Moving from B2X to B2X2Y Value Propositions in Service System Networks

Moving from B2X to B2X2Y Value Propositions in
Service System Networks
Stephen K. Kwan, Peter Hottum, and Cheryl A. Kieliszewski
1st International Conference on Human Side of Service Engineering, HSSE 2012
San Francisco, 24 July, 2012

SAN JOSÉ STATE UNIVERSITY (SJSU) & KARLSRUHE INSTITUTE OF TECHNOLOGY (KIT) & IBM

www.sjsu.edu www.kit.edu www.ibm.com

Agenda

1 Introduction

2 Value Propositions in Service System Networks

3 Model for Value Propositions based on B2X2Y scenarios

4 Outlook: Concept of loss-less derivations of Value Propositions

5 Further Research and Limitations

2 7/24/2012 Moving from B2X to B2X2Y Value Propositions in Service System Networks San José State University
Karlsruhe Institute of Technology
IBM

Several Service Systems with their entities spanning a Service
System Network

“Service System Worldview”
Service System A

Service
Customer
Provider
service interactions
Service
Experience Service
System
B Service
System
C
Service
System
E
Service
System
D
Service
System
F
Source: Kwan & Min (2008): An Evolutionary Framework of Service Systems.

IBM

In Service Systems Value is co-created through Value Propositions

Service System
Community

Value Service
Value Customer Value Partners
Provider

Service
Experience

 Traditional B2B and B2C Value Propositions for service offerings are premised
on the service provider convincing the business or consumer customers that
they will receive superior value at certain cost in a competitive environment
 Business environments become more global and complex, so that Service
Providers often have to construct a Network of Partners and/or Contractors to
fulfill the service obligations as promised by their Value Propositions
 Customers in turn share service value with their Community through their own
social Value Propositions
Representation is an extract from: Kwan & Min (2008): An Evolutionary Framework of Service Systems.

IBM

An Example from an Industrial Scale Service Provider

Provider Customer
(B) (C)

offers accepts Delivers
service
VP SLA
Value Service
Proposition Level
Agreement

Contract Partner
(P)

250,000 Employees delivering services

Source: Anand, K. et al. (2012) “Value Driven Approach for Services Design”.

IBM

A provider should look beyond his customers in service constellations

Provider’s
Value System

 
 
 Customer’s
 Value System

Provider 
  
  His Customer’s
 Value System

★
Customer ★ ★ ★
★ ★
Looking more closely on four scenarios: ★ ★
 Outsourcing Customer’s
 Channel Partners Customer

 Outcome-based Contracting
Opportunities for
 Extending Customer Value Value Co-Creation

IBM

The variety of Value Propositions is diverse
Maslow’s
Hierarchy
Of Needs
Service Provider
Society Hedonic
Stakeholders Spiritual
Community Cultural
Corporal
Employees Emotional
Intellectual
Stockholders Familial….

Partners
A point in this 3-D space is a potential
Customers
Value Proposition e.g. Service Provider
/ Society / Environmental

IBM

Our approach is based on a formalized model of Value Propositions



Source: Kwan & Müller-Gorchs (2011). Constructing Effective Value Propositions for Stakeholders in Service System Networks.

IBM

Each Value Proposition is based on a set of these attributes

VPj = [SE,B,C,P,Q,Sc,R,M]j
** Expected **
Performance
Service Experience
Metrics
Benefits
Stakeholder
Roles
Costs Quality
will will
will Probability Schema for Data
do not
do of Success
for +$ do Exchange

IBM

1 Business Model – Outsourcing

VPc for the customer

Service Experience [ SE ] [B] [C] [P] [ Q ] [ Sc ] [ R ] [ M ]
is composed of a set of
Service Components
[ S0 … SN ]
that are delivered
over time as a series
of Service Episodes [ Se0 … SeK ]
?
VPp from the partner/subcontractor
Often is the Low cost provider
= SLA?
 The success of such service system networks depends on the alignment of
Value Propositions
 They have to deliver the service obligations to the customers as promised
 If the linkages among provider, customer and partners are broken, the
customers will likely be dissatisfied with the level and quality of service

IBM

1 scenario: banking - outsourcing service call center

 Partner / Outsourcer provides service to the VPc
customer of the bank based on contract
Provider Customer
with the bank. (B) (C)

 Value Proposition: “I will do this for your
customers….” or the bank issues an RFP of
the form: “Do this for my customers…”
 Often there is a disconnect with the bank’s Provider
(B)
Customer
(C)
customers due to misalignment of value
propositions and/or loss of linkage. VPp

