2006/08/28 09:30 Paul Lillrank, "Towards a Service Engineering and Management Framework: Process Perspectives on Services"

2006/08/28 09:30 Paul Lillrank, "Towards a Service Engineering and Management Framework: Process Perspectives on Services", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Paul Lillrank, Helsinki University of Technology, Professor and Dean, Faculty of Industrial Engineering and Management

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Had started working on process perspective, didn't really get there

• Will start on a production system perspective on services

Agenda

Key idea: service machines

Definitions: what is services?

• Basic two dimensions: Borderline between things we talk about, and don't talk about
  • Professionalism:  services are produced by people who have developed skills, in a community
  • Could create a professionalism scale, where have more/less
  • Not performed by anyone off the street, someone trained.
• Commercialism: what kind of commercial exchange is in place, when something is producted
  • Dividing line, when there is money (unless we include barter)
  • Includes systems to calculate price, and the payment of taxes, accounting systems
• Combining the two, some things look like services, but are not.
  • Favours:  e.g. hitchhiking
  • Barter
  • Could develop into a taxi service
• Look at services when value is created for someone, not enough.
• Need to look at the institutionalism context
• Not-for-profit
• Black market

Literature on services marketing has been focused on some intrinsic features that would make it different from products

• Ontological exercise
• Difference would lead researchers to develop management methods
• Management methods behind manufacturing work well.
• Can we copy management methods from manufacturing to services, or have to develop something new?
• Service marketing, and recently service engineering, as new sections of management
• Reading, doesn't think it leads anywhere

IHIP model:

• Intangible: not something that you can drop on the floor
• Heterogeneous: service production systems are complicated, repetitions are different from one to the next
  • Every customer is a little bit different
  • Standardization and automation can not easily be applied, due to the heterogeneity of the input stream
• Separability: services are identical to the service production function, can't be separated
  • In manufacturing, can put the end result into inventory, separated somewhere else in the factory
  • Service producer and customer have to meet
• Perishability: product won't last
• e.g. airline, empty seat can be solved before the gate closes, and then it's gone forever

On any of these issues, can think of a number of counter-examples

• Customization: this is also increasingly true for products
• Inseparability and perishability:  e.g. a haircut exists as long as it is recognizable
• Inventory and storage: customers can be used as inventory, keep them waiting; can manage capacity

These categorization have limited explanatory functions

• Kotler 2003, from pure tangible good to pure service
• Solutions in the middle
• Could have core products, and add-on services
• Augmentation exists, but it doesn't separate immaterial services from material products
• Another view that everything is services:  service and product distinction isn't helpful in different management techniques
• Reference point:  e.g. word processing is a service for me, but it's a product for Microsoft 
• Mobile telephone:  a product-service

Service product matrix, classifying different types of services

• Labour intensity vs. degree of customization
• Problem:  the same model can be applied to physical products

Warneke, The Fractal Company: production as a system of transformations, from inputs into outputs

From book, Service Operations Management, compared to Operations Management

• Most of the content is the same
• Similarly for Service Marketing versus Marketing
• Then, not smart to create a new program in Service Management, as no new content

Deep integration happened in computer science

• Idea from IBM
• Had a number of problems, created a new content
• Then the old sciences start to combine
• Computer, as a device, has been developing since Babbage, Victorian England, steam powered, huge as a house
  • Same thing as today, but couldn't be done with mechanical machines, friction
  • Had Boolean algebra and portable programming, but no electronics
• After WWII, computer science started emerging
• Computer science is big program, can't be split into component parts
• IBM was the company that made it happen
  • In the 1950s, computers were huge, expensive things
  • Academics didn't see this
  • IBM funded chairs, faculty
• In the 1950s, this wasn't obvious
• There was huge, aggressive debate:  you can't have machine-centric science
• If you insist on a computer science, then I'll have a washing machine science
• Washing machine is made up of some scientific components:  electronics, fluid dynamics, chemistry
• No deep integration
• Computing has a lot more, and wider applications than washing machine science
• Washing machines just replace manual labour
• There might be something inherent in washing machines that don't allow deep integration

First management students in 1964, teacher was physics Ph.D., look at students with disdain; whereas now 2-years do this

• At Northwestern, psychologist and linguist started computer science program
• Similarly, Herbert Simon came from political science
• In computer science today, need cognitive science, etc.
• Electrical engineer doesn't need to know much about chemistry
• Similar, the same thing happening in pharmaceutical

But what's different in service science?

• CEO of IBM is enthusiatic in kicking off service science

An example where deep integration didn't happen:  TQM, Total Quality Management

• Lillrank's speciality, spent a lot of time in Japan
• In the early 1980s, a lot of people thought that it was the most important thing around, e.g. Japanese automobiles and electronics
• Reassembling manufacturing
• Many people believed in this, got a chair in Finland in quality at that time
• As time passed by, recognized that there is no such thing
  • Looks foolhardy
• At heart, theory of variation, and Statistical Process Control not replicated elsewhere, by Walter Shewhart at AT&T in the 1920s
  • This helped people do things, reduce errors
  • Japanese adopted these after WWII, and became a world manufacturing power
  • At the same time, it looked like deep integration, but it was not
  • Will eventually run into management problems:  how to do organization issues, etc.
• In Japan, no business schools, and the economics departments don't talk to business
  • Japanese needed to import consultants, etc., got into quality-oriented views of marketing
  • But if compare TQM way of looking at marketing is a simplification/bastardization, focusing only on customer satisfaction and forget everything else
  • End up with a general collection of bad management ideas, put together in a book, and not deep integration
• Some value, if you have engineers that never would study management, they'll learn something
• If your goal in life is to create science, this won't go
• Quality movement has collapsed
  • National quality awards: no one pays attention any more
  • Still have SPC, which has resulted in six sigma thinking, as SPC in more complex environment
  • Also quality metrics
  • COPQ, cost accounting
  • But nothing at the core, it's operations management at the core
• We don't want to come to the same place with service management

Question: If you have service as the central process, have to integrate?

• Can put a perspective in the middle (e.g. look at human resources from a quality perspective)
• But will it create something new, like computer science, which isn't a perspective.
• There are knowledge perspectives, network perspectives of management
• Change location, see thinks differently
• If deep integration happens, then have a new model that becomes a new department
• Important for university administrators to not run around, and focus on things that matter

Question:  In India, find these things

• Business Process Outsourcing is an application, like a washing machine

Having destroyed IHIP, tell us what to do?

• Do something practical? A violation of the mission of creating new knowledge, through science.
• Need definitions and classifications, as they're fundamental to scientific work
• Need a common understanding, so can have meaningful discussions
• Makes it possible to study alternatives:  wouldn't cut down IHIP model if it weren't define
• Models shape the real world, e.g. accounting

Example from clinical medicine:

• Have a medical condition, e.g. leukemia
• It has certain symptoms, body of knowledge
• Then diagnosis, with a treatment
• Look at results, see all over the place
• Not clear causal connection
• Similarly in management, e.g. motivational programs sometimes work and sometimes don't
• Different levels of scalability
• Psychiatry is the worst, and surgery is the best, because you know what the outcome will be

Recently, have discovered the leukemia isn't a single disease, it's seven diseases with similar symptoms

• When know this, and can classify, then could develop seven different diseases

This is why classifications are important, and need definitions that are clear and well-founded

Another example, from quality management, from Walter Shewhart

• Symptoms, use common sense
• But Shewhart suggested breaking symptoms down into common cause quality problems, and specific cause quality products
• They look the same in a defective product
• They can only be distinguished in time series analyst
• Natural defect level comes out of natural processes:  then should do nothing, because the system is running as it should, although by random processes, defects happen
• If can find time and place where this defect happens, then can take action
• Otherwise, will just mess around, and won't be successful
• Shewhart:  you can't make the distinction between common cause and specific cause by the naked eye
• Need to gather data
• It looks like magic, not obvious, a bonanza for consultants

Lillrank created a classification on Types of Science last spring, created some discussion last year

• Traditionally, have made categories based on what scientists do:  
  • (a) Basic science types who generate theory, not practical
  • (b) Applied science people, mostly concerned with solving problems, e.g. engineering, medicine, apply to some field of study
  • Think that this classification isn't good enough, doesn't explain what we do in this department
• We need to look at the governance of science:  the whole superstructure for financing, strategy, dividing roles and responsibilities, monitoring results
  • Look at bigger system on the financing of science, and recipients of science
  • (a) Things done for instrumental value:  science not for itself, used for something
  • (b) Inherent value:  science for its own sake
  • Funding is different
  • In studying Shakespeare, inherent
• Thus, four different types
• (a) Curiousity driven science
• (b) Engineering, clinical science
• (c) New: explorative science, filling defined knowledge gaps
  • This is where Tuta should be
• (d) Another new:  Experimentation for fun, playful science (liked by Nokia), e.g. tinkering with your motorbike
  • Many inventions this way, e.g. Wright Brothers
  • Can discover new things

Less from systems and their environments:  trying to make a definition, isn't always good to look just at the phenomenon by itself

• Looking at scientists today may not help
• Need to look at other layers of the system
• Then it's not just definitions, but context
• May think beyond material and immaterial systems
• Look at different types of production systems and business systems, that have differences

The institutional environment:

• The ontology of IHIP as foundational differences
• Production systems:
  • Difference between open systems and closed system
  • Closed means all of the defined inputs, certain processing and then output
    • Can't change the scheme by what's going on
    • Many companies operate this way
  • Open systems, e.g. travel and tourism system has terrorists, can't have a full and complete description before the act of production
    • Closed systems have low uncertainty, ex ante negotiated, volume low
• In a business system, have a production system, but contractual
  • Could be favour, barter, or public service
• Receiving system

e.g. consuming the services of an automobile (driving)

• Production system:  manufacturing, sales, service and repair
• Business system: car sales (new and used have different behaviours), leasing and rental
• Business system doesn't change the production system
  • Business system comes from ownership and financing
• Receiving systems: time becomes a criteria for billing, charged by number of days that you have the car
• Then, meaningful to say that car manufacturing and sales is part of the material world, and rental is services?

Comment: difference between pre-owned cars and used cars

• Pre-owned cars have all of the same warranty attributes as a new car

Comment: more and more value is not from the physical product, but from the value in use

• Act of consumption is the same

Comment: cars can be customized.  Value comes when I get in the car, and drive.

• An argument that everything is a service, eliminate the difference between the material and non-material
• It's not a different production system, it's a different business system
• Type of business configuration

Student doing R&D study:  the major difference is not the production process, it's the receiving process

• If the end is articulated well, it's different from a receiving system that is vague

Question: Is receiving system is different from the funding system?

• In the R&D example, they're the same

Based on Dalaunay and Gadrey 1987, Araujo & Srping 2006

• Production and exchange
• Could have a separate service provider
• 3-way, different from IHIP, can be split out
  • Production / exchange / consumption

Process management perspective, look at constraints:

• Time constraints:
  • Perishable?
  • Returnable?
  • Creates constrains on production system:  
    • inventory vs. capacity management; billable, revenue models
    • Objectificaiton, at point of invoicing
• Space / location constraints
• Boundary constraints
• Many of these constraints are changing, particularly with information tehcnology

If agree with the reasoning so far, then what could we practically do research on?

• Service machines:  an analogy, since we're a technical university
• In mechanical engineering, have a contract
  • Design parts, have a frame, connect them: need mechanical engineering skills
• Structure and framework aren't articulated, but these are the sorts of things that need to be studies
• This picture is the outcome of a quick and dirty exercise with colleagues in Delhi:  what sort of machine can handle 40,000 calls?
• If only look at process, the operating process is in service delivery, and is relatively simple
  • e.g. someone calling in from Iowa
• Service delivery may be simple, but the operations planning is complex

What kind of contract is made between the customer and vendor?

• Different generations
• First generation of call centers, was on capacity, e.g. buy 52 desks
  • This system doesn't work well, because the number of incoming calls is variable
  • Risk falls on the customer
• Then want to negotiate a different contract, based on the number of calls
  • Then the risk shifts the other way:  the vendor has to shift capacity, will have to pay even if there's no demand
  • From the customer's perspective, there's a risk of not answering the calls
• Third version: forecast given by a customer, in 30-minute time slots, given 2 months ahead, used as a reference point on which incoming traffic is judged
  • This becomes the basis of the revenue model
  • A sophisticated set of quality metrics
  • Metrics can then be linked to bonuses or penalties
  • Operations planning:  in all people-intensive systems, all of things are related to staffing and scheduling, can't save money unless something happens in staffing
  • Human resources: sophisticated incentive system, so people do a good job

In services engineering, the direction is not to dig more deeply into material and immaterial, but go into production systems and develop some perspectives, that allow looking at classical production systems

2006/08/28 11:15 Valerie Mathieu, "Services Strategies within the Manufacturing Sector"

2006/08/28 11:15 Valerie Mathieu, "Services Strategies within the Manufacturing Sector", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Valerie Mathieu, Institut d-Administration des Enterprises d'Aix-en-Provence, Chair in Marketing, working in B2B

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Come from southern France, near the Riviera

• Background in marketing

Won't disconnect services marketing from services management

• When in services marketing and management, have to approach everything from the lens of a customer
• It's not the only lens, but it's important
• Important to understand what the client expects
• How the client behave, in a service position
• Specificity of service marketing

In services, everything happens between the service firm and the client

• The border between the two is the service experience
• Client consumes the service process
• Not just production, includes consumption and client satisfaction
• Experiences are different for different customers, each service experience is unique
• Each customer arrives with a set of different expectations
• e.g. we have expectations of this training experience
• The service experience is different for each of us, but is valuable

What is the client interaction / encounter / need with the service firm?

• The service firm is not real
• Have physical evidence of the service experience: store, table, equipment
• Front line employees
  • A teacher is a front line employee
  • Human contact, face-to-face, by phone, by mail
  • In a service transaction, may split off a part that is a non-human contact
  • There can be an alternative to human contact
• Challenge in the gap between the perceived service experience and the real one
• Not a distinction between hard and soft in services, there's a continuum

The challenge of a service marketer is to manage the service experience

• Not only to define and market a service product
• Manage, and be sure that the service experience will fit customers' expectations
• Levitt: The main difference between product and service is that product most think technically, and service must think humanistically
• Service marketing is not a challenge of design, it's a challenge of implementation, which is different from product marketing

Everything is a service?

• This is a popular approach in management
• This is dangerous
• From a marketing viewpoint, consider a market offering
  • Could be a solution, a benefit, a pursuit
  • There's a difference between the value offered by the company, and the benefit received by the customer
  • e.g. Why buy a car? To get to work, for pleasure?
• Can create a 2x2 comparing product and service
  • The company offering is expressed in a product or a service
  • The customer benefit in terms of product doesn't exist; it's always a service
  • The customer may be satisfied by a product or a servcie
  • e.g. travelling may be achieved by buying a car, or a subscription to a rental car
• Thus, everything is not a service

In selling a car, is delivery / speed a vehicle a service?

• Delivery is part of the design

Another classification of the service domains, where the company may deliver a service offering:

• Service firms: companies don't business with services, e.g. hotels, banks, consulting services, marketing services
• Internal services: departments dedicated to a production of success, e.g. HR, information technology
  • Some services can be hidden, difficult to realize or approach, yet essential
• Service associated: When the product is sold with services around it
  • May also be called product services
  • This is the focus of this lecture: services within a manufacturing company

Relationship between the three domains

• Internal services are being outsourced into service firms
• Service firms can provide B2C services to final customers and B2B services to companies
• B2C: can have services to people (e.g. health care), and services to objects (e.g. maintenance)
• B2B services:
  • Services to people, e.g. IT help desk, training desk
  • Services to objects, e.g. maintaining plants, physical maintenace
  • Services to the company: e.g. consulting services

Associated services:

• e.g. computer, hot line
• e.g. car with financing

How to explain the increase of services, added to products?

• e.g. a box of pasta, with a toll-free number, which is a service
• e.g. a car with an extended guarantee
• e.g. a computer with a package
• Leave the marketing environment and management environment, and look at ...
  • the economic data;
  • debate from sociology; and 
  • managerial explanations

Economic data:  

• Services denominate economies in employment, about 70%
• GNP is 80% to 85% service sector
• Conclude that the developed economies are service economies
• Two theses:
  • Post industrial economy: the service economy is the new stage of the economy
    • This is a natural evolution
  • Neo industrial economy
    • Can't challenge the data
    • They challenge the explanations of the data
    • Service economies are strong, as a result of the industrial sector
    • Without the industrial sector, the service sector is nothing
    • The puts industry as important
    • Finance, insurance, consulting are developing because the industrial economy is becoming globalized, more complex
• In France, Jean Gaudrey, what is challenge is not to oppose service to product, but to position at the borderline of service economy and product economy, and think about what can be done better
• What can be done with products, to package more value to deliver to the customer?

Sociology:

• Based on the meaning of consumption:  sociology asks, what does it mean to consume?
• Baudrillard: consumption is a question of language
  • When you buy a product or service, you say something.
  • Not a question of acquisition, or buying, it's to say something
• Consequence: material values are at the heart of consumption
  • Brand
  • Why do we buy Nike? Why do we buy Nike for our kids?
  • Branding is a material value in today's culture
• In B2C, human capital is an important immaterial value
  • Can create trust, engender loyalty
  • May link information and knowledge to human capital
• Thus consumption is a complex bundle around a product
• Society is demanding more immaterial values, both in the B2C and B2B domain

Managerial explanations:

• Companies have discovered that the main sources of value are on the services part, less on the production part

For manufacturing companies, it's a question of no or no go with services around the product

There's three kinds of benefits:

• Financial benefits:  increases sales, and the margin in services is higher than in the product
• Strategic benefits: self-service, or expansion to new markets
• Marketing benefits: improve customer satisfaction, customer loyalty, service as a buying criterion

However, there are costs inherent in services to a manufacturing service, in two costs:

• Cultural costs: manufacturing culture in an industrial approach has to adapt to a service culture
  • IBM succeeded in this transition, but not all industrial companies have succeeded
• Organizational costs: when developing the service package, have to develop a new position
  • e.g. a car manufacturer entering the credit market

Matrix: diversity of services manoeuvers in the manufacturing field

• Large range from putting the toll-free number on the back of a package of pasta, to the cultural shift required at IBM
• X-axis: opportunities for manufacturing companies to create services:  organizational intensity
  • What will be the impact of services on the company?  Large, like IBM?
  • (a) Tactic: small impact
  • (b) Strategic:  have to get new competencies to implement a service strategy
    • e.g. selling a training program to make the product work
    • e.g. Medical branch of GE, decided to sell a new training program, had to develop new training competencies
  • (c) Cultural: manufacturing company develops services, to change the culture into a service culture
    • This was the change of IBM
    • e.g. Lexus brand of Toyota:  we don't sell cars, we sell a luxury service package
• Y-axis: service specificity, i.e. how intense is the service offering?
  • (a) Customer service: Just a toll free number, or developing a relationship with the customer
  • (b) Product services: a new offering around the product offering, e.g. extended guarantee
  • (c) Service as a product: developing services not connect to a product
    • e.g. IBM Global Services, without buying IBM computers
    • Autonomous company, apart from manufacturing

Matrix versus benefits and costs

• Most benefits to upper right, as are the costs

Two worldwide examples: IBM, and GE

• GE, more than 90% of products come from services.
• Need to change the culture of IBM

2006/08/28 13:45 KIBS Track Session

2006/08/28 13:45 KIBS Track Session, SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Led by Marja Toivonen

Each day, one presentation by the coach, and then one presentation by a participant

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Marja Toivonen, "From Professional Services to KIBS"

First will talk about KIBS more generally today

• Then tomorrow will speak about natural KIBS and services
• Innovation in services
• Thursday, processes

Agenda:

• KIBS concept
• KIBS history
• Two schools of thinking: general business services studies; and studies into professional services students
• Current view of KIBS
• KIBS are part of the knowledge economy
• Some preliminary discussion on KIBS and innovation

KIBS are expert firms that provide services to other companies and organizations

• Business services, not consumer services
• In addition to being business services, they are knowledge-intensive
  • Some define knowledge both as input and output
  • Some say specialize in problem solving
  • Here, say that KIBS always creates new knowledge, it's a learning process between KIBS and clients, which links to innovation
• Main KIBS industries are IT services, R&D servies, architectural engineering and industry design, legal services, financial consultancy, management consultancy, and communications services
  • Many firms now combine these in KIBS, may be different industries
• In Finland, where compared to other European countries, found KIBS sector is smaller
• This is a reason that Tekes is putting more resources behind KIBS
• If you think of KIBS only as firms and not an industry, can't do statistics

Clarification of basic concepts: (4 here, but there are others)

• KIBS are private firms, that provide expert firms.
  • There are other firms that provide similar services
  • e.g. VTT is public, call it RTO, Research and Technology Organizations: similar work, different funding
  • Important to recognize private firms
• KIBS-ification:  firms not normally in KIBS, but provide some services
  • e.g. Metso, in the Finnish metal industry, provides some services
  • KIBS clients produce these same services
• KISA, Knowledge Intensive Business Service Activities are more focused on actors
  • e.g. OECD has published on KISA
• There are also Knowledge-Intensive Consumer Services, studies much less, e.g. medical healthcare
  • Talking about KICA and KIBS, use the term KIS
• KIBS services are not synonymous with information services
  • Organize store and transfer information
  • Not create and trasnfer knowledge

History of KIBS

• Professions (engineers, lawyers) have existed for thousands of years
• They emerged as firms relatively recently, e.g. linked with industrial revolution
• First KIBS were advertising agencies in the 1820, with mass consumption goods, development of brand names, establishement of popular newspapers
• Then, growth in R&D, book-keeping and management consultancy.
• Engineering offices came about in 1920s

Early KIBS studies:

• KIBS was small until 1950s, then rapidly developed
• In the 1960s, already several studies, statistical
• In the 1950s, KIBS grew faster than the economy
• In the 1970s, KIBS was the highest growth sector
• Rapid growth
• In 1960s, research into business services, on productivity and competitiveness
• Greenfield 1966, discussion is very modern, readable today

Then two lines of Research:

• General research into business services
• Have to use this data before 1995, when didn't have other data
• PSF == Professional Services Firms, which is what U.S. and Canadians use
• PSFs are usually business, rather than KIS

General business studies:

• Also include some routine services
• Some other producer servides, including transportation, trade and storage
• To end of 1980s, research weas in explaining growth
• Attacked as not real, transferring services from one place to antoher

Since the early 1990s, outsourcing explanaiton is too simple

• Services change at outsourcing, often upgrade at initiation

Main reason for growth for KIBS is increasing needs for expertise

Earlier studies focused on demand, now also focused on supply side

• W'hat sort of firms
• How long (life cycle)?

