SSME: Service Science, Management, and Engineering
Service Science, Management, and Engineering (SSME):
A Next Frontier in Education,
Employment, Innovation, and
Economic Growth
Dr. Jim Spohrer
Director, Services Research
IBM Almaden Research Center, San Jose, CA
spohrer@us.ibm.com
PARC Forum | Palo Alto, CA | Nov 16th, 2006
SSME: Service Science, Management, and Engineering
Communications of the ACM, July 2006
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
http://www.ibm.com/university/ssme
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SSME: Service Science, Management, and Engineering
IBM Definition of Service: The application of Business & IT
competences for the benefit of clients and society
Business Consulting Services &
Project-based Systems
Integration
Business
Transformation
Outsourcing
Strategic
Outsourcing
& IT Hardware,
Software &
Services
2003: 50 of 3000 of 320,000
2006: 550 of 3200 of 340,000
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Application
Management
Indian workforce has gone from 9,000 to 43,000
in just two and a half years.
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
2007 Services Area Strategies
2. Services Software Engineering
3. Services Management and
Products
5. Services Information
4. Services Optimization
1. Business Value
SSME – Service Science, Management and Engineering
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Today’s talk
 Part I: Context
 Part II: Progress
 Part III: Science
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What is SSME, really?
 An urgent “call to action”
To become more systematic about innovation in services
Complements product and process innovation methods
To develop “a science of service” that studies service systems
 A proposed academic discipline
Draws on many existing disciplines
If the study of service systems is legitimate in engineering, business, social sciences, and
information schools – that will be good progress
However, integration into a new specialty (looking for our Einstein) is ultimate goal
 A proposed research area
Service systems are designed (computer systems)
Service systems evolve (linguistic and social systems)
Service systems have scale-emergent properties (economic systems)
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SSME: Service Science, Management, and Engineering
Why is SSME so important?
Because the world is a giant service system.
Top Ten Nations by Labor Force Size
(about 50% of world labor in just 10 nations)
A = Agriculture, G = Goods, S = Services
Nation
% WW %
Labor A
%
G
%
S
25 yr %
delta S
China
21.0
50 15
35
191
India
17.0
60 17
23
28
U.S.
4.8
3 27
70
21
Indonesia
3.9
45 16
39
35
Brazil
3.0
23 24
53
20
Russia
2.5
12 23
65
38
Japan
2.4
5 25
70
40
Nigeria
2.2
70 10
20
30
Banglad.
2.2
63 11
26
30
Germany
1.4
3 33
64
44
2004
2004
United States
(A) Agriculture:
Value from
harvesting nature
(G) Goods:
Value from
making products
(S) Services:
Value from enhancing the
capabilities of things (customizing,
distributing, etc.) and interactions between things
The largest labor force migration
in human history is underway,
driven by global communications,
business and technology growth,
urbanization and low cost labor.
>50% (S) services, >33% (S) services
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SSME: Service Science, Management, and Engineering
How to invest to make systematic improvements?
(year-over-year)
Service System
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Computational System
1. People (division of labor, multi-tasking)
2. Technology
3. Internal and External Service Systems
Connected by Value Propositions
4. Shared Information (language, laws, measures)
Shrink Transistors
People do more, high value win-win actions
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What types of service systems would we like to improve?
 People
 Families
 Businesses
 Cities
 Nations
 Hospitals
 Universities
 Call Centers
 Data Centers
 And many more…
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SSME: Service Science, Management, and Engineering
People
 “All the information workers
observed experienced a high
level of fragmentation in the
execution of their activities.
People averaged about three
minutes on a task and about two
minutes on any electronic device
or paper document before
switching tasks.”
Gloria Mark and Victor M. Gonzalez, authors of
“Research on Multi-tasking in the
Workplace”
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SSME: Service Science, Management, and Engineering
Families
 "The family is the natural and fundamental
group unit of society and is entitled to
protection by society and the State".
Article 16(3) of the Universal Declaration of Human
Rights
 “Developing a Family Mission Statement”
Stephen R. Covey, author of The 7 Habits of
Highly Effective Families
 “In the agricultural age, work-life-andfamily blended seamlessly.”
IBM GIO 1.0
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Businesses
 “…of the 100 entities with the largest
Gross National Product (GNP), about
half were multi-national corporations
(MNCs)… The MNCs do not exist on
traditional maps.”
Alfred Chandler and Bruce Mazlish, authors
of Leviathans
 “The corporation has evolved
constantly during its long history. The
MNC of the late twentieth century …
were very different from the great
trading enterprises of the 1700s. The
type of business organization that is
now emerging -- the globally
integrated enterprise -- marks just as
big a leap. “
Sam Palmisano, CEO IBM in Foreign Affairs
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SSME: Service Science, Management, and Engineering
Cities
 “Cities are the defining
artifacts of civilisation. All the
achievements and failings of
humanity are here… We
shape the city, and then it
shapes us. Today, almost half
the global population lives in
cities.”
John Reader, author of Cities
 IBM Releases ``IBM and the Future
of our Cities'' Podcast
IBM Press Release 2005
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Nations
 “Understanding economic change
including everything from the rise of
the Western world to the demise of
the Soviet Union requires that we cast
a net much broader than purely
economic change because it is a
result of changes in (1) the quantity
and quality of human beings; (2) in
the stock of human knowledge
particularly as applied to human
command over nature; and (3) the
institutional framework that defines
the deliberate incentive structure of a
society.”
Douglass C. North, author of Understanding the
Process of Economic Change
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Hospitals
 “Modern medicine is one
of those incredible works
of reason: an elaborate
system of specialized
knowledge, technical
procedures, and rules of
behavior.”
Paul Starr, author of The Social
Transformation of American
Medicine
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Universities
 “The contemporary
American university is in
fact a knowledge
conglomerate in its
extensive activities, and
this role is costly to
sustain.”
Roger L. Geiger, author of
Knowledge and Money:
Research Universities and the
Paradox of the Marketplace
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SSME: Service Science, Management, and Engineering
Call Centers
 “Call Centers For Dummies
helps put a value on customer
relations efforts undertaken in
call centers and helps managers
implement new strategies for
continual improvement of
customer service.”
Réal Bergevin, author of Call Centers For
Dummies
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SSME: Service Science, Management, and Engineering
Data Centers
 “All data centers are unique, but
they all share the same mission:
to protect your company’s
valuable information.”
Douglas Alger, author of Build the Best Data
Center Facility for Your Business
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SSME: Service Science, Management, and Engineering
Some Types of Service Systems
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People
Families
Businesses
Cities
Nations
Hospitals
Universities
Call Centers
Data Centers
IBM Research
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Professional Associations
Disciplinary Associations
Government Agencies
PACs
NGOs
Non-Profits
Foundations
On-line Communities,
MMORPGs, Virtual Worlds
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Can there really be a science of service?
“Wherever there are phenomena, there can be a science to describe
and explain those phenomena. Thus, the simplest (and correct)
answer to “What is botany?” is, “Botany is the study of plants.” And
zoology is the study of animals, astronomy the study of stars, and so
on. Phenomena breed sciences.”
- Newell, A., Perlis, A. & Simon, H. A. (1967).
Computer Science, Science, 157, 1373-1374.
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Possible Objections… to Computer Science
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Only natural phenomena breed sciences
The term “computer” is not well defined
Computer Science is the study of algorithms, not computers
Computers are instruments, not phenomena
Computer Science is a branch of another science
Computers belong to engineering, not science
- Newell, Perlis, & Simon (1967)
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SSME: Service Science, Management, and Engineering
Possible Objections… to Service Science
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Only natural phenomena breed sciences
The term “service” is not well defined
Service Science is the study of work, not services
Services are performances, not phenomena
Service Science is a branch of another science
Services belong to engineering (or management), not science
- with apologies to Newell, Perlis, & Simon (1967)
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SSME: Service Science, Management, and Engineering
What makes SSME hard is that it is multidisciplinary…
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Services depend critically on people, technology, organizations, and co-creation of value
People work together and with technology and with organizations to provide value for clients
Shared information helps coordinate activities – language, laws, measures, models, etc.
So a service system is a complex socio-techno-economic system
Growth requires innovation that combines people, technology, organizations, value, shared
information, clients
 A service system is a value coproduction configuration of people, technology, internal and
external service systems connected by value propositions, and shared information
 Services systems are both designed (Artificial) and shaped by evolutionary forces (Natural)
Science &
Engineering
Social & Cognitive
Sciences
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Technology
Innovation
Social
Innovation
Business
Innovation
Demand
Innovation
Business &
Management
Economics
& Markets
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Herbert A. Simon – My vote for first service scientist
The Sciences of the Artificial
by Herbert A. Simon
 http://en.wikipedia.org/wiki/Herbert_Simon
 “Herbert Simon (1916-2001), in the course of a long
and distinguished career in the social and behavioral
sciences, made lasting contributions to many
disciplines, including economics, psychology, computer
science, and artificial intelligence. In 1978 he was
awarded the Nobel Prize in economics for his research
into the decision-making process within economic
organizations. His well-known book The Sciences of
the Artificial addresses the implications of the decisionmaking and problem-solving processes for the social
sciences. “
Models of a Man :
Essays in Memory of Herbert A. Simon
by Mie Augier (Editor), James G. March (Editor)
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SSME: Service Science, Management, and Engineering
Complexity 1: So many types of service jobs/industries
enable
People
develop
Consumer services
Non-market services
design
Products
operate &
maintain
Industrial services
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enable
Business
transform
Business services
create
Information
utilize
Information services
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Complexity 2: So many academic disciplines…
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People
Business
Schools of
Social Science
Schools of
Business Management
Products &
Nature
Information
Schools of
Science & Engineering
Information Schools
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“Service science is just ___________ “
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Dancing Elephants
 What I learned at IBM is that culture isn’t part of
the game. It is the game.
- Louis V. Gerstner
 Actually, the cultural change required for ITIL [IT
Infrastructure Library, related to ISO 20000
Standard for IT Service Management] success is
often a much greater challenge than the
