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Dr. Stephen K. KwanProfessor, Service Science
Management Information SystemsCollege of Business AdministrationSan José State University, CA, USA
http://www.sjsu.edu/ssme
Contact: stephen.kwan@sjsu.edu
Presented at the Service System Modeling WorkshopManchester Business School, September 20th, 2011, Manchester, UK.
Download these slides at: http://www.slideshare.net/StephenKwan
Constructing Effective Value Propositions for Stakeholders in Service System Networks
Mercè Müller-GorchsKarlsruhe Service Research Institute
Karlsruhe Institute of TechnologyKarlsruhe, Germany
ServiceExperience
ServiceProvider
Customer
A Service System and Its Entities
1Kwan, S. K. & Min, J. H. (2008) “An Evolutionary Framework of Service Systems”. Presented at the International Conference on Service Science, Beijing, China, April 17-18.
Service System Worldview1
Kwan & Müller-Gorchs 2011 2
ServiceExperience
ServiceProvider
Customer
Society
Community
Competition
Partners
Service System
Employees &Stockholders
Service System Worldview
Kwan & Müller-Gorchs 2011 3
ServiceExperience
ServiceProvider
Customer
Society
Community
Competition
Partners
Service System
Employees &Stockholders
Value
Value
Governance
Value
Value
Value Co-Creation Through Value Propositions
Kwan & Müller-Gorchs 2011 4
Customer
ServiceExperience
ServiceProvider
Stage 1: Value Chain
FocalRelationship
Value Proposition
Stages in Customer Empowermentin 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, 2010.
Kwan & Müller-Gorchs 2011 5
Customer Driven Service Value Network
Customer’sSocial
Network
Customer
ServiceExperience
ServiceProvider
Value Proposition
FocalRelationship
Value Proposition
Provider PartnerNetwork
Value Proposition
Kwan & Müller-Gorchs 2011 6
7Kwan & Müller-Gorchs 2011
Customer’s Value System
Provider’s Value System
Opportunities forValue Co-Creation
His Customer’s Value System
★
★
★★★★★
★
Value Systems and Value Dimensions
Stages of Customer Empowerment
12
34
Sta
keho
lder
s
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
Econom
icE
nvironmental
Societal
SocialP
olitical
Kwan & Müller-Gorchs 2011
Intrinsic
Maslow’sHierarchyOf Needs
8
HedonicSpiritualCorporalEmotionalIntellectual
Kwan & Müller-Gorchs 2011
Disposable Income &Desire forServices
Needsvs.
Wants
9
Maslow’s Hierarchy of Needs
10Kwan & Müller-Gorchs 2011
Foundational Premises of Service Dominant Logic
MicroeconomicConsiderations
11Kwan & Müller-Gorchs 2011
€
VPj = [SE,B,C,P,Q ]j
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
€
Vj =PijBijQijciji: S ij ∈SEj
∑
€
V ' = maxj∈J
Pij'Bij
'Qij'
ciji: S ij ∈SEj∑
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
€
V =π i, cβ i, cθ i, c +π i, kβ i, kθ i, k
cii: S i ∈Sek'
k: Sek' ∈SE '
∑€
V =π iβ iθ icii ;S i ∈SE
'∑
A Customer’s Realization of Value
A Customer’s Realized Value:
Customer’s Contributions
Service Provider andHis 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
ServiceProvider
Customer
Value Proposition Model (VPM)Starting with the Service System
16Kwan 2011
ServiceExperience
ServiceProvider
Customer
ServiceExperience
Customer
ServiceExperience
Customer
Value Proposition
VPM – a common example
17Kwan 2011
ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Customer
A SharedExperience
Community/Social
Network
Value Proposition
VPM – individuals and community
18Kwan 2011
ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Customer
A SharedExperience
Community/Social
Network
Value Proposition
VPM – individuals and Facebook community
19Kwan 2011
ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
Value Proposition
ServiceExperience
Vendor
ValueProposition
ServiceExperience
VPM – service provider partners
20Kwan 2011
ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Vendor
ServiceExperience
ServiceExperience
VPM – partner’s acquistion of customer
21Kwan 2011
ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Vendor
ServiceExperience
Example 1 of 4
22Kwan 2011
ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Vendor
ServiceExperience
ServiceExperience
VendorService
Experience
Example 2 of 4
23Kwan 2011
ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Vendor
