The Service Economy

© Services Transformation & Innovation Group, LLC All rights reserved.

1

“The Service Economy”

ISSIP Service Economics

Can you measure the new services economy the same old way?

Doug Morse

12/17/2014

1


1

“Follow the Money”

Proposal to form a Community of Interest within ISSIP to

study service economics for the purpose of gaining greater

insights around issues concerning economic measures,

metrics and accounting standards affecting service innovation

and the general economy.

• I am NOT an economist but have spoken to many

• I AM a Service practitioner with 35 years of experience

• I have been involved with the Service Science work for

10 years

• Frustrated by slow but obvious need for change

• Worked to understand root cause –follow the money

• This is an underserved area of study that needs a voice

to drive service innovation


1

• Economic principles are still deeply rooted in the

Industrial economy and from work dating back to the late

1700’s by Adam Smith in his book, “The Wealth of

Nations

• Money is a core driver and measurement of change and

drives:

• Government Policy

• Education Curriculums

• Business Strategy and Policy

• Service Innovation and Education are inhibited by

antiquated economic measurement and policies

• Can’t measure the NEW economy by yesterday’s

standards

Burning Platform (s)


1

• Government Policy

• International Trade , Labor , Research Funding,

Social Change

• Education

• Provide the right skills for defined labor markets and

economic growth

• New Curriculum and Certification for new industries

• Data Science, Service Science – Cross

Disciplinary

• Business Strategy and Policy

• Servitization

• Consumption economics

• Revenue Recognition

• Business Valuations (value of data ownership )

Wh

y C

han

ge

?

Universities

Economic Drivers

Industry Needs

National Interests

Natural or

Unnatural Events

Re

sear

ch a

nd

Fu

nd

ing

$$

$ Innovation

IP and New Businesses

High Skilled Labor Public Policy

Alumni $$$

Demand Supply Influence

Universities are driven by Economics

Advancement of Knowledge

5


1

How do we measure the services economy ?

Is Service Revenue double counted?

Are NAICS / SIC Codes and other classification systems are outdated?

Why do Businesses have to reach financial doom before expanding Services?

Do FASB Reporting and Revenue Recognition rules inhibit servitization?

What economic factors drive Services R&D? (private or public )

What economic factors affect national and international policies regarding Service?

How do labor laws affect the growth of services in world trade?

How do economic measures drive education?

Are Consumption Economics and Service Economics Related?

Are Services best measured as a 3rd Generation of the Industrial Revolution?

Can Customer Equity become a new measure to value companies?

What is the value of Data or core knowledge workers?

A Few Interesting Questions


1

Proposal for Service Economics COI

Service Economics Group Charter / Mission

The key purpose Service Economics Group is to bring together a diverse team of individuals and

organizations to help define and better understand current and desired future state economic tools,

models, processes and technologies that would reduce inhibitors to current service innovation and to drive

change that accelerate service innovation in the future. Ultimately the group would become an instigator /

influencer of change to economic policies, economic and business metrics and accounting rules in support

of the services economy.

This may include but is not limited to the following:

Create a center of knowledge and expertise around service economics

Use the COE( Center of Expertise ) to drive change that promotes service innovation.

Understand new forms of value creation

o Customer Equity – Customers as an asset – beyond ‘goodwill’

o Value of Data (big data, sensor data et al )

o Touchpoint value ( Twitter, Facebook, other social media that collects eyeballs )

Research and education on both micro and macro-economic models of service(s)

Definition and valuations of non-tangible economic transactions

Create intellectual property (papers, books, presentations etc ) that create a better understanding of

services related economics

o Might also look at the “knowledge economy” and “digital economy” to see if there are differences

or similarities – are they just new names for the same problem


1

Next Step - Actions

If you think that this is of interest to you:

Contact Me: Doug Morse @ [email protected]

Please Specify:

• Name and Contact info.

• Organization or Affiliation

• Specific areas of interest

• Are you interested in presenting to the group?

• Do you wish lead a specific topic or sub-group interests?

• Suggestions?

mailto:[email protected]


1

Misc. Background Slides


1

Douglas Morse is a service innovation professional with over 35 years of

experience leading all aspects of global service for Fortune 500 companies.

He spent 19 years with IBM and was deeply involved in their services

transition. After IBM he was sought by other global companies to help build

and lead new service strategies. From 2002- 2008, Douglas was with Oracle

heading up service operations, service strategy and customer experience for

a $ 10 Billion global services business. Douglas is currently the founder and

Chief Inspiration Officer of ServTrans. focused on creating customer centric

companies through designed strategic customer relationships.