Professional service studies

• Focused on occupations (c.f. KIBS forcused on firms)
• Idea: beneifts depende on background
• Studies originally focused on single firms: .lawyers, engineers
• Firms don't have much power on employees, they get advice from outisde professional societies
• Social control (e.g. who had rights to work) were passed by professional associations
• Partnership principle, seniority imporant
• Leadership weak, partner oriented

Views of PSFs are now becoming more questionable

• Traditional studies were more stable
• Occupatations of blurring
• PSFs are becoming more local

Idea of KIBS combines the two lines of research

• Professional, and business-oriented
• Client is the starting point
• Many now understand the client's industry, value chain
• Modularizing KIBS are at the very beginning

Can't be above the client, have to be there

• Leads to management consultants

KIBS works for large firms, while small firms joint chains

Most KIBS are close to urban:  70% in Finland

KIBS as part of the knowledge economy

• Globalization, networking and ICT contribues to KIGS
• Network ways are more natural in external services

KIBS and ICT

• Innovation changed in the late 1980

Innovative Work Community: Tea Lempiala

[3:20]

 

2006/08/29 09:30 Ashok Agarwal, "Equity in Health Services: Issues and Challenges"

2006/08/29 09:30 Ashok Agarwal, "Equity in Health Services: Issues and Challenges", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time duringthe meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Ashok Agarwal, Insittute of Health Management Research, India

---

Introduction by Paul Lillrank

• Extreme differences between Finland and India, good for academics
• Possible for them to jump into higher level of technology, avoiding some of the blind spots of early adopters

[Ashok Agarwal]

Bring the science of management to health care

• Like many other countries, health care is managed by doctors

Agenda

• Equity
• How to measure it
• Comparison of developed and developing coutnries
• Millenium goals
• Indicators of goals

Difficulty between defining equity, versus equality

• Equality: compare various attributes of a country or person, in a semblance
  • Different background, financial, social
  • Hence provision of services is equally spread out
  • Equality is value-free
• Equity means social justice
  • Several disparities in wealth, health care, democratic freedoms
  • Can understand inequities in wealth, from inheritance, and some people work harder than others
  • Everyone should have equal access to health, though
  • Health equity is multidimension, includes all of the other special acts in living
  • No matter where they're living, health level, age group

Bring health differentials as low as possible

Dimensions of equity in three parts:

• Economic equity
• Provision
• Health outcomes

There's horizontal equity and vertical equity

• Horizontal:  people who have the same neeed receive same services
• Vertical:  people with more needs get more services

Extreme poverty: World Bank defines as less then $1 per day

• However, different purchasing powers
  • One other way: caloric intake
  • People of different age groups, of different sexes, have different values of intake without malnutrion
  • 2000 calories per day
• Also define poverty as resources, and access to services

Ten richest countries in the world

• Do they have the best health status?
• Do they provide equal health care?

Consider a world where they talk instead about taking care of their babies

• More linked to public health than to engineering
• Number of deaths of infants, under age of one year
• Talks to nutrition status of the woman, health care of the woman while pregnant, health care, ... health status of the child when born

Lowest infant mortality rate:

• Only 2 of 10 richest countries on the list

Range of infant mortality rates around the world

• Countries more than 150/1000 live births
• Singapore lowest at about 2

Expenditure health in different countries in the world, both public and private sector

• Low income, middle income, and high income countries
• Low income countries spend less per capita
• India about 5%, low
• Developed countries spend about 10%, and the U.S. is spending about 1/6 of GDP

Absolute numbers in spending:

• Low income countries spend about $20 to $30 per person per year
• Middle income countries spend about $200
• High income countries spend about $3000
• U.S. spends about $6000 per capita per year

India: typical example of a undeveloped country

• Public health care only 30%
• 82% is private, out of pocket
• Have just started private health care
• Rich people can get either free or fee services

Low income countries have low life expectancy

• Sri Lanka an exception, infant mortality rate is relatively low
• South Africa is an exception: apartheid, high infant mortality rate

1987:  Millenium Development Goals

• Set up by U.N. and World Bank
• Aim for 2015
• Goals not equally spread out
• Defines according to each country, each region in each country, based on 1990: environment, health care
• #1 target: eradicate extreme poverty and hunger
  • Medicine won't improve everything
• #2: achieve universal primary health care
  • Educated women have better health
• #3: gender equiality
• #4: reduce child morality
• #5: improve maternal health

Why is goal setting important?

• According to each countries' relevance
• Important to mobilize world resources
• Goals allow U.N. system to monitor progress
• Last time: eradication of smallpox, a disease know for 5000 years that was highly contagious
• In the 1970s, joint work, countries came together to say to eradicate one disease in the century
• Up to $10000 reward in each country, to find an incidence of smallpox

Where are we?

• On poverty, we're nowhere, because we don't know how to measure it
  • In India, have a different definition of poverty
  • Haven't been able to measure over the past 6 or 7 years
  • Wealth is increasing globally, but in only certain classes of people
  • Many countries in Africa, GDP sometimes goes down
• HIV/AIDS: nothing has been achieved in 2005, because the goal is different, to halt new cases
• Safe water, somewhat better, one of the most basic for health care

Goal to reduce child mortality

• 2015 goal
• Smallpox was eradicated in 9.5 years, without today's technology
• Indicators:
  • Under 5 mortality rate, reduce by 2/3
  • Infant mortality rate
  • Measles
• Under five rate in high-income countires < 5 per 1000 live births, and >100 in low income

In India, 26 million births per year:  5 Finlands

• Highest proportion of global annual live births, but also highest proportion of neonatal deaths
• Deaths less than 4 weeks are mostly related to mother's health status, or delivery conditions
• Under-5 mortality rate is coming down

India's population is 1.1 billion

• Diverse
• Each state, 60 billion to 150 billion
• In south, Kerala is poor, yet lowest infant mortality rate
• Orissa, another poor state on the east, has highest infant mortality rate (similar to Africa), yet bad infant mortality rate
• 100 years ago, Kerala had a policy of educating masses, families working together
• Kerala has infant mortality rate, comparable to the U.S.
• Kerala has electricity rate of 90%, Orissa has about 40%
• Punjab, Delhi have higher mortality rates, and the ratio of men to women is high, biologically incorrect

If trend continues, won't make 2015 goal, but India can take steps

Goal 6: Improve maternal health, target, reduce by 3/4 by maternal mortality ratio

• Indicators:
  • Maternal mortality rate
  • Proportion of births attended by skill health personnel
• Death of the woman while pregnant, or within 6 weeks of termination of pregnancy
• In India, preparing adolescents, a lot of women get pregnant at 18 or 19

Differential in maternal mortality health: 1100 per 100,000 live births in sub-Saharan Africa, compared to 12 in industrialized countries

• In sub-Saharan Africa, a woman will be pregnant 5 or 6 times in her lifetime

Skilled birth attendants at time of childbirth

• About half of children in the world at born at home
• Chances of a child or mother getting infected is very high
• In poor India, 10% have access to nurse or doctor, whereas in rich India, 90%

Goal 7:  Combat HIV/AIDS, malaria and other communicable diseases

• Use of condoms
• Knowledge of women
• In 2005, global 1% with HIV, but about 6% in sub-Saharan

Limitations to achieving Millenium Development Goals

• Difficult in countries that aren't well-defined, e.g. wars
• Poorer people have to pay out of pocket expenses more often
• When a poor person has to go to a hospital, 25% will have to dispossess something

Prescription to remove inequity?

• Wish there was something, no standard prescription, has to vary country by country
• Regions in mountain, by sea, inequal distribution of resources

What needs to be done?

• Firstly, need resource allocation related to social and health needs
  • Some have other priorities, e.g. war
• Education
• People will live near jobs, health care has to go where people are
  • New technology can be distributed
• Must be someone who looks at quality of care at national and regional levels.
• Lots of centres provide free services, but people don't go there
  • Don't understand why
  • In fact, people go to public sector, spending a lot of money, to get the same services
  • Often, go to illegal doctors, quacks
  • In India, one major factor: unreliability, never find a doctor or nurse there or clean facilities
  • People would rather go to a private practitioner who will serve quickly

Most data not collected in a way that is useful

• Lots of data, not churned out into information used in policy

How to monitor and evaluate health equity?

• One research says: guided by values
• You collect data, make it information, but must use it to provide care to the population
• Hard to measure equity directly

Recommendation:

• More resources must be provided to health care, particularly in developing countries
• Resources not just money, also trained manpower and infrastructure
  • Often find the building good, and doctors and nurses are there, but aren't trained well
• Should be a pro-poor approach
• Public funding should be distributed according to distribution of people, where they need it, even in special needs
• Public/private partnership is difficult, defined differently
• Instances where government are providing health care at high cost, and outcomes are quite low
• There are cases where government could outsource to private, at same or lower cost
  • Instances in Cambodia and India, no cost to patients, health care is better
• Health financing models, either by government or by companies, and others can't get it
  • Micro-health insurance
  • India is experimenting with community health insurance, e.g. 1 million people with access to a designated health system

Generic/research questions:

• Is the equity definition correct?
• Found more than a dozen definitions, most often defined as what is inequal (in health care needs, expenditures)
  • Equity to reduce disparities: people with more needs should get more resources
• Who provides? government, people, private sector, NGOs?
• Why is quality in health care intangible?

[Questions]

Equity.  Horizontal, same care to same needs. Can this definition of equity really work in a wealthy society? Curve flattens out at $700-$800 per person, then spending more money doesn't improve health. Amartya Sen 1995 and Robert Fogel 1993 have different views.  Fogel says in U.S., main obstacle is the concept of equity.

• Definition of equity is not standard
• There's 5000 ways to lose weight
• Sen: equity is not in a narrow sense, it's multidimensional.
  • Ability of the people to access health care, or any other public good
  • Thus inequitable

Fogel says there's also moral behaviour, not just determined by body or environment, but by also how you choose to live your health.  If this is ignored, then the consequence is health totalarianism. In Nordics, this isn't far away. An issue of individual freedoms.

• Living the life you want to live is a small decision
• In poor countries, government resources are very limited

Obesity a bigger problem than malnutrition, increasing most in developing countries with bad foods. Should be addressed on a U.N. level. U.S. health care, diabetes at age 20 requires being on machines, cost of life.

• Obesity is behaviour.

How much education about obesity?

• Agree, more education should be on health behaviour.
• Newfound wealth is in a certain class of people.

International problem.  Smallpox eradicated because all countries came together. Some issues difficult not just internationally, but within a country. e.g. polio vaccination, outbreaks in India.

• Diversity, 6 billion people around the world
• In 1970s, diversity, 4 billion people, but the whole world came together to talk about one problem, smallpox.
• This wasn't about control, it was eradication.
• Uniform will, manageable input.  Countries came together.

Politics and religion. A lot of health resistance is by religion communities. Mullahs. Person who wanted to set up a condom factory in Bangladesh, said that privately would support it, but not publically.

Management view.  What kind of health care service providing system, service production system could tackle this? Probably not the same as in the rich world. No alternative health production system, so that poor countries have to wait for GDP to grow.  Average return per user, e.g. building a mobile cell phone for under $20, or Negroponte computer < $100, lean production.

Jakur artificial knee, made of aluminum.

• Health care is limited by doctors.
• Doctors use medicines and technologies, which increase cost of health care.
• Artificial limb is provided free to people. Cost is less than $1000.
• Eye care, cataract surgery.
  • Do this on a camp basis, instead of at hospital at $200 to $1000, do it at $10 per person.
  • Infection rate and complication rate is as low as a hospital.
• Can bring the cost down, but need to take it out of doctor's purview.

Who is responsible for ensuring health care? A lot of stakeholders.  People. Education.

• Everyone has to pitch in.
• Kerala, brought in the right time, 100 years ago, whereas in other states only 10 years ago.

From political theory, government is responsible to ensure equity of people.  Can't ask private sector to do this. Businesses tend to segment markets. Asking them to give up this fundamental principle is not sustainable.

In Finland, it has been NGOs. Service that public sector is offering, has been first developed by NGOs. When the knowledge has been gained, public sector takes them, and the NGO focuses elsewhere. Health clinics on maternal care.

• Am an NGO.
• They don't necessarily belief in government.

Governance doesn't come up with something new.  NGO doesn't have the rights to make it universal.

2006/08/29 11:20 Som Garimella, "Indian Pharmaceutical Value Chain: Opportunities and Challenges"

2006/08/29 11:20 Som Garimella, "Indian Pharmaceutical Value Chain: Opportunities and Challenges", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

S. Garimella, International Management Institute, New Delhi

---

Was working on a project on alliances in India

• Not many studies in the Indian context
• Took up 3 sectors to improve the supply chain, one was pharma
• Realized certain important aspects of the Indian pharma value chain
• Quiet revolution industry, some related to busines process outsourcing or IT related industries
• India will be known for contract manufacturing, contract research

While trying to get information, little comes from pharma industry, little comes out

• Had to collect through anecdoctal, secondary sources
• Contract services relevant to the SEM 2006 audience in general

Agenda:

• Overview of Indian pharam industry
• Value chain and R&D
• Factors for success
• Opportunities nad challenges, particularly in contract manufacturing
• Impact on health care

In 1947, no pharma industry at independence, but now has one beginning 1970, meeting 95% of country's pharmaceutical needs

• 1.3% of world value, 8% of world production
• Highly fragmented, 23,000 licensed units, range of 100,000 drugs
  • Whatever is supplied, customers will buy
  • Substitutes coming up, working on older drugs
  • $50,000 investment would be large, low technology, not more than 5 to 10 people in an area
  • Work like small production, then supply to larger manufacturers
  • In south India, see this:  small manpower, low capital investment

Indian companies focus on bulk drugs (about 400 types) and formulations (mixes in combination)

• Bulk relates to volume, not profit
  • Few companies in formulation, more profit
  • Formulations by larger companies, have marketing
• Drug price control order, from 1970
  • At one time, drug prices were high, and people couldn't access drugs
  • To provide access to drugs, government brought in price controls to be available to common man
  • Government has a formula to calculate
  • A lot of drugs are under this order
  • Some drugs were under this order, but then brought the number of drugs so that MNCs are interested
  • Control of 74 or 75 drugs, rest are deregulated
  • In other countries, it's not the government that controls prices, but maybe health providers
• Indian Patents Act, 1970
  • Recognition of process patents
  • Has created a revolution in the industry
  • Indians went abroad, and then brought back and reverse engineer
  • In 1995, drug takes $500 million, now costs $800 million, and no Indian company could do this.
  • Controversial
  • Not equitable
  • Different process, and then put drug back into the same market, at the low cost
  • Amendment: Indian has signed GATT agreement in 1995, converted to WTO, new patent regime, where the product is patented and not the process, can't reverse engineer
  • Cost to make drug about 1/6
• Knowledge-intensive sector, lots of universities churn out chemistry graduates
  • R&D still low, 1.5%, compared to MNC 15% to 24%
  • Most Indian pharma companies dependent on someone else
• 20% to 25% cheaper to produce drugs in Europe, as compared to elsewhere
• Only 18% public funded, the rest by people themselves
• No insurance to support, so drugs came in handy
• 16% of expenditures is medicine

Indian Industry

• 1947, non-existent industry
• 1946-1970: Government created large public sector companies: Indian Drugs and Pharma Ltd., and antibiotechs company
• 1970-1979: Watershed, Indian Patents Act created a lot of companys that would ride on reverse engineering
  • Also DPCO to control prices
• 1979-1995: Reduction of drugs in DCPO from 247 to 63
• 2001, signed GATT
• Have to change by 2005, so companies have to change R&D
• 2002-2004, more reduction in DPCO, amendment of Patents Act

Key success factors:

• Look at R&D as an essential component of business, investment for long-term survival
• Good access to technical manpower, but need foreign experts, being done
  • Access to long-term funding, huge investment required
  • Indian companies still don't have access, mostly out of pocket funding, need to look to long-term funds
  • Need to access new technology platforms
• Manufacturing, have technical competence, but lag behind companies worldwide
  • Distribution could be improved, 50% of cost is raw materials
  • Need to contain the cost
  • Most companies acting more as job shops, no thought of management, single man show
• New to introduce new products
  • Most companies don't have a lot of patents in portfolio
• Refocus target markets
• Most don't have blockbuster drugs
• Need distribution efficiencies

Value chain:

• Discovery chemistry: lag behind
• Process R&D, good
• Manufacturing good for a few companies

R&D plays a critical role

• At least 30 claim R&D
• Must be correlation between R&D and profits
• Define as ...
  • New Molecular Entities (few over the past years)
  • New Drug Delivery Systems: Indian companies good at this
    • Can differentiate drugs through delivery
    • Can support MNCs
  • Improved Chemical Entities: same molecule, maybe isomers separated to make more effective
  • Research in Generic Drugs, off patent: Indian companies will look at them
• Indian companies can't invest like Pfizer: Prizer talks of $40M revenue, and total Indian revenue is $7M
• U.S.A. accounts for 44% of global research expenditures
• Research is shifting towards lifestyle, e.g. elderly
  • Higher margins
• Need to balance to serve other infections, as in India

Scope of pharma research

• Basic research
• Prototype design or development
• Pre-clinical development: most expensive stage, countries are insisting longer and more subjects
  • Doing trials in India are cheaper
  • Criticism that India is being used guinea pig
• FDA filing
• Then launch

Indian is nowhere on any of the above list

• Neglected to do research.

Trends in Global R&D

• Rising costs, declining productivity
  • Costs fall 8% to 10%, number of discoveries coming down, large companies are failing
  • Potential for contract services, where India could emerge
• Increase in numbers of alliances
  • R&D expensive, better to shift to low-income countries
  • India, China, Singapore
  • India has also picked up in the last 3 to 4 years
  • Matrix Laboratories
  • A lot of comparison to IT Industries, e.g. started in Y2K problem
• Universities are still going to investors
  • Companies try to poach in on Indian ex-pats at NIMH, but salary differentials are huge, where paid 5x or 6x more in India
  • Arguing patriotism, to come back and serve
  • Also trend, where people from U.S. coming back
  • Large number of research institutions, but output is disappointing
  • CISR was developed on British model
  • Government labs, competent researcher, good research, but basic research that has little to do with the Indian industrial scene
• Licensing: many large MNCs would like companies who can take over, cheaper
  • Outsourcing, puts more drug into pipeline
• Generics are becoming important
  • Payers are specifying generics

Global scenario, driving outsourcing

• Significant price controls exist in developed countries
• High costs and long gestation period forces MNCs to sell drugs at a premium
• Large companies need to bring down R&D expenditures
  • Favourite targets: India, China, Singapore

Three types of outsourcing organizations in India

• Contract research organization: pre-clinical and clinical trials
  • Create molecule
• Contract manufacturing organization: formula given, put production at fraction at a cost
  • Need to see if a service machine works in this way
  • Similar to call centre work
• Contract sales organization: marketing on behave
  • Nicolas Perlman: know distribution network better

Benefits of oursourceing that companies are looking from on CxOs

• Can screen and focus efforts on most promising projects
• Can be first to market in different countries
• Study protocols, number of patients, period of time

Typical Indian outsourcing scenario

• Large generic houses from U.S. outsourcing
• Some using Indian subsidiary, e.g. Baxter
• Large Indian companies setting a trend: Raxbaxy-Eli Lilly
• India has over 500,000 doctors, hundreds of medicial colleges, abundance of diseases
• Low development costs
• Easy raw materials
• Follow Good Clinical Procedures, as prescribed by USFDA
• Pharma research more IT oriented, India has strong IT base
• As well as U.S., EU potential

Opportunities for India

Challenges for Indian companies:

• CEOs survey, not in favour: close interactions required, not as simple as BPO, travel and communcations and time differences are a challenge
• Asking for proven capability
• Major issue: weak in IP protection
  • Although subscribe to the new regime, hard to enforce
• e.g. software is something that you shouldn't pay for
• Companies resistant to share
• Quality and regulatory issues a risk
• Cost effectiveness has to be proven
  • In IT, took a long time to convince people
  • Not just cheap manpower, but whole cost, related to productivity

[Questions]

Style?

• Expats, professional, like startups.
• Even largest company is more family oriented
• Lots of MBAs, but decisions still by family method

Geographical distances. Clusters?

• Like IT clusters, Bangalore, or Hyerabad
• State on the west coast, more into manufacturing
• Mumbai, contract research

Clusters because of pools of labour, or collaboration between companies?:

• Little collaboration
• Clusters has been promoted by government, associations are formed, but companies are very closed
• Companies can't believe trust other companies
• Another school of thought:  you think it's a secret, but everyone seems to know
• Some reliance on local universities, e.g. Hyerabad is becoming a centre for life sciences
• Skilled labour, some fear of poaching
• Expertise across companies can't be transferred, because companies are working at different segments, skills not transferrable

Similar to Japanese pharma industry, fragmented, want to go international. Major relationship with clients? In Japan, symbiotics between medical community and pharma, consumption is high even for mediocre drugs and moderate production systems. Role of pharma industry in improving public health?

• Most companies are there to make profits.
• Top Indian companies focus on drugs that make profits, export potential.
• Should be a focus on drugs that solve infections, but who is going to fund that? Government says can't fund this.
• Could look at private-public partnership.

Some cross-subsidization, e.g. charge rich patients, distribute to poor patients

2006/08/29 13:35 Karita Ilvonen, "Towards eHealth Services"

2006/08/29 13:35 Karita Ilvonen, "Towards eHealth Services", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Karita Ilvonen, Helsinki University of Technology

---

(Came in a few minutes late, a few slides in)

Started studying Palo Alto Research Foundation

• Do patients get more out of ICT in primary care?
• The current healthcare paradigm has been to add resources, and now there is no more resources to add
• Can ICT help create new system of innovation?
• What part of healthcare can be taken online?

Drivers for online healthcare

• Electronic Healthcare Records in the USA
  • State levels: Regional Healthcare
  • Local and regional have done EHRs
• Personal records locking onto one part of a regional record
• Connection to 
• Hurricanes Katrina and Rita, had to take the patients out, but most of the servers were in the lower floors, and then don't have records, and they're only in one place.
• A case for servers on the Internet

U.S. health care is 13.6% (compared to 7% in Finland with good health care), will to go to 23% by 2010

• Some reduction in costs, but aging, and obesity with increasing number of diabetics
• Consumerism and medical breakthroughs are expensive, they like newest technology
• Want to lower costs

Healthcare Operations Management

• Analysis, planning and control
• Products can be defined by specialty of patients, e.g. outpatient care
• Further subdividing: diabetics
• Gaze: consultation

Healthcare processes by Paul Lillrand

• Care episodes

Online service delivery in healthcare

• Internet is almost everywhere in the U.S.
• Including rural, will be in almost every library.
• Few access via mobile phone, different from Finland.
• Lots of health care data, but currency/date and source are not notated, concerns on quality.

Patient Health Records

• An electronic application, wher eindividuals can access themselves
• Similar to banking, except doctor's visits, results from lab
• Messaging: secure, encrypted e-mail over a specific application
• Also link remote patient technologies: diagnostics, monitoring, consultation (videoconferencing, avoiding phone tag)
• Non-clinical support functions, e.g. online appointment scheduling

There are different models for PHR, talking about PHR out of EHR

• There's also models where you write it up yourself, or your health insurance company keeping records.

PHRs:

• More informed, more empowered patients.
• Typical way of providing messages: where specific words are highlighted, e.g. diabetes with a link to trusted information
• Safer than e-mail through work or Hotmail accounts
• Still lacking a business case, not incentive for Finnish or European use, as not access to health outcomes
• Study by Mayo Clinic that show that people leaving a hospital, 62% don't know the use of their prescriptions, 86% don't know side effects, 58% didn't know their diagnosis.
  • PHR could provide all of this
• Found that the older people do use the Internet, up to 80 years old
• Palo Alto, average patient using is 64
• Messaging can be async, that allows doctors to reply when they have time
  • If a patient takes 10 minutes of a 20 minute appointment, have time
  • Only non-urgent information
• PWC 1999 study says access to e-mail would reduce in-office visits by 20%
  • Doctors could be reimbursed for online messages
  • Why would you want to spend time with patients that don't need urgent care?

Palo Alto patients pay $60, doctors in the study did it out of goodwill

Lillrand: Most businesses would like to increase demand. Health care is different. Fixed costs might cause overconsumption.  But pay as you go raises equity issues.

• Alok: Delco cost per employee is about $65.  Employee gets $28/hour, health care provider gets $25.

Had data on 15,000 patients, chose diabetic patients of 127 for 12 months before and 12 months after intervention

• Control: patients that don't have Internet
• Second group: some that have access, but not messaging
• Heavy users

Messaging patients have more chronic patients, need the service more, potentially replacing visits with messaging

• Number of visits flatten out, at a higher level, rather than continuing to trend up
• Messages: after intervention, have a kick the tire effect, initially higher demand for the first 4 months, then goes down to one message per month

Physician survey

Asked physicians for estimates on how long it takes them to do a function

• On average, phone call takes 5 to 7 minutes or above
• Online results or prescriptions could be done in a minute or less
• Messaging improves quality of care: better access to health care, better lab results, better disease management

Today and future

• Static health content --> Test results
• Appointment requests --> direct scheduling, like airlines
• --> more information online
• Possible for someone to take photos of everything that they've eaten that day
• Asynch advise --> real time chat
• Unstructured e-mail --> Patient-physician messaging
• Generic content --> personal illness content

Future:

• Need to be able to migrate, as people move
• Automatic algorithms to devices in home
• Aim to increase national security

[Question]

Service innovaiton. Driver?