implementation of any supporting technologies.
- Brian Johnson, in CIO News Headlines Oct. 1, 2006
 We strongly believe that development of an
effective services science curriculum in Chinese
universities will have a direct impact on China's
economic growth
- Sam Palmisano, quoted Infoweek, Nov 14, 2006
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SSME: Service Science, Management, and Engineering
Complexity 3: So many definitions of service…
Service: The application of competence for the benefit of another
Service System: A value coproduction configuration of people, technology,
internal and external service systems, and shared information
People
External
Service
Systems
Model as
complex systems
Connected by
Value Propositions
Technology
Information
Internal
Language, laws, metrics,
standards, culture, etc.
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Complexity 4: No unique, fundamental problems…
What are the origins, types, and evolutionary patterns of service systems?
How are service systems similar to/different from other types of complex systems?
Are service systems the most complex type of complex system? How to invest?
How are competences transferred from one service system to another?
People
External
Service
Systems
Model as
complex systems
Connected by
Value Propositions
Technology
Information
Internal
Language, laws, metrics,
standards, culture, etc.
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SSME: Service Science, Management, and Engineering
SSME is an emerging multidiscipline (frontier field)
Science and Engineering
Industrial and Systems Engineering
Computer Science & Info. Systems
Math and Operations Research
Economics and Social Sciences
Business Anthropology
Organizational Change & Learning
Business and Management
“Need I-shaped, T-shaped, π-shaped people… “ – Stuart Feldman (Oct. 6, 2006)
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Slide by Jean Paul Jacob
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SSME: Service Science, Management, and Engineering
More T-shaped People
to work in, study, and innovate
service systems
Social Science
(People)
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Management
(Business)
Slide by Jean Paul Jacob
Engineering
(Technology)
© 2006 IBM Corporation
Almaden Services Research
Part I: Context…
 All national economies are shifting to services – service systems are an important type
of complex system
– major industrialized nations are >75% services, developing nations are close behind – growth
increasingly depends on service innovation at multiple scales - person, family, city, firm, nation
– credit cards are a simple example of service innovation, requiring integrated business, technology, and
social-organizational change to be successful
– drivers: outsourcing, globalization, internet, self-service - Wipro, IBM, EDS, eBay, Amazon, Google
 New workforce skills are needed - to better study, manage, and engineer service
systems
– study benefits from a combination of business, organization, technology skills – soft skills enhance hard
skills – more organizational transparency and data sharing by industry would help greatly
– new profession (like service scientist) needed, and new tool (service system ecology simulator)
 Educational system is slowly shifting toward services
– service management, operations, marketing, and engineering courses and programs exist - study of
complex systems seeks to integrate
– Research universities should increase number of grant proposals focused on service systems
– new multidiscipline (like SSME) needed, to integrate and break down silos – industry must hire them
 National systems are slowly shifting policy towards service innovation
– bootstrapping investment in research and education through targeted programs
– focusing attention on intellectual property protection for service innovation
– new innovation policy and metrics needed (government role in creating historical data sets)
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Service Science
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Part II: Progress
(2004-2006)
“The SSME Palisades event was the biggest and most diverse
gathering ever in support of service education.” – Roland Rust (Oct. 15, 2006)
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SSME: Service Science, Management, and Engineering
Progress by country/region
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1. Germany, Japan
2. Finland, EU
3. China, Ireland
4. United States, UK
5. India, Russia, Brazil, Mexico, and others
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Communications of the ACM, July 2006
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SSME: Service Science, Management, and Engineering
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SSME: Service Science, Management, and Engineering
Textbooks
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Berry (1999)
Chase, Jacobs, Aquilano
Davis
Fisk, Grove, & John (2000)
Fitzsimmons & Fitzsimmons (2001)
Grönroos (2000)
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Hoffman & Bateson (2002)
Lovelock & Wright (2001)
Sampson (2000)
Teboul (2006)
Zeithaml & Bitner (2003)
Service Management:
Operations, Strategy, and Information Technologies
by James Fitzsimmons and Mona Fitzsimmons
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SSME: Service Science, Management, and Engineering
Journal and Conference
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© 2006 IBM Corporation
16th Annual AMA
Frontiers in Service Conference
At San Francisco’s
Westin St Francis
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SSME: Service Science, Management, and Engineering
On what foundational logic, could we build a science of
service?
 Defines service as the application of competencies for the benefit of
another entity and sees mutual service provision, rather than the
exchange of goods, as the foundational logic
 This new paradigm is service-oriented, customer-oriented,
relationship-focused, and knowledge-based
The Service-Dominant Logic of Marketing:
Dialog, Debate, and Directions
by Robert F. Lusch and Stephen L. Vargo
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SSME: Service Science, Management, and Engineering
On what theory of economics, could we build a science of
service?
 Firms: Viewed as historically situated combiners of
heterogeneous and imperfectly mobile resources under
conditions of imperfect and costly to obtain information,
towards the primary objective of superior financial
performance.
 Resources: Viewed as tangible and intangible entities
available to the firm that enable it to produce efficiently and/or
effectively a market offering that has value for some market
segment(s).
A General Theory of Competition :
Resources, Competences, Productivity, Economic Growth
(Marketing for a New Century)
by Shelby D. (Dean) Hunt
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SSME: Service Science, Management, and Engineering
How do new professions arise?
 In The System of Professions Andrew Abbott explores central
questions about the role of professions in modern life: Why should
there be occupational groups controlling expert knowledge? Where
and why did groups such as law and medicine achieve their power?
Will professionalism spread throughout the occupational world?
While most inquiries in this field study one profession at a time,
Abbott here considers the system of professions as a whole.
Through comparative and historical study of the professions in
nineteenth- and twentieth-century England, France, and America,
Abbott builds a general theory of how and why professionals evolve.
The System of Professions:
An Essay on the Division of Expert Labor
by Andrew Abbott
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How do new professions and new disciplines coevolve with
government institutions?
 Emergence of German dye industry, German mid-19th Century
 Emergence of chemistry as an academic discipline
 Emergence of patent protection in the new area of chemical
processes and formula
 Emergence of new relationships connecting firms, academic
institutions, government agencies, and clients
 Demonstrates needed coevolution of firms, technology, and national
institutions
 Took England and US over 70 years to catch up!!!
Knowledge and Competitive Advantage :
The Coevolution of Firms, Technology, and National Institutions
by Johann Peter Murmann
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SSME: Service Science, Management, and Engineering
How does the service economy and the innovation
economy relate?
 “… modern economies are both service economies and economies
of innovation. Paradoxically, they are not regarded as economies of
innovation in services, that is as economies in which service firms'
innovation efforts are proportional to their contribution from the
major economic aggregates. It is as if service and innovation were
two parallel universes that coexist in blissful ignorance of each
other.”
 Gallouj, F. (2002). Innovation in the Service Economy: The New
Wealth of Nations. Cheltenham UK: Edward Elgar.
Productivity, Innovation and Knowledge in Services
by Jean Gadrey and Faiz Gallouj
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SSME: Service Science, Management, and Engineering
Berkeley SSME Certificate Program
http://ssme.berkeley.edu/
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SSME: Service Science, Management, and Engineering
NCSU SSME Curriculum for MBA
http://www.mgt.ncsu.edu/news/2006/mba_ssme.php
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SSME: Service Science, Management, and Engineering
Service Science at ASU
http://wpcarey.asu.edu/csl/
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SSME: Service Science, Management, and Engineering
SSME: Growing Body of Knowledge about Service
Percentage of labor force in service sector: US (blue) and World (green)
100%
75%
50%
25%
1750
1800
1850
1900
1950
2000
Economics and Social Science
Bastiat Marx
Smith
Clark
Murmann, Seabright, Latour, Sen
Cohen & Zysman, Triplett & Bosworth,
Abbott, Baumol, Hill, Gadrey & Gallouj
Berry (1999), Teboul (2006)
Fisk, Grove, & John (2000) .Davis
Fitzsimmons & Fitzsimmons (2001)
Grönroos (2000), Sampson (2000)
Hoffman & Bateson (2002)
Lovelock & Wright (2001)
Zeithaml & Bitner (2003)
Hesket, Sasser, & Hart, Rust, Ramirez
Pine & Gilmore, Schneider, Chase
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Bryson et al
March Milgrom
& Simon & Roberts Herzenberg, Alic&Wial
Management
Taylor
Deming
Argyris
Alter
Lusch & Vargo
Engineering
Ganz, Weinhardt, Rouse
Tiene & Berg, Carley
Sterman Glushko
Jaikumar & Bohn
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
http://www.nytimes.com/2006/04/18/business/18services.html
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SSME: Service Science, Management, and Engineering
Part III: Science(2007-2009)
“People-Oriented, Services-Intensive, Market-Facing Complex Systems –
complex systems and services – are very similar areas
around which we are framing the very complicated problems of
business and societal systems that we are trying to understand.”
– Irving Wladawsky-Berger (Oct. 9, 2006)
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SSME: Service Science, Management, and Engineering
The challenge – need shared vocabulary and understanding of
what a service system is – a type of complex adaptive system
 Operations Research and Industrial Engineering
More realistic models of people
 Computer Science and Electrical Engineering, Information Systems
Software and systems that adaptively change with business strategy
 Economics and Business Strategy, Service Management & Operations
Better models of scaling and innovation
 Law and Political Economy
Better models of social innovation – in what way is passing a law innovation
 Complex Systems and Systems Engineering
Better model of robustness and fragility of service systems (sustainability)
 Service systems are value coproduction configurations of people,
technology, internal and external service systems (connected by value
propositions), and shared information (language, laws, measures,
models, etc.)
Examples: People, families, cities, businesses, nations, global economy, etc.
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SSME: Service Science, Management, and Engineering
What is science?
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Data – the language of nature (empirical framework)
Model – measurable quantities and relationships (theoretical framework)
Analytics – fit data to model, explain variance (analytical framework)
Take Action – interact with world and iterate (engineering and design frameworks)
Can we create CAD for service systems?
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SSME: Service Science, Management, and Engineering
Under what conditions do value propositions exist between
service systems to justify service for service exchanges?

