Dr. Stephen K. Kwan Professor, Service Science Management Information Systems College of Business Administration San José State University, CA, USA Contact: Presented at the Service System Modeling Workshop Manchester Business School, September 20 th, 2011, Manchester, 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 Kwan & Müller-Gorchs 20112

ServiceExperience ServiceProviderCustomer Society Community Competition Partners Service System Employees & Stockholders Service System Worldview Kwan & Müller-Gorchs 20113

ServiceExperience ServiceProviderCustomer Society Community Competition Partners Service System Employees & Stockholders Value Value Value Governance Value Value Value Co-Creation Through Value Propositions Kwan & Müller-Gorchs 20114

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 & Müller-Gorchs 20115

Customer Driven Service Value Network Customer’sSocialNetwork Customer ServiceExperience ServiceProvider Value Proposition Focal Relationship Value Proposition Provider Partner Network Value Proposition Kwan & Müller-Gorchs 20116

7 Customer’s Value System Provider’s Value System Opportunities for Value Co-Creation               His Customer’s Value System ★ ★ ★★ ★ ★ ★ ★ Value Systems and Value Dimensions

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 8 Hedonic Spiritual Corporal Emotional Intellectual

Kwan & Müller-Gorchs 2011 Disposable Income & Desire for Services Needs vs. Wants 9 Maslow’s Hierarchy of Needs

10Kwan & Müller-Gorchs 2011 Foundational Premises of Service Dominant Logic

11Kwan & Müller-Gorchs 2011 Constructing a Value Proposition Quality Probability of Success Costs Benefits Service Experience The Customer have a lot of VP’s to choose from

12Kwan & 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

13Kwan & 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

14Kwan & 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

15Kwan 2011 ServiceExperience ServiceProviderCustomer Value Proposition Model (VPM) Starting with the Service System

16Kwan 2011 ServiceExperience ServiceProviderCustomer ServiceExperience Customer ServiceExperience Customer Value Proposition VPM – a common example

17Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Customer A Shared Experience Community/ Social Network Value Proposition VPM – individuals and community

18Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Customer A Shared Experience Community/ Social Network Value Proposition VPM – individuals and Facebook community

19Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer Value Proposition ServiceExperience Vendor Value Proposition ServiceExperience VPM – service provider partners

20Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Vendor ServiceExperience ServiceExperience VPM – partner’s acquistion of customer

21Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Vendor ServiceExperience Example 1 of 4

22Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Vendor ServiceExperienceServiceExperience VendorServiceExperience Example 2 of 4

23Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Vendor ServiceExperienceServiceExperience VendorServiceExperience Example 3 of 4

24Kwan 2011 ServiceExperience ServiceProvider Customer ServiceExperience Customer ServiceExperience Vendor ServiceExperience ServiceExperience Example 4 of 4

25Kwan & Müller-Gorchs 2011 Amazon.com Bookcloseout_us nengland4 theBookGrinder Customer Example: E-Commerce

26Kwan & 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

27Kwan & Müller-Gorchs 2011 LBSCommunity Quality of Life ImprovementService Safer Sutton ServicePartnership Service Provider Service Experience Customer VP 0 Example: Social Service London Borough of Sutton

28Kwan & Müller-Gorchs 2011 LBSCommunity: Residents & Businesses SSPS – Coordinator Role MPS LBS Council Partnership Partnership Partnership Partnership Sutton Police SaferTransportTeam Safer Park Teams SaferNeighborhoodTeams FairerServiceComponents GreenerServiceComponents SaferServiceComponents:PreventAssistReduceImprove SuttonNeighborhoodWatchAssociation Quality of Life Improvement Service VP 0 Partnership Partners Customer VP 1 VP 2 VP 3 VP 4 VP 5 Example: Social Service London Borough of Sutton

29Kwan & 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 Integrate VPM with Service System Prototyping 29Kwan & Müller-Gorchs 2011 Framework Service System & Networks Value Propositions & Service Patterns Foresight and Innovation Method © Cockayne and Carleton

Dr. Stephen K. Kwan Professor, Service Science Management Information Systems College of Business Administration San José State University, CA, USA Contact: 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 End Presented at the Service System Modeling Workshop Manchester Business School, September 20 th, 2011, Manchester, UK.

Kwan & Müller-Gorchs

32 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

33 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

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

36Kwan & Müller-Gorchs 2011 S 1 = S 2 = Customer ServiceProvider Service Experience Made up of Observable or Evidential Components Service Components Co-produced by Customer Service Components Co-produced by Service Provider S 1,C S 2,C S 2,0 S 1,0 Illustration of Service Co-production

37Kwan & Müller-Gorchs 2011 V = Σ Customer (π 1,C β 1,C θ 1,C (π 2,C β 2,C θ 2,C π 2,0 β 2,0 θ 2,0 ) π 1,0 β 1,0 θ 1,0 ) / c 1 / c 2 Value + + ServiceProvider Illustration of Value Co-creation

38Kwan & 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

39Kwan & Müller-Gorchs 2011 Customer SE 0 SP 0 Time VP 0 Pattern 2 – Continuous Service over a Period of Time

40Kwan & 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

41Kwan & Müller-Gorchs 2011 Customer Se 0 SP 0 Time Se 1 Se 2 VP 0 Pattern 3 – Continuous Service with Occasional Service Episodes

42Kwan & 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