• Started before born
• Demand driven, by people who want to get better access to providers

2006/08/29 14:55 "KIBS Track"

2006/08/29 14:55 "KIBS Track" (Marja Toivonen), SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Three presentations

---

Marja Toivonen, "Innovations in KIBS as Examples of Service Innovations"

Relationship between KIBS and innovation

• First talk about service innovation, based on studies on the research project
• What service innovation can mean
• Results from the empirical study

Agenda:

• Development of perspective
• Similarities and differences services/manufacturing
• Working definition
• Starting point for categorizations
• Two examples

Development of perspectives

• Services were first considers as secondary from manufacturing
• As services has become more important in the economy, need something more
• Pressure to understand service innovation is heavier
• In history of innovation research, first research on services innovation in 1980s:  Barras 1986.
  • Barras 1986 wasn't really about service innovation, but it was related to information technology that spurs services firms
  • More about diffusion of innovations, rather than creation of innovations

More recent theories start from Schumpeter

• Schumpeter was a pioneer in manufacturing, but had a broader view that later researchers
• Later focus on technological
• Schumpeter (1934, p. 66) listed many types of innovation: product innovation, process innovation, market innovations, intermediate inputs in innovation, and organizational innovation
• Schumpeter also said innovations can be radical (new), or combinations of new things (recombinative)
• Raised entrepreneurs into the centre of innovations
  • In his time, innovations were created in universities, as synonymous with inventions, thus inventors
  • Schumpeter argued that there wasn't anything special about those people

Most researchers start Schumpeter, differences in degree between manufacturing and services

• Some say that we can use both, nothing special in services
• Others say services are totally different
• At HUT, have adopted something in between, some things similar, with some differences

Five characteristics that are common to both services and manufacturing

• (1) Innovation is an idea that is put into practice
  • Ideas are in the front end, but it's a long way to the real implementation, put into the market
• (2a) Innovation provides benefits to its developer
  • Motivation: something to compete with
• (2b) In order to be sustainable, innovation has to provide benefits to users
  • Developers can innovate for themselves, but not necessarily long term
• (3) Innovation is reproducible
  • Important for service firms, who say that they make something different for every client
  • This isn't the idea
  • Innovaiton is something that can be applied every time
  • Tailor-made service is not an innovation, although it may contain an element that has been applied from many areas
• (4) Innovation differs from everyday development
  • Most of the time on a stable path, then break a framework
  • Breaks are innovation, maybe incremental or radical, but the formulation is different
• (5) Innovation is an economic concept, in some area or some industry
  • Impacts not only the company that creates it, it has program impacts
  • Others will try to imitate it
  • Thus, need to have some intellectual property system
  • e.g. today comparison between banking and healthcare
  • Both geographic and sector contexts

Differences, in two groups

• Not clear whether meaning outcome, or process
• Usually mean innovation as the outcome, and then can speak to innovation process

Differences in innovation as an outcome

• With goods, can separate out the end product from the process
  • It's something in its own right.
• Services, however, often can't make a distinction between the process and the outcome
• Often, the process produces a benefit for the customer
• e.g. entertainment or tourism, no specific outcome, it's the process
• There are a few services where you can't make a differentiation between the process and the outcome
  • If can make a differentiation between back office and front office, then can differentiate
• For researchers, if studying service sectors, it's not reasonable to go to a service firm and ask about what kinds of innovations
  • They may respond that they don't have innovation, or they can say everything is an innovation
  • Can discuss customer satisfaction or quality, then when you tell them what you mean by an innovation, then they'll be able to speak of some cases

Differences in innovation processes

• Big differences between manufacturing and service companies
• In services, rare that companies will have specific departments, for an R&D, or a specific person
  • In service companies, innovation is seen as a quality process, it's everyone's job
  • Intrapreneuring, guided by strategic management
• Service innovations are often not the result of planned activity
  • The company just provides services, and after 2 to 3 years, and then finds the service is not the same
  • May not be new just for the the firm but the industry
  • Innovation can be found a posteriori
  • Makes it hard to study innovation
• Client participates in the innovation process, unlike in manufacturing (at least in a deep way)
  • In services, without a client, can't innovate, because can't pose relevant questions

A working definition for service innovation

• A service innovation is a new service or such a renewal of an existing service which is put into practice ...
• ... and which provides benefit to the organization that has developed it; ...
• ... the benefit usually derives from the added value that the renewal provides to the customers.
• In addition, to be an innovation, the renewal must not be new ...
• ....
• ....

Possible categorizations of service innovations

• Which elements in the services are changing?
  • Innovation inputs, usually product, process, organizational ... from Schumpeter.
  • In services, division from product and process innovation are difficult, need deeper in a different way
• What kind of changes are happening?
• How radical is the change?  Two ways to understand.
  • Radical due to the extensiveness of the context, e.g. only in some region, it's incremental; in a country is more radical, then world is also radical.
  • Another way, not radical, but in total, how much it's changed.  If no common element with the earlier service, it's really radical.

Modeling a service, if we can't divide it into product and process, based on Edvardsson 1996 (Nordic school, service marketing), modified by Brax 2006 to make it more detailed, primarly in Saara's thesis, but Marja and Tina have been involved.

• Three fold element:
• (1) Structural, including market characteristics
• (2) Process
  • Stages
  • Roles and tasks
  • Nature of the service relationship
• (3) Resources, especially skills of people is important
  • In manufacturing, resources belong to the production stage, as compared to services people who are here and now
• These three form a system
• Innovation can happen in any of the three
  • Could change roles of client and provider, e.g. making a solution for the client, or may give more tasks to client as self-service
• Then can find a locus of innovation

Locus of innovation from the Lille School, Gallouj and Weinstein 1997

• These form a whole.
• They have another dimension of radical innovation, which is something else.
• (a) One of the three elements can be improved, e.g. pricing
  • Pricing is often on work hours, often discuss that should have other pricing systems that would be useful
• (b) Add something to the service that you didn't have before, a new element
  • e.g. self service
• (c) Two services in the firm, that are combined in a new way as one service; or split a service into two parts -- as architectural or recombinative innovation
• (d) Formalization innovation:  Make the value proposition for the client more clear
  • e.g. promise will do something for the client
  • Making the relationship between the service and the value
  • Communication of the services can be an innovation, although not all communication is an innovation
  • If it's a deep change that provides something for clients and customers

Two case examples of innovations in KIBS

• Have studied 11 services, and gone deep into them
• Two interesting examples

(1) Engineering, in RAU-Info, can find this on the Internet

• Internet-based optimization of building services
• (a) followup on function of systems
• (b) if the client want to analyze further, service company provides tools
• (c) consulting can be provided, e.g. reduce heating costs
• These are new in the Finnish context, although not radical
• Both improvements in a single module, when independent of the automation system (e.g. Siemens provides it for Siemens system, but not for others) and data is gathered from individual meters, not from the meter for the house
• Services are provide both with clients who want to do this in-house, and for people who want to outsource
• Also recombination innovation
• Also sells tools to competitors, as competitors can have deep relationships with other clients, but don't have the tools

(2) Non-technological example, from an auditing company

• Auditors have more than auditing services
• Regulations have changed, so if you have mergers and acquisitions, you have to make the valuation more accurate, and have to include immaterial
• Provides tools, and will also consult
• Innovation in technological KIBS have been very often, but not in non-technological
• Regulatory changes can drive change, and don't tell how you would make the change that can be constructed for the marketplace
• Idea of immaterial property is innovative
• Provides guidelines on best practices for local, and for the chain internationally

Question: where did the idea of radical come from?

• From Gallouj
• Dick Besset, speaking of extensiveness of context
• Important, should develop it further, because not sure which is most important

Question: Gallouj

• Gallouj has written many articles, and a book
• Writings are not all about this categorization
• We think that he is one of the most important writers in this field
• Spent a day in Lille a year ago
• His book has a funny title, because he compares himself with Adam Smith in a new wealth of nations

Tiina Tuominen, "Managing innovativeness in KIBS"

Started formlating this 1-1/2 years ago, as a result of the linking management and innovation

• Might still evolve

Agenda:

• Key theories
• Observations from case studies

Innovation management is an interesting problem in KIBS

Innovation activities are all around the business

Responsible for design an implementation

Managers want to manage these, but can't control everything

How can organizatoins, who have a lot of interdependent employees, manage innovation so that they have capabilities, and have something beneficial to the firm.

• Haven't found many theories that explain these context
• Started from Sundbo's empowerment theory
• Instead of having separate R&D divisions, with innovation experts, every employee might be involved
• Instead of hierarchy, loosely coupled interaction structure in innovaiton, and then a controlling mechanism that manages
• Can be an innovator, or part of the management system
• Questions are about the mechanisms in use (if any)

First, need to do identify the innovation activities that are being managed

• Hult 2004: Innovativeness relates to the firm's capacity to engage in innovations ...
• Useful starting point, but doesn't help in figuring out how it can be capitalized
• They don't have a process type or a process model

Marja is trying to identify processes, but that research is just beginning

• So, go back to look at innovative activites, call them innovation behaviours

Kleysen and Street 2000 cite 5 behaviours:

• (1) Opportunity explorations, looking for problems to solves
• (2) Generativity: new ideas
• (3) Formulative investigations: development
• (4) Championing: presenting the idea, and push them forward
• (5) Application: implementing, modifying, routinizing
• Assume that these can be stimulated by management
• Could be done by process, but not tying into them.

Assumption in this phase:  innovation is a capability

Research questions:

• How are innovation activities organized
• How can they be stimulated adn controlled?
• How does organizational setting able/disable?

Qualitative, inductive research method

• 10 interviews in each
• 2 cases

First case, construction company, innovative because it didn't wait for customers to call, but initiated own projects and marketed them to customers

• Knowledge intensive
• Project management
• Project initiation department, but also stretched towards construction phase
• Innovativeness is embedded in organizational culture
• Divided into four activities, traits:
  • (a) Strong individuals, free to do what they like, no formal management presentations
  • (b) Individuals spent more time outside office than in, with customers
  • (c) When in the office, they had a lot of informal communications, and built with other
  • (d) They tried to think long term, could start with 100 ideas knowing that only a few would make it, but it was important not to reject the ideas early
• Able to maintain this spirit
  • (i) Careful in recruiting people, taking only people they knew, nice people, already had social ties
  • (ii) This is the way we do things here, if you don't like it, you can leave
  • Strong implicit norms, didn't notice them unless someone wrote them down
  • (iii) Since the organization was growing, they tried to spread the spirit through more formal mechanisms

Second case: auditing company, one of big four accountants

• Auditing functions weren't innovative, quite structured
• Some other departments, focused more on mechanisms
• Stimulating
  • First, difficult for them to discuss
  • Not explicit or used organization-wide
  • Gave resources: Lowered objectives for chargeable hours
  • Tried to increase reources for development
  • Tried to give specific growth goals
  • Put development goals in performance plan, if manager
  • Strengthen competences
• Controlling mechanisms
  • In many cases, control by the customer:  if the customer would buy the idea, it would be okay
  • In the largest development ideas, needed more formal decisions
  • Two kinds of control
    • (i) Channelling innovativeness towards some idea: idea generation, make decisions, let customer decide
    • (ii) Control amount of innovation, i.e. the amount of time spent
  • Both non-intentional control
  • Most important control activity was because they didn't dedicate time to these

Rehearsal analysis: link controlling and stimulating mechanisms into innovative behaviour

Conclusions: a lot of questions

• How to deal with mechanisms that aren't formal, including non-intentional or informal
• How to (or should) take into account professional communities?
• Innovations originating elsewhere
• Are mechanisms specific for KIBS, or other types of companies

[Questions]

Started studying service innovation 3 years ago, this project 1.5 years ago

Comparing Finnish firms with international firms?  Google?

• May study in Denmark

Chaos or disorder to create an atmosphere?  Allowed to make mistake

• Yes, in the first case

Inductive case study method?

• Design from concepts in the literature, and Sundbo model.
• Inductive to find the mechanisms from the material, not to have to many about them.
• Sundbo hasn't written about complete mechanism, particularly on channelling, although there are more on stimulating

Loose coupling?

• Activities don't have a strict structure
• Anthony Giddens
• Sundbo has used Gidden's structure (civil society) and institutions

How do companies compare? Different industries?

• Common: professional / knowledge-intensive nature
• Core may be elsewhere, but know KIBS
• Also have an architecture office, advertising agency, engineering, real estate

[David had a long discourse about Bourdieu]

Robert van der Have "Constructing a Service Innovation Database"

From VTT, one of the largest research organizations in the Nordics

• Most VTT people are engineers, there's a small group of social scientist
• Am an economic geographer
• University of Utrecht, graduated in February, then started at VTT
• VTT is a KIBS

Will give own department's point of view

• Innovation Studies
• 22 people
• Both quantitative and qualitative
• One team does impact assessments, e.g. projects for Tekes
• A team of future studies, dealing with environmental studies
• Support decision-making for industrial organizations

Group studies innovation activity in firms, renewal processes

• Take micro level approaches, and translate to processes of change
• Have built up a database of single innovations from Finnish firms, call Sfinno
• As a researcher, was asked if could incorporate service innovation into firms
• Do econometric analysis on innovation processes, as well as studies

Attention for services is under-represented

• Complexity: product, process, intensity is mixed up
• Start at the basics
• Observation: services in manufacturing sectors, boundaries are blurring, really diffusing in the overall economy
• Speak of service activities
• Lack of available data and knowledge on innovation

How do services different? Innovation often takes place in the organizational sphere.

• Nature of innovation is different, but many common elements
• Data is limited
• Now moving from demarcation approach, where services are different, to synthesis, early stages

Loci of innovation is hard

• den Hertog and Bilderbeck (1998), from Dialogic, various loci of innovation
• (1) New Service Concept, how you build up your solution
  • There is a design/concept behind the service, and you may not be able to grasp it.
  • Recombinant use
  • Can apply an existing context in a new application, e.g. self-service banking.
• (2) New Client Interface: services are intimate with clients
  • Service activity connects, how you reach your client
  • Interactive client interface: important whether the feedback loop is there, or not
  • Yesterday, at ABB, formation of partnerships means they invade their clients environment, and absorb the uncertainty.
  • Can mean you're physically there
  • Client can be a coproducer of information
• (3) New Service Production System
  • Relates to firm boundaries, internal to the firm
  • Like a production chain, in manufacturing sector
  • A production system can exist outside the border of the firm, as relationships with partners and public authorities.
• (4) Technological optoins
  • Barras, IT, technology can be important in services
  • Also, services can be important to drive the technology

From loci, to innovation process

• Smith: traditional science and technology view of R&D is related to the linear model of innovation, considered outdated
• Leads more to an interactive model
• Complicates matters for a researcher
• (Diagram: chain-linked model of Kline & Rosenberg, 1986)
• Kline & Rosenberg allows for feedback loops

Frascati, in R&D, recognized as systemic creative work, including knowledge of man

• Widens perspective
• More general, addresses service R&D, in the generation of new knowledge
• R&D activity doesn't necessarily mean innovation
• Incremental nature of services takes place outside, introduced by Gallouj & Weinstein 1987, allows for ad hoc innovation

Database on service innovation, try to measure concrete innovations, at a micro level to build up the data.

• Service innovations
• For products innovation, have been using technical, trade and professional journals for new product announcements, so that it creates values for customers
• An object-based approach, where the developing firm is the subject
• Alternatively, a subject-based approach
• Try to find characteristics of the products of the proceess
• Questionable whether methodology will work, will start with top 50 firms in Finland, using annual reports, as they say something about services
• Try to create a rich micro-level data set
• e.g. send a survey, self-assessment introduces errors
• Extended LBIO method, two stage with second stage asking more about innovations

Expect preliminary results:

• extent and impact of innovation in services
• Where does innovation come from?
• What are the clients?
• What is the knowledge base of the firm? In technological firms, can count patents.
• Systemic nature of service innovations
• Want to do cross-country analysis, one partner is in Singapore studying KIBS
• Need to develop the right indicators

[Questions]

Databases in other countries?

• Comparable, but not generally available.
• Sprew, in Sussex
• In U.S., consultancy had done it for NSF, but have stopped
• Other databases aren't oriented towards services
• Literature based has gone out of fashion in recent years, but now popping up again, e.g. in Holland, helpful to study spatial
  • Delft, looking at regional development
• Other studies in Spain, on ceramic tile
• 2002, one study in UK, focus on special types of services, using the same methodology

In database, describe the process?

• First survey contact, then go back with questions in the firm
• Even have names of contacts in the database
• In Finland, can get educational profile of respondents.

This is a unique project.

• At this point, don't know if will be successful

Hard to identify innovation, when you have a practice

2006/08/30 09:30 Alok Chakrabarti, "Technology and Innovation in the Services: Some Issues and Research Needs"

2006/08/30 09:30 Alok Chakrabarti, "Technology and Innovation in the Services: Some Issues and Research Needs", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Alok Chakrabarti, New Jersey Institute of Technology

---

Long discussion with Saara on content

Saara: Today's focus will be on information-intensive and knowledge-intensive approach

• Marja will describe the more humanistic perspective later

As focus, will look into health care

Health care means a lot of things for a lot of programs

Four objectives in healthcare:

• Preventive, e.g. smallpox eradication, have a lot of programs in vaccinations
  • Supposed to take flu shot, but then have to pay if under 65
• Curative: anti-infective drugs, curing a certain disease
• Disease management: e.g. hypertension, not curing but managing the disease for life extension
• Quality of life improvement: not curing or extending life, but improving quality for someone who has a disease

Where you provide the service, ontological:

• Doctor-patient in situ, i.e. the same place
  • Doctor's office
  • Ambulatory care, go there a few hours, then go home
  • Hospital, for a few days
  • Nursing home (in the U.S. means long term care, as opposed to in India where it means private hospital)
  • Provides long-term insurance
    • Very expensive, about $150K-$200K per year
    • Can't get this reimbursed by the government, until you exhaust your assets
    • There are laws about asset dispositions
    • If you're ill, and about to enter a nursing home, you can't transfer your home to your children, need to look 3 years back
  • Hospice: quality of life management issue, for terminal patients
• Can we have doctor-patient in different locations
  • Telemedicine: Karita was speaking about Palo Alto, messaging systems
    • Vodaphone, put phone on chest, and it will send information to heart specialists

Time: temporal dimensions in health care delivery

• Chronic <--> acute
• Emergency <--> non-emergency
  • John Hopkins in Baltimore, lots of experience with gun shots

Ecosystem of health care delivery

• Patient
• Doctor
• Lots of other actors in health care delivery:
  • Regulators
  • Financing system
  • Medical device manufacturers
  • Pharmaceuticals
  • Diagnostic services
  • Hospital
  • Nurses and paramedics provide quality of health care

J&J executive: soon you won't need a medical device, because will inject stem cells and the injured parts will grow back

In the future, doctors could look at genes, and will give you something will act specifically on the gene part

Alfred Park, NY, good technology on glass, doing research on implanting glass beads into tumour, then changes in the magnetic field will cause 1 to 2 degree F change, enough to kill cancer cells

Why do drug trials take so long?

• Thalmidomide: wouldn't know unless had a test for a long time
• DES: given to mothers for morning sickness, babies healthy, but then female children at a later stage (30 years later) developed uterine cancer

In India, drug manufacturers may not provide medicine with full strength

Who controls the efficacy of the drugs?

• A lot of people go to hospitals, and catch a new disease

Pharmaceutical value chain

• Pre-clinical development
• Could be NCE New Chemical Entity, new molecule; or NDA New Drug Application, used in a different way
• Clinical development
• Manufacturing Operations
• Sales and Marketing

Traditionally, pharmaceutical has been based in organic chemistry

• e.g. Turku is good in chemistry
• (1) Stem cells are biotechnology, not chemistry
• (2) Use of computer technology to develop designer drugs, specific drugs to act on cells
  • Computational biology, combinatorial chemistry

By breaking out the value chain, small companies spread the risk

In clinical trials, double-blind tests, are done by large companies

Manufacturing is now outsourced, to China or India

Marketing is done by large pharmas, have a brand name

New systems are developing, issue is orchestration

• Big pharma is becoming an orchestrator

Deep ethical issues, e.g. trials in third world countries as being guinea pig; or patients receiving placebos

• In 1930s, tests on syphilis in Alabama prison system, blacks
• At universities today, have to get approval of human study committees

Issues related to preventive programs:

• Generally audience is large, e.g. smallpox or malaria
• Have to teach, and have behavioural modification
• e.g. TB, take a few pills and the fever breaks, so they don't finish the whole prescription
  • This DOTS: Directly Observed Treatment System, take the medicine in front of the nurse

Issues for curative systems:

• Access
• Diagnostic services
• Pharmaceuticals
• Infrastructure
• Financing system

Issues related to long term care:

• Facilities
• Access
• Financing
• Pharma

Technology bases

• Core: Medical science and technology
• Enabling: ICT
• Supplementary: Logistics, transportation

Hype cycle for health care, from Gartner

• RFID to tag emergency room equipment, so that know where it is
• PDA direct prescription through wireless to pharmacy

[Questions]

What do you do research in?

• It depends on who's funding.
• Interested in technology and business gap.

Home care?

• Lillrank: People would prefer to die at home.
• Monitoring technology, e.g. floor sensors to know person is moving in the room

Karita: looked at dermatologist, video conferencing, could see 40% more patients; EHR will probably help accelerate home care; challenge that don't know what happens when the line goes down except for doctor sitting and watching monitor

Professions?

• New roles: nurse practitioner, physician's assistant

2006/08/30 11:15 Marja Toivonen, "Services Supporting Innovation: The KIBS Perspective"

2006/08/30 11:15 Marja Toivonen, "Services Supporting Innovation: The KIBS Perspective", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Marja Toivonen, Helsinki University of Technology

Marja may have done the first dissertation on Knowledge Intensive Business Services

---

Everyone from the KIBS research group is here

• 4 person group, 3 working on Ph.D.s
• Tiina Tuominen
• Anssi Smedlund
• Saara Brax has mostly moved over

Work in the knowledge management institute, one of the 11 centres in Tuta

Agenda

KIBS project has been running 1.5 years, and still has one year to run

What are knowledge intensive business services?

