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Service Systems, Value Propositions, and Service Innovation Stephen K. Kwan, San José State University, Service Systems, Value Propositions, and Service Innovation Stephen K. Kwan, San José State University, CA, USA http: //www. sjsu. edu/ssme Contact: kwan_s@cob. sjsu. edu Presented at the Case Studies in Service Innovation Conference SSMEnet. UK, Manchester Business School June 14 -15, 2010, Manchester, UK

Motivation • Service Dominant Logic – high level perspective of provider-customer interaction • Service Motivation • Service Dominant Logic – high level perspective of provider-customer interaction • Service Science – Static Value Propositions before start of service Service Value Networks – provides symmetry between provider and customer driven value co-creation Customers dynamically enhance value based on creation/choice of service value network endpoints – leads to more service value varieties and innovative opportunities Kwan & Yuan 2010 2

Formulation of Value From: Better Off Customer Value = (Results + Process Quality ) Formulation of Value From: Better Off Customer Value = (Results + Process Quality ) / (Price + Customer Access Costs) Heskett et all 1997 To: Harvey 2005 To: Kwan &Yuan 2010 3

Service System Worldview 1 Service Provider Customer Service Experience A Service System and Its Service System Worldview 1 Service Provider Customer Service Experience A Service System and Its Entities 1 Kwan, 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 & Yuan 2010 4

A Service System Network Service System A Service Interactions Service System B Service System A Service System Network Service System A Service Interactions Service System B Service System E Service System D Service System C Service System F Kwan & Yuan 2010 5

A Service Supply Chain Service System A Service Interactions Service System B Service System A Service Supply Chain Service System A Service Interactions Service System B Service System E Service System D Service System C Service System F Kwan & Yuan 2010 6

Example: Purchases from Amazon. com Kwan &Yuan 2010 7 Example: Purchases from Amazon. com Kwan &Yuan 2010 7

Example: Purchases from Amazon. com Service Supply Network Customer Amazon. com Bookcloseout_us the. Book. Example: Purchases from Amazon. com Service Supply Network Customer Amazon. com Bookcloseout_us the. Book. Grinder nengland 4 USPS “transparent” service provider Not being evaluated USPS

Service System Worldview Employees & Stockholders Community Service Provider Customer Service Experience Service System Service System Worldview Employees & Stockholders Community Service Provider Customer Service Experience Service System Partners Competition Society Kwan & Yuan 2010 9

Service System Worldview Employees & Stockholders Capacity & Manpower Planning, Training Community Customer Service Service System Worldview Employees & Stockholders Capacity & Manpower Planning, Training Community Customer Service Provider Facility Location & Design Service Experience Social Networking Society Partners Competition Customer Market Segmentation Flow & Service Delivery Service Concept Realized Kwan & Yuan 2010 Operating Strategy Competitive Strategy 10

Value Co-Creation Through Value Propositions Employees & Value Stockholders Community Value Customer Value Service Value Co-Creation Through Value Propositions Employees & Value Stockholders Community Value Customer Value Service Experience Society e anc rn ove G Service System Kwan & Yun 2010 Service Provider Value Partners Competition 11

Service Systems, Computing, and IT Services 1 Service Provider’s Back Stage Support Back Stage Service Systems, Computing, and IT Services 1 Service Provider’s Back Stage Support Back Stage Processes Information Technology Platform Front Stage Processes Front Stage Service Computing 1 Kwan, ITSM – Management of the Processes and Infrastructure of IT Services S. K. & Hefley, B. , “Service Systems”, 2008. Kwan 2010 12

Stages in Customer Empowerment in Value Co-Creation Stage 1: Value Chain Value Proposition Customer Stages in Customer Empowerment in Value Co-Creation Stage 1: Value Chain Value Proposition Customer Focal Relationship Service Provider Service Experience Kwan & Yuan 2010 13

Stage 2: Traditional Service Value Network Value Proposition Focal Relationship Customer Service Experience Service Stage 2: Traditional Service Value Network Value Proposition Focal Relationship Customer Service Experience Service Provider Partner Network Value Proposition Kwan & Yuan 2010 14

Stage 3 – Improved Value Chain Value Proposition Customer Focal Relationship Value Proposition Customer’s Stage 3 – Improved Value Chain Value Proposition Customer Focal Relationship Value Proposition Customer’s Social Network Service Experience Kwan & Yuan 2010 Service Provider

Example of Customer Driven Service Value Network Their Friends TV Programs Ad’s and “Buy Example of Customer Driven Service Value Network Their Friends TV Programs Ad’s and “Buy Me” Target Audience Illustration from: Vascellaro, J. A. “Video’s New Friends”, The Wall Street Journal, February 28, 2008. Product Placements Kwan & Yuan 2010 16

Taking Advantage of Social Networks Kwan &Yuan 2010 17 Taking Advantage of Social Networks Kwan &Yuan 2010 17

Stage 4: Customer Driven Service Value Network Value Proposition Customer Focal Relationship Service Provider Stage 4: Customer Driven Service Value Network Value Proposition Customer Focal Relationship Service Provider Value Proposition Customer’s Social Network Service Experience Kwan & Yuan 2010 Provider Partner Network

Variety of Value Propositions So l cie cia So tal al mic al ent Variety of Value Propositions So l cie cia So tal al mic al ent nm litic viro ono Partners D Po En Community Stockholders s a Society Employees ic teg Str Ec Stakeholders Service Provider n ctio ire Customers A point in this 3 -D space is a Potential Value Proposition 1 Stage so 2 3 f Cust omer 4 Empo werm ent Kwan & Yuan 2010 19