Assume service system A and B (imagine two people, family-clans, cities,
nations, or businesses) each produce two same kinds of service, each have
demand for ten performances of the services each day, and each have
different costs of producing the services for self-service consumption
 Case 1 – complementary superior
performance
Costs
Costs
A = 1 4, B = 3 2
Self Service
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A = 1 2, B = 4 3
Self Service
A: 10 + 40 = 50
A: 10 + 20 = 30
B: 30 + 20 = 50
B: 40 + 30 = 70
Over produce best by one and exchange
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 Case 2 – one with strictly superior
performance, namely A
Over produce best by one and exchange
A: 11 + 36 = 47
A: 11 + 18 = 29
B: 27 + 22 = 49
B: 36 + 33 = 69
Surprisingly, in Case 2, it still makes sense to exchange service for service as well!
Of course, this ignores transaction costs associated with the exchange…
What happens when the cost decreases with experience/learning/innovations?
What about trading the skill to perform a service, rather than simply performances?
IBM Research
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SSME: Service Science, Management, and Engineering
Under what conditions are compliance laws innovative in a
service system of selfish optimizers?
 Pigou’s Example
A population of commuters must drive from
point A to point B. There are two roads.
The first road always takes one hour. The
second road takes time proportional to the
amount of traffic (all = 1). If everyone takes
the second road, the time is one hour. All
drivers take the second road, it is never
worse than one hour, and maybe better.
C(x) = 1
A
B
C(x) = x
 Braess’s Paradox
Two roads with composed of two parts.
First road has constant one hour plus one
hour max if congested. Second road has
one hour max if congested plus one hour.
Traffic splits so everyone gets from point A
to point B in 90 minutes. However, by
adding a zero cost interchange connecting
the two midpoints, now everyone takes the
two connected congested routes, and now
every takes 120 minutes!
A law that mandates odd and even license plates take different routes
on different days, if backed up with sampling and tickets/fines, could yield better results.
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SSME: Service Science, Management, and Engineering
Baumol and Oulton – Progessive and symptotically
stagnant sectors of economies
 Circa 1960: Imagine an economy with two sectors (manufacturing and
services). Technology for labor substitutions increase productivity at a
steady pace in the “progressive” sector, and the “stagnant” or
“asymptotically stagnant” sector absorbs the labor from the other.
 Circa 2002: Now imagine that the asymptotically stagnant sector is R&D
(primus inter parus). Oulton (Bank of England) suggests that R&D which
produces information is not a final result, but is actually input to the
progressive sector. So as long as R&D productivity gains are slightly
positive, the economy as a whole does not stagnate!
Let, yi = the output of sector I, Li = the primary input quantity used by sector I, where
L1 + L2 = L (constant), Pi = the price of the sector’s output, Gi = the growth rate of
the productivity of the primary input used directly by sector I (with 0 < G1 < G2, so
that sector 1 is the relatively stagnant sector, w primary input price
Y1 = F1(L1, t), Y2 = F2(y1, L2, t)
• Data (Fano): In US, between 1921 and 1938 industrial research personnel
rose by 300%. Laboratories rose from fewer than 300 in 1920 to over 1600 in
1931, and more than 2,200 in 1938.
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Spohrer-Engelbart Cycle of Service System Evolution
 Growing populations of service system in an environment
 Service systems multitasking two services based on two underlying
capabilities
 Advantage of pairs forming to trade, or part of same organization
 Over time efficiency leads to better competencies
 In a growing populations multitasking service systems give rise specialized
service systems, markets and organizations
 Free time leads to new goals, competences, and more multi-tasking as
cycle repeats
 Learning curves improve specialization and technologies used, until it is
cost effective to form new service systems that provide the technology
 As technology capability improves some service systems shift back to self
service – multitasking more
 If the service and technology become universally needed, the technology
may be embedded into the environment as part of a government action to
establish a new utility or national infrastructure
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
If time permits…
 Call centers as exemplar service systems
Balance productivity and quality
Balance compliance and innovation
 Service innovation, beyond cost cutting (e.g., global sourcing, automation)
How to grow when markets don’t
Blue ocean strategies
 Simple service system ecology simulator
Measures up, same, down, indeterminate
Population of measurement makers and users
Examples prices, salaries, success rates, etc.
59
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
How will we know when we have succeeded?
 A textbook that is used in service science and complex systems
courses around the world
Data from variety of service systems (e.g., call center), models, analytics,
action research plans and case studies of service systems
 Payoff in business and societal results (better measurement
systems, models of business-clients-competitors, and theory of
value proposition evolution between service systems)
 Perhaps even a Moore’s like law or investment road map for
predictable service system capability growth (we’ve even had a few
people starting to propose some)
60
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What would service scientists actually do?
 Service scientist own the body of knowledge around service system
problem solving
 Service scientists identify a service system that needs improvement
 Service scientists identify the stakeholders their concerns and perceived
opportunities
 Service scientists envision augmentations (additional new service
systems) or reconfigurations (of old service systems components) that
best address all problems and opportunities
Identify year-over-year improvement trajectories
Identify incentives to change (ROI, leadership, laws)
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Example: Are there “scale laws” of service innovation –
year-over-year compounding effects?
 Problems
Year 1:
20%
Year 2:
20%
Year 3:
20%
Input: Student quality
Process: Faculty motivation
Output: Industry fit
 Augmentations
.
A: -20% eLearning certification
B. +10% Faculty interest tuning
Year N:
.
.
.
.
.
.
.
20%
C. +10% On-the-job skills tuning
After a decade the course may look quite different
Service systems are learning systems: productivity, quality, etc.
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Quadruple Loop Learning of Service Systems
Invest
Relationships
Goals
Plans
Action
Versatility
(Strategy
Adaptation)
Sustainability
(Ecology)
Effectiveness
(Exploration)
Efficiency
(Exploitation)
Expectation
(Met?)
Service actions have quantitative, qualitative, and serendipity components.
63
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
REST IS BACKUP
Contact
Jim Spohrer ( spohrer@us.ibm.com )
Paul Maglio ( maglio@us.ibm.com )
Wendy Murphy ( wendym@us.ibm.com )
PARC Forum | Palo Alto, CA | Nov 16th, 2006
SSME: Service Science, Management, and Engineering
Why does IBM care? Our ability to hire needed talent and innovate
IBM played a role in establishing Computer Science
Now IBM is working with academics and
government to establish Service Science
Engineering and Natural Sciences
Engineering and Natural Sciences
Social Sciences
Social Sciences
Business and Management
Business and Management
Liberal Arts and Humanities
Liberal Arts and Humanities
Other
Other
PhD’s & Masters in U.S. IGS and IBM Research
Physicists
Computer
Science
Electrical Engineers
Mathematicians
Philosophers
(Boolean Logic)
Need to hire Computer Scientists
65
IBM Research
Need to hire Service Scientists
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Herb Simon: “The first service scientist?”
 “Herbert Simon (1916-2001), in the course of a long and
distinguished career in the social and behavioral sciences, made
lasting contributions to many disciplines, including economics,
psychology, computer science, and artificial intelligence. In 1978 he
was awarded the Nobel Prize in economics for his research into the
decision-making process within economic organizations. His wellknown book The Sciences of the Artificial addresses the implications
of the decision-making and problem-solving processes for the social
sciences. “
Models of a Man :
Essays in Memory of Herbert A. Simon
by Mie Augier (Editor), James G. March (Editor)
66
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
National Academy of Engineering, 2003
 “The studies suggest that services industries represent a significant source of
opportunity for university-industry interaction. Services account for more than 80
percent of the U.S. gross domestic product, employ a large and growing share of the
science and engineering workforce, and are the primary users of information
technology. In most manufacturing industries, service functions (such as logistics,
distribution, and customer service) are now leading areas of competitive advantage.
Innovation and increased productivity in the services infrastructure (e.g., finance,
transportation, communication, health care) have an enormous impact on productivity
and performance in all other segments of the economy. Nevertheless, the academic
research enterprise has not focused on or been organized to meet the needs of
service businesses. Major challenges to services industries that could be taken up by
universities include: (1) the adaptation and application of systems and industrial
engineering concepts, methodologies, and quality-control processes to service
functions and businesses; (2) the integration of technological research and social
science, management, and policy research; and the (3) the education and training of
engineering and science graduates prepared to deal with management, policy, and
social issues.”
 From "The Impact of Academic Research on Industrial Performance“
(ttp://newton.nap.edu/catalog/10805.html)
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IBM Research
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SSME: Service Science, Management, and Engineering
Smith: Unproductive Labour, Division of Labour
 “That work consists in services which perish generally in the very instant of
their performance, and does not fix or realize itself in any vendible
commodity which can replace the value of their wages and maintenance... It is
upon this account that, in the chapter in which I treat of productive and
unproductive labour…”
 “This great increase of the quantity of work which, in consequence of the
division of labour, the same number of people are capable of performing, is
owing to three different circumstances; first, to the increase of dexterity in every
particular workman; secondly, to the saving of the time which is commonly lost in
passing from one species of work to another; and lastly, to the invention of a great
number of machines which facilitate and abridge labour, and enable one man to
do the work of many. “
An Inquiry into the
Nature and Causes of the Wealth of Nations
by Adam Smith
68
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Karl Marx: Productive Forces, Social and Technical Relations
 “… maintained at the expense of the whole community.” (judge, police, taxgatherer, religious services, schoolmaster, barber, washerman)
 Marxian thought rests on the fundamental assumption that it is human nature to
transform nature, and he calls this process of transformation "labour " and the
capacity to transform nature “labour power.”
 A mode of production is a specific combination of:
* productive forces: these include human labor power, tools, equipment, buildings and
technologies, materials, and improved land
* social and technical relations of production: these include the property, power and
control relations governing society's productive assets, often codified in law, cooperative
work relations and forms of association, relations between people and the objects of their
work, and the relations between social classes.
Das Kapital
(Capital: The process of the production of capital)
by Karl Marx
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Colin Clark saw the growth of services…
 National Accounting and Services: “It was an outstanding error on
Adam Smith’s part to attempt to exclude services from his definition
of real national product. This exclusion… persisted in the Soviet
definition of national income until Stalin’s recent pronouncement
(October 1952).” (p 6)
 Demand Innovation: “…we may judge the success of an economic
system, as an economic system, by the extent to which it enables
men to satisfy (without contravention of morality) their desires. It
follows logically from this that we must ask ourselves: are we doing