• KIBS is used in the context of firms
  • Expert firms
  • Could be used at the product level
• They're business services, B2B, not B2C
• Knowledge intensive has 3 descriptions by researchers:
  • Knowledge intensity is both the input and output of the activity
  • KIBS have been seen as problem solvers
  • Most important, and the meaning used here is interaction between KIBS and clients creates new knowledge
  • Many other processes are learning processes, e.g. in health care, but in KIBS, the learning process is central and created by the firm and client jointl
• What kinds of industries?
  • R&D services, technical consultancy (architectural and industrial design), and non-technical (legal, financial consultancy, management consultancy, and marketing communications services).
  • KIBS-ification of industrial firms

How and why the term KIBS was adopted

• Business services was adopted as a term in the 1970s
  • The sector growing most rapidly
  • Also some pioneering researchers interested not just in growth, but the role of them
    • Impacts on productivity on other firms
• This issue came more and more in studies, and analyzed in terms of innovation
• At the end of the 1980s, more growth in the role of innovation in the economy
  • Other kinds of studies emerged, focused on the role in innovation
  • Not on all business services, but on expert roles
  • Industrial cleaning is not include
• 1995, KIBS was first defined by Ian Miles

The role of KIBS in innovation

• KIBS must have a role in innovation, because they're experts, keep at leading edge, otherwise they don't have a business
• KIBS have different attitudes:
  • They're sources of innovations, and have to be innovative themselves
  • They're facilitators of innovation processes within firms
  • If we look at the whole economy, KIBS are carriers of innovation, as the accumulate information and know more at the next client
  • As brokers, bridging intermediaries, they bring together different clients that can use each others' knowledge
  • At the broad level, they're orchestrators of innovators' networks
  • (A hard but reasonable argument), KIBS form the second knowledge infrastructure of society (with universities being the first), and as more practical
• It's important to study KIBS in innovation, and innovation in KIBS
• Processes are facilited by KIBS

Not many empirical studies on the role of KIBS

• In the Netherlands, Cox 2002 asked about the role of outsourcing
  • Some say it's must moving an activity from a manufacturing company to an external firm
  • Cox showed that when companies outsources, business doesn't remain the same, so there's service upgrading
• In Finland, Lith 2005 have centres of expertise programs, where new emerging technologies are put in various regions
  • In Helsinki, micro systems, biotech
  • Made a KIBS study, interviewed companies in these new areas, asking to what extent they used KIBS in their innovation activities.
  • One in three used a KIBS
  • Most were start up companies, lacked resources
  • Still could recognize the role of KIBS
• The role of KIBS as sources of innovation has been found in Eurostat surveys (carried out every 3 years, 2004)
  • Every time the role of KIBS as innovators has come out
  • 64% of technology-based KIBS carried out some innovation activity
  • Have also carried out on non-technology-based

What are the concrete way in which KIBS support their clients? Miles lists 6 ways

• (1) KIBS provide expert knowledge.
  • Traditional way professionals have worked for decades.
• (2) Carrying experience from one setting to another, e.g. from one sector to another
• (3) Benchmarking, identifying concrete best practices
• (4) Brokering, putting people together
• (5) Diagnosis and problem clarification, as clients can't articulate
  • Important converters of tacit knowledge to explicit, and explicit knowledge to tacit
• (6) Acting as a change agent, if the company knows what is wrong but doesn't have the power to change

KIBSINET:

• Anssi at network level
• Tiina at the level of the firm
• Saara and individual innovations and processes

Will speak to the level of individuals, and individual processes, where have the most amount of data currently available.

Three theoretical approaches to service innovation

(1) The linear NSD New Service Development process

• From idea, through development, to pilot and testing and markets
• Well-established model of New Product Development, applied for decade
  • Have developed a similar model in services
  • This has much to do with the marketing school, e.g. Garney and Hooper
• Ideal is that we have a formal innovation process with clear stages and checkpoints
• In the newer models, because clients orientation is important, and client input has been created, can't say the NSD only describes the inside of the innovating company
• Its strength is that it's the only model where the proceeding of the service development process has been studies at a detailed level.
• Weakness: service is a black box
  • Service is just something developed
• Theoretical definition of service innovation is ad hoc

(2) The Nordic school of service marketing, main representative is Edvardsson in Sweden

• Very client-oriented
• Service only exists in the presence of a client
• Diagram:  the service model framework by Edvardsson as in Tuominen 2004, including text into diagram
• Three prerequisites:
  • Service concept: includes the main idea in which the service fulfills the needs of the client, connected to market properties
  • Service system: the resources used in the service, human and technological
  • Service process: the stages of the process, as well as the role and provider
• From the prerequisites comes out the real experience: output and process, both of which have quality
• This is the best to date service model, but not sure all of the elements are the right ones
• Not many models at the detailed level, service specific as separate from goods
• Problematic: the innovation process is not discussed, or very superficially, with no linkage to innovation

(3) The Lille school in France, Gallouj

• Starting point is the modelling of the service, starting from the model of the good
• In the good, have production characteristics, technical characteristics, and the benefits to the client
• Then develop something for services
• Services a final characteristics, technology characteristics, and competence characteristics
• What's different?
  • In services, the production characteristics and technical characters can't be separated
  • Generally the product and process are one and the same
  • Then tries to define service characteristics
• If everything changes, and nothing common to earlier services, call it radical innovation
• Improvement innovation means something one of these three elements has changed
• Innovation by addition: some new element introducted
• Recombinative (architectural) innovation
• Formalizatoin innovation: clarification

Gallouj also lists ad hoc innovation, meaning innovation is not planned a priori, but the service provider provides the service in practice, and gradually discover that innovation has been made a posteriori

• Gallouj provides categorization for different types of incremental innovation
  • But compared to Edvardsson, not much detail, everything is included
  • Need a model where can locate the locus of innovation
  • Services are systems
  • The point at which the innovation in services begin, changes everything around it, yet it's still important to see everything around in advance
• In addition, the categories describes many thing
  • Radical innovation doesn't belong on the list, it's a different dimension, how radical or incremental

Summary:

• NSD is the only model that provides proceeding
• Nordic school provides a good start to model
• Lille school provides categorization of types of service
• In our project, try to use them all

In our project, have found Schumpeterian definition was much broader than the approaches after him, where the linear ideas came out

• Schumpeter saw product innovaiton, process innovation, market innovation ....
• A good start
• 5 criteria:
• (1) Carried into practice
  • Carried into market, with some approval
• (2) Provides some benefit to both developers and to client
  • Can provide benefit to self, but to be sustainable, have to penetrate the client
• (3) Innovation is reproducible
  • Some say everything is innovation
  • Tailor made doesn't have to be innovation
• (4) Innovation represents a discontinous change
• (5) Innovation is a economic concept, somehow impacts in a broader context
  • Innovativeness, adoption of innovation is different from creatoin of innovation
  • Need ways to protect innovation
  • Other firms want to follow, creates issues
  • e.g. compare healthcare and banking, innovation is done in a different sector

Still one problem with innovation

• Most researchers don't specifiy whether they mean the outcome or the process
• We have selected innovation to mean the outcome, and speak to the process of innovation

A working definition for service innovation

Question: social anthropology debate, can innovation be made many times in many places, or one and then diffusion

• Context needs to be taken into account
• Then depends on concrete situation
• e.g. case companies from advertising agency and architectural and auditing
• Can't make a general rule

Difference between step by step development, and incremental innovations

• Real change could be small, but could have huge impact

Innovation is a relative concept

• Want to stop relativity by calling something only new to the firm

In KIBINET, have worked with 6 companies, have studies 11 individual services -- preliminary results

• Told them that we're looking over services, and they could also select services from their viewpoint, to find something interesting
• Based on 25 interviews (of the 70 made)
• First use Edvardsson to understand what types of services, roles of clients, resources
• Then categorize by Gallouj
• Finally, analyze processes

Results:

5 cases of an innovation, but all quite incremental, geographically within Finland and not new worldwide

• Cases were mostly in technological KIBS, 
• One in audting that wasn't expected
  • Service for purchase price acqusition in M&A, since legislation now requires the value of company be estimated much more clearly, and have to recognize immaterial parts
  • At regulatory level, haven't said how to make a service out of this
  • How can we value brand names?  How do we value partner relationships?

3 cases of tailor-made services, with the possibilty of innovaiton could be made

5 where no innovation, by step by step

Three different types of innovation:

• (1) Separate planning stage:  some preplanning, then step by step
  • Some resources devoting, some testing, some piloting
• (2) Rapid application, simultaneous planning and production
• (3) Gallouj's idea of an a posteriori recognition of an innovation

Separate planning states, related to linear NPD

• Pilot, then prototype with a different client, then offered same service package to all clients, finally tools and consultants packaged
• Discover some clients want the tool only, others want consulting only
• Now can choose why you buy

Rapid application model was most general, especially in telecommunications

• 3 reasons for generality
• (1) Don't need massive investment in advance
• (2) Only thing to do, because client doesn't know what he/she wants
• (3) Companies had already worked with the same clients, and got a new idea from their existing clients

A posteriori recognition of innovation, only one, a bit surprised, but the companies didn't present many cases

• Engineering company that had provided a service for 8 years to a client, and thought could apply to other clients.

Where we are now

• How to organize to create and innovate at the same time?
• One project had Tekes funding
• We don't know how they organize this, in practice

Concluding: have to combine different models

• We should also understand these incremental innovations, but not step by step

In auditing company, it's not only technology, but regulation can also drive innovation

Shouldn't juxtapose models, some companies still follow NSD

• But it's not enough, have to study more rapid application

2006/08/30 13:55 "KIBS Track"

2006/08/30 13:55 "KIBS Track", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time duringthe meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Presentation first, then discussion

---

Arja Hallberg, "Exploring Impact on the Interconnected Relationships in a Network Setting"

Arja Hallberg, Swedish School of Economics, started the program last September

Relationship marketing and service management

Agenda

Relationship marketing as a new paradigm

• Marketing as process that covers all parts of the business, about fulfilling customer promises
• How to operate, why are we here

Network economy, but the business environment starts as an aggregate

Relationship marketing, focused on dyadic and multilateral relationships

Use Capra's Triad: pattern, then process, then structure

2006/08/30 15:20 "KIBS Track"

2006/08/30 15:20 "KIBS Track", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Second presentation

---

Ian Miles, "Knowledge Intensive Business Services: Links to the Service Base"

Project two years ago for the British Government, and business-university links

• Mostly science in universities
• Privitized labs went under

Agenda:

• Relationships with universities and public science
• Analysis with surveys within KIBS firms and universities

Little work, maybe one German study, although a lot on university-industry link

• Talks about industry are usually manufacturing, not services
• Don't see many departments at universities on service innovation
• Service tends to be service in management, running hotels
• Little on services in the university system

Found many things in university-business link are common

• Common: size differences, large firms will invest more and have more relationship with university
• Exception:  in IT firms, the smaller firms have more relationships
• Centre of excellence
• Barrier to good relationships often related to professional funding, e.g. university quality assessment exercise is biased against applied and cross-disciplinary report

This is mostly about companies already cooperating, how far companies want to use universities as a source of knowledge

• Requests don't always come from companies, but sometimes university person will come with a good idea, or come with EU study
• CASE (Cooperate Awards for Scholarship) awards to students, where most money from government, small money and supervision from company.
• Cheaper for company because graduate students are half the price of professors, but requires a lot of supervisor's time

Assumed knowledge flows are a linear model of innovation

• Knowledge flows to industry, directly or through intermediaries (associations)
• Flows through graduates or professional training, or publications, or cooperation, sometimes access to facilities (e.g. an experimental 3-D printer), or through general consultation
• This simplistic model needs modification, and found more than expected
• Can examine linkages, using existing survey, community innovation survey plus survey

Data from the communication inventory survey

• Tells about flow of graduates, science and engineering vs. others
• KIBS sectors are most knowledge-intensive, about hiring more university graduates
• Orderd by number of graduates: more technology-based KIBS than professional KIBS
• In terms of flows of bodies, the universities are very important for KIBS
• This doesn't tell us much about innovation
• Hiring from undergraduate training
• Business say that universities don't teach useful skills, but do get people who are trainable
• Computer science companies are dubious about computer science approaches at universities
• Accountancy firms don't like accountant students, e.g. they don't like critical theory, want boring people; thus will hire and train other graduates
• Construct validity: high-tech, medium tech, low-tech

Surveys tell about other things

• Relevance of sources of information
• Use of public information (blue line) is lower than that for private information (red line) ... except R&D firms
• Services vs. manufacturing not much different in information sources

Collaboration

• Manufacturing firms are more likely to collaborate with universities than service firms
• 9% of manufacturers, 5% services collaborate:  relatively few
• Exception is technology-based universities
• Study: most dynamic companies correlated with collaboration

Interviews:

• Large firms collaborate more, and use less formalized types of information
• Types:
  • Environment Services
  • Business Continuity Services (disaster recovery, but doing risk assessment and risk management)
  • More interested in market research and marketing firms: one more physical and the other dealing with IT
• All firms through innovation was important, but no person in charge of innovation
  • When engage, set up a new social network, rather than having a long-running department
• Could be other links, but survey asked for innovation-related

Human resources:

• Large firms more strategic
• Often send people to professional development systems within their disciplines

Small firms have few links, links ad hoc, don't know how search for right people

Universities have lots of liaison officers, etc., but none has any strategies for services or KIBS

• Occasionally, would say work in sector, e.g. media interested in engaging with multimedia students
• No thought that historic links need to be refurbished, e.g. from industry to services
• People were surprised by this idea, encouraging

Can see knowledge flows in both ways

• Large firms: research collaboration, information

Overall:

• Lack of knowledge about KIBS (absorptive capacity) on both sides
• Heritage: services didn't used to be technology-intensive
• Create beacons, that universities may be useful to providing knowledge that is useful, or companies having interesting problems to research

2006/09/01 16:40 Ian Miles, "Services, Innovation and R&D"

2006/09/01 16:40 Ian Miles, "Services, Innovation and R&D", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

At Suomilinna

---

From PREST/Manchester Business School

Drawing on studies: The Future of R&D in Services" and RENESER "Research Needs for Service Industries"

Linear model of innovation, from manufacturing

• Science Base to Industrial R&D, Product Innovation to Productive Process, Production Innovation to Use in Market
• Arrows between everything, lots of feedback loops
• Upstream science base is influenced by feedback and new knowledge from the others
• Some ideas of strategic research, can find way to application
• A lot of work in genomics and biotech

EU leading to policies to encourage investing in R&D

• Lisbon agenda of being dynamic and innovative

U.S. spends a greater share of GDP on R&D than Europe

• Service sectors in the U.S. spend more on R&D than Europe
• Around 2000, over 1/3 of business expenditure on services, whereas Europe was 12%
• Europe will take decades to catch up

UK manufacturing and services growing in parallel, much lower in services

OECD: Services % of GDP is growing much faster in U.S. than Europe

• Belgium, Germany, Ireland are bucking the trends a little 
• Recorded R&D is services has grown, they didn't use to track this
• So a survey of service companies they think are investing
• 95% of service companies spend nothing
• Would not place much confidence on statistics on R&D, although sampling better now than before
• U.S. and UK were first in measuring services in R&D, Japan rather late

NSF 2000: Which services do R&D?

• 9 services sectors, Japan does 1 and Germany does 2, so would expect a lot of invisible activity
• IT services is a big sector
• R&D services means business is doing R&D, 10% of companies do this
• Communications sectors is small in some countries, not elsewhere
• Transportation strong in France
• Retail strong in U.S. and Canada
• Can't say much about professional services, as they're hidden, and not elsewhere classified
• It's more a matter of judgement in statistic measurements

One other source of R&D, Community Innovation Centre, being measured across EU

• Ask 1000 companies in each country
  • Do you do it in-house, with others?
  • Almost 50% of firms don't do R&D, over 50% say that do
  • They conduct less R&D than professional size
• Technology-related KIBS are most active
• Even small firms do R&D

Official data:

• Almost all retail and wholesale trade R&D done by 3 firm types
• Professional and equipment wholesalers (selling computers), electrical good wholesalers (appliances) and drug wholesalers
• Findings: most classifications are by output product, but where companies are classed depends on where their human resources are.
• A lot of manufacturers have been been reclassified as wholesalers (e.g. Dell as a computer retailer)
• Social science service firms are excluded.
• Frascati Manual, includes social science in the definition of R&D
  • Tax credits written to support science
  • We don't want market research

Within company:

• R&D may be lower, even if incluidng underdevloped
• May be budgeted and reported as others

Barro: innovation is service led, which leads to products

Case studies

• When some companies pressed on innovation, what they were doing was R&D
• BBC separates technology R&D from creative content R&D
• Some companies say that they don't have R&D, but do provide a sandbox
• Telecom companies working on visual radio
• Almost all firms said that innovation would be relevant to R&D in the future
• Public sector uses the word R&D more

Community innovation survey: expenditures

• Share of effort on R&D

Two new:

• Professions-led innovation, e.g. associations, training
• Practice-led innovation, i.e. in the course of delivering the service
  • Innovation management is not well done that is reproduced
  • Done by one worker, and it's not picked up
  • Efforts to create knowledge management systems

2006/09/02 12:55 "KIBS Track"

2006/09/02 12:55 "KIBS Track", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-time duringthe meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Groupwork discussion

---

Robert as our reporting person

What has the group learned during this week?

Ian: Would like to think about solutions, rather than providing services.

• Solutions are part of management philosophy, but not part of the academic language.
  • Can we learn by this?
  • If it's useful for business, we need to understand why.
  • Emphasis on customer's customers
• It's in the KIBS literature
  • Difference between going along, i.e. we have a problem this before and can solve it, as opposed to jointly solving the literature.
• Solution-centered approach, versus commodization
• Can broaden to similar solutions, rather than a customized solutions
• Two ideas:
• Customer side added, rather than just the product
• Service within a service, a systemic element

Ian: solutioneering, rather than solution engineering

Tarja: service innovation, Schumpeterian innovation that includes the customer

• Guidelines and/or tools when thinking about service innovation

Arja: have found a focus for thesis work

Tinna: listening to different types of presentation, nice to hear about other types of services

• Still have difficulty in discussing the SEM perspective

David: a working definition of service innovaiton, as a base

M: Service development and service provider, as compared to just the customer side

Anssi: Service concept from industrial point of view very different from professional services

• Is service science a field of its own, or is something old put into a new context?
• Researchers like what they do now, and they just take what they've done before rather than bringing new innovative ways to looking

Alok: Blurring of the demarcation between product and service

• Idea that goods and services are different
• Discussion with Valerie that products also have intangibles wrapped in
• More and more manufacturers aren't providing a product, but are manufacturers providing a service
  • Tim Sturgeon (MIT), not just bending metals
• Service as similar to benefit?
  • Both goods and services provide services
  • Complicated discussion, from the 1970s
  • In specific manufacturer firms, all workers provide labour services

Ian: Three way distinction:

• Products:  goods - services
• Activities: manufacturing - services
• Functions:  artifacts - services
• All are transformations
• Transform the state of artifacts, people and symbols
  • Symbolic transformation: knowledge transformation
  • Physical transformation: repair and maintenance, storage, transport
  • Organic, changing people: health, education

Alok: SEM has different perspectives, coming from different points of views

• Uncertain about service innovation
• Could be changes in the state, or the changes in the way you produce that state

Marja: Differentiation between product and process can be difficult in service innovation

• Alok: eyeglasses vs. laser surgery
• Marja: some services, where have back office and front office activities, can separate product from process, but in KIBS, can't separate
• Based on Edvardsson:
  • Service as a concept, as a process, and as resources
  • Together, concept, process and resources provide value to the customer
  • Try to develop the value proposition
• Example: customer not knowing whether a screw is included or not included
• Alok: Ikea case for Indian executives don't like it, because there are 5 servants behind them
• Marja has a problem with Edvardsson, would like to call the whole thing a concept
• David: may look at IBM Global Services Method, as a comparison

[break]

Consulting methods:

• Some will sell consulting more towards methods, and others will may methods murky

Marja: learned more about different types of services and service providers

• Do need definitions, but need different types of tactics
• It's not outsourcing that is important, but selective out-tasking, that is particularly important for KIBS
• Same provider can provide services, as well as tools so that the customers can do it themselves
• More is being outsourced, as core are less core, more brand as core
• e.g. of out-tasking: an accounting company with services in M&A valuation, which then sold tools
• We've been discussing products becoming services, but this could be services becoming products: asset-based consulting to tools

Robert:  learned two things

• From David's presentation, services are highly contextual, so a systems approach is helpful
• From Marja and Ian, R&D innovative activity is extremely limited, need more spontaneous

Question: How could the group collaborate in the future

• Start an e-mail list
• Write, make presentations and distribute
• Meet again?  Friday, October 27
• Marja will send a KIBS policy presentation that she's making in Spain
• Tiina, Robert and Marja will work on a service model for the next meeting
• Arja is planning on going to Umea to the Vargo and Lusch "Service Dominant Marketing"
• David will work on a paper on Service and Theory of Practice
• Anssi is going to Berkeley, and arranging a Finnish-American conference for March / April, with 40 spaces for Europeans
  • Opportunity to publish in California Management Review

2006/09/02 14:25 "Groupwork Reports"

2006/09/02 14:25 "Groupwork Reports", SEM 2006, HUT

Services Engineering and Management Summer School, Helsinki University of Technology, August 28-September 2

This digest was created in real-timeduring the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Groupwork discussion

---

Industrial Services Track

What has the group learned during the week?

Focus on technology-oriented to a service-oriented world

• Starting point: customer

Framework doesn't exist, first contribution to establish one

• Definitions of products and service, or not clear?
• Better approach to integrate both sides: Hard services (technology) and soft services (processes, human)

Further collaboration?

• Let's meet in India

Papers:

• Send to saara.brax@hut.fi
• Write in academic style, use Harvard-style references
• Do not use more than two levels of headings (heading 12pt bold, subheading 12pt)

KIBS Track

What have we learned?

Services as solutions, how should we separate them from services?

Innovation in services? Schumpeter is useful

Have seen perspectives, how do they relate to each other, and re-integrate them

Need a definition, and need some more clarity on service innovation

Role of the customer 

Gap between engineering perspective, and the professional practice.  Maybe service science will integrate this.

Products vs. services: boundaries

• product, activities, services

Outsourcing of complete functions, vs. selective out-tasking

R&D in services: Schumpeterian

Services as systems

Collaborate in future?

• Establishing a community of practice?
• Set up Internet forum
• Next meeting on October 27

Healthcare Services track

Didn't have structural discussion, more spontaneous

Learned?

• Broader view on service management
• Ontology
• Equity issues
• Role of actors

How has the group's work contributed to the SEM framework?

• Solutions
• Relationship to relationship marketing
• Needs, wants and demand
• Solution to a problem, or a need?
• Segmented needs, and segmented solutions
  • If forget about products and services, and started from businesses and offerings, then how else could we split?
  • Then solutions and component businesses
  • Solution-business-based management
  • Difference: risk
  • When we do the deal, can't know everything that it takes, have some idea of risk management

[Discussion]

There's a lot of power in discussing service engineering, but there's a lot that is reductionist

• Didn't like, but was impressed by the idea of solutioneering, which took the idea of engineering out

Service management is a limited function, and limited in innovation, might be more open in innovation

Service marketing

All things need to be put into context, and since we're in a technical university, no other approach is appropriate

• European school of service engineering is rather traditional
• The reason for the summer schools is that we weren't satisfied by it
• Not just a new title to an old theme
• It's very interdisciplinary, thus Service Engineering and Management, not just Service Engineering

Service Engineering as different

• Ambiguity of services
• Service management means something if talk about a services firm, that includes management of people
• However, management of service process means that have to involve the client

2006/10/06 08:30 Nick Donofrio

2006/10/06 08:30 Nick Donofrio, IBM, SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Nick Donofrio, Executive Vice-President, Innovation and Technology, IBM Corporation

(Slide 1)

People move to where the opportunities are

Network ubiquity

Open standards

New business designs

(Slide 2: Innovation Defined)

National Innovation Initiative, a few years ago

Push doesn't work, pull does

Global Innovation Outlook: innovation as product and services, processes, and business models

(Slide: Why Innovation Matters)

Discussion with president of Vietnam

(Slide: The Changing Nature of Innovation)

Open, collaborative, multi-disciplinary, global

(Slide: Global Innovation Outlook)

IBM as largest patent holder, but it's not enough

Outlook for opportunities for innovation

(Slide: Global Innovation Outlook, Key Findings)

Are putting the patent applications online, so don't clog up the patent offices

(Slide: Commission on the Future of Higher Education)

At least got the discussion on higher education

Was only one of three industry people there:  industry consumes 75% of the universities' output

(Slide: The Commission Report)

Report title: "A Test of Leadership"

• (See: http://www.ed.gov/about/bdscomm/list/hiedfuture/pre-pub-report-highlights.html )

75% of the economies have GDP that are services-led

Have been putting money into physical sciences and life sciences, as we always have

• Value is migrating

(Slide: The 21st Century Demands Uniquely-Skilled People)

A few years ago, universities said: got it, take MBAs and put them through business schools

• Not sure that that's it

(Slide: Emergence of Services Science)

Industry will do other things, in addition to academics

(Slide: Investment in Services Innovation)

Study everything, or segment?