Customers Partners Stockholders Employees Community Society Service Provider Value Propositions can also be bi-directional Customers Partners Stockholders Employees Community Society Service Provider Value Propositions can also be bi-directional Service Provider Society Community Employees ? ? Stockholders Partners Customers Kwan & Yuan 2010 20

Innovation 혁신 創新 创新 革新 CREATING SOMETHING NEW Innovation resides at the intersection of Innovation 혁신 創新 创新 革新 CREATING SOMETHING NEW Innovation resides at the intersection of invention and insight, leading to the creation of social and economic value. National Innovation Initiative Innovation can happen anyway on the Value Chain! (business model, organization, environment, process, technology, etc. ) Kwan &Yuan 2010 21

Example: Theodoulidis et al. “Innovation Perspective of a Personal Financial Services Call Center √ Example: Theodoulidis et al. “Innovation Perspective of a Personal Financial Services Call Center √ & Capacity Manpower Employees & Stockholders Planning, Training Community √ Customer √ Society √ Service Provider Facility Location & Design Service Experience Customer Market Segmentation Flow & Service Delivery √ Partners Competition Service Concept Realized Kwan & Yuan 2010 Operating Strategy √ √ Competitive Strategy 22

Business Process Management Game from IBM Kwan &Yuan 2010 23 Business Process Management Game from IBM Kwan &Yuan 2010 23

Innov 8 Kwan &Yuan 2010 24 Innov 8 Kwan &Yuan 2010 24

Innov 8 Using the Game to Learn About Service Systems With Multiple Queues Kwan Innov 8 Using the Game to Learn About Service Systems With Multiple Queues Kwan &Yuan 2010 25 25

Example: Andrea Cocchi, “Innovation by Intermediation” Kwan & Yuan 2010 26 Example: Andrea Cocchi, “Innovation by Intermediation” Kwan & Yuan 2010 26

Example: Jinluan Ren “Innovation in … CMMB” CBBM for Subscription Fees, Value-added Service Customer Example: Jinluan Ren “Innovation in … CMMB” CBBM for Subscription Fees, Value-added Service Customer CBC Provider Partner Network CBBM Service Experience China Mobile Tele. Comm. Companies Kwan & Yuan 2010 Ericsson License and Fees Advertisers, Elec. Comm. 27

* energy usage * Carbon dioxide/methane emissions * other emissions * water pollution * * energy usage * Carbon dioxide/methane emissions * other emissions * water pollution * waste to landfill * hazardous substances * natural resources * wate Example: Mark Stein “Sustainable Procurement in the UK Public Sector” l cia So tal cie So al mic al ent nm litic viro ono Partners D Po En Community Stockholders s a Society Employees ic teg Str Ec Stakeholders Service Provider n ctio ire Customers 1 Stage so * energy usage * Carbon 2 dioxide/methane emissions * other 3 emissions * water pollution * waste to f Cust omer 4 Empo landfill * hazardous substances * * employment, diversity, education * werm ent natural resources * water * biodiversity health * community * developing world * local environment supply chains Kwan & Yuan 2010 28

* energy usage * Carbon dioxide/methane emissions * other emissions * water pollution * * energy usage * Carbon dioxide/methane emissions * other emissions * water pollution * waste to landfill * hazardous substances * natural resources * wate Example: Peter Ward “SMS for Life, ……” l cia So tal cie So al mic al ent nm litic viro ono Partners D Po En Community Stockholders s a Society Employees ic teg Str Ec Stakeholders Service Provider n ctio ire Roll Back Malaria Customers 1 Stage so 2 3 f Cust omer 4 Empo werm ent Kwan & Yuan 2010 29

How the Framework could complement the Foresight Method applied to Services © Cockayne and How the Framework could complement the Foresight Method applied to Services © Cockayne and Carleton 30

How the Framework could complement the Foresight Method applied to Services Global Innovation Network How the Framework could complement the Foresight Method applied to Services Global Innovation Network Project © Cockayne and Carleton 31

How the Framework could complement the Foresight Method applied to Services Business Models & How the Framework could complement the Foresight Method applied to Services Business Models & Value Propositions Service System Thinking © Cockayne and Carleton 32

Example of how the Framework could complement an Innovation Method applied to Services BPMN Example of how the Framework could complement an Innovation Method applied to Services BPMN UML – Use Cases Service Blueprint Story Boards UI Prototyping MANGA textbooks etc. Kwan & Yuan 2010 33

Teaching MBA Class at Sogang University Kwan & Yuan 2010 Kwan 2010 34 Teaching MBA Class at Sogang University Kwan & Yuan 2010 Kwan 2010 34

Using the Foresight Method 35 Using the Foresight Method 35

Sample Project from SJSU MBA Students Kwan & Yuan 2010 36 Sample Project from SJSU MBA Students Kwan & Yuan 2010 36

Teaching the method for “Service Made in ? country? ” Kwan &Yuan 2010 37 Teaching the method for “Service Made in ? country? ” Kwan &Yuan 2010 37

Service Systems, Value Propositions, and Service Innovation Stephen K. Kwan, San José State University, Service Systems, Value Propositions, and Service Innovation Stephen K. Kwan, San José State University, CA, USA http: //www. sjsu. edu/ssme Contact: kwan_s@cob. sjsu. edu Presented at the Case Studies in Service Innovation Conference SSMEnet. UK, Manchester Business School June 14 -15, 2010, Manchester, UK