any good in laboring to provide a greater abundance of goods and
services, if in the course of so doing we cause man’s desire to
increase (whether directly through advertising or indirectly as a
result of the general restlessness and competitiveness of the world
in which they live) faster than the means of satisfying them; which is
apparently what we have done in most modern communities.” (p5)
The Conditions of Economic Progress
by Colin Clark
(1940, 1947, 1957 editions)
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
How did the service economy come to be?
Estimated world (pre-1800) and then U.S. Labor Percentages by Sector
120
100
Services (Info)
Services (Other)
Industry (Goods)
Agriculture
Hunter-Gatherer
80
60
40
20
20
50
20
00
19
50
19
00
18
50
18
00
20
00
00
0
2 0 YA
00
0
1 0 YA
00
0
Y
20 A
00
YA
0
Estimations based on Porat, M. (1977) Info Economy: Definitions and Measurement
The Origin of Wealth
by Eric D. Beinhocker
71
IBM Research
The Pursuit of
Organizational
Intelligence,
by James G. March
Exploitation vs exploration
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What economic variables matter in service systems?
 Evolution of Trust: Human beings are the only species in nature to have
developed an elaborate division of labor between strangers. Even something as
simple as buying a shirt depends on an astonishing web of interaction and
organization that spans the world. But unlike that other uniquely human
attribute, language, our ability to cooperate with strangers did not evolve
gradually through our prehistory. Only 10,000 years ago--a blink of an eye in
evolutionary time--humans hunted in bands, were intensely suspicious of
strangers, and fought those whom they could not flee. Yet since the dawn of
agriculture we have refined the division of labor to the point where, today, we
live and work amid strangers and depend upon millions more. Every time we
travel by rail or air we entrust our lives to individuals we do not know. What
institutions have made this possible?
The Company of Strangers : A Natural History of Economic Life
by Paul Seabright
72
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
How do service economies grow?
 Production is measure of results or “goals achieved”
Production per capita (Y) as a function of output per worker (L) and capital assets per worker
(K) and technology investment per worker (I)
Investment drives technology progress and improves the efficiency of labor; accumulates
over time as capital assets
Today: Six billion people (L) with the capital assets created by one hundred billion people
throughout history (K) and innovation investments (I) to increase efficiency of L, K, and I
 Innovation impact will be realized in terms of…
More workers (L): Healthy – healthcare services
More capital assets (K): Wealthy – financial services, retail services, transportation services
More technology investment (I): Wise – education, information, financial services
Growth Theory: An Exposition
by Robert M. Solow
73
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
How do service economies grow?
Developing nations that invest in government services, health and education services, financial
and business services, transportation services, utility services, communication services, and
wholesale and retail services (growth of their service economy) create large populations of
service labor – removing “un-freedoms” of un-healthy, un-educated, un-safe, un-employed, etc.
(see Amartya Sen, “Development as Freedom”)
Business
Services
Financial & information
Professional & business
Extractive
Sector
Consumer
Infrastructure
Services
Trade
Services
Transportation & warehousing
Utilities & communication
Public
Administration
Government & Police
IBM Research
Social/personal
Education & healthcare
Services
Manufacturing
Leisure & hospitality
Sector Source: Dorothy I. Riddle (1986) Service-Led Growth. Praeger, NY
Development as Freedom
by Amartya Sen
74
Wholesale & retail
1998 Nobel Prize
Winner Economics
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Does geography matter in service system evolution?
 People, organizations, technologies
 Space/Geography in the economics of services
 Consumer power in services: Client demand
 Dynamics of knowledge value
 Unifying themes across all service sectors
Service Worlds: People, Organisations, Technologies
by John R. Bryson, Peter W. Daniels, Barney Warf
Also, see “Age of Services”
By James Teboul
75
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What comes after the service economy?
Economic
Offering
Commodity
Goods
Packaged
Goods
Commodity
Services
Consumer
Services++
Business
Services++
Economy
Agrarian
Industrial
Service
Experience
Transformation
Economic
Function
Extract
Make
Deliver
Stage
Co-create value
growth
Nature of
Offering
Fungible
Tangible
Intangible
Memorable
Effectual
Key
Attribute
Natural
Standard
Custom
Personal
Value growth
relationship
Method of
Supply
Stored in
Bulk
Inventory of
product
Delivered
On Demand
Reveal over
duration
Sustained over time
Seller
Trader
Manufacturer
Provider
Stager
Collaborator
Buyer
Market
Customer
Client
Guest
Collaborator
Factors of
Demand
Characteristics
Features
Benefits
Sensations
Capabilities
(Cultural Values)
Based on (Pine & Gilmore, 1999), Table 9-1, pg 170.
The Experience Economy
by B. Joseph Pine II, James H. Gilmore
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
How does one measure productivity in a service economy?
 The services industries—which include jobs ranging from
flipping hamburgers to providing investment advice—can no
longer be characterized, as they have in the past, as a stagnant
sector marked by low productivity growth.
 They have emerged as one of the most dynamic and innovative
segments of the U.S. economy, now accounting for more than threequarters of gross domestic product. During the 1990s, 19 million
additional jobs were created in this sector, while growth was
stagnant in the goods-producing sector.
 They highlight the importance of making improvements within the
U.S. statistical system to provide the more accurate and relevant
measures essential for analyzing productivity and economic growth.
Source: Amazon.com book review
Productivity in the U.S. Service Sector
by Jack E. Triplett and Barry Bosworth
77
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Definition of services (based on Gadrey, 2002)
A. Service Provider
-
Individual
Organization
Technology that
A is responsible for
B. Service Client
Forms of
Service Relationship
(A & B coproduce value)
-
Individual
Organization
Portion of reality
owned by B
Forms of
Forms of
Forms of
Service Interventions
Responsibility Relationship
Ownership Relationship
(A on C, B on C)
(A on C)
(B on C)
C. Service Target: The reality to be
transformed or operated on by A,
for the sake of B
-People, dimensions of
-Business, dimensions of
-Products, technology artifacts & env.
-Information, codified knowledge
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
How do service systems improve over time?
 Arguris: Double loop learning: Double loop learning questions the
governing variables of a systems
 Governing variables: Those dimensions that people are trying to
keep within acceptable limits. Any action is likely to impact upon a
number of such variables – thus any situation can trigger a trade-off
among governing variables.
 Action strategies: The moves and plans used by people to keep
their governing values within the acceptable range.
 Consequences: What happens as a result of an action. These can
be both intended - those actor believe will result - and unintended. In
addition those consequences can be for the self, and/or for others.
On Organizational Learning
by Chris Argyris
79
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Hoe can one manage service system trade-offs?
Service Breakthroughs: Changing the rules of the game
by James L. Heskett, W. Earl Sasser, Christopher W.L. Hart
 From managing trade-offs (old) to creating self-reinforcing service cycle relationships (new)
 Key measures
Quality of service (customer satisfaction) = service quality delivered – service expected
Value to customer = quality of service (results & process) / (price + acquisition costs)
Profit leverage = value to customer – cost to provider
Profitability to provider = margin x repeat usage / investment
customer
Increased Trials
provider
Increased Volume
Lower Cost of Service
Increased Margins
Increased Referrals
Greater Pricing
Latitude
Increased Repeat Usage
Greater Investment Options in Service Results and Quality
Greater Conformance
with Expectations
Lower Perceived Risk
Increased Value
Lower Acquisition Costs
Increased Service Quality
Improved Results from Service
80
IBM Research
Development of
Customer-Oriented
Policy
Investment in Technology
Service Delivery
Investment in
Human Resources
Investment in
Marketing
Higher Server
Motivation
Higher Server
Satisfaction
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Can a business be viewed as a service system?
 “First, and most fundamentally, organizations and business
strategy can be as important as technology, cost, and demand in
determining a firm's success.”
 “The study of organization is not about how berries are arranged
on a tree of authority, but about how people are coordinated and
motivated to get things done.”
 “We study coordination: what needs to be coordinated, how
coordination is achieved in markets and inside firms, what the
alternatives are to close coordination between units, and how the
pieces of the system fit together. We also study incentives and
motivation: what needs to be motivated, why incentives are
needed, and how they are provided by markets and firms, what
alternative kinds of incentive systems are possible, and what
needs to be done to make incentive systems effective."
Economics, Organization and Management
by Paul Milgrom, John Roberts
81
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What can be learned from the evolution of manufacturing?
 Process control is the coordination of machines, human labor, and
the organization of work to effect the manufacture of a product.
 Six epochs of manufacturing process control can be delineated:
Craft System (circa 1500)
English System of Manufacture (circa 1800)
American System of Manufacture (circa 1830)
Taylor System (circa 1900)
Statistical Process Control (circa 1950)
Numerical Control (circa 1965)
Computer Integrated Manufacturing (circa 1985)
From Filing and Fitting to Flexible Manufacturing:
A Study in the Evolution of Process Control
by Roger Bohn and Ramchandran Jaikumar
82
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Does Service System = Socio-technical System = Economic
System = Work Systems Design and Evolution?
 The Work Systems Method to organizations:
* Recognizing that systems involve much more than IT
* Describing and understanding systems from a business viewpoint
* Analyzing and improving systems
* Improving communication between business and IT professionals
* Increasing the likelihood of successful implementation
* Understanding the role and limitations of IT
The Work System Method:
Connecting People, Processes, and IT
for Business Results
by Steven Alter
83
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
How does technology matter in designing new web
services?
 Document Engineering: A new synthetic discipline
With roots in Information and Systems Analysis (Data Analysis), Electronic
Publishing (Document Analysis), Organization Science (Business
Process Analysis), Business Informatics (Transaction Analysis), UserCenter Design (Task Analysis)
Design of Documents and Business Processes
Design of Web Services and Service Oriented Architectures
 Related to Business Informatics– “combine the modern theory,
methods, and techniques of business (i.e., organization science)
and informatics (information and computing science) into one
integrative programme.” (definition from Utrecht University)
Document Engineering :
Analyzing and Designing Documents for
Business Informatics and Web Services
by Robert J. Glushko, Tim McGrath
84
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
How can we formally model service systems?
 “Accelerating economic, technological, social, and environmental
change challenge managers and policy makers to learn at
increasing rates, while at the same time the complexity of the
systems in which we live are growing. Many of the problems we
now face arise from unanticipated side effects of our own past
actions.”
 Dynamic complexity arises because systems are:
Dynamic, tightly coupled, governed by feedback, nonlinear, history
dependent, self organizing, adaptive, counterintuitive, policy resistant,
and characterized by trade-offs
 How rapid is the change and are there any patterns in how humans
deal with complexity… how do people invest their time?
Business Dynamics:
Systems Thinking and Modeling for a Complex World
by John Sterman
85
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Example Model:
Oliva & Sterman (2001) Quality Erosion in Service Industry
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Introduction to SSME