(Slide)

Remember, 50,000 people needed at IBM over the next 10 years

It could be a million people in industry

(Slide: Points to Consider)

Came to IBM when there was innovation: transistor to integrated circuits

More transistors on the earth now, than there are grains of rice

2006/10/06 09:10 Richard C. Larson, "Holistic Trinity of Services Sciences: Management, Social and Engineering Sciences"

2006/10/06 09:10 Richard C. Larson,  "Holistic Trinity of Services Sciences: Management, Social and Engineering Sciences", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time duringt he meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Dick Larson, Engineering Systems Division, Massachusetts Institute of Technology

Operations management

• High-rise buildings, elevator delays
• Russ Ackoff sent a student
• Typically, more elevator shafts
• Problem isn't the delay in elevators, it's the complaints
• Entertain them, instead, put in mirrors
• Bringing ideas into engineering analysis
• Not one theorem, but problem solved

ESD: at the intersection of management, engineering, social sciences

• New center: Center for Engineering Systems Fundamentals
• Work on real problems
• Different on service systems

1. U.S. Presidential Elections: Queue Wait Equity

• Voting is participation in a government-offered service
• True also in Zimbabwe, Afghan, Ohio
• If someone balks and leaves, have a stealth disenfranchisement
• Looking for funding, using the 2008 U.S. presidential election as data

Article in Christian Science Monitor: Heroic acts

2. Pandemic Influenza

• Killed Americans more than any war
• Social distancing and hygenic steps analysis
• Working with STEM, open source software
• For first 6 months, only control: won't have any vaccine
• Then little

Boston Herald: National ill-prepared flu

• Then published a year late in Boston Globe

3. Hurricane Preparedness and Response

• With Ph.D. student Michael Metzger
• Social science: the boy that cried wolf syndrome, if evaculation called that wasn't required

4. LINC = Learning International Networks Consortim

• Students now getting education through computer and telecommunications technologies
• Focus on helping developing countries get quality education in underserved communities

Educational implications

Educating doctoral students at the intersection of management, engineering and social sciences

[Questions]

Design for Ph.D. students?

• Silos in schools of engineering, first course born in 1861; second course born in 1880
• Experiment across faculties
• 5-years old, Ph.D. program is 3 years old

Publications by young faculty, when journals looking for depth

• Untenured junior faculty, recently tenured and long tenured
• Let the research what ever is comfortable

How to bring real problems into the educational system

• Have spun off many companies, and professors have consulting companies
• Practicum includes summer jobs

Projects with graduate courses or undergraduate?

• Not primarily graduate
• However, Dan Hastings has moved from graduate programs to undergrad, sympathetic

2006/10/06 09:35 Steven G. Allen, "The IBM-SSME-NC State Fit"

2006/10/06 09:35 Steven G. Allen,  North Carolina State University, "The IBM-SSME-NC State Fit", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Introduction by Racine Mitchell-St. Clair

Steven G. Allen,  North Carolina State University, "The IBM-SSME-NC State Fit"

Wall Street Journal Article: "Majoring in IBM"

Client: spent a lot of money acquiring customers, but didn't spend anything on maintaining them

• Organization was functional
• Government funded
• It's universities

New entrants: private universities

Convenience matters

What to discuss how NC State handles this competitive environment

What makes the IBM - NC State partnership work?

IBM hires more graduates from NC State, than any other college in the U.S.

• Cooperative research
• Physical proximity is 15 minutes from campus, enables dialogue

NC State has had experience with interdisciplinary education, e.g. now starting up bioinformatics

Started quickly: developed from existing computer networking and MBA

Developed and delivered 5 new courses

• IT services systesm
• Networking systems
• plus courses from existing tracks: people management, processes, strategy -- deeper than average engineering course

MBA students could have a relationship management focus, or a service innovation focus

Use projects in classroom as pedagogy

MS in computer networking

Center for Innovation Research

(Introduction of Yiannis Viniotis)

Key research areas:

• Network services
• IT services
• Web services (as an intersection of the other two)

e.g. upgrades in frequency programs: if not full with gold, want to fill with silvers

[Questions]

Students?

• Didn't start promotion until February
• Trying to put together with other curriculum: supply chain, biotech
• Close to technology companies, and competing against Duke in marketing and finance
• Had a decline in part-time enrollment this fall, because Phoenix hit the area this year
• This is something that Phoenix can't do: they'll beat us on price, and on delivery mechanisms

[9:55 break]

2006/10/06 10:35 Government Panel

2006/10/06 10:35 Government Panel, SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Introduction by Susan Tuttle (Moderator), IBM,  Director, Worldwide Innovation Policy

Governments are important

• Jésus Villasante, Department Head, Software Technologies and Distributed Systems Unit Directorate General of the Information Society, European Commission 
• William B. Bonvillian, Director, Washington Office, Massachusetts Institute of Technology
• Debasish Dutta, Ph.D., Advisor, Office of the Assistant Director, Education and Human Resources, NSF 
• Leandro S. Jesus, Professor, Federal University of Rio de Janeiro 

"Software and Services Research in the European Union" 

• [Slides are available at almaden.ibm.com]

(actually projects supported by the European Commission)

(Jésus Villasante, European Commission)

European Commission on Information Society and Media

• Regulation
• Research
• Policy

Trends:

• Interest in services
• Software was packages, now services
• Interest in public on reliability and dependability, impact on buisness
• Will influence society in general

Present framework (to 2007), funding 46 projects, $275M Euros

Research topics:

• Services
• Complexity
• Software engineering
• Open source

Expect for 2007-2013, will adopt Framework Programme VII

Horizontal roadblocks:

• Network and service infrastructures
• Cognitive systems, robitics and interacitons
• Components, subsystems and embeeded systesm

Challenge 1:

• Network of the future
• Security
• Media
• Services

Looking for more industry involvement, looking for commitment to NESSI

"Government Research Support for the New Engineering"

• [Slides are available at almaden.ibm.com]

William B. Bonvillian, Director, Washington Office, Massachusetts Institute of Technology

Two problems:

• Where would services science fit in the federal R&D portfolio?
• Can't just ask for money, need a research task agenda

Services is both hard and soft

• Pending competitiveness policy in Congress includes services
• Is this social science? Little research funding there, and poor fit
• Is it educational research? So informed by research, that can't just think about curriculum
• Is it traditional science? Silos, e.g. biolgoy
• Probably need to look at this as an engineering problem, then can go to DoD or NSF

Have to walk in the door with serious research tasks in hand

• One way: case studies, learning by doing
• Some deep fundamental issues in learning by doing, and engineering has a history of doing this, integrating new fields
• Could we embrace services science as a field that engineering could look at?
• Key part of complex systems

If engineering integrates (and as an applied science, it has to), what is the research task, what foundational approaches?

One: complexity theory

• Complex adaptive systems, where no master agent, and agents act in parallel, and rearrange building blocks
• Agents learn and can evolve
• Work between engineering's tradition of rational systems, and evolutionary systems

Two: engineering has missed some fields, e.g. when Japan launched lean production

• Need to fill the gaps
• Engineering Systems Division at MIT is starting to tackle complex systems
• They transport and exchange not only materials, but information
• In a globalized economy, will be big gaps and holes, may need a complex systems toolset
• New economic imperative, can't just graduate engineers as in the past, need to join complex systems, products/services, social

Three: Integration as a toolset

• Lester/Piore: Analysis vs. interpretation
• Analysis assumes can see all of the pieces, which isn't true in complex systems, so need interpretation
• Steve Jobs: creativity is just connecting things: process of experience, learning and connecting experiences
• Need for engineering to integrate with social sciences

Four: Economics has begun to include complex systems

• Neo-classical economics takes a physics attitude
• But also need to understand dynamic systems
• Economies as complex ecosystems

Summary:

• Engineering as an applied since may be a niche for services science, and has history
• New fundamentals

Debasish Dutta

Debasish Dutta, Ph.D., Advisor, Office of the Assistant Director, Education and Human Resources, NSF 

No slides

Now back at U. Michigan, having returned from NSF

NSF is interested in integrated streams

NSF represents only 4% of the R&D funding by the government

• It is 50% of non-life science research funding at universities

The foundation of NSF is the community

• It's developed in partnership between universities and industry
• Peer-reviewed agency

Important to NSF:

• Interdisciplinary
• Integration of curriculum and research
• Global partnerships
• Broadening participation, in under-represented minorities

Commitment, due to innovation policy, is to double NSF's budget over the next 10 years

• Will fund 500 additional research grants

Federal University of Rio de Janeiro

• [Slides are available at almaden.ibm.com]

Leandro S. Jesus, Professor, Federal University of Rio de Janeiro

Brasil is competing in a worldwide arena

Brazilian Industrial, Technological and Foreign Trade Policy

Questions

From government fund, improving the quality in user-friendly interfaces, for services

• Standards work
• EU view is in verticals
• Interoperability

2006/10/06 11:40 Roland Rust, "SSME -- Let's Not Forget About Customers and Revenue"

2006/10/06 11:40 Roland Rust, "SSME -- Let's Not Forget About Customers and Revenue", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-timeduring the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Roland Rust, who usually runs the services conferences

• University of Maryland
• Also started Journal of Services Research

[Roland Rust]

Call for papers for Frontiers of Services Conference

Cost reduction vs. revenue expansion

• Profit = revenues - costs
• Cost reduction = productivity = efficiency = inwards focus (engineering, systems, operations view)
• Revenue expansion = customer attraction and retention = customer choice = outward focus (marketing, psychology, economics, sociology, anthropology)

SSME is under-estimating the revenue side, which is a problem

Liebler and Sterman, Journal of Management Research:  too much attention to internal can lead to a downward spiral

Another issue:  Tradeoffs different from product manufacturing

• Manufacturing:  productivity is usually correlated with satisfaction
• Because service is more labour intensive, there's more of a trade-off between productivity and customer satisfaction

Strong emphasis on cost and revenues is less profitable

• Need to think more about driving revenues
• This is a people thing
• How do we attract them, retain them

How do we get ROI from revenue expansion?

• Companies mostly think about ROI from cost savings
• ROI through revenue increases is a more complicated chain of effects:  need to model changes in attitude, etc.
• Have to think about customer lifetime value
• Sum that up, and it becomes the customer equity (Rust, Lemon and Zeithaml 2004)
• Soft measures matter as much as hard measures

What should this imply in terms of grants and research funding?

• NSF are really going through hard sciences and engineering, maintaining status quo
• If have revenue-side funding, that's support for marketing and social sciences

Conclusion:

• SSME funding is too focused on the cost side
• Need to increase attention to revenue expansion
• Can only reduce cost to zero, but can increase revenues to infinity

SSME should be a big tent

[Questions]

Cake and eat it too?

• Have to do both sides: improving efficiency is good, but need both sides

Political reality in Washington, where definition of science is limited

Big tent?

Supply chain problem: over-investing in the wrong part of the supply chain, get a problem

Relative emphasis?

• Companies with revenue emphasis are most successful
• Companies with a dual emphasis usually can't pull it off

2006/10/06 12:00 Daniel Berg, "Services Research and Education"

2006/10/06 12:00 Daniel Berg, "Services Research and Education", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Daniel Berg, RPI

Wrote a paper with James Tien, on which this talk is based

Department name has changed to Complex Engineering Systems

Small school, 400 faculty

• Problem: had a few faculty, all in different parts of institutes
• Faculty made a play to get some scale by joining people together
• Were SME before we knew it, with a heavy focus on manufacturing because of the time
• Still working on the convergence from manufacturing and systems

Came from robotics institute, Westinghouse before that

• Went to U. Penn., between engineering and Wharton, funded as a Citibank fellow
• Most funding comes from industry

Part of research purpose, focus on intellectual property

Educational issues

Masters, service sector 1985 29%, and 2005 now 69%

Master's program, take what you got and build on that, built three classes: one was service information systems

[Questions]

Any measures from hiring companies, are students less effective, and in what area?

• RPI is ranked modestly in the academic community, but disproportionately high by hiring (#7)
• Understanding of basic fundamentals

Size of MS degree program

• Created 3 years ago, came into effect 2 years ago
• In New York State, have a Regents system, and regent needs to approve every program
• Haven't been approved yet, it's illegal
• We develop Ph.D. students, had a student in service design 15 years ago, wouldn't have called it a services degree

2006/10/06 13:35 Carl Schramm, "The Entrepreneurial Imperative"

2006/10/06 13:35 Carl Schramm, "The Entrepreneurial Imperative", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Presentation slides, book cover, and an article are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Intro by Jim Spohrer

Kauffman Foundation - Entrepreneurship

A lot of service innovations come from small companies

Schramm is working with Baumol, who in the 1960s said that services are stagnant, has now changed his mind

[Carl Schramm]

Transformation comes from the outside

Post-war conception of business:

• Big business
• Big government
• Unions

Assume economics works like engineering

• But economics doesn't work like, move when have failures

John Kenneth Galbraith: big firms will be responsible for ensuring prosperity

• So did Drucker
• What about entrepreneurs?
• Last person to write about entrepreneurs was Schumpeter in 1938

Economist studied monetarism or Keynes, or macro

• No one studies when firms started
• Baumol resurrected interest
• American Economic Association only started studying entrepreneurism 4 months ago

Terrible economic times in 1970s

Almost did error in bureaucratic policy to follow Japan, John Kenneth Galbraith in Washington, doing centralized planning

• Instead, did restructuring
• By accident, intellectual property law
• Portable pensions
• Pension funds investing in startup companies

Demise of bureaucratic entrepreneurism, birth of entrepreneurial capitalism

• Kids see education as starting businesses
• Embedding into culture at the bachelor's level

Couldn't have seen the shift in reading the past decades of Harvard Business Review

Gary Becker wins an essay in the 1980s for the 1972 article saying that human capital is more important than financial capital

• This is how slow economists are in leaving the triangle of big business, government and unions

See mess:

From 70% union to 12% union, now no one to bargain with

• 70% of jobs are created by companies less than 5 years old
• When Schramm graduated, would have 4 employers in life
• For son, will have 4 employers before 30, one of whom will be less than 5 years old or a self-employer

New actor:

• Start-up firms:  totally discounted in the 1980s

Keynes: pay unemployment to people until they can get back on their feet

• In the last recession, more people willing to take the risk to start their own businesses
• Companies like IBM talking about openness

Government is playing a lesser role, but has played a central role in NIH and DARPA

Universities aren't all that central

• Had Ford Foundation pushing him through
• Could make money going to graduate school
• Over-supply of Ph.D.s, who could then start businesses

Compare to Carlotta Perez: continuous innovation

• In Europe and United States, taught Dark Age, then Enlightment, dark era, then Industrial Revolution, then electricity, depression, jet age
• View that we're in the shock of 1999, when we did stupid stuff
• A lot of people lost money, but that's the way that capitalism works

What does a firm look like?

• Used to have plants
• Microsoft employees have never been in an IBM-type environment
• 75% of Fortune 500 isn't in corporate entity form
• It's people, technology and how the financial markets work

New institutional forms:

• Foundations
• Venture capital
• Business schools
• Suggest that research is the new institutional forms

What roles do universities play?

• Great conceit of universities: they live in the future
• Are universities going to move fast enough to absorb this?
• Reports now that more is spent in basic research in China than in the U.S.

Why did economists miss the switch? Why haven't universities responded?  Why does invention happen outside of engineering?

• Article: The Broken M.B.A.
• Don't count out America

Professors of business don't have an understanding of the new economy

• ATT went, but no news in America
• In Europe, it would have been backed by a family

We teach inductive and deductive

• American way: abductive reasoning
• Permits freedom to individuals: gives them money, lets them make mistakes, lets them fail and try again

This event may be iconic in a change in our business culture, intellectual culture, democratic culture

• This is unique to the United States

[Questions]

In a few years, a few trillion dollars in wealth in foundations

• A foundation is lot like a university, an invented creation of capitalism
• Invented by great entrepreneurs who made so much, they decided to give much of it back
• This doesn't happen in Europe, where they create dynasties and pass it back
• In the U.S., children don't get more the $10 million, but the rest of the $4 billion goes
• Will ruin kids by not letting them learn
• They people are encouraging democratic capitalism
• Foundations are freer than other institutions, no revenue, no customers, only think about how to propel society forward
• With economic growth will come growth of economic welfare

Spreading entrepreneurial thinking across universities, and maybe business schools

• Mostly adjunct faculty
• About 86% of people in Inc.'s fastest growing businesses are all university graduates, and engineers in particular
• Engineers are practical, they're fooling around
• They're doing what entrepreneurs do
• Then thought: how about spreading the money across the whole university, entrepreneurism everywhere
• Got 26 replies, asked for responses within 4 months, to give $5M
• One example: Washington U.:  a dormitory as a community of entrepreneurism where entrepreneurs and families live in, with a mall in the center of the campus where they need to fight to get space
  • Have legitimized entrepreneurism
• Theory of change: Washington U. is one of the most endowed universities, $6 billion, yet offered them $3.5M with matching from the state
• Have 25 to 30 schools like this

2006/10/06 14:25 Bill Hefley

2006/10/06 14:25 Bill Hefley, Carnegie Mellon University, SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Intro by Jim Spohrer

Director of ISQU at Carnegie-Mellon University

One of the first maturity models for outsourcing, not just from the supplier side, but also the client's side

Carnegie Melon University

[Bill Hefley]

IS program in university?

• How about one in the humanities college?
• Only Carnegie Mellon, and a Belgian University

Have lots of Master's that fit in with SSME

Want to talk about legitimizing what we're doing

• Made lots of transitions between departments
• Would like to make it easier for student that for me
• Member of the American Psychologist Association, have a section on Organization Psychology, and they won't let me be a member

Dealing with interdisciplinary, but also multi-disciplinary, e.g. dealing with an individual consumers

• Not just what IBM means, where large organizations

Have to have grounding within the discipline, as well as working across disciplines

Where do we publish?

What are the things we can do

[Questions]

• Don't think should convert everyone, still need specialists, but do need people that can bridge between the tents

2006/10/06 14:40 Gianmario Motta, "Engineering of Digital Services"

2006/10/06 14:40 Gianmario Motta, "Engineering of Digital Services", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Gianmario Motta, University of Pavia

Pavia is near Milan, founded in 1361

• Had Volta as a professor
• 15,000 students, 13,000 in engineering

Problem: number of university students were dropping

• Decided to make a new major where students understood almost nothing, but almost everything

Understanding coming from a processes perspective

• Master's level, people coming from information technology or industrial engineering

Supply chain isn't a lot different from giving services in a telecommunications environment

Case studies, e.g. SCOR supply chain reference model

Key points:

• Normative application portfolio
• Two ways: can create a process, or document a process that already exists

Syllabus is similar to an engineering class

Uniquenesss:

• Hands-on: more labs than students
• Making engineers, people who can design
• Business awareness:  not strategists, understand needs

2006/10/06 14:55 John Murray, "A Research Based Educational Initiative: The Institute for International Services Innovation"

2006/10/06 14:55 John Murray, "A Research Based Educational Initiative: The Institute for International Services Innovation", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

John Murray, University of Dublin, Trinity College, "A Research Based Educational Intiative: The Institute for International Services Innovation"

May risk putting together old content

• Taylorism
• May want to be ahistorical

TCD 1582: undergraduate degree, with a moderatorship if honours

• Should be able to moderate specialists in their fields
• Should look to past, and replicate a few successes

Second industrial revolution: 1880-1890s, telegraphy, steel, automobiles

• Becames the canon of management literature, written by Chandler
• Perhaps another significant tipping point at work

Jim Quinn:  Study of wholesaling systems in Europe

• Evolutionary view:  most is global, mostly innovations in format and business models, across Europe and into the United States

Approach has to be to start with knowledge creation rather than teaching

• Dilemma: operating on different time scales
• Was in Copenhagen, working with TetraPak
• Is manufacturing becoming a service industry?
• Time scales, they want answers now

Case study inductive (which later becomes deductive), or action research (which isn't as common, but help people learn)

Ireland:

• One of most global countries
• Around 2000, export of products flattened out, and services grew
• Only 4 million people in Ireland, and per capita figures are misleading, but services is #13 in the world

Found Paul Maglio, phoned him, while Paul drove in his car

• If also had been driving in Ireland, would have been in the ocean

Origins of the institute is recognition of the service sector growth

• Sister institute studies globalization
• Irish Development Authority
• SSME, IBM Almaden and IBM Ireland

Model: research --> dissemination --> practice

• Research: Short term research, action research, to longitudinal research
• Dissemination: Master's, executive development
• Practice: Evolution of clusters, extent to which innovation in services is geographically sticky

Not just services, but it's multi-level, multi-disciplinary, multi-modal, but ONLY international services

See Ireland as a laboratory

Interested in talking with others who are doing similar work

2006/10/06 15:20 Bob Glushko, "Services Science at Berkeley"

2006/10/06 15:20 Bob Glushko, "Services Science at Berkeley", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Bob Glushko, University of California, Berkeley

Not an academic, but an entrepreneur

• Dismayed, expected to see 20 people
• Don't know how to frame this as intellectual determinism
• Stumbling through

History: a lot of us were services science, and didn't know it

• Came from a background of cognitive science
• Started up company, one on helping desktop publishing
• Web put out of business, so tried to capture the first B2B marketplace forums
• Wanted to retire
• Came to Berkeley, working in the School of Information, library school after its mercy killing, headed by Hal Varian, who brought in law professors and economists
• IBM invited Bob to a workshop

With nudging:  IBM gave a faculty award, so would give a talk once in a while

• Jim bought 100 copies of document engineering
• Came onto Berkeley as a director
• First course developed, offered this semester

Try to think about services science really meant, as opposed to old wine in new bottles

• A discipline, as opposed to a curriculum
• If you think about disciplines, want the program to be what you're go at
• What would a discipline look like?

Let's not start from what we got, what are the key issues?

• Services science from people at the tent raising isn't the same as who we would invite
• Don't care if first to market, want to be right to market
• Sat around the table for 6 months, asked what the important issues would be, and then what would help to answer them

Examples:

• Change over time?
• How does it innovate?
• How do firms learn, and teach?
• Where does services come from, and how do they evolve?
• Can we plug in: core competencies (management), trust (sociologists), terms and conditions (law) ...

What can we do? Let's do it.

From June, spent time developing "An Information and Services Economy" course look like?

• Would read everything from Adam Smith to Karl Marx to Chandler to Prahalad
• Decided to try to read everything
• Reading Palmisano paper on the Global Organization

Teaching a course in web-based services (not web services), how can the web be used to deliver stuff

• e.g. http quality of service

Redesign Document Engineering course

Service Innovation, taught by Hank Chesbrough

Have more adjuncts than faculty teaching the course

• e.g. information systems clinic, hired someone from IBM teaching professional consulting skills: business process analysis, document modelling

Services Science lecture series

Already had two CEOs of Silicon Valley startups

Has been exciting

Need to pull it together in the class, because guest lectures didn't do that

Variable depth: can read Palmisano, but can't read Oliver Williamson

Chumming: draw in CEO lectures for one hour per week, then fill the rest

Skeptics: can't get tenure in services science

Others: I support this, where do I get the money?

[Questions]

From marketing, tend to focus everything on customers.  What do the customers say about value, and co-creation?