ServiceExperience
ServiceExperience
VendorService
Experience
Example 3 of 4
24Kwan 2011
ServiceExperience
ServiceProviderCustomer
ServiceExperience
Customer
ServiceExperience
Vendor
ServiceExperience
ServiceExperience
Example 4 of 4
25Kwan & Müller-Gorchs 2011
Amazon.comBookcloseout_us
nengland4
theBookGrinder
Customer
Example: E-Commerce
26Kwan & Müller-Gorchs 2011
Customer
Amazon.comSP0
Bookcloseout_usSP1
theBookGrinderSP2
negland4SP3
S0
S4
S1
S5
S2
S6
S3
Se0
Se1
Se2
Se3
SE
SP4
VP0
27Kwan & Müller-Gorchs 2011
LBSCommunity
Quality of LifeImprovement
Service
Safer SuttonService
Partnership
Service Provider
Service Experience
Customer
VP0
Example: Social ServiceLondon Borough of Sutton
28Kwan & Müller-Gorchs 2011
LBSCommunity:
Residents &Businesses
SSPS – Coordinator Role
MPS
LBS Council
Partnership
Partnership
Partnership
Partnership
Sutton Police
Safer Transport
Team
Safer ParkTeams
SaferNeighborhood
Teams
FairerService
Components
GreenerService
Components
SaferService
Components:PreventAssist
ReduceImprove
SuttonNeighborhood
WatchAssociation
Quality of LifeImprovement
Service VP0
Partnership
Partners
Customer
VP1
VP2
VP3
VP4
VP5
Example: Social ServiceLondon 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. KwanProfessor, Service Science
Management Information SystemsCollege of Business AdministrationSan José State University, CA, USA
http://www.sjsu.edu/ssme
Contact: stephen.kwan@sjsu.edu
Download these slides at: http://www.slideshare.net/StephenKwan
Constructing Effective Value Propositions for Stakeholders in Service System Networks
Mercè Müller-GorchsKarlsruhe Service Research Institute
Karlsruhe Institute of TechnologyKarlsruhe, Germany
End
Presented at the Service System Modeling WorkshopManchester Business School, September 20th, 2011, Manchester, UK.
Kwan & Müller-Gorchs 2011 31
32
Customer
ServiceExperience
ServiceProvider
Stage 1: Value Chain
FocalRelationship
Value Proposition
Stages in Customer Empowermentin 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, 2010.
Kwan 2011
33
Stage 2: Traditional Service Value Network
Customer
ServiceExperience
ServiceProvider
Value Proposition
Provider PartnerNetwork
FocalRelationship
Value Proposition
Kwan 2011
cf. ICT-enabled service networks,mobile applications, etc.
Stage 3 – Improved Value Chain
Customer’sSocial
Network
Customer
ServiceExperience
ServiceProvider
Value Proposition
FocalRelationship
Value Proposition
Kwan 2011
Stage 4: Customer Driven Service Value Network
Customer’sSocial
Network
Customer
ServiceExperience
ServiceProvider
Value Proposition
FocalRelationship
Value Proposition
Provider PartnerNetwork
Value Proposition
Kwan 2011
cf. “Resource Integrators” in Service Dominant Logic literature
36Kwan & Müller-Gorchs 2011
S1 =
S2 =
Customer
ServiceProvider
Service ExperienceMade up of
Observable orEvidential
Components
Service Components
Co-produced byCustomer
Service Components
Co-produced byService Provider
S1,C
S2,C S2,0
S1,0
Illustration of Service Co-production
37Kwan & Müller-Gorchs 2011
V = Σ
Customer
(π1,Cβ1,Cθ1,C
(π2,Cβ2,Cθ2
,C
π2,0β2,0θ2,0)
π1,0β1,0θ1
,0)/ c1
/ c2
Value
+
+
ServiceProvider
Value
Illustration of Value Co-creation
38Kwan & Müller-Gorchs 2011
Customer
SE0
SP0
Time
SE0 = Service Experience provided by SP0
SP0 = Service Provider of the Focal Relationship (the basis of the Value Proposition from Kwan & Yuan 2011)VP0 = Value Proposition offered by SP0 to Customer for SE0
FocalRelationship
VP0
Instantiationof the Service
Experience at aparticular point
In time
Service Pattern 1 – Single Service Episode
39Kwan & Müller-Gorchs 2011
Customer
SE0
SP0
Time
VP0
Pattern 2 – Continuous Service over a Period of Time
40Kwan & Müller-Gorchs 2011
Customer
Se0
SP2
Time
VP0
Se1
Se2
SP1SP0Instantiation of the Service
Experience at a particular point In time
Service Pattern 3 – Service in Parallel
41Kwan & Müller-Gorchs 2011
Customer
Se0
SP0
Time
Se1 Se2
VP0
Pattern 3 – Continuous Service with Occasional Service Episodes
42Kwan & Müller-Gorchs 2011
Customer
SE0
SP0
Time
SE1 SE2
SP1 SP2
SE4
SE5
SP3
SE6
SE3
VP1
VP2
VP3
VP0
Pattern 4 – Service provided by more than one Partner Service Providers