ServTrans helps companies attract and retain valuable

customers in order to build Customer Equity www.servtrans.com

About Me

http://www.servtrans.com/

How Do We Measure the Services Economy ?

http://wdi.worldbank.org/table/4.2

Are NAICS / SIC Codes and Other Classification Systems are outdated

http://www.census.gov/epcd/www/drnaics.htm#q1

Are Consumption Economics and Service Economic Related?

http://www.tsia.com/research/books-by-tsia/consumption-economics.html

http://en.wikipedia.org/wiki/Consumption_(economics)

Are Services best measured as a 3rd Generation of the Industrial Revolution?

http://www.theguardian.com/sustainable-business/jeremy-rivkin-third-industrial-revolution

Some Informational Links

11

http://wdi.worldbank.org/table/4.2

http://www.census.gov/epcd/www/drnaics.htm#q1






















World’s Large Labor Forces A = Agriculture, G = Goods, S = Service

2009

The largest labor force migration in human history is underway, driven by global

communications, business and technology growth, urbanization and

regional variations in labor and infrastructure costs and capabilities.

US labor force shift to service jobs

44% 64 33 3 1.4 Germany

30% 26 11 63 2.1 Bangladesh

30% 20 10 70 1.6 Nigeria

38% 67 28 5 2.2 Japan

39% 69 21 10 2.4 Russia

21% 66 14 20 3.0 Brazil

35% 39 16 45 3.5 Indonesia

25% 76 23 1 5.1 U.S.

28% 23 17 60 14.4 India

50% 27 22 49 25.7 China

Service Growth

S %

G %

A %

Labor %

Nation

2009

(A) Agriculture: Value from harvesting nature

(G) Goods: Value from making products

(S) Service: Value from enhancing the

capabilities of things and their ability to interconnect and create value

CIA Handbook, International Labor Organization Note: Pakistan, Vietnam, and Mexico now greater than Germany (since 2005)

www.servtrans.com 12

U.S. trade in commercial knowledge-intensive services and intangible assets—business, financial, and communications services, and payments of royalties and fees—has produced a consistent and growing surplus (figure O-38). It reached a record $108 billion in 2008, sufficient to counter-balance the high-technology goods deficit, and has been flat since then, reflecting the recession's effect. The EU's surplus was sharply off, and that of the Asia-8 fell as well—reflections of the continuing effects of the global recession.

NSF Science and Engineering Indicators 2012

13

http://www.nsf.gov/statistics/seind12/start.htm

http://www.nsf.gov/statistics/seind12/start.htm

By country, the largest U.S. surpluses in services are with Canada, Japan, Ireland, Brazil, the United Kingdom, China and Mexico. The U.S. services surplus with China has accelerated rapidly since 2007, from $2.4 billion to $10.4 billion in 2010, because of sharp gains in exports and relatively flat imports, according to ESA data. Exports support more than 10 million American jobs, and those whose jobs depend on trade earn 13 to 18 percent more than the national average. As a result of administration policies and the global economic rebound, exports grew 17 percent in 2010 compared to 2009 – the largest year-to-year percent change in more than 20 years. Private services are defined as non-tangible items of value that are either consumed when purchased or at a later date by their terms of sale, such as school tuition or an airplane ticket. These are distinct from tangible items, or “goods,” such as oranges or motor vehicles.

U.S. services driving overall exports growth, topping half a trillion dollars The U.S. Department of Commerce’s Economics and Statistics Administration (ESA) released a report showing U.S. trade in private services totaled $526.6 billion in 2010, representing a trade surplus that is growing, rising from $66.7 billion in 2003 to $168 billion in 2010.

14

http://www.esa.doc.gov/Reports/us-trade-private-services

U.S. Surplus with China is Growing Rapidly Figure 4: Trade Balance in Private Services Billions of dollars 1992 1995 1998 2001 2004 2007 2010 -40 -200 20 40 60 80 100 -40 -20 020 40 60 80 100 Royalties and license fees Travel and fares Freight and port use Other private services Source: Bureau of Economic Analysis. Figure 5: Largest U.S. Surpluses and Deficits by Country in 2010* Private services trade, billions of dollars Canada Japan Ireland (2009) Brazil United Kingdom China Mexico India Bermuda (2009) -30 -20 -10 0 10 20 30 Source: Bureau of Economic Analysis. * 2009 data is used if 2010 is not available.

15

The Service Economy

Presentations & Public Speaking

Transcript of The Service Economy