• There are more slides

2006/10/06 16:10 Avishai Mandelbaum, "Service Engineering: Data-Based Research and Teaching in Support of Service Management"

2006/10/06 16:10 Avishai Mandelbaum, "Service Engineering: Data-Based Research and Teaching in Support of Service Management", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Avishai Mandelbaum, Technion, Israel, "Service Engineering: Data-Based Research and Teaching in Suppot of Service Management"

Started 13 years ago, moving from Stanford to Israel

• Background: math, networks, queuing theory
• Started with a little consulting, research
• Started a research seminar
• Supplemented with data
• Compulsory course in industrial engineering

Appreciate simple, useful models

• Simple model might still require deep analysis

With Wharton, started a repository for call centers:  Models for Call Center Analysis

• 2.5 years, 220M calls handled by a machine, 40M call handled by a person

Find going back to basic research paradigm (as in physics, biology): measure, model, experiment, validate, refine

Yield scientifically-based design principles

Will focus on one model for this talk: staffing problem

• 3 to 6 billion people answering phones
• Staffing based on an Erlang-C model (M/M/n), 1913
• Another model: Palm/Erlang-A, simple but not too simple

2006/10/06 16:35 Val Rahmani, "Injecting Science into the Art of Services: A Perspective from IBM Global Technology Services"

2006/10/06 16:35 Val Rahmani, "Injecting Science into the Art of Services: A Perspective from IBM Global Technology Services", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Val Rahmani, General Manager, Infrastructure Management Services, "Injecting Science into the Art of Services: A Perspective from IBM Global Technology Services" 

Have been in IBM hardware, moved to services in March

Could use help in research

Have come from a product mentality

IBM has products and services, but how do we put them together

• Services are 50% of revenue, but less than 50% of profits

CEO Study, with CIO implications

• Innovation starts at the top
• Innovation isn't just products and services, it's business model innovation
• Collaboration is more important, need to be both internal and external
• Gap between 80% knowing what we need to do, and 20% saying that the they know how to do it

Partners and customers edge out employees for ideas

• R&D is #5

IT services market is changing

• Used to think we could sell standalone services, now want integrated solutions
  • Customer doesn't want to be beta tester, integration by FedEx (meaning assembled when it arrives)
• Not full-scope outsourncing, now want selective out-tasking (e.g. call centre, payroll, security, etc.) so that I can see real value and doesn't lock me to one supplier
• From customized offerings (where they pay extra) to standardized services
  • e.g. 17-1/2 windows cost $2500, 18" windows cost $200
• Local labour goes to global delivery (which may mean make whole services into a process)
• Labour-based models, moved to asset-based models (meaning anything repeatable and scalable, e.g. methods, software)

GTS Strategy:

• Globalize: traditionally, have had local teams working with person power
  • When make them assets, the people will have less power
• Simplify: Don't have the skills, make a simple set of steamlined portfolio
• Standardize
• Automate: If can't standardize, automate
• Have put some work in India right beside Research Labs

Can services be more like products?  Business Week Online

Ten Service Product Lines cover all of our IT services:

• IT Strategy and Architecture: middle-skilled consultant with better tools
• ....

Most interesting places for security services

• Biggest cost in security is people, particularly doing stuff that could be automated

Similar approach in server services

[Questions]

Missing link is not in innovation, but whether it's easy to use?

• Yes

Don't automate me, informate me.

Privacy.  Have non-technologists involved in planning

2006/10/06 17:30 Michael E. Gorman, "Trading Zones, Interactional Expertise and Service Science"

2006/10/06 17:30 Michael E. Gorman,  University of Virginia, "Trading Zones, Interactional Expertise and Service Science", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Michael E. Gorman,  University of Virginia, "Trading Zones, Interactional Expertise and Service Science"

A psychologist in an engineering school

Kuhn: Problem of incommensurability:

• experts in an old paradigm can't communicate with those in a new
• What's a problem; what's a problem worth solving; what's valid date

Galison: Scientists and engineers still work together

• They working in a trading zone

Three levels of shared expertise in a multidisciplinary trading zone (adapted Collins and Evans)

• None: speak different languages
• Interactional: expert in one, mastered enough in other language to facilitate trades
• Contribution: can go from one domain to another

Crude taxonomy of trading zones (with Matt Mehalik)

State 1: a technological, ideological or political elite

• e.g. centralized agricultural planning, good for control, bad for producing food

State 2: relatively equal trading zones

• Actors often trade without boundary objects or across systems
• Don't need to be aligned, just aligned enough to trade

State 3: shared mental model, similar goals

• Dynamic representations
• Towards a cohesive team
• e.g. developing an Arpanet
• May not be able to stay in this zone very long

Services science needs development of a creole

• Need new expertise
• Need agreement on language
• Leads to trading zones that understand revenue

SSME as UVA: could play a part in Engineering Business minor, could see transforming this

• UVA bought a "semester at sea" program, takes students around the world (not just a cruise)

2006/10/06 17:45 Xiaofei Xu, "The Current States and Development Plan of Research and Education on SSME in Harbin Institute

2006/10/06 17:45 Xiaofei Xu, "The Current States and Development Plan of Research and Education on SSME in Harbin Institute of Technology", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Xiaofei Xu,  Dean, Computer Science, Harbin Institute of Technology, "The Current States and Development Plan of Research and Education on SSME in Harbin Institute of Technology"

In developing countries, services industry is 70%

• In China, 35% in 2004, expected to grow year by year
• Call "modern service industry"

Adopted IBM definitions on services science, two years ago

• Focused on service engineering

Focuses:

• Adapting Model Driven Architecture to SMDA
• Service reuse based on service components

Service methodology:

• Service models
• Service modeling: requirements analoysis, design and implementation
• Service building
• Service evaluation
• Support tools and platforms

2006/10/06 18:05 Christof Weinhardt, "SSME for eOrganizations"

2006/10/06 18:05 Christof Weinhardt,  "SSME for eOrganizations", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Jim Spohrer's introduction: What tools would service scientists use?

Christof Weinhardt,  Karlsruhe Institute of Technology, "SSME for eOrganizations"

KIT is the biggest research institute in Europe

• Established 3 to 4 years ago
• 12 professors, 18 young professors, 115 Ph.D. candidates (e.g. working on NESSI)
• Schools of economics and business engineering; computer science; electrical engineering; mechanical eningeering

eOrganizations? e.g. Virtual power plants

• Project running with 10 professors and 10 research assistants and industry
• How could we change the traditional supply chain?
• Supply and demand rules change
• Should be able to collaborate to get better prices through auctions and reverse auctions

Service-driven Applications; Services, components, modeling; Service substrate

Caomputer Aided Market Engineering (an integrated service engineering toolsuite)

Created Meet2Trade...

• Idea: Knowledge-based parametric design
• Design: Market modeling language (MML)
• Configuraiton: ConfiguraitonMarket configurator and composer
• Testing: Market experimental system (MES)
• .. Agent-baed simulation environemnt
• Introduction Operation: Market Planning and Operation intellgience (MAPOI)

Looking at how could capture emotional attributes in trades

[Questions]

Value?

• Compared Belgian and California markets

2006/10/06 18:20 Taina Tukiainen, "Master’s Program for Service Management at Helsinki Polytechnic Stadia"

2006/10/06 18:20 Taina Tukiainen, "Master’s Program for Service Management at Helsinki Polytechnic Stadia", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Taina Tukiainen,  Helsinki Polytechnic Stadia, "Master’s Program for Service Management at Helsinki Polytechnic Stadia"

Background in ICT industry, dissertation in ventures

Ventures background means start project quickly

Launch with industry: Nokia and IBM

• Content development as co-creation

Had half a year to develop and start the program

Have started a research project including IBM, Nokia, Kone, etc., but the focus here is in the class

• Got approval from the government
• Initiated with a Business Advisory Board (IBM, Nokia, Siemens, Metso and Bearing Point)

Students:  115 applicants from 20 countries, with ICT background

• 30 applicants accepted, 8 countries
• Background, B.Sc. in engineering
• 3 to 25 years of practical industry experience
• Classes Thursdays and Fridays, with business people coming in, and international faculty (in 2 weeks will have NJIT)

Curriculum and themes

Pedagogic approach:

• Thesis industry base, mostly with employers
• Action-based learning, experiential learning
• Dialogue and discussion: students are discussion leaders

Examples of industry collaboration:

• Advisory board
• Co-creation within industry and people
• Visiting lectures from industry, maybe easier in Finland
• Thesis supervision, and coaching: need industry application

2006/10/06 18:35 Irving Wladawsky-Berger, "At the Threshold of a 21st Century Revolution"

2006/10/06 18:35 Irving Wladawsky-Berger, "At the Threshold of a 21st Century Revolution", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Irving Wladawsky-Berger, IBM Vice President, Technical Strategy and Innovation, "At the Threshold of a 21st Century Revolution"

Last week, was a speaker at MIT on Complex Systems Engineering

Also worked on Complex Systems last week, for NSF

• Bill Rouse will summarize
• Consensus that what is most interesting about complex systems now, is that they incorporated the market-facing aspects and the social aspects (i.e. people)

Can't have services without people

• Different lenses on the same problem?
• Comfortable that when you design an airplane, you can see and touch it
• When you talk about something that you can't see, who cares what the reality is?  What matters is its behaviour, how it performs.
• e.g. wave and particle duality: when you get through the angst that there's no reality, life goes on and it's okay
• We're dealing with designing and architecting these incredibly complicated things that don't exist in the same way that cars and airplanes and chips exist.
• Can have an attack of anxiety or get over it.
• Sometimes a complex systems approach is the right approach, and sometimes a people approach is right, but it's important that they're all lenses on the same general thing, i.e. how do we understand market-facing complex systems that involve people.
• They're dynamic, unpredictable.
• Some of these things you'll automate, the rest you'll provide better tools for the people to make better decisions.
• We're not after automating the people out of the equation; you can't automate the clients out of the equation.
• May want to have people working with an automated part, or with humans.
• In restaurants, menus don't have variance.
• In markets, opportunities are in the variances.

At the end of the day, we want to figure out how to better design, build, operate, manage and evolve these market-facing, people-oriented systems that have heretofore have existed fine, but have been working in ad hoc ways.

• Design is at the root of what we want to do.
• In people-oriented, market-facing system, you're never complete.  It has to adapt to market conditions.
• Most people don't like their ERP systems, which were designed 15 years ago when the biggest thing was relational databases and mainframes ruled the world.
• They took a rigid approach to the business processes they automated.
• They told people: you want ERP, we'll automate you.
• Today, we're in a different environment:  what parts should we automate, what should be flexible, what should evolve?

One related area to complex systems and services, where I'm interested

• If you're going to design something, you need a model in your head.
• What's the model of businesses, and business models and innovation?
• Answer is going to come from the world of gaming and massive multiplayer online games, where people are creating worlds.
• Creating sim-business or sim-Almaden or sim-Harrod's.
• The link to the interfaces is critical.
• There's not point in doing any of this work, if human beings can't use them.
• Exciting that new tools are ways of visualizing complex things.
• There are existence proofs, question is how you bring them in
• If you're going to design businesses, how do you design them.
• There are experts that design hospitals, bridges, planes.
• Incredible opportunities, but incredible challenges.
• What's appealing about challenges: if going to design a very good hospital, going to your room and thinking about hospitals, we are being liberated so that our applications can look and feel more like the real world.
• Since the real world is to satisfy humans, the virtual worlds can have a lot of richness
• Need to educate and research people who can go out and model businesses in a systematic way that we haven't done before.
• This was done 35 years in manufacturing.
• Universities sent people to the plant floor.
• Now, the opportunities to do this in the rest of the world

2006/10/07 08:05 Debra Stewart

2006/10/07 08:05 Debra Stewart, President, Council of Graduate Schools, SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Debra Stewart, President, Council of Graduate Schools

Have shared some assumptions that service sectors will be large in the future

Advancing services in non-service companies

Also a science in service businesses

Mondale: If you're sure that you know everything that's going on, then you're hopelessly confused

• Not the Washington question: What did you know and when did you know it?

What needs to happen in the current phase?

In the positive global convergence of a corporate business putting forth an agenda on something that it thinks is important, to a group of academics who are enthusiastic and motivated?

• What happens next?
• The next phase to find people in our institution who will move these ideas forward?

Usually the title will be vp of research and/or dean of grad studies: advancing either research or grad education

• Graduate senior is the senior official responsible for oversight
• Includes U.S. schools and Canadian schools
• European schools are getting more like this

Graduate education will push innovators

• 1.15M students of 1.6M are master's
• Most faculty care about Ph.D.s

Also need certificate programs, e.g. Berkeley -- package of advanced training

Graduate schools need to determine that faculty standards are met

• Reflect diversity
• Link employers

Beyond quality (which students don't know much about), students say:

• Interested in linkage between education and future jobs
• Compelling need for transparency in process
• Fixed time: a destination, not a lifetime
• Faculty generally don't like these career preparation, students don't want prepare for a job, but instead prepare for lifetime where they will have to change for jobs

Employers: strongest advocates for graduate education

• Need flexible students
• Global economy, but can work locally
• Flexible
• Can deal effectively with people

Professional science master's: developed with the sponsorship of the Sloan Foundation, located in the Council of Graduate Schools in Washington

• 75 graduate programs
• Unfilled niche: science-based companies wanted something beyond bachelor, but not up to a Ph.D.
• It's science-plus, i.e. science plus the business of science (law, communications, business)
• Helsinki program described yesterday looks like this

How can deans help?

• Find ways to mobilize students

How to scale up:

• Recommend to faculty: know it takes time, but have to find allies, need to make services science the dean's problems
  • IBM money will go away some day, and you need to find an institutional home and commitment
• Recommend to administrators: recognize services science is on the frontier, and it's risky
• Recommend to employers: they say they want these people trained, and then employ people with degrees like they have, so need commitment to hire graduates

Asked: is the world is flat?

• Believes Richard Florida, that the world is spiky
• How to ensure that your region is on a spike?
• Focus on compelling areas
• Universities are at the source of spikes, but it's not just any university

[Questions]

Globally-integrated enterprise. What do we do about supply-demand imbalances? Ph.D. shortage in India

• Indian government has committed to grow Ph.D. programs by 5 times in 6 to 7 years
• American model: take undergraduates paid by public funds elsewhere, draw them to the U.S., and keep them here
  • 60% to 70% of science and engineering graduates are like this, even despite declines
• Some American schools are starting programs in Asia
• But Ph.D. programs aren't something you can turn on and off

Professional master's degree numbers? Professional doctorate degrees

• 1200 PSMs, but some are very small and niche oriented (e.g. graduate and start a new business)

Jim Spohrer:  Will have meetings of employers

Debra: Have a book on PSM program, can find on web side

2006/10/07 08:40 Hideaki Takagi, University of Tsukuba, "Research and Education of SSME in Japanese Universities"

2006/10/07 08:40 Hideaki Takagi, University of Tsukuba, "Research and Education of SSME in Japanese Universities", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Hideaki Takagi, University of Tsukuba, "Research and Education of SSME in Japanese Universities"

40 years ago, government decided to move universities outside of Tokyo, Tsukuba is north of Narita airport

• Now subway line

2006/10/07 09:05 Bob Lusch, "The Service-Dominant Mindset"

2006/10/07 09:05 Bob Lusch, "The Service-Dominant Mindset", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Steve Vargo & Bob Lusch, University of Hawaii and University of Arizona, "The Service-Dominant Mindset"

Fish or wheat:

• Exchanges: competences for trading proteins for trading carbohydrates

Even in agriculture, work is done by services

• Computers: informed matter with our intelligence
• Service-dominant logic: focus on processes
• Processes have no start and no end

What is a service?

• Application of competencies, for the benefit of another entity
• Sometimes done with goods, which we call appliances

What firms produce are not outputs, but instead inputs into another system

• With scientific management, we treat humans like operant inputs, they're operand resources that do things
• We sleep, work, and co-create
• Consuming not the right idea, as they don't destroy, they co-create
• Consumers assemble resources to co-produce

We've been on this journey from a goods-dominant logic to a transition, to service-dominant logic

• Goods --> Services --> Service
  • Units of input, whereas service implies process
  • Service science, not services science
• Products --> Offerings --> Experiences
• Features / attributes --> Benefits --> Solutions
• Equlibrium systems --> Dynamic systems --> Complex adaptive systems (learning and evolving)
• Supply chain --> Value chain --> Value-creation networks or constellations

Big meta-questions (that Karl, from the Kauffman foundation brought up)

• What is the theory of the firm?  What do firms do?
  • From producing outputs --> producing inputs
  • New institutions will evolve not just it's good for one firm, but when it's good for the whole system
  • Democracies work, because they're co-creation
• How do firms do this?
• Why do firms do this?
• What scientific concepts and tools are dominant?
  • Towards discovery
• (Could also ask what consumers do)

[Questions]

Value.  Definition of services, where there isn't a transfer of ownership.  Do have trouble when come to consumer goods.  Distinction between durable goods and consumable goods.

2006/10/07 09:20 Christos Nikolaou, "Progress Report on Efforts towards Services Science in in the EU and Greece"

2006/10/07 09:20 Christos Nikolaou, "Progress Report on Efforts towards a Research and Education Agenda for Services Science in the EU and Greece", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Christos Nikolaou, University of Crete, "Progress Report on Efforts towards a REsearch and Education Agenda for Services Sciene in the EU and Greece"

When say EU, should say European Commission

Funding, like NSF:

• Network on complex systems
  • In Europe, primarily a community of physicists, now getting economists and computer scientists interested
  • One day workshop that didn't get anywhere
  • Should be looking at microscopic and operational level
  • Relationship between organizations and services
• Bridging the business-IT gap

[Quesions]

NESSI?

• Yes, many working groups

2006/10/07 09:40 Guido Dedene, "A Research and Educational Framework for Service Management"

2006/10/07 09:40 Guido Dedene, "A Research and Educational Framework for Service Management", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Guido Dedene, Catholic University of Leuven (K.U.Leuven), Belgium, "A Research and Educational Framework for Service Management"

Also teach in Amsterdam and Gent

• Officially MBA:  what language do you use for business?

• Teaching business modeling and service management

Classical management frameworks, including Strategic Alignment 2x2 by Henderson and Venkatraman

Services as a meaningful bundle of technology / resources satisfying a predefined service contract

Threefold division: Preconditions, postconditions and variants

• Similar to Praxis, Semantics, Syntax
• Similar to Experience, Services, Resources
• Similar to Knowledge, Information, Technology

The Service Management Enneahedron (3x3)

• X-axis: Business, Services, Technology and Resources
• Y-axis: Strategy, Structure, Operations

First used this framework for service level agreements

• Operations: Business activities --> I/C Service Activities --> Technology Activities
• Little's law
• Boundary conditions for functions

Second application of the framework: course development of ICT/S Service Management

• Each of alignment of rows, columns, then triangles

Research activities:

• Service strategy: look for market inperfections, as opportunities
  • Assymetries
  • Solve the imperfection or retain the imperfection
• Structures vs. execution
  • Looking for ways to discover, from the bottom up

[Questions]

Definition of service?

• System in which knowledge is mediated, but the knowledge is in praxis
• Hard services vs. soft services (where break rules)

2006/10/07 10:00 Jiangfan Li, "CCSSR Research & Education and Service Economies & Management"

2006/10/07 10:00 Jiangfan Li,  "CCSSR Research & Education and Service Economies & Management", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Jiangfan Li,  Sun Yat-sen University, Guangzhou, China, "CCSSR Research & Education and Service Economies & Management"

Started research on service economies in the 1980s

Research areas:

• Service economics

[Personal history]

China 5-year plan: include provincial level programs

Development of services sector: yellow bar agricultural, green manufacturing, red services

• Second chart: employment

Education:

• Ph.D., two majors:  enterprise management; industrial management

Website

Plans: Service economics and management

2006/10/07 11:05 Javier Reynoso, "The Evolution of Services Management in Latin America: Building an Academic Program"

2006/10/07 11:05 Javier Reynoso, "The Evolution of Services Management in Latin America: Building an Academic Program", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Javier Reynoso, Instituto Tecnológico y de Estudios Superiores de Monterrey, "The Evolution of Services Management in Latin America: Building an Academic Program"

Three foundations:

• Scientific development:  What are services in a Latin American content, at the bottom of the pyramid
• Academic development: Certificate programs
• Competitiveness of service businesses in Latin America: students in action research projects

Rationale:  

• Need to have a systemic view of services organizations
• Need to understand distinctions between IT services management and services management
• Need to integrate management areas before integrating sciences

[Discussion]

Services in private sector?

• Yes, increasing flows into Latin America: airlines, hotels, banks
• Began under the Salinas regime

Missing services?

Acknowledge different perspectives or find a problem to solve.

[Back to presentation]

Focus one level at a time, e.g. services science, but what is a science?  Epistemology, philosophy of science

Need to see other service sciences without necessarily IT bias

2006/10/07 11:20 Mary Jo Bitner, "Services Science at ASU"

2006/10/07 11:20 Mary Jo Bitner, "Services Science at ASU", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

• [Slides are available at almaden.ibm.com]

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Mary Jo Bitner, Arizona State University, "The Evolution of Services Management in Latin America: Building an Academic Program"

Center for Services Leadership is 20 years old

Strong roots at Center for Services Leadership, have done research, executive programs, MBA programs, Ph.D. programs

• Depth is in marketing
• Found that couldn't keep just in marketing, had to learn about business
• Actionable research, e.g. self-service technologies
• Focus on the customer:  a hub

Companies aren't all just IT, although IBM has been a big partner for some time

• For pure services like Marriott and Mayo Clinic to IT Business
• November 1-3: Compete for Services symposiums

Building from services research, focusing on customer and competiting through service

Recent trans-disciplinary:  information systems, psychology, computer science and informatics

Service Science is an emerging discipline that focuses on fundamental science, models, theories and applications to drive innovation, competition and quality of life thorugh services(s)

• A big tent

Have had an MBA specialization in services leadership for 10 years

• Textbook (4th edition)
• Will be teaching in Shanghai (2006, 2007)
• Started a cross-disciplinary Ph.D services seminar (2006)
• Executive programs

Initiatives:

• Moving towards faculty research clusters, e.g. IT services, healthcare

Acceleration factors and challenges

• Have center and web of companies
• President of the university, Michael Crow, has a vision of the new American university:  accessible, excellence, impact (as Cafe University)
• Size: have 63,000 students, will become 90,000 in the next few years

Challenges:

• Languages across disciplines
• Reward and incentive structures
• Funding

At a critical juncture

• Can't expect IBM to fund this, that's not why we're here
• Universities have to want to do this

[Questions]

Bigger tent here that I thought.  But then no one person could know everything.  Where does synthesis come from?

• Agree.  However, universities and governments have never paid attention to services.

2006/10/07 11:45 Business Partner Panel

2006/10/07 11:45 Business Partner Panel, SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Panel:

• Cathy Lasser, IBM, VP in Research, Industry Solutions

Have heard of changes from IBM, now something completely different

• We're employers

For Cathy: talked about services sciences, came into engineering

• Solution, said dive into telecom, health
• Said, maybe we need solution science
• In conversations with Jim and Irving, this became solution engineering
• The discipline to be able to do it over and over again
• Today, it takes a perfect storm:  need right people at the right time in the right geography to make it happen
• SSME would make the perfect storms more frequent

Sid Dalal, VP of services research: Xerox

• Started information services division
• Four colleagues at the VP level came to this event
• Xerox has $4B / year in services, document process outsourcing, which is very human intensive
• In the business of big-I small-T
• Services research, 200 people
• See benefits in shorter time to hire, shorter time to train
• As an employer, want to hire:  analysts, solutions architects, researcher
• Trying to solve a problem: end to end, complete multidisciplinary approach
• Services is a human-intensive business
• Multidisciplinary, can't come from a single discipline
• When we are with a customer, need to understand risks: haven't seen risk analysis discussed
• Comparable to 1960s and 1970s Deming: not complicated, but just people in factories discussing with a toolkit
• At Xerox, have many six-sigma black belts trained
• We're not about cost-cutting, notion of a new business model: can we charge for services by click?

Peter Tompkins: Information Techologies Inc.