87
What is SSME?
Why is SSME so important?
Why does IBM care?
Who else cares?
What kinds of skills should a service scientist have?
What kinds of tools should a service scientist have?
What does a service scientist actually do?
Are there “scale laws” of service innovation?
Questions?
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What is SSME?
(Services Sciences, Management, and Engineering)
 An urgent “call to action”
To become more systematic about innovation in services
Complements product and process innovation methods
To develop “a science of services”
 A proposed academic discipline
Draws on many existing disciplines
Aims to integrate them into a new specialty
 A proposed research area
Service systems are designed (computer systems)
Service systems evolve (linguistic and social systems)
Service systems have scale-emergent properties (economic systems)
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What is SSME?
(Services Sciences, Management, and Engineering)
 The application of scientific, management, and engineering disciplines to tasks
that one organization beneficially performs for and with another (‘services’)
Understand the evolution and design of service systems
Service systems are value coproduction configurations of people, technology, organizations,
and shared information, such as physical, mathematical, and national laws
Make productivity, quality, compliance, sustainability, and innovation rates more predictable
Invest in service systems to make them into double-loop learning systems
 Science is a way to create knowledge
 Engineering is a way to apply knowledge and create new value
 Management improves the process of creating and capturing value
89
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Why is SSME so important?
 Governments need to make service innovation a priority
GDP growth of nations increasingly depends on it
 Businesses need to make service innovation a priority
Revenue and profit growth increasingly depend on it
 Academics need to make service innovation a priority
Students’ futures depend on it
Improved education productivity and quality depends on it
New frontier of research with business and societal impact
90
IBM Research
© 2006 IBM Corporation
Almaden Services Research
IBM’s SSME Course Materials
http://www.almaden.ibm.com/asr/SSME/coursematerials/
91
Service Science
© 2006 IBM Corporation
Almaden Services Research
Recent Meeting on Education for Service Innovation
http://www.almaden.ibm.com/asr/SSME/esi/
92
Service Science
© 2006 IBM Corporation
Almaden Services Research
Upcoming Summit on Service Education – October 2006
http://www.almaden.ibm.com/asr/SSME/summit/
93
Service Science
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Who else cares?
 Governments
US,European Commission, China, Japan, Germany, UK, Finland,
Norway, Denmark, Sweden, Italy, Netherlands, Russia, India, Belgium,
and others
US Department of Commerce, NSF, NIST, DARPA, VTT,etc.
 Industry
IBM, Accenture, HP, EDS, CSC, Cisco, P&G, American Express, John
Deere, Avaya, Oracle, and many others
 Academics
ASU, PSU, NCSU, Berkeley, RPI, UCSC, Georgia Tech, Bentley,
Stanford, CMU, UCLA, BYU, Yale, Harvard, MIT, Northwestern,
UArizona, UMaryland, UGeorgia, UMichigan, UTexas, MichiganSU,
Columbia, Oxford, Warwick, Tokyo University, Peking University,
Carlsruhe, AIO, Norwegian School of Economics, Helsinki University
of Technology, University of Rome La Sapienza, and many others
 Others
BestServ, OECD, Institute for the Future, Bay Area Economic Forum, etc.
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Evolution &
Revision
School of
Management
Marketing
Service Marketing
Operations
Service Operations
Accounting
Service Accounting
(Activity-Based Costing)
Contracts & Negotiations
Service Sourcing
(eSourcing)
Management Science
Service Management
Management of
Technology
Management of
Innovation
Operations Research
Service Operations
Industrial & Systems
Engineering
Service Engineering
Computer Science
Service Computing, Web
Services, SOA
Economics
Institutional Economics
Experimental Economics
Psychology
Labor Psychology
(Human Capital Mgmt)
Anthropology
Business Anthropology
School of Engineering
and Science
School of Social Sciences
Organization Theory
Other
95
Information Science & Systems, Service professional
schools
IBM Research
Selection &
Aggregation
Transformation
& Integration
Services Sciences, Management, and Engineering
(SSME) and Solutions Engineering
Discipline
Service & Solutions Excellence Centers
(Information Science & Technology Management)
School
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What kinds of skills should a service scientist have?
 Technology
Make, Verify, Deliver, Operate, plus eServices & eMarkets
 Business
Propose (win-win), Finance, Market, Manage, plus eBusiness & eMarkets
 Social-Organizational
Coordinate, Motivate, Govern, Learn, plus eSourcing and eMarkets
Education in reading, writing, and arithmetic (3 R’s) enabled 19th century innovation.
Add science, technology, engineering, and mathematics (STEM) for the 20th century.
Add more info. technology, business, and social-organizational enable 21st century, or
Social-Technology-Economic-Environmental-Political (STEEP).
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What kinds of skills should a service scientist have?
Academic disciplines evolving to combine technology, business, and social-organization
Before 1900
1. Education
1960-1990
Technology
2. Sociology
17. Experimental
Economics
3. Law
4. Economics
18. AI & Games
15
5. Business
Administration (MBA)
6. Managerial
Psychology
7. Human Capital
Management (HCM)
8. Organization Theory
9. Operations Research
10. Systems Engineering
11. Management Science
12. Game Theory
13. Industrial Engineering
14. Marketing
15. Computer &
Information Sciences
97
16. Management of
Innovation & Tech (MoT)
1
19. Management of
Information Systems
13 10
18
24
19
26
21 23
28
9
22 16
27 25
20
7
8 2
14
17 4
5
11
6
Business
Social12
Organizational
3
1900-1960
IBM Research
1990-2004
20. Computer Supported
Collab. Work (CSCW)
21. Performance
Support Systems In
Business & Organization
22. Inform. Sci & Sys
23. Service Ops & Mgmt
24. Service Engineering
25. Service Marketing
26. Social Complexity
27. Agent-based
compute. economics
28. Computational
Organization Theory
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What kinds of tools should a service scientist have?
Operating&Monitoring
Market
outcome
Conduct
Market structure
Knowledge
Based
Market
Design
Trader
A
CAME Web Service
Transaction object
Trader
B
CAME Web Service
CAME (WEB) Suite
Market
Engineering
Workbench
( Bichler, Kersten, Strecker 2003)
(Transcoop, Weinhardt, Neumann,2003)
For Example: Computer-Aided Market Engineering System
(AvH and SSHRC)
D. Neumann, J. Maekioe, C. Weinhardt (2005): CAME - A Toolset for Configuring Electronic Markets; In: Proceedings of the ECIS 2005, Regensburg
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SSME: Service Science, Management, and Engineering
“We are continually
creating a new
and novel world.”
- Douglass C. North
“Innovative activity
is fundamentally a
service activity.”
- William J. Baumol
Service
Economy
New Industries
…
…
New Specialists
Knowledge Workers
Education & Employment
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IBM Research
Based on slides by Jean Paul Jacob, IBM Researcher Emeritus
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Definition of services (based on Gadrey, 2002)
A. Service Provider
-
Individual
Organization
Technology that
A is responsible for
B. Service Client
Forms of
Service Relationship
(A & B coproduce value)
-
Individual
Organization
Portion of reality
owned by B
Forms of
Forms of
Forms of
Service Interventions
Responsibility Relationship
Ownership Relationship
(A on C, B on C)
(A on C)
(B on C)
C. Service Target: The reality to be
transformed or operated on by A,
for the sake of B
-People, dimensions of
-Business, dimensions of
-Products, technology artifacts & env.
-Information, codified knowledge
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Questions?
Focus on Education, Employment, Innovation, Economic Growth:
Complex Business Performance Transformation Services
Service Marketing, Operations, and Management
Operations Research and Management Science
Industrial & Systems Engineering, Control Theory
Information Sciences and Systems Engineering
Management of Technology and Innovation
Computer Science, Distributed AI, CSCW
Computational Organization Theory
Social and Cognitive Science
Economics & Jurisprudence
Game Theory and Mechanism Design Theory
Management of Information Systems
Organization Science, Complexity Management Theory
Business Informatics and Document Engineering
Business Anthropology and Learning Organizations
Decision Science and Knowledge Management
Human Capital Management & Incentive Engineering
Quality, Six Sigma, Statistics, Process Optimization
Computer Aided Market Engineering
SSME
Service Science
Services: Value coproduction acts, promises, and relationships
via sharing work, risk, information, assets, decisions, responsibility, and authority
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IBM Research
Slide by Jean Paul Jacob
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
A Grand Challenge: Predictable Service Productivity Growth
Productivity Other Considerations
Global
Values, Demands,
Aspirations, Wants, Needs
Sustainability
& Demand
National
Policies & Laws,
Public Infrastructures
Growth &
Innovation
Industry
Crime, Terrorism,
Cheating, Other Mischief
Standards
& Compliance
Enterprise
Foundations, Not-for-Profits,
Research Organizations
Growth &
Innovation
Work System
Graduates from
Schools & Universities
Quality
& Learning
Knowledge Worker
Professions
Family Life, Local
Community, Environment
Opportunity
& Sustainability
IBM Research
Measurement of Service Systems
Measurement of Sociotechnical Systems
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Issues
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Innovation sustains skilled employment and exports
1800-
England
Industrial Revolution
1850-
Germany
Chemicals Revolution
1900-
USA
Electrical & Information Revolution
1950-
Japan
Quality Innovation: Product Revolution
1990-
Finland
Mobile Communication Revolution
2000-
India
Cost Innovation: Services Revolution
2000-
China
Cost Innovation: Product Revolution
?
Future of Products & Services Exports
Sustainable growth depends on innovation via
regional government, industry, academic collaboration.
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Are there “scale laws” of service innovation?
 Moore’s Law underlies much of the information technology and business capability growth over the
last half century
Are there analogous “predictable capability doubling laws” that apply in the realm of services? If so, how might they
be exploited to improve service productivity and quality in a predictable manner?
It seems three improvement or learning curve laws that might be applicable in services:
The more an activity is performed (time period doubling, demand doubling) the more opportunities there are to
improve the process
The better an activity can be measured (sensor deployment doubling, sensor precision doubling, relevant
measurement variables doubling) and modeled the more opportunities there are to improve the process
The more activities that depend on a common sub-step or process (doubling potential demand points), the more
likely investment can be raised to improve the sub-step.
 Example: Amazon’s Book Buying Recommendation Service Quality
The quality of the recommendations depends on accurate statistics – the more purchases made, the better the
statistical estimates for recommendations
 Example: Call Centers Query-Response Productivity and Quality
The speed and quality of call center responses can be improved significantly given accurate statistics about the
kinds and number of queries that are likely to be received.
 Example: New Service Offerings Viability (Blue Ocean Strategy)
The viability of new service offerings often depends on the scale (amount of demand) in adjacent market segments
where service satisfaction is low enough to result in sufficient critical mass of defections to bootstrap the new
offering.
 Example: Predictable Education Gains (Student Knowledge, Teacher Satisfaction)
If eLearning can be used to shift 20% of routine teacher activities into automation that can be covered in half the
normal time, freeing up 10% of teacher time each year to innovate and add new content or exploratory activities
to the curriculum, then each year students will be learning more and teachers will have time to try new things.
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What is SSME?
(Services Sciences, Management, and Engineering)
 The application of scientific, management, and engineering disciplines to tasks
that one organization beneficially performs for and with another (‘services’)
Make productivity, quality, compliance, sustainability, learning rates, and innovation rates more predictable in
the service sector, especially complex organization to organization services – business to business,
nation to nation, organization to population
Services are anything of economic value that cannot be dropped on your foot – the key to service value is in
actions, performed now or promised for the future. Services transform/protect or promise to
transform/protect a state of the target of the service. The client may not have the skill, time, desire, or
authority to perform self-service, do it themselves. Services often create mutual interdependencies.
Services are value coproduction performances and promises between clients and providers, with alternative
work sharing, risk sharing, information sharing, asset sharing, and decision sharing arrangements and
relationships (promises to perform now or in the future, once or repeatedly, when needed or demanded,
standard or customized, satisfaction guaranteed or best effort, service levels fixed or variable)




