – partner’s acquistion of customer Service Provider Customer Customer Service Experience Service Experience Service Experience Service Experience Vendor Service Experience

44. 40 Kwan 2011 Example 1 of 4 Service Provider Customer Customer Service Experience Service Experience Service Experience Service Experience Vendor

45. 41 Kwan 2011 Example 2 of 4 Service Provider Customer Customer Service Experience Service Experience Service Experience Service Experience Service Experience Vendor Vendor Service Experience

46. 42 Kwan 2011 Example 3 of 4 Service Provider Customer Customer Service Experience Service Experience Service Experience Service Experience Service Experience Vendor Vendor Service Experience

47. 43 Kwan 2011 Example 4 of 4 Service Provider Customer Customer Service Experience Service Experience Service Experience Service Experience Vendor Service Experience

48. 44 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

49. 45 Kwan & Müller-Gorchs 2011 Illustration of Value Co-creation Customer Value / c1 V = Σ + / c2 + Value Service Provider

50. 46 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

51. 47 Kwan & Müller-Gorchs 2011 Pattern 2 – Continuous Service over a Period of Time Customer VP0 SE0 Time SP0

52. 48 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

53. 49 Kwan & Müller-Gorchs 2011 Pattern 3 – Continuous Service with Occasional Service Episodes Customer VP0 Se2 Se1 Se0 Time SP0

54. 50 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

55. 51 Kwan & Müller-Gorchs 2011 Example: Quality of Service Supply Chain Example from Dan Pritchett