• 30 years ago, started, leading suppliers of software in banking
• 700 people in Lincoln, Nebraska
• In professional services group, professional services manager
• Banking software provided to 1/3 of banks, 700 people
• Fiserv out of Madison, Wisconsin, bought the company, parent of 130 companies
• Had a wire from a Unisys mainframe to green screen
• Now everything on networks, talks to PDA and refrigerator doors
• 5 years ago, partnered with IBM
• 3 years ago, open up a refined version of software, runs on other platforms
• Midwest work ethic
• Former president of the company is the chairman of Fiserv that bought ITI
• Initially, professional services was a silo
• Translates geekdom to business terms
• Can't know it all
• Only came on to services science a few months ago
• What do banks need?  We need data mining, etc., that are things that universities teach to students.
• Model is to create wealth for customers.
• Partnership is biggest thing of what we do.
• Consulting: fake the experience, live the passion

Adrian McKinney: Boston Consulting Group

• Variety of perspectives, intent
• Some thousand consultants, $1 billion in revenue, we solve problems
• We sell the service of problem solution
  • Role is mostly in client service: people want an edge, as an innovation value solution
  • Means creation of new business models, creation of new services
• Spend 20% of time in the Strategy Institute, looking for the next horizon of ideas
  • Not going to find this B-schools and MBAs
  • Go to sociologists, physicists, etc. to see what sparks fly
  • Disciplines are arbitrary
  • Emanuel Wallenstein's work on systems theory
• Training in physics, jumped to business in the 1990s
• But have taught classes, created curriculum
• At BCG, hiring MD MBAs, but then still need to give them experience
• Beyond content, need to allow people experiences that generate their internal abilities to do:
  • Networking, someone who can talk to a poet and a physicist
  • Insights: pattern recognition, dynamic range in thinking, at undergrad and grad programs
  • Impact: what's the value?
• For BCG, it's about going beyond the MBA
• Also something about tools and learning devices:  at BCG have a Strategy Gallery, encourage people to dip into that to get a space to think

[Questions]

When do we have services and product for free?  People-based business to asset-based businesses.  Need services sciences who come to build tools and technologies.  You're not looking for us to develop courses to help you.  Not production line, person putting in screws on a production line.  Strategies born or trained?

• Adrian:
  • Can be gently engineered, starting in high school, then through university.
  • Looking for renaissance men and women, not that can do everything, but can figure out everything.
  • Need a different way of interacting, and at the personal career level
  • Genocide: if someone has too many interests, too many degrees, too many experiences, we're too concerned about why they're jumping around
  • Strategy requires those properties
  • Can grow these people
• Cathy:
  • Methods and disciplines of what to ask
  • How integrate and use them
  • Technology bits and bytes, but then how do we make money?  Can train for this
• Sid:
  • Will it create methdology of tools?
  • Will it cause a disruption?
• Peter:
  • Confidence factors:  can you teach outgoingness, then experience and failure need to kick in, that leads to performance
  • Can't teach personality

Challenge on people and metrics.  In IGS, easiest measure is utilization.  People need a space to think.  Can't acquire a skill unless it's practice.  Too often, people are practicing in front of the customer.  What's the answer to keep them sharp?

• Peter:
  • Ride-along, apprenticeship
• Adrian:
  • Don't handle it well, but it works
  • Every 6 months you get a review
  • Up or out system, or go or grow
  • We keep talent sharp by citing it quickly
• Sid:
  • Tough question
  • Experimenting:  allow newer people some extra time
  • Rotational assignments work, allow them to replenish batteries
    • Finite limit to do this
  • Allowing some amount of time after an assignment to do it
  • Can't do it 20% of time, because people are so busy

Corporate funding for services research? Services research and development budget isn't a phrase that is used often.  Even with Val's presentation yesterday, it was using product-oriented methods to get long term services research. Could be a few bad quarters for long-term benefits. What have you learned at your companies on how to get support and funding of academic research?

• Sid:
  • Things have been changing
  • All say services as a business or a cost centre or support for hardware is new.
  • Cash cows say why are we wasting money
  • Key challenge: highest levels of management committing to growing this business
• Peter:
  • Parent company put out a press release a month ago on synergy between services
  • Leader knows that services are where things are
  • We're in the middle of that
• Adrian:
  • Constrast between a pessimist and an optimist
  • If you have a successful business model, it's hard to get money to change it
  • The only way to have innovation has been to get senior people committed, historical perspectives, and fiscal accountability
• Cathy:
• Have to do this without impacting profits quarter to quarter
  • Have been good at developing things, need to figure out how to leverage them

2006/10/07 12:45 Stu Feldman, "Summary and Closing"

2006/10/07 12:45 Stu Feldman, "Summary and Closing", SSME - Education for the 21st Century Conference, IBM Palisades, New York

Services Science, Engineering and Management Conference, at IBM Palisades, October 6-7

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Stu Feldman, vp of exploratory research

Excitement:  it's a new area, a new way of thinking

This is the time for snowballing

Lead to socio-economic value

The way you tell pioneers is by the arrows in their back

At least four clusters of intellectual impetus:

• Math/OR
• Industry engineering / systems engineering
• Computer science / information management
• Physics, complexity

Already recognize success will come from crossing individuals

• T-shaped individual, but reality we need for pi-shaped people, deep in two directions and broad across everything else

Not just intellectual output: experience factor, not just cognitive, you won't understand why it's hard

• Describing contexts (invisible relationships) is hard

Services are, at base, about people

• The most we talk about: humans as actors, operands.
• They also provide purpose, goals, impetus
• Humans are at the core of a small enterprise
• But want to maximize value, e.g. Moore's law

What are service activities?

• Designing / building / operating
• Monitoring
• Managing
• Understanding, looking at long-term questions, e.g. societal

Sat on an agenda-building model in Europe, for people to focus on 10 years

Book: Academic charisma -- basically, everything came from German academics in 1870s.

• What did it take to make a radical change in the world, and what does it take?
• Changes will be evolutionary

Tenure the usual block, only mentioned twice here:

• Mostly likely to do new is the young, and they shouldn't do things that will hurt them from getting tenure.

Respectability: computer science only got this after 25 years, still some questions as to whether it's a real field.

Who is going to support this?

• Have spoken to Brussels and Washington
• Think that they should do something, but they're reactive, not proactive.
• Feedback loop, that no one starts
• Cross-disciplinary

Need to build constituents in governments, also foundations.

Curriculum: the master's degree is the soft spot, where can sneak in new courses and experiment

• At an early stage, want diversity

How do we create graduate programs?

• What perterbations should happen in the undergraduate programs?

IBM will help, fund a little (although not a government)

2007/04/27 08:30 Henry Chesbrough, "Welcome"

2007/07/27 08:35 Henry Chesbrough, "Welcome", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Event sponsors:

• Institute of Management, Innovation & Organization (IMIO),
• Haas School of Business, UC Berkeley
• The Information School at UC Berkeley
• Citizens for IT Research in the Interest of Society
• California Management Review
• Finnish Funding Agency for Technology and Innovation - Tekes

Welcome by Henry (Hank) Chesbrough

Co-sponsorship by Berkeley and Tekes

Had approached NSF for funding last year, but they didn't have a category

• Response: won't this just create jobs in India?

Opportunity for high-wage countries

2007/04/27 08:45 David Teece, "Managing Dynamic Capabilities and Expert Talent in Today's Global Economy"

2007/04/27 08:45 David Teece, "Managing Dynamic Capabilities and Expert Talent in Today's Global Economy", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Intro by Henry (Hank) Chesbrough

David Teece, known for dynamic capabilities

Also own consulting business

Services sector

• Will focus on professional services, which he does as a hobby

 

[David Teece]

What's different?

Basis of competitive advantage has changed

• Not managing tangibles, managing intangibles
• Competition for intermediate goods, final goods, competitive markets
• Can fall into the zero profit trap
• Want better than competitive return, which you could be passive investment

Aren't markets for intangibles

• Know-how, capabilities
• Something isn't tradable, perfect markets don't exist, so should be able to get competitive advantage

Style and genre of management is entrepreneurial management, also called dynamic capabilities

• Managing down through hierarchies isn't sufficient
• 1. Have to sense new opportunities -- somethings that entrepreneurs do
• 2. Seize new opportunities
• 3. Reconfigure organization, because target will be different today from tomorrow.

Started in 1997 with Teece, Pisano and Shuen paper

So what does this mean about the way a company is run?

• Organizations complement markets
• What is it that organizations can do that markets can't?
• Markets coordinate things, where there is a price system at work, meaning commodity markets
• Otherwise, management has something to do: sensing, seizing and reconfiguring

Sensing means seeing where the market is in disequilibrium, or putting it into disequilibrium

• Not new: Schumpeter
• Putting together specialized or non-specialized asset in a combination that others don't
• Kirzner:  entrepreneurs re-establishing equilibria
• One way to sense is to do R&D, an exploratory activity
• Chesbrough's Open Innovation says that innovation doesn't have to happen inside the firm
• David Merry: companies good at showing innovation are good at doing it:  insourcing
• In addition, have to be scanning the periphery of the organization, it's part of how organizations are alerted to new opportunities

Seizing

• How do firms come to be great?
• Some sense early, but then screw it up
• Putting money down in a sensible away is crucial to competitive advantage
• Alfred Chandler looked at 100 years of history, to separate sheep from goats.
• Companies that didn't just see the opportunity, but were willing to put their money behind it, to building manufacturing, org hierarchies
• Important investments must be made
• Firms good at this do better

When world changes, have to reconfigure

• Path dependence
• More than adaptation and response, it'shaping markets
• Took 25 years to learn this:  economists say markets are exogenous to companies
• More often, it goes the other way, that companies shape markets
• e.g. Microsofts of the world shape markets, and determine the competitive
• What pages of the textbook do you have to pull out to see what's happening in the global market?

Reconfiguring the business model

• Took 25 years to learn this, learned it from Henry Chesbrough
• e.g. Dell Computer, new business models with new business methods to back them up
• In a world of open innovation, there's increasing advantage to getting the business model right

How does this play out around talent and services?

• Expert talent, as in any high-end organization, is required
• e.g. software, the top 5% of code writers do 90% of the creativity
• U.C. Berkeley: 90% of the research comes from 10% of the people

How to manage top talent?  What do they need, and what don't they need?

• They want greater autonomy, which requires greater accountability
• Command and control structures won't work
• Role of management is to create new structures that provide greater autonomy, and then orchestrate:  make individual talent more productive in teams

How do you do this where traditional management doesn't work?

• Peters, 1993:  Today's professional services firm is the best model for tomorrow's organization in any industry
• They're built around intangibles

Look at the literati: high-end educated people, who provide a lot of the talent to create new products and services

• International trade, open markets: creates more of a winner-take-all economy
• They solve complex problems

Assumptions about what makes literati tick:

• They're worthy of trust
• They like they work (sometimes too much)
• They have important non-pecunary gogals
• ...

Can team with highly centric, egotistical people

• Compare traditional teams with virtuoso teams
• Think of organizing a Broadway show:  a few highly talented actors, others not so talented, all choreographed
• Need to have the highly talented and talented recognized
• Don't take substance over form
• Satisfy highly sophisticated clients

How is this organization different from a collection of individuals?

• Sometimes not, but it can be
• Can bring it together, brand it
• Involves building co-dependencies
• Will retain people if have some individual professional freedom, and combine them with people who have complementaries
• Collective brand, can achieve common goals

Leadership?

• Can't run highly centralized model
• Got centralized from army, church
• Weren't hierarchies in business until had them in government
• Arthur Andersen accounting founded in 1920s in the General Motor model
• Could have done this differently

Model probably needs to be more decentralized

• Open and transparent incentive system
• Some metrics-driven capabilities and rewards

Contrast expert services model with industrial model

• Decentralized
• Persuasion
• ...

Service innovation requires new knowledge

• It requires managing intangibles
• Starting in a game where there isn't as much foundation
• Talent is scarce, have to build it, can't buy it
• Have to move to dynamic capabilities

[Questions]

Metric-based compensation, like to paid for what I accomplish.  How well can it be assessed?  e.g. lawyer that does a good case, but loses

• Have to inject some market rationality
• If lead partner does a bad job, not only internal sanctions, will have some external
• Requiring metrics
• If you don't have metrics base, then have to set up a compensation committee, then there will competition to be on that committee; and then those who aren't on the committee lobby those who are, which is really inefficiency
• Oriented towards influencing
• Have to avoid, it's how politicizing happens
• Want them to kiss up to customer, not internal
• External deficiencies easier to deal with than internal

Juniors at piece rate.  At senior levels, rainmakers take out what they're worth to another firm

• Being under that brand has benefits that another brand doesn't
• Fundamentally a race to build brand and complementariness

Stop people from moving?

• Incentives are necessary but not sufficient
• Culture, values, leadership

Knowledge management.  Where does trust play?

• Multiple ways
• Individual has to trust the organization to do the right thing
• Organization has to trust individual
• Individuals have to trust others, which requires norms
• Building trust with heterogeneous talent is tough
• It sometimes takes 10 years to get someone to trust an organization
• A manager can easily under 5 to 10 years of work
• Haven't done as much research into trust as would like, hard to measure

Dynamic capabilities, but where does the customer come to play?  In services, co-creating of value.

• Haven't thought of this
• Hank Chesbrough: professional services requires integration with a customer more than others
• Not just 1-800 number
• Quasi-joint ventures
• Opportunity to sense the marketplace, as close to customer
• In seizing, desire for joint ventures
• See this in computer services business, particularly hardware and software
• Some relevance, haven't thought it all of the way through

Few people in an organization can be described as virtuosos.  Yet 80% of the economy is services. So how to apply this idea to the larger services economy

• Things that are not virtuoso are on the way to India
• Virtuoso companies will stay in high-wage countries, that's where the customers are.
• Not many people are virtuoso, but that's where the value is

What's a virtuoso? One company has 2 people, one driving the truck and the other supervising; the other has one person doing everything

• Virtuoso needs to adapt
• Non-virtuoso can be given the book and guide

Business orchestration, combined with virtuosity.  Orchestration in cultures. Experience: in some cultures, time is absolute, can fix dates in advance.

• Haven't thought about this
• Time element is important
• Virtuoso teams operate on spontaneity
• On the other hand, still need to perform when the curtain comes down
• In law firms, have to show up at court
• Have to back off a little bit in terms of organization, virtuoso teams need some basic project management skills

Talent motivated by challenge, that could be a deadline

• My organization missed 4Q last year, because didn't have the platforms in place
• As an economist, figure that people with right incentives will work it out
• But need project management skills
• Have a revised journal article on strategic management, in Strategic Management Journal
• Used to have entrepreneurial management, doesn't just mean being intrapreneurial: have to set up supplier arrangements
• Work with Peter Grindley: hierarchy upside down, the job of top managers isn't just administration down, it's managing externally that is important
• You wouldn't pick this up in the Haas School, where management is down rather than out sideways
• COO does down
• CEO does external stuff

University example.  We don't have these incentive models in universities and government

• We're getting them in this university, Berkeley was one of slowest to move
• It has to come
• It won't happen in public sector, and the public sector will continue to underperform
• In organizations that need to compete -- governments don't have to compete -- it will happen

In coopetition and two-sided markets?

• New paper deals with these
• The way value is created, where intangibles are hard to trade, is putting specialized assets together intangibles
• Markets can't put together idiosyncratic, non-tradeable assets
• In dynamic capabilities, try to put a role of managers into the economic system
• Economic textbooks only talk about principals and agents, not managers
• Tradeable assets can orchestrate value

Contrasting market governance and hierarchical governance.  Now starting towards network governance and relational governance.  Inter-organizational management.  Dealing with incremental value systems.  More like emergence.  Contingency effects.

• Profound
• A lot is incremental
• Being best of breed or being benchmarked processes doesn't build competitive advantage where everyone has access to those process
• Technical fitness versus ecological fitness
• Technical fitness means doing the operations well, but they may not be what the markets need
• Dynamic capabilities already assumes strong operations, but then, how to stay consonant with the external marketplace
• Debate within Harvard strategy and operations people, Michael Porter:  if don't have world class operations, don't have a strategy, but then Porter says necessary but not sufficient to be competitive

How to make change? Surgery? Chemotherapy?

• Have to sensititize the organization to changing competitive advantage
• Rethink of market strategies, and business models
• Can you adapt?  Organizational ecology, John Freeman says organizations can't adapt, they're type by birth date, and there's so much path dependence
• Harvard Business School: managers can change the world
• Truth is somewhere in between
• There is a lot around strategy and class of products that are malleable
• Absent changing underlying routines, can't do much
• Changing business model isn't easy

[Thanks]

2007/04/27 10:10 Panel on "The Challenge of Managing Services in a Global Economy"

2007/04/27 10:10 Panel on "The Challenge of Managing Services in a Global Economy", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Intro by Henry Chesbrough

• Innovation and management in services in a global economy

Panel

• Panel Chair: AnnaLee Saxenian, dean of the information school at Berkeley, trained as a regional economist and technologies: 1994 book on "Regional Advantage" contrasting Route 128 versus Silicon Valley, relational network distributed organizational structures in Silicon Valley, compared to hierarchical
  • The New Argonauts: at a global level, and the role of individuals who are argonauts
  • This panel session will focus on:
  • Challenges of managing services in a global economy
• Wayne Dai, Chairman and CEO, Verisilicon, chip design in Silicon Valley, with manufacturing in China and Texas where they capitalize on the chip architecture
• Henry Tirri, Nokia, runs systems research centres around the world, a new role:  in Palo Alto, Beijing, two in Cambridge, as search networks around the world
• Anssi Rantasalo, Managing Director, Kemppi Oy, manufactures electric arc welding with services

Minna:

• Memory sticks in U.S. customs
• Content will also be

[AnnaLee Saxenian]

Argonaut, returns with golden fleece, but keeps ties

To now, though of globalization in terms of manufacturing busineses, not services

• Even the most commodity-like products must become services, to be value-added

Two questions:

• Explain your company, the service aspects, and globalization
• Top three challenges of managing global services

[Anssi Rantasalo, Managing Director, Kemppi Oy]

PC broke down in Frankfurt, no slides

Kemppi, family-owned business, 1949

• Customers are in ship-building
• 160M Euro business, 15 countries, 730 people on payroll
• Still family owned

Typical equipment manufacturer

• Success on technology leadership, high quality, and internationality
• Went international from Finland in early 1950s
• Almost a global company, but not large

Globalization is putting pressure on manufacturing and technology industries

• Need to innovate outside technology area
• Engage company to industrial services business

Move up the value curve to transform from equipment provider to solution provider

• Have always had some services, including information services
• Have done some training, consultancy
• Provide maintenance

Solutions: standard equipment that we manufacture, incorporating technology outside our R&D, related to open innovation

• e.g. wireless information transfer systems, with network destinations
• Enables customers with systems for quality and productivity control
• Remote diagnoses, preventive maintenance
• Software is a big part
• Service, whether man-to-man or maintenance or reporting, is becoming more important

[Henry Tirri, Nokia]

Disclaimers:

• Formerly life, used to speak as academic
• Research person, leading research
• Perspective is renewing Nokia, not focused on present
• Lead innovation globally, trying to find a way to renew a giant, eating mouses
• Global as a company, global markets
• An adventure, won't talk about theories, although good at that

Company history

• Nokia has renewed itself many times, from paper/pulp to current cellular phones
• Are currently in the process of renewing again
• Maybe not like before
• Rubber boot company

Are a technology company

• Renew Nokia, lead Nokia, look outside of core business
• Handsets play only a minor role, there's another group in Nokia researching core technologies
• More than better devices
• Device has a role, but moving towards the service-dominant:  hardware, software, services

Numbers:

• Produce 13 devices per second, 1 million per day (and producing 1 million empty boxes per day is already an achievement)
• Challenge: what do you do with a giant, that is in a playoff game
• Large scale, optimized logistics, yet want to innovate and compete in different domains coming together
• Internet companies, carriers, phone companies all want to come together
• Google wants to make a phone, Apple has already done it, carriers want services, Nokia and others want to bypass carriers

What is the enabling?

• Voice centric phones
• Multimedia phones
• Corporate-connected phone

Multiple convergences going on

• Converged devices are fastest growing market

Software has become important

• Symbian, S60, a necessity
• PCs became popular on standard software platform
• Computer scientists by training
• Have been working with universities
• Most challenging: these new devices as the new platform, a world of 1 billion devices
• Connected, not just voice, but computing platform
• Obvious: mobilizing Web 2.0, more and more sophisticated services, not just passively viewing data

Mapping, navigation, location-based services

• Almost all mobile handsets from latter 2007 will have GPS built in
• GPS by itself doesn't do anything, how do you use this information?
• Came today from Palo Alto over Dumbarton bridge, would have liked to have total dynamic traffic module

Music

• Mobile entertainment has different dimension
• Working with Hollywood immersive formats

Camera:

• Imaging local level, building a map of the world, sharing it as a service
• Service mash-ups, services on top of services
• Same game as Google plays: a platform game

Not just a device game, the value of the device comes from the services and overall interaction, whether you're a carrier, telco or device company

[Wayne Dai, Chairman and CEO, Verisilicon]

Integrated device manufacture

Digital 1.0: mainframe days, 

• IC fabs, with only  TI and IBM continuing to invest

2.0:  Separation of design from manufacturing

• Taiwan took advantage of this, fabless

Now, design is expensive

• Starting is $20M
• If this is a good market, why isn't Broadcom doing this?
• Have to do something to outsource design
• Call this Digital 3.0 for midsized companies

iPod, everything is outsourced

• Manufacturing is considered to be a service
• Design foundry as a service
• Last week, Bosch pulled out, have also outsourced

Reduce cost in electronics

• Components are from China

Components are System-on-a-Chip

• Core competence is not implementation
• Software architecture defines markets
• Software companies take most profit from components, want to do less from more
• Not outsourcing China to China, from outside China to China

Support worldwide

• Manufacturing, packaging, testing, with the branded name on the chip
• Don't build until there's an order

New 3 C's:

• Still consumers at central
• Need a China strategy
• Consolidation everywhere, pressure to outsource

[AnnaLee]

Relentless: moving towards customers, services

Challenges of managing?

[Anssi]

1. Creating a service culture and mindset, for both service innovation and execution

2. Need to educate the industrial market to pay for services that they used to get for free, in the capital equipment

3. Managing quality at a global level when getting together with partners, e.g. maintenance and repair, other kinds of services

Question: how manage the conflicting agenda of partners in different ecosystems?

• Need to be innovative at how we train to give them capacity to do service
• Building loyalty in innovative ways

[Henri]

1. Scale: interested in services which are different from a traditional growth market, since there are 1 billion device platforms readily available

• Growth model is good, because can debug things on the way
• One-shot model means sink or go
• Achieving this requires innovation mechanisms to debug earlier
• Are moving fast to living labs innovation:  testing, roadmap, design

2. Ecosystem game: if one piece missing, don't have anything

• Content, platform, distribution
• Maybe something in between, e.g. communication channel
• Assume starting to use devices as sensors, sending 100 bytes per minute x 1 billion devices, this would collapse the network
• e.g. pollution sensing around the globe, but the data would congest the whole system

3. World is so heterogenous

• New, when joined Nokia
• Understanding different questions and challenges in India, China, North America
• What is a service, what are the innovations from the consumer parts ... is like day and night
• e.g. privacy: location-based service, first question in North America, what do you do with the location data; and this isn't a question in India, where no one cares about statistical advantages

[Wayne]

1. Repeatable, scalable, high-availability service

• Division: integration of Texas and Silicon Valley teams with Shanghai head office

2. Business model: low margins or higher-margin IP

• Can't scale

3. No-asset business, how to retain people without increasing salary, e.g. in Taiwan, help with mortgage to buy a house

• Leveraging people's knowledge

[Annalee]

In China and India, wages are rising quickly, people crowding into Shanghai and Bangalore

• Salaries between China and India and Silicon Valley could be at the same level in 10 years

How to maintain loyalty?

Wayne: Have to maintain distinctive IP, so customers come back

Henri: Formerly life, bayesian statistics

• Partnership is the same, it's conditioned
• Game: Diplomacy
• e.g. want a dominant platform for Internet services, would make sense for Motorola and Nokia to work together, yet still compete on other parts
• Win-win game, but the wins change
• Haven't been successful, don't think IPR can lock
• Always pieces needed, e.g. content
• Collaborating with Yahoo, but doesn't seem like collaborating

Anssi: Industrial services, trust is important

• Keep trust by maintaining promises
• Have been successful in Finland, where you don't always need paper, handshake is good

AnnaLee:  Taiwanese could do things on a handshake, but a lawyer then says spent hundreds of hours working on that

[Questions]

Device convergence, yet some fundamental changes.  Convergence trends?