Partner
(P)

equals to

Partner Provider Customer
(P) (B) (C)
service

IBM

2 scenario: CISCO - selling through channel partners

 CISCO sells its products and services VPc
through channel partners*.
“Sell this to my customers…” Provider
(B)
Customer
(C)
Often the channel partners add value to the
products and services they resell (VAR).
 Problems arise when channel partners are
not enthusiastic in selling certain services Provider Customer
(B) (C)
to the customers because they do not
benefit directly from them. VPp
 There is a misalignment of value Partner
propositions. (P)

equals to

Provider Partner Customer
(B) (P) (C)
service
* except direct sales to large customers

IBM

3 scenario: Outcome-Based Contracting

 This is based on the business model that
you get paid based on how much you
improve the outcome of your customer.
Provider Customer’s

Customer
The outcome is usually some KPI of your (B) (C) Customers
(C)
customer (some dimension of his value service
system). This could well be what the
customer needs to improve his
performance to serve his own
customer better.

Examples
 Rolls Royce’s model of
“Power by the Hour”
 UPS handles logistics and sales
for customers
 John Deere coordinates the
harvesting for customers
IBM

4 scenario: Apple – extending value beyond your customers

 Apple sells products that empower the
customers to connect and share value with
Provider Customer Customer’s
their friends and community. (B) (C) Community
(C)

equals to

Provider Customer Customer’s
(B) (C) Customers
(C)
service

Pictures are taken from 23th WWDC (Worldwide Developers Conference) in June 2012 in San Francisco

IBM

The Value Proposition Patterns considered can be represented as…

Scenario Value Proposition Common representation
Outsourcing P2B2C
Channel Partners B2P2C
B2X2Y
Outcome-based Contracting B2C2C
Extending Customer Value B2C2C


 
 

 
   
 
B
 ★ ★
★ ★
★ ★
X
★ ★
Y

IBM

Outlook: Derivations of Value Propositions (1)

 An enterprise can be viewed as a hierarchy of Value Propositions presented to
its stakeholders. Each Value Proposition at a lower (more micro) level should
be derived from one at a higher (more macro) level – without loss of essential
information – and vice versa.
 For example: The syllabus of a course could be viewed as a Value Proposition
to a student from this hierarchy:

University

College

Department

Major

Concentration

Course

IBM

Outlook: Derivations of Value Propositions (2)

 The subcontract for third/fourth… party service provider should be derived from
the original Value Proposition (then SLA) without loss of essential information.
 Furthermore the experience of the customer is cumulative and the sum of
experience (quality, completeness, etc.) from all the service episodes.

*from Dan Pritchett

IBM

Further Research and Limitations

Further Research

 Within Service System Networks even more trilateral constellations between
providers, partners and customers will come into existence, so the perspective
of B2X2Y will help capture the complexity more extensively
 More real world scenarios should be examined to demonstrate their
applicability.
 Develop the concept of “loss-less” derivation using the VP model.

Limitations

 Examples only taken from
United States and Germany
 Need more examples to validate

IBM

References

 Anand, K., Lokku, D.S., Zope, N. R. (2012) “Value Driven Approach for Services Design”. Presented
at ISSS 2012, July 15th-20th, San José, USA.

 Kwan, S. K. & Min, J. H. (2008) An Evolutionary Framework of Service Systems. Presented at the
International Conference on Service Science, Beijing, China, April 17th -18th .

 Kwan, S. K., Muller-Gorchs, M. (2011). Constructing Effective Value Propositions for Stakeholders in
Service System Networks. Proceedings of SIGSVC Workshop. Sprouts: Working Papers on
Information Systems, 11(160). http://sprouts.aisnet.org/11-160

 Kwan, S. K. & Yuan, S. T. (2011) Customer-Driven Value Co-Creation in Service Networks, 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.

Acknowledgement

 This study was supported by the Karlsruhe House of Young Scientists (KHYS).

IBM

Contact

Stephen K. Kwan, Ph.D. Peter Hottum Cheryl A. Kieliszewski, Ph.D.

SJSU – Service Science, KIT - Karlsruhe Service IBM Almaden Research
Management Information Systems Research Institute (KSRI) Center

San José, California, USA Karlsruhe, Germany San José, California, USA

stephen.kwan@sjsu.edu peter.hottum@kit.edu cher@us.ibm.com

IBM

Moving from B2X to B2X2Y Value Propositions in Service System Networks

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