Science is a way to create knowledge
Engineering is a way to apply knowledge and create new value
Business Model is a way to apply knowledge and capture value
Management improves the process of creating and capturing value
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What can you do to get involved? [government]





106
Does your agency fund innovation?
Does your agency influence innovation policy?
Does your agency establish standards?
Does your agency deal with intellectual property?
Does your agency deal with economic statistics?
IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What can you do to get involved? [industry]
 Does your business develop, sell, and/or deliver service offerings?
 Does your business have a service innovation process?
 Does your business use services to complement and add value to
manufactured products?
 Does your business invest in internal R&D?
 Does your business fund university or other external R&D?
 Does your business create case studies, success stories, white papers, or
point-of-view documents about service offerings?
 Does your business recruit service professionals? Service researchers?
 Does your business provide feedback to schools (survey recent graduates
hired) on what skills are desired to be most effective in your business?
 Does your business procure services? eSource of services? Outsource
services?
 Does your company patent or otherwise protect intellectual property related
to service innovation?
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What can you do to get involved? [academics]
 Do you teach courses that include or could include complex business to
business service case studies?
 Do you have responsibility for revising or creating new curriculum?
 Do you perform research that could be published in the Journal of Service
Research or other relevant journals or conferences?
 Do you have students who could intern with business service or service
research organizations? Compete for PhD fellowships in services?
 Are you interested in industry-academic rotations?
 Are you interested in developing tools that could enable SSME?
 Are you interested in creating business proposals or grant proposals
related to SSME and service innovation? Competing for university
research awards?
 Are you interested in participating/speaking in SSME events? Hosting one
at your university?
 Does your school already have services related courses, degrees, centers,
or institutes?
 Are you a service innovation pioneer? Are you interested in competing for
a faculty award?
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What is IBM doing to support others?
 Publicizing a “call to action” around SSME and the need for systematic
approaches to service innovation (identify IBM relationship/ambassadors)
 Hosting and cosponsoring SSME and service innovation related events with
government, industry, and academics around the world
 IBM Faculty Awards to select service innovation pioneers
 IBM PhD Fellowships to select services-related PhD students
 IBM University Research (SUR) awards to select academic institutions
proposing leading edge service innovation and SSME related work
 Providing best paper awards for leading service research related journals
and conferences
 Working with government funding agencies to increase focus and establish
new programs related to service innovation
 Inviting people to contribute to an SSME blog, and share information about
their SSME related efforts (http://www.research.ibm.com/ssme)
 Working with some academic institutions to provide access to service data
 Hiring recent graduates into IBM Global Services and IBM Research
 Supporting curriculum development and research efforts, and much more…
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
IBM’s SSME Course Outline
1. Services – What are services?
2. Systems – Services depend on sociotechnical systems
3. Methods – Service delivery depends on methods
4. Industrialization – Services are being standardized
5. Quality – How do we ensure quality of service?
6. Components – Business processes are being modularized
7. Science – Is there a science of services?
8. Management – What is different in management of services?
9. Engineering – Can service engineering foster innovation?
10. Productivity – Why do services resist productivity gains?
11. Challenges – What are the big problems for the service economy?
12. Innovation – Can we be systematic about innovation on services?
13. Business Transformation Services & Industry Solutions
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Mary Jo Bitner, ASU, Center for Services Leadership
IBM faculty award, Service research pioneer
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Example: Berkeley’s new ORMS undergraduate major
http://www.ieor.berkeley.edu/AcademicPrograms/Ugrad/ORMS.pdf
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Example: Berkeley SSME Certificate Program
http://www.citris-uc.org/news/2006/01/25/services_science_management_and_engineering_curriculum_launched
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Example: Business School SSME Curriculum for MBA
Services
Management
Relationship
Management
Focus
Electives
Market Research
Marketing Strategy
Project Management
Supplier Relations
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IBM Research
Consulting
Service
Innovation
Focus
Business
Relationship
Management
Process Analysis
and Design
Organizational
Culture
Organizational
Culture
Market Analytics
New Service
Development
Electives
Project Management
Marketing Strategy
Service Modeling
E-Commerce Practicum
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Henry Chesbrough, Berkeley, a service science pioneer.
IBM Faculty Award
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Jim Tien and Daniel Berg, RPI
IBM Faculty Award, Service research pioneers
Established RPI “Service Research and Education” Center in early-90’s
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Marietta Baba, Dean, Social Sciences, Michigan State University
IBM Visiting Scholar, Spring 2005, Sociotechnical Systems Theory Pioneer
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Service Science – Reading List
 Motivation
Chesbrough (2005) Towards a new science of services. Harvard Business Review.
Chesbrough (2004) A failing grade for the innovation academy. Financial Times.
Rust (2004) A call for a wider range of services research. J. of Service Research.
Tien & Berg (2003) A case for service systems engineering. J. Sys. Science & Sys. Eng.
Rouse (2004) Embracing the enterprise. Industrial Engineer.
Karmarkar (2004) Will you survive the services revolution. Harvard Business Review.
 Philosophy
Vargo & Lusch (2004) Evolving a new dominant logic for marketing. J. of Marketing.
 Exemplar Model
Oliva & Sterman (2001) …Quality erosion in the services industry. J. of Management Science.
 Economics
Bryson et al (2005) Service worlds. Routledge. London, UK.
Herzenberg et al (1998) New rules for a new economy. Cornell University Press. Ithaca, NY.
 Technology
McAfee (2005) Will web services really transform collaboration? MIT Sloan Management Review.
 Textbooks
Fitzsimmons & Fitzsimmons (2001) Service management. McGraw-Hill. New York, NY.
Sampson (2001) Understanding service businesses. John Wiley: New York, NY.
 Evolution and Change: Managed, Designed, and Emergent
Khalil, Tarek (2000) Management of Technology. McGraw-Hill, New York, NY.
Nelson (2003) On the uneven evolution of human know-how. J. of Research Policy.
Agre (2004) An anthropological problem, a complex solution. J. of Human Organization.
Baba & Mejabi (1997) Socio-Technical Systems. J. of Human Factors & Industrial Egronomics.
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Select efforts to promote service science

