Dr. Stephen K. Kwan Professor, Service Science Management Information Systems College of Business Administration San José State University, CA, USA Contact: Presented at the Conference on Understanding Complex Service Systems Through Different Lenses, September 2011, Cambridge, UK. Download these slides at: Constructing Effective Value Propositions for Stakeholders in Service System Networks Mercè Müller-Gorchs Karlsruhe Service Research Institute Karlsruhe Institute of Technology Karlsruhe, Germany

ServiceExperience ServiceProviderCustomer A Service System and Its Entities 1 Kwan, S. K. & Min, J. H. (2008) “An Evolutionary Framework of Service Systems”. Presented at the International Conference on Service Science, Beijing, China, April Service System Worldview 1 2Kwan 2011

3 Service System A Service System B Service System C Service System D Service System E Service System F Service Interactions 3 A Service System Network Kwan 2011

4 Service System A Service System B Service System C Service System D Service System E Service System F Service Interactions 4 A Service Supply Chain Kwan 2011

ServiceExperience ServiceProviderCustomer Society Community Competition Partners Service System Employees & Stockholders Service System Worldview 5Kwan 2011

ServiceExperience ServiceProviderCustomer Society Community Competition Partners Employees & Stockholders Service System Worldview 6 Market Segmentation Service Concept Realized Customer Flow & Service Delivery Operating Strategy Facility Location & Design Capacity & Manpower Planning, Training Competitive Strategy Social Networking Kwan 2011 Service Management Fitzsimmons & Fitzsimmons

ServiceExperience ServiceProviderCustomer Society Community Competition Partners Service System Employees & Stockholders Value Value Value Governance Value 7 Value Value Co-Creation Through Value Propositions Kwan 2011

8 From: To: Formulation of Value = Benefit / Cost To: Customer Value = (Results + Process Quality ) / (Price + Customer Access Costs) Heskett et all 1997 Harvey 2005 Better Off

9 Customer ServiceExperience ServiceProvider Stage 1: Value Chain Focal Relationship Value Proposition Stages in Customer Empowerment in Value Co-Creation 5 Kwan, S. K. & Yuan, S. T. ”Customer-Driven Value Co-Creation in Service Networks”, to appear in Demirkan, H., Spohrer, J.C. and Krishna, V. ed., The Science of Service Systems, volume in Service Science: Research and Innovation (SSRI) in the Service Economy series, Springer, Kwan 2011

10 Stage 2: Traditional Service Value Network Customer ServiceExperience ServiceProvider Value Proposition Provider Partner Network Focal Relationship Value Proposition Kwan 2011 cf. ICT-enabled service networks, mobile applications, etc.

Stage 3 – Improved Value Chain Customer’sSocialNetwork Customer ServiceExperience ServiceProvider Value Proposition Focal Relationship Value Proposition Kwan 2011

12Kwan 2011 Product Placements Ad’s and “Buy Me” TV Programs Their Friends Target Audience Improved Value Chain – Connecting with Customer’s Social Network

Stage 4: Customer Driven Service Value Network Customer’sSocialNetwork Customer ServiceExperience ServiceProvider Value Proposition Focal Relationship Value Proposition Provider Partner Network Value Proposition Kwan 2011 cf. “Resource Integrators” in Service Dominant Logic literature

14 Stages of Customer Empowerment Stakeholders Service Provider Society Community Employees Stockholders Partners Customers A point in this 3-D space is a Potential Value Proposition Value Dimensions Variety of Value Propositions Economic Environmental Societal Social Political Kwan 2011 Intrinsic Maslow’s Hierarchy Of Needs Hedonic Spiritual Corporal Emotional Intellectual

15Kwan 2011 Disposable Income & Desire for Services Needs vs. Wants

16 Value Propositions can also be bi-directional Service Provider Society Community Employees Stockholders Partners Customers Service Provider Society Community Employees Stockholders Partners Customers ? Kwan 2011 Partners Service Provider Customers

17Kwan 2011 ServiceExperience ServiceProviderCustomer Value Proposition Model (VPM) Starting with the Service System

18Kwan 2011 ServiceExperience ServiceProviderCustomer ServiceExperience Customer ServiceExperience Customer Value Proposition VPM – a common example

19Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Customer A Shared Experience Community/ Social Network Value Proposition VPM – individuals and community

20Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Customer A Shared Experience Community/ Social Network Value Proposition VPM – individuals and Facebook community

21Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer Value Proposition ServiceExperience Vendor Value Proposition ServiceExperience VPM – service provider partners

22Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Vendor ServiceExperience ServiceExperience VPM – partner’s acquistion of customer

23Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Vendor ServiceExperience Example 1 of 4

24Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Vendor ServiceExperienceServiceExperience VendorServiceExperience Example 2 of 4

25Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Vendor ServiceExperienceServiceExperience VendorServiceExperience Example 3 of 4

26Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Vendor ServiceExperience ServiceExperience Example 4 of 4

27Kwan & Müller-Gorchs 2011 Foundational Premises of Service Dominant Logic

28Kwan & Müller-Gorchs 2011 Customer’s Value System Provider’s Value System Opportunities for Value Co-Creation               His Customer’s Value System ★ ★ ★★ ★ ★ ★ ★ Value Systems and Value Dimensions FP8

Stages of Customer Empowerment Stakeholders Service Provider Society Community Employees Stockholders Partners Customers A point in this 3-D space is a Potential Value Proposition Value Dimensions Variety of Value Propositions Economic Environmental Societal Social Political Kwan & Müller-Gorchs 2011 Intrinsic Maslow’s Hierarchy Of Needs 29 Hedonic Spiritual Cultural Corporal Emotional Intellectual Familial…. FP10

30Kwan & Müller-Gorchs 2011 Constructing a Value Proposition Metrics Rules Schema Quality Probability of Success Costs Benefits Service Experience The Customer have a lot of VP’s to choose from FP7 Service Level Agreement?

31Kwan & Müller-Gorchs 2011 A Customer’s Choice of Service A Customer’ Choice Function: A Service Provider’s Promised Value: Based on the Customer’s own expectations

32Kwan & Müller-Gorchs 2011 A Customer’s Realization of Value A Customer’s Realized Value: Customer’s Contributions Service Provider and His Partners’ Contributions Co-Production Service Process Co-Creation of Value FP6 FP9 An Example

33Kwan & Müller-Gorchs 2011 Constructing Value Propositions: Customers and Service Providers Connecting Components of a Value Proposition to a Service Provider’s KPI’s through Feedback Sc,R,M too

Kwan & Müller-Gorchs 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Vendor ServiceExperienceServiceExperience VendorServiceExperience Example: Social Network 34

35Kwan & Müller-Gorchs 2011 Amazon.com Bookcloseout_us nengland4 theBookGrinder Customer Example: E-Commerce

36Kwan & Müller-Gorchs 2011 Customer Amazon.com SP 0 Bookcloseout_us SP 1 theBookGrinder SP 2 negland4 SP 3 S0S0S0S0 S4S4S4S4 S1S1S1S1 S5S5S5S5 S2S2S2S2 S6S6S6S6 S3S3S3S3 Se 0 Se 1 Se 2 Se 3 SE SP 4 VP 0

37Kwan & Müller-Gorchs 2011 Customer SE 0 SP 0 Time SE 0 = Service Experience provided by SP 0 SP 0 = Service Provider of the Focal Relationship (the basis of the Value Proposition from Kwan & Yuan 2011) VP 0 = Value Proposition offered by SP 0 to Customer for SE 0 Focal Relationship VP 0 Instantiation of the Service Experience at a particular point In time Service Pattern 1 – Single Service Episode

38Kwan & Müller-Gorchs 2011 Customer SE 0 SP 0 Time VP 0 Pattern 2 – Continuous Service over a Period of Time

39Kwan & Müller-Gorchs 2011 Customer Se 0 SP 2 Time VP 0 Se 1 Se 2 SP 1 SP 0 Instantiation of the Service Experience at a particular point In time Service Pattern 3 – Service in Parallel

40Kwan & Müller-Gorchs 2011 Customer Se 0 SP 0 Time Se 1 Se 2 VP 0 Pattern 3 – Continuous Service with Occasional Service Episodes

41Kwan & Müller-Gorchs 2011 Customer SE 0 SP 0 Time SE 1 SE 2 SP 1 SP 2 SE 4 SE 5 SP 3 SE 6 SE 3 VP 1 VP 2 VP 3 VP 0 Pattern 4 – Service provided by more than one Partner Service Providers

42Kwan & Müller-Gorchs 2011 Future Directions More on development of Value Dimensions and Measurement More on connecting VPM with Service Provider’s KPI More on Quality Dimensions and Measurement Integrate VPM with Service System Design and Prototyping 42Kwan & Müller-Gorchs 2011 Integrate with Foresight and Innovation Method © Cockayne and Carleton

Kwan & Müller-Gorchs 2011 Foresight and Innovation Method Service System Framework & Service System Networks Value Propositions & Service Patterns © Cockayne and Carleton 43

44Kwan & Müller-Gorchs Kwan & Müller-Gorchs 2011 Foresight and Innovation Method BPMN UML – Use Cases Story Boards UI Prototyping Service Blueprint MANGA Work System Service System Framework & Service System Networks Value Propositions & Service Patterns © Cockayne and Carleton Process Chain Network Diagram