Dec. 2002: Almaden Service Research established, the first IBM Research group completely dedicated to understanding service
innovations from a sociotechnical systems perspective, including enterprise transformation and industry evolution
(http://www.almaden.ibm.com/asr/)

March 2003: IBM-Berkeley Day: Technology… At Your Service!
(http://www.eecs.berkeley.edu/IPRO/IBMday03/)

September 2003: Coevolution of Business-Technology Innovation Symposium
(http://www.almaden.ibm.com/coevolution/)

April 2004: Almaden Institute: Work in the Era of the Global, Extensible Enterprise
(http://www.almaden.ibm.com/institute/2004/)

May 2004: “Architecture of On Demand” Summit: Service science: A new academic discipline?
(http://domino.research.ibm.com/comm/www_fs.nsf/pages/index.html)

June 2004: Paul Horn, VP IBM Research, briefs analysts on “Services as a Science”

September 2004: Chesbrough’s “A failing grade for the innovation academy” appears in the Financial Times
(http://news.ft.com/cms/s/9b743b2a-0e0b-11d9-97d3-00000e2511c8,dwp_uuid=6f0b3526-07e3-11d9-9673-00000e2511c8.html)

November 2004: IBM’s GIO focuses on service sector innovations: government, healthcare, work-life balance
(http://www.ibm.com/gio)

November 2004: Service Innovations for the 21st Century Workshop
(http://www.almaden.ibm.com/asr/events/serviceinnovation/)

December 2004: Samuel J. Palmisano, IBM CEO, Harvard Business Review interview discusses the important role of “values” in
organizational performance, “Leading Change When Business is Good”
(http://harvardbusinessonline.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=R0412C)

December 2004: IBM expands academic initiatives related to service innovations, including sponsoring Tannenbaum Institute of
Enterprise Transformation at Georgia Tech.

February 2005: Chesbrough’s “Service as a Science” in Harvard Business Review Breakthrough ideas of 2005

2005 - Oxford, Warwick, Bentley, Penn State, UMaryland, ASU, NCState, Japan, China, Norway, etc.
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
One Policy
Challenge:
Beyond Technology
Patents… Patenting
Business, SocialOrganizational,
Demand Innovations
Source:
Robert M. Hunt
“You can patent that?
Are patents on software and
business models good for
the new economy?”
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SSME: Service Science, Management, and Engineering
Terms & Definitions
 Service Science, short for Services Sciences, Management, and Engineering (SSME)
 Definition 1: The application of scientific, management, and engineering disciplines
to tasks that one organization beneficially performs for and with another (‘services’)
Make productivity, quality, performance, compliance, growth, and learning improvements
more predictable in work sharing and risk sharing (coproduction) relationships.
 Definition 2: The study of service systems.
Evolution & Design: Services systems evolve in difficult to predict ways because of naturally
emergent and rationally designed path dependent interactions between economic entities,
acting in the roles of clients and providers coproducing value.
Interactions & Value Coproduction: Service systems are made up of large numbers of
interacting clients and providers coproducing value. Each economic entity is both a client
and a provider. Service system dynamics are driven by the constantly shifting value of
knowledge distributed among people, organizations, technological artifacts (culture), and
embedded in networks or ecosystems of relationships amongst them.
Specialization & Coordination: One mechanism for creating value is specialization of clients
and providers, which results in the need for coordination via markets, organizational
hierarchies, and other mechanisms. Specialization creates efficiency. Efficiency creates
profits and leisure. Profits and Leisure create investment (profits to innovation) and new
demand (leisure to new aspirations).
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SSME: Service Science, Management, and Engineering
So, services are…
Pay for performance in which client and provider coproduce value
 High talent performance
Knowledge-intensive business services (business performance transformation
services) (e.g., chef’s, concert musicians)
 High support performance
Environment designed to allow average performer to provide a superior
performance (average cook with great cook book and kitchen; average
musician with a synthesizer)
 High tech performance
Computational services (e-commerce, self service – client does work)
Even here… talent builds, maintains, upgrades, etc. the technology
 Routine performance (sometime High Finance)
This is being automated, outsourced, labor arbitrage, financial arbitrage,
migrated to high talent/value sectors, or otherwise being rationalized
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Service Science Core Questions: How do work systems
reconfigure? What role does innovation play? Can integration
relationships be found across different types of work system?
Human
System
Help me
by doing some
of it for me
(custom)
Help me
by doing all
of it for me
(standard)
Tool
System
Collaborate
Augment
(incentives)
(tool)
1
Z
2
Delegate
Automate
(outsource)
(self-service)
3
4
The choice to
change work practices
requires answering
four key questions:
- Should we? (Value)
- Can we? (Technology)
- May we? (Governance)
- Will we? (Priorities)
Organize People Harness Nature
(Socio-economic models with intentional agents) (Techno-scientific models with stochastic parts)
Example: Call Centers
Collaborate
(1970)
Experts: High skill people on phones
123
Augment
(1980)
Tools: Less skill with FAQ tools
IBM Research
Delegate
(2000)
Market: Lower cost geography (India)
Automate
(2010)
Technology: Voice response system
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Global Services: Opportunities & Challenges
 Opportunities
Globalization (Developed & Developing)
ICT (R)evolution (eServices & Semantics)
Business Performance Transformation Services (BPTS)
Service Entrepreneurship (SME)
 Challenges
Education (Talent & Tools: High Value Jobs)
Innovation (Investment & Protection: High Value Exports)
Science (Formalization of Service Systems & Systematic
Methods: Sustainable Growth)
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What will the next new service industry be?
 Online game worlds for
business applications?
 Google Search (less
than a decade old)
 Semantic Search?
 Book: Blue Ocean
Strategies
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Endless Stream of Industries & Knowledge Workers…
Government
& security
Health &
education
Financial &
insurance
Professional
& business
Information &
communication
Retail &
wholesale
Leisure &
hospitality
Transportation
& utilities
High skill
executive,
judge
doctor,
professor,
dean
broker,
partner
executive,
lawyer,
scientist,
engineer,
architect,
entrepreneur
executive,
engineer
executive,
proprietor
producer,
director,
proprietor,
designer,
star athlete
performer
pilot, executive,
engineer
Semiautonomous
legislator,
policy
researcher,
patent
analyst
pharmacist,
nurse,
teacher,
technician
analyst,
actuary,
underwriters
manager,
accountant,
HR, PR,
marketing,
business dev
technician,
system
administrator,
journalist, writer,
announcer
buyer, high
end sales
actor,
performer,
artist,
technician
attendant,
maintenance
technician,
plumber,
electrician
Unrationalized
labor intensive
police,
firefighter,
security
guard
nurses aid,
day care
worker,
ambulance
driver
adjustors,
auditor,
investigators
admin.
assistant,
hiring
specialist,
door to door
sales
call center
specialist,
librarian
sales clerk,
stocker,
shipping &
receiving
maid,
janitor,
waiter,
gardener,
cook,
barber
truck driver,
field force
technician,
machine
operator
Tightly
constrained
inspectors,
data entry
data entry
bank teller,
check
proofers
inspectors,
receptionist
telephone
operator
sales
counter
clerks
fast food
worker
inspectors
Client
citizen,
plaintiff,
defendant,
inventor
patient,
student,
subscriber
shareholder,
client,
subscriber
client
subscriber
consumer,
shopper
guest
subscriber,
commuter
- based on Herzeberg et al, (1998). All occupations span a range, placement is representative only.
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© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Service jobs are increasingly the high skill knowledge worker
jobs – especially in business and information services
95% of all business executives and research scientists are alive today.
Type of work
system
1979
All
Service
Manufacture
Admin.,
Manager
High-skill
Autonomous
34%
40%
40%
40%
Executive,
Scientist
SemiAutonomous
35%
30%
30%
35%
Admin.,
Manager
Unrationalized
Labor
Intensive
25%
25%
26%
15%
Maid, child
care
Tightly
Constrained
6%
5%
4%
10%
Call center,
Fast food
From Herzenberg, Alic, Wial (1998)
127
Example
1996
IBM Research
-from Herzenberg, Alic, & Wial (1998). New rules for a new economy.
Employment and opportunity in postindustrial America.
Cornell University Press.
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Projected US Service Employment Growth, 2004 - 2014
US Bureau of Labor Statistics.
http://www.bls.gov/opub/ooq/2005/winter/art03.pdf
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IBM Research
© 2006 IBM Corporation
Information services is fastest growth
Uday Karmarkar & Uday Apte: “Service industrialization in the global economy”
Author of HBR article: “Will you survive the services revolution?”
Products
Material
Information
Services
11%
30%
9%
50%
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© USK/Sep’04
SI&GIE/129
IBM Research
Having a vision is not enough …
Bob Sutton, IBM Faculty Award, pro-Service Innovations
Skills +
Incentives +
Resources +
Action Plan
= Change
Skills +
Incentives +
Resources +
Action Plan
= Confusion
Incentives +
Resources +
Action Plan
= Anxiety
Resources +
Vision +
Vision +
Skills +
Incentives +
Vision +
Skills +
Incentives +
Vision +
Skills +
Action Plan
= Frustration
Action Plan
= Slow change
Structure
Resources +
= False starts
Strategy
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IBM Confidential
Implement
Process
People
Tools
Culture
Vision +
Operations
© Copyright IBM Corporation 2004
SSME: Service Science, Management, and Engineering
Does manufacturing matter in a service economy?
 “In today’s sophisticated technological environments, high-tech
services are inextricably linked to mastery and control of
manufacturing. Lose manufacturing, and you will lose your
competitive edge high-tech capabilities, as well as much”
 Upstream services help producers of products/technology
Typically shift to production locations
 Downstream services help consumers of products/technology
Typically shift to consumer locations
Manufacturing Matters:
The Myth of the Post-Industrial Economy (1987)
by Stephen S. Cohen and John Zysman
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IBM Research
© 2006 IBM Corporation
Source: OECD Science, Technology and Industry Outlook 2004
Jerry Sheehan
%
Manufacturing
Slovak Republic (1992-2001)
Czech Republic (1992-2001)
United Kingdom
Switzerland (1996-2000)
Poland (1994-2001)
Norway (1991-2001)
Belgium (1992-2001)
New Zealand
Italy
Australia
Hungary (1993-2001)
Canada
United States
Greece (1991-1999)
Denmark
Services
Spain
European Union (1995-2001)
France
Netherlands
Total OECD (1995-2001)
Finland (1991-2001)
Portugal
Austria (1993-1998)
Germany (1991-2001)
Japan
Korea (1995-2001)
Sweden (1991-2001)
Ireland
Turkey (1990-2000)
Iceland
Mexico (1992-2001)
Growing role of services
Average annual growth rate of business R&D expenditure, 1990-2001
50
40
30
20
10
0
-10
-20
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Even though R&D is less closely linked to
service-sector innovation
Manufacturing
Services
70
70
60
Innovation density, 1998-2000
as a % total firms (Eurostat CIS3 survey)
Innovation density, 1998-2000
as a % total firms (Eurostat CIS3 survey)
Germany
Belgium
Netherlands
Austria
Iceland
Denmark
50
Finland
Portugal
Sweden
France
Italy
Norway
Spain
40
30
60
Germany
Iceland
Portugal
50
Sweden
Austria
Belgium
40
Netherlands
Finland
Denmark
France
Norway
Greece
30
Greece
Italy
Spain
20
20
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
0.0
Average BERD intensity, 1995-2000
as a % of GDP (OECD data)
Source: OECD Science, Technology and Industry Outlook 2004
Jerry Sheehan
0.2
0.4
0.6
0.8
Average BERD intensity, 1995-2000
as a % of GDP (OECD data)
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OECD Science, Technology and Industry
Outlook
Jerry Sheehan, OECD, 8 February 2005

Science, technology and innovation are receiving greater policy
attention as their links to economic growth are more widely
appreciated.

Innovation policy has been slow to adapt to the needs of the
service sector, which accounts for growing share of output and
employment in OECD economies.

Science, technology and industry are increasingly globalized,
requiring further adaptation of policy to ensure benefits accrue
to national economies.
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SSME: Service Science, Management, and Engineering
Trend 1: Rise of the Service Economy
Service sector has rapidly grown in US
(70% of labor force)
Other nations are following the same
pattern (urbanization, infrastructure,
and business growth drive the shift)
Service sector buys 80% of the $2.1T IT
annual spend (worldwide)
Four service industries are large and
growing their IT spend rapidly to
transform processes: financial and
information, professional and business,
retail and wholesale, and government
Top Ten Labor Forces by Size
(WW 50% Agriculture., 10% Goods, 40% Services)
% US Labor Force by Sector
(S) Services:
Value from enhancing,
protecting, distributing,
understanding, and
customizing
(G) Goods:
things
Value from
making products
(A) Agriculture:
Value from
harvesting nature
IT spend contributes to rapid growth of
productivity (GDP/Jobs) as well
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SSME: Service Science, Management, and Engineering
Trend 2: Rise and Shift in Service Research
Academic centers have slowly
increased over the past 20 years to
advance the practical and theoretical
knowledge of services businesses
Initially, the emphasis in service
research and teaching was on B2C
capacity and demand models – because
underutilized capacity hurts
productivity. Also demand that is
simply waiting in queues may be lost or
damage client satisfaction. Service
places like banks, airports, hotels, etc.
Increasingly over the past ten years, the
new frontier of service research and
teaching has shifted more and more
towards B2B business process
transformation models. Process reengineering, IT productivity paradox,
and other case studies highlight the
need to constantly redesign work to
improve productivity through multiple
types of innovation (demand, business
value, process, and organization)
Service research and practice agree that
effective communication in service
engagements depends on an
appreciation of multiple factors:
technology and process, business value
and strategy, and organizational culture
and people. With proper coordination
between these per- spectives BPTS
engagements succeed. A top adaptive
work force requires people with a level
of capability and familiarity in many
relevant areas.
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IBM Research
“The biggest costs were in changing the organization.
One way to think about these changes is to treat the
Organizational costs as an investment in a new asset.
Firms make investments over time in developing a new
process, rebuilding their staff or designing a new
organizational structure, and the benefits from these
Investments are realized over a long period of time.”
Eric Brynjolfsson, “Beyond the Productivity Paradox”
Part 3: Managing Service Operations
Chapter 10. Forecasting Demand for Services
Chapter 11. Managing Waiting Lines
Chapter 12. Queuing Models and Capacity Planning
Chapter 13. Managing Capacity and Demand
(Excerpt from Fitzsimmons & Fitzsimmons)
BPTS = Business Process Transformation Services
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
Four targets of knowledge intensive service activities…
people, business, products, and information
Has Rights
Tangible
Intangible
People
Business
(organizations)
Is Owned
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IBM Research
Products
Information
(technology artifacts
and environment)
(capital, reputation,
process, laws, science)
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
What Physicists Do At IBM Research…
This achievement is a major milestone toward creating a microscope
that can make three-dimensional images of molecules with atomic resolution
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
IBM Computer Scientists build bigger, faster computers
Blue Gene, as its name suggests, is aimed at the drug-development market.
Scientists hope eventually to model how proteins fold – a process that is
important in designing drugs that can block cancer cells and other diseases.
70.72 teraflops on 11/2004
(Linpack benchmark)
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IBM Research
© 2006 IBM Corporation
SSME: Service Science, Management, and Engineering
But what about service innovation?
 What is service innovation?
Increase margins of delivering existing service offerings – cut costs
Create new kinds of high value service offerings – grow revenue
Improve skilled labor productivity in creating and delivering service…
But how to do these things?
We can hire physicists and computer scientist to innovate
But who do you hire to do service innovation?




Easy to name technology innovations
Bit harder, but can name business innovations
What about social-organizational innovation?
How about client-driven demand innovation?
 What should a service scientist learn to know these things?
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SSME: Service Science, Management, and Engineering
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© 2006 IBM Corporation