• Convergence to a wireless grid: wireless access that is transparent, but WiMax, Wifi, proximity radio ... 
  • Abstract level, there is convergence to wireless; but at the lower level, it's not converged, it's heterogeneous, with a layer that allows us to do this
  • Converged surface is an artifact
• Cross-converence in multi-functionality
  • Individual music players
  • Don't see device convergence
• Software convergence: never see this

Handling spin-offs

• Henri: one of interests, what are different technology transfer modes
• Core technology is a technology transfer no-brainer: protocol map, and it pops out
• New innovation: how to sell it to businesses that don't understand it
• Want people with an entrepreneurial mindset
  • In Silicon Valley, want first year as angel, second year to sell initially, and third year with a distribution model
  • Starts with assumption of spin-offs, works in Silicon Valley, okay in China, and it's difficult in Finland
  • Yes, encourage this, not for everything, but it should be different technology transfer from core
• Wayne: starting businesses in long distance
  • Everyone can come back, but the head
• Henri:  when you go out, you go out, and don't have a safe haven
• Wayne: people go out, and come back as customers
• Anssi:  more trouble in attracting talent, want to keep them
  • Understand that from a global perspective, retaining talent in China is an issue

Similar, setting up; dissimilar is the virtuoso teams

• Wayne: Any service needs to be replicable, scalable, high-value
• Henri: Why should they?
  • Renewing Nokia to become biotech, doesn't leverage history of machines sending bits
  • Vision: merging physical and digital world
• Anssi: Binding is challenges, they're all about people and relationships
• AnnaLee: they're all customer-oriented, which isn't what you would have seen in manufacturing businesses 30 years ago
• Henri: variation, not opportunity costs
  • Did a chip for Intel
  • Can't afford to do different for countries, China, India
  • Have IP protection

2007/04/27 11:20 Stephen Pratt, "Innovation and Management in Knowledge-Intensive Business Services"

2007/04/27 11:20 Stephen Pratt, "Innovation and Management in Knowledge-Intensive Business Services", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Intro by AnnaLee Saxanian

• Kids go to soccer together
• Was at Deloitte and Booz Allen
• Offered services to India
• Started the first U.S-based consulting branch of an Indian company

 

[Stephen Pratt]

Three years ago, decided to create Infosys Consulting

• Customer: great work, but paid $144M, is there a way to cut costs
• Reflected, customer was right, hadn't found an innovative way to do this
• Tried doing a project with onsite consulting, with developers in India
• Had friend who started as Deloitte consulting in India

It worked

• Workers liked it
• Customer found higher quality
• Higher profits

Previous firm wasn't in a position to take advantage of this, so went to do it ourselves

• $200M run rate this year
• Expect to double again within next 2 years
• At Infosys, say, what took you so long?
• 3 years ago, 25,000 people, today it's 78,000 people, adding 2000 per month, at 100 people per day
• Passed the market capitalization of Accenture
• A great model for investors, most in U.S. and some in U.K.
• Only 3% of clients are in India
• 70% of employees are in either India or China
• Over 90% of clients are in North America or Europe

Are services companies going insane?

• Einstein:  Insanity is doing the same thing over and over again, and expecting different results

Consulting: innovation going down, quality going down

• Model isn't working
• Clients have gotten ahead of consulting firms and services firm
• When a services firm falls behind its client, it's a problem
• Big disruption

Inflection points for services companies: three

Early 1900s, consulting industry started by Edwin Booz

• Hire retired workers to give advice to executives
• Inconsistent quality

1926: James McKinsey

• More like a law firm, hire people out of business school, hire them, train them
• Management consultant

Worked until 1980, when technology came onto scene

• McKinsey said we don't this
• Created an opening for accounting firms: Arthur Anderson, Deloitte, Touche-Ross
• Results in large consulting firms
• Not working
• Client in Chicago, consultants in New York, fly in, rent cars, take spots in client offices
• Why? No competition was driving away from this
• But, Dell said, we won't manufacture in Manhattan, we'll build in Penang, Malaysia

Maybe the companies need a new business model

• Friedman: a flat world mindset

Fourth generation of consulting:

• Good onsite consultants, working with clients, rich and high-touch, excellent communication skills
• Things that don't have to be onsite can be where ever is best in the world
• A fundamental disruption in the services business, especially in consulting
• Feel that Infosys is leading here, with third generation companies (Accenture, IBM) following
• Some will be successful, some will be left behind

Things are changing quickly, it's an exciting time

Tremendous debate about this

• Charlie Rose, Allen Blinder talking anti-globalization, saying it's a net adder of jobs, but need to create a social safety nets
• Companies aren't going back, they're here to stay
• Impact on society, U.S. needs to step up to orchestrate the world's work force
• Isolationism is a bad idea, we'll lose

What's the flat world?

1. Opening of emerging economies, India and China, with Brazil and Russia next

• Hundreds of millions of people with access to market and information
• Workforce is amazing:  India has done well educating in sciences

2. Demographics:

• U.S., Japan, Italy, rapid aging, need workers to pay pensions for retirees
• In U.S., unemployment is low, but using people around the world
• Demographic shift in advanced countries

3. If have people available in countries, but not way of accessing it, it's a problem

• Telecommunications has become free
• Skype
• 5 to 10 years ago, used to unplug fax machines to get a 9.6 line
• Now, we're upset if we can't get 100 Megabit, upset if can't get it in a taxi in New York

4. Consumers are getting comfortable with technologies

All causing disruptions, particularly in services

Statistics:

• GDP of emerging companies growing
• Number of companies from emerging companies in Fortune 5009
• Aging workforce in developed countries, can see China 1-child policy
• Talent pool, number of engineering graduates in China high
  • e.g. can't put hub in Australia, it would require hiring every engineering graduate
• Age of citizens, computers going down
• Cost of telecom falling

Idea of flat world came from conversation with CEO at Infosys and Tom Friedman, but also don't agree with everything that Friedman said

How to win in a flat world?  Four shifts

1. Dread: mindset of Chinese coming to sell below our cost, and being afraid of that

• Need to think about how can be the one causing dread
• The most creative using capital
• Want to be the "China price"
• Leader: Toyota, doing counter-intuitive things, e.g. building manufacturing plants in the U.S., when people think that everything is moving to India
• Renault: want to create a car for emerging markets, the Logan, low-cost, $5000 can be sold in India and China, successful
• Renault also learned a lot about cost discipline and manufacturing, that could be applied in mature markets

2. Shift, from generating customer loyalty through goods/service so they'll stay around forever

• Now, can compare prices on the Internet, almost perfect information
• Demand to have the best product is extreme
• Can't have loyalty customers by relying on good customer service, have to rely on innovation
• e.g. InnoCentive: affiliated with one of major consumer brand companies
• Have problems, but not enough problem solving people
• They put the problem out to the world, and say they'll pay $75,000
• Someone in Budapest comes back with the answer, and they charge the company $100,000 for the innovation

3. Shift from collecting information, more centralized databases to get a 360-degree view of the customer

• People had access to more information, but so what?
• From spending money to collect information, to making money
• e.g. Harrah's Casinos, Total Rewards program, the frequent loser's club
• Consumer perceives more value

4. Moving from the mentality of winning in the straightaway, i.e. straight line

• Reality is life is more chaotic
• Companies need to be designed for change, variable cost structures
• If things go down, cut back, and if they go up, scale
• When tolerances weren't so tight in companies, used to be able to absorb this
• Now companies are changing positions in the turns, either downturn or disruption, where companies pass each other

Philosophy: battle of the skeptics versus the rebels

• Skeptics:  this is hooey, it will destroy America, or my kids will never get a job
• Rebels:  this is the future, the way we're going to make great countries is to lead this thing

Battle, even within companies

• We've been doing this for 50 years, versus no, we need to do this
• Corporate personalities come out
• A lot of whitewater
• Vote for rebels

Have to set sacred cows free (coming from an Indian company, says a lot)

• Manufacturing went through this, and services is now going through this

(Will skip consulting as a case study)

Infosys 3 years ago, started at 25,000, now growing at 2,000 per month

• Operating margin was 25% after tax, now 26% after tax
• Most consulting firms run at 12% after tax, we're double that
• From client's perspective, we can do things as good quality or better, and charge 30% less
• The value of the company, from $15B to $32B, trading at 10-times-revenue

Think flat!

[Questions]

Wage rates going up in India, the differential with U.S. won't last more the 10 to 15 years.

• That would be an economic miracle
• If the wages in India were even close to the U.S. it would be
• Hotel rooms are as expensive as Manhattan
• This will happen more slowly than people think
• It will be at least a decade before getting in shouting distance
• It will be difference places within India and China, then Brazil and Russia
• Wage differences are 6:1 or 4:1

There are skill shortages globally, everyone is competing for the same skill base

• It will be educational system versus educational system
• How many can IIT generate?

Clients ahead.  Clients now pay for connection to someone who can do it.  Social network.  What's to stop the customer from going around?

• Right now, clients are hiring consultants to get a result, e.g. fix inventory turns
• Days of give advice and run away are numbered
• Only advice firms are going away
• Big market, e.g. for large oil and gas majors to see if metrics change
• What's the fifth generation?
• Maybe private equity, consulting professional that go in to fix the company, then the improved company would have a high value and could IPO
• But we won't lead this, we'll have some else that will do this:  it's risky, negative cash flow
• Will see much tighter alignment between hiring someone and results

Education statistics

• Number of U.S. citizens graduating is much smaller
• Being an immigrant nation, think would embrace smart people moving into the country
• We're putting in limits on smart people, and letting low labour in
• H1-B visas down to 65,000 per year, and on the first day, got 120,000 applications
• Closed applications, and decided to have lottery
• For people in the U.S., their jobs are better
• e.g. Deutsche Bank, doing credit analysis, found problems having skills
• We say: we'll hire Ph.D.s, and let them do analysis, not only crunching numbers, but telling them what to crunch
• Now, they're only limited by the creativity on site

H1-B and O1 blocks are limiting Nokia's growth in U.S., so we're doing more in Asia.  We have four people in Germany, UK and Asia that can't get to Palo Alto.

Original management consulting based on law firms.  Law firms are dinosaurs, how can they improve?

• Will have to have some "equivalent to us" forces.
• Audit firms are also dinosaurs, could do supporting analyses remotely
• Career paths in law firms start at student and go through to partner
• Due for disruption

An oil well in a flat world.  How do you train or harness your employees?

• Gave a keynote at the consulting summit
• Some attributes of consulting profession that need to be retained
  • We do what we say
  • Critical analysis of business problems
• Also, we spend a lot of time breaking down walls
  • Either your technology or your business walls have to come down
  • Need technology and business people to work together
• Also, ego in past on background, e.g. what school
  • Spend time culturally breaking down
• We don't have this completely figured out

Transfer of some of work, but in the case of law firms, it's the entry level work that builds people.  If you're building a pure information job, how do you train people for senior positions in the U.S.?

• Two distinct disciplines:  technology and business
• The majority of people are near clients, here or Europe, some in Japan
• Hire MBAs, and they go through the consulting professions
• There are some people who transfer from Infosys Technologies to Infosys Consulting
• Ideal candidate: computer science undergrad, who became an MBA
• Will take a generation to find out

2007/04/27 13:40 Panel on "Innovation and Management in Services within an Industry"

2007/04/27 13:40 Panel on "Innovation and Management in Services within an Industry", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Panel Chair: Henry Chesbrough

• Business issues in developing and deploying services innovations

Panel

• David Tennenhouse, Amazon
• Kaj Hedvall, Director, Senate Properties, Business Development
• Suvi Anttila, President & CEO, Pöyry Forest Industry Consulting Oy

[Kaj Hedvall]

Organization is trying to the do the same as others, redefine itself

• Move from leasing business to a service business
• We were owner, buying things from service providers, and now we're one of the service providers

Gadde & Hakkason 2001: Move from supply chain

• To network

Senate properties

• 11,300 properties

Would like to manage like "guided missiles"

Solutions set up as standardized elements in a modular hierarchy

You don't do services in the R&D department, you do it day to day

[Unfortunately distracted during the talk]

[David Tennenhouse,]

Ex-Amazon, now with New Venture Partners (was the AT&T New Ventures Group, literally Chapter 7), had been with Intel

Will focus on what learned at Amazon

Joined Amazon, frustration over product cycle in a large company

• Intel 5 to 7 years to get a product out the door, meant research had to be 5 years before
• Fear of shipping defects out the door

When did you last upgrade your Amazon software?

• It's upgraded constantly
• Can take a few servers offline, pushing out new features
• Put beta out, let your customers tell you
• Marketing people like calling it a beta, it has more hype, so everything is a beta
• Don't have to fully harden everything, can put more under the covers

SOA:  individual services are divided up into support

• Don't have an architecture, just have support
• Have lost faith in Big-A architecture
• Obsolete when the roll out, if they roll out
• With SOA, you don't really have an architecture
• Have people with responsibility with running services
• After they've launched beta, they're carrying pagers 7/24
• Not software developers, we're service providers
• Can dynamically create new teams
• Amazon 2PL:  two pizza team leader, can't define teams larger than those that can be fed by two pizzas

Organizational impact of SOA

• Even if customers are internal, they're very customer-focused
• Great deal of room for innovation

Think that 2PLs are a bit too small

• You don't quite get enough people
• Some people are fire fighters
• If have 20 to 30 people, could manage two or three services
• At 5 to 10 people, if someone goes wrong, hard to keep all of the skills and depth needed

Amazon: have shifted the capital

• Consumers used to own computers, now the company owns the servers
• Feels like Intel with its fabs
• Will have software companies that look more like capitally-based companies
• Not yet working its way through the industry
• In the services game, you own the capital to provide those services

Partnerships are important to Amazon

• Even more important to Google is anonymous partners, i.e. self-service people who sign up for web services
• These partnerships are dynamic
• If you have a web site and show ads, it's self-service
• High leverage, it takes a lot of know-how to make it friction free
• Can't hand-hold every used bookseller
• Amazon does partnership with Target and others: heavy lifting

Some people who are Amazon Prime will come on every day, and buy stuff

• Europeans will pile up things in a friend's house, and pick it up on the next trip to the U.S.
• They're buying in the middle of the night

[Suvi Anttila, President & CEO, Pöyry Forest Industry Consulting Oy]

Started in 1958

Now 6000 people around the world, in three sectors

Will cover three areas:

• Traditional engineering business
• Management consulting services
• Opportunities in coming years

Shrinking profitability, have to keep people occupied

From Finland to Poland

• Joint venture in China
• Acquired 260 engineers in Russia
• Have an industry in India

Challenging, gained a lot

• Engineers around the world seem to get along well
• Management has more challenges

Have increased profitability

• Gained new ideas
• New paper machine is $2B investment, it ways thousands of tons

Need to take care of quality all of the time

Different animal: management consulting

• From study works to products
• Customer relationships haven't traditionally been well understood in a Finnish engineering company
• Have transferred expert knowledge into marketing organization

Would like to change the company to be a little more bottom-line oriented, as well

Implementation is different

• Can tell them, strategically
• Different to design and make the paper

The future:

• Are involved in plantation, reforestration, related to wood, in global forest
• Have energy in management consulting, traditional and renewable energy
• Infrastructure
• All related to climate change

Made a mistake 3 years ago

• Some internally said that climate change was a big thing, and we didn't pay attention

Internally, how to package knowledge and get processes to work across management

Where do we take relationship knowledge and expertise?

[Hank]

Comments on Suvi

• Global
• Relationships
• Coproduction may mean co-innovation

Kaj:

• Servicing 11000 buildings with other people
• Locus of innovation is shifting
• Game is not the lego bricks, because they're available throughout the world

Comments on David:

• Self-service, so may not need to move so much to India
• Customer end state, e.g. FedEx tracking system
• Customer loyalty, why use anyone other than Amazon
• Capital cost moving to service provider

[For next talk]

Future is not in products, it's in services

• Products are in tangible, services are intangible
• Separation between suppliers and customers, as compared to service coproduction
• Knowledge content moves with a product, but in services, it's tacit

What does this mean for customer-facing activities?

• Can you verify what you got?
• Can you write the spec?
• Haven't address intellectual property in this meeting, should address this

Business model issues

• Products are big ticket items, with free service thrown in, whereas services have lower initial purchase price
• Initial high margin versus long term margin
• Accounting systems that track costs initially, versus ongoing annuity

In software space:

• Packaged software, big ticket, compared with utility pay-as-you-go
• One size fits all, creates bloatware, as opposed to pay for use
• Warranty for free vs. renewals
• Multi-step distribution vs. hosted online, with little or no role for traditional retail

Software as a Service:

• Can tell what code customers are using
• Small continuous improvements versus infrequent upgrades
• Linux has been revised 40 time during Windows pro to Vista
• Fixed costs become variable costs

Constrasting metrics, from Mironov 2007

• The way you think changes

Human resources:

• Product-based companies typically are based on functionally specialization

[Questions]

How does servicification change engineering?

• David: Have seen both sides
  • Intel has lots of software engineers, and ships Mac software
  • Product people want to give the upgrades for free
  • Amazon show agility from changing from direct selling to selling besides its partners
  • Product company:  your customers have an expectation

• Suvi: In consulting, you have to a lot of ground work to understand the industry
  • Data banks, multi-client studies, where can't really charge
  • Then hope for participation when contracts come

Self service: creating an externality.  Calls, menu trees.  World as a whole loses?

• David:  Continental Airlines, large parts of call centres move back to U.S., incentives for people, e.g. choosing own hours

Lowest common denominator

• Hank: Customers are heterogeneous
  • Others are reassured by voice

Mary Jo Bitner did a nice study on self-service; also Womack & Jones

• David: Amazon and Google cases are a little bit different because not pushing work to the client, it's enabling an economy

Cultural difference country by country, except engineers, who are a cultural group

• Suvi: Has been easier to become global in a certain branch
• There are other cultural challenges

Innovation

• Kaj: can't say much about innovation, can tell mistakes
• At a certain point, it starts to increase costs
• Shouldn't have to offer the same thing to all customer
• In service mode, some though would offer everything to everyone, took a year to find out not a good thing
• Managers forwarding the whole package to the customer, and gave the name of the service developer -- not good
• Like financial services, it's wrapping different things in a different way.

2007/04/27 15:15 Panel on "Technology Issues in Creating and Delivering Knowledge Intensive Business Services"

2007/04/27 15:15 Panel on "Technology Issues in Creating and Delivering Knowledge Intensive Business Services", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Panel Chair:  Robert Glushko, Professor, Information School, UC Berkeley

Panelists:

• Dennis Browne, Emerging Solutions Imagineering, SAP Labs
• Lasse Mitronen, Vice President, Strategic Development, Kesko Oy, largest retailer in Finland

[Bob Glushko]

How customers and information service providers

School of information science

• Used to be library science program
• Now they get hired by Google

Knowledge intensive, buzzwords

• Not constrained by physical world
• Strategy: on demand, dynamic capabilities
• Web services, software as a service, plug-and-play, composite applications, model-based applications, mash-up

Examples

• Newt Gingrich, paper kills:  lobbying for automating paper-based prescriptions, because there's a lack of drug interactions checks
• Merchant of Venice problem: tracking global shipping, bananas to Helsinki

Business architecture will coevolve with knowledge-intensive businesses

• IT has changed the structure of firms
• Business models shifting from forecast/schedule to demand/event-driven
• Business relationships can be more flexible / promiscuous

Coevolution of business models and enabling technologies

• Internet bubble: challenges and opportunities created for incumbent firms

Vertically-integrated hierarchy has been exploded into business components, networks

Information supply chain

• Can flow information separate from the goods, thus can reroute shipments en route

Moving from forecast to event-driven business models

Service Oriented Architecture

• Avoids locking
• Lots of competing standards: web services stack, using rich set of applications, to quick-and-dirty mashup technologies that have a philosophy of treating loosely cooperating entities both inside and outside the enterprise
• It's not enough to get the information to the application

[Dennis Browne, Emerging Solutions Imagineering, SAP Labs]

SAP

• 35 years old
• 40,000 employees

Big beast, moving slowly

• Will see speed of innovation accelerating

Had been on cycles of 2 to 3 years, now customers want a faster cycle

SAP started as a consulting business

• Automating processes
• SAP was one-on-one

If you don't upgrade, then the customer expects maintenance

• SAP has been late to the party, want to move to be fashionably late
• 1 of every 2 transactions in the world today goes through SAP
• 10 million users on an everyday basis
• How do we to go from 10 million to 250 million within those enterprises?
• Thinking of customers at platforms: how can you create a trading network across enterprises
• This won't come easy or quick

Last June, came on board as entrepreneur in residence

• Background in ASP, hosted services

SAP has done a good job of taking care of business, but how does it keep customers happy?

• Looking at everything 2.0
• Event driven architectures, networks across customers
• Worried about tsunami wave of data rolling over everyone
• Shovelled data in, forgot about roles

Focus on customers

Focus on SAP Developer Network

• Opening up innovation process
• Social networking in the enterprise

[Lasse Mitronen, Vice President, Strategic Development, Kesko Oy]

Kesko is a 65-year old Finnish company, but operates in other companies

• Food
• VW-Auto

25 brands, almost all market leaders

Strategic emphases:

• Looking for cost-efficient business models, using information on customers

20,000 suppliers, of which 200-300 are most important

Service as interaction:

Customer most important

Secondly, person performing the service task

Finally, technology in the background

[David was distracted]

[Bob]

Words: customers, users, consumers

Customer as the platform

• Dennis:  Across companies
• Single firm might have a million profiles, but across SAP would have 100 million profiles

Technology

• Dennis:  Walmart is big enough to make vendors comply, e.g. be on a particular platform

SOA

• Dennis: SOA at core
• When SOA exposes a service, it guarantees that interface for many years
• You don't get these types of guarantees from other vendors today, e.g. Flickr

Compatibility with Software as a Service

• Dennis: Will see hybrids

Different types of customers

• You have to care about every single actor along the way

Focus on customer-provider interface

2007/04/27 16:25 Panel on "Customer Perspectives on Services Innovations"

2007/04/27 16:25 Panel on "Customer Perspectives on Services Innovations", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Discussant: Stephen Ezell, Peer insight

Panel:

• Jim Marsden, HP, Digital Photography
• Ursal Oesterle, Swisscom Mobile, Vice-President
• Jaakko Villa, CEO, Villa Academica Oy

[Stephen Ezell]

Focus on customer-provider interface

Peer Insight founded as a pure service innovation consulting organization

• Formed by academic observing students going into services
• Tekes study, 4 month study, innovation in four industries

Professional services, financial services, retail and distribution

1. Customers are the central reference point, not direct competitors

2. Service concepts shift boundaries

3. Information technology

Traditional value chain is being turned on head

• Not starting from core competencies, they're starting from customer needs

Customer experience: cX

Zeithamel and Berry: five service attributes

Paco Underhill: job as service innovators is create unique human value

Research approaches:

• Axes: Latent / explicit, micro / macro
• Moving from market research to empathic research (latent micro) vs. video ethnography (latent macro)
• Bank of America: keep the change, rounding, to put the dollars in a bank account
• Found this via ethnography, watching a person balance a chequebook by rounding up to the dollar
• Have gotten 3 million new account in 12 months

See philosophy and concepts understood, and methods and techniques exist, but a missing middle: operating models

• Changing from being faith-based initiatives

[Jim Marsden, HP, Program Manager, Customer Experience Design Change Effort]

With HP 18 years, half in marketing management, most in startup businesses or those going through change

• Have migrated to organization development

HP's digital photography business

• Had a collection of assets: scanners, printers
• Each had difference governance and measurements

Usage model for mom, picking up a camera, doing the things easily

• Also a business in retail photofinishing, selling in kiosks
• Want to have offerings come together to be easy
• Home, Snapfish on Internet, then retail (e.g. printing)

Lewis Carbone: Customers will always have an experience

Customer experience transformation

• Develop HP's brand
• Deliver customer value enabling customers to easily tell life's stories
• Deliver business benefits

Organization development in four tracks

• Make a sustainable shift across cultures
• 1. Executive leadership track, working at vp level, what does it mean to be leading an experience-based business
• 2. Experience design track
• 3. Operating model
• 4. Organization development

Results to date:

• From targeted projects, coming to market
• Strategies formalized across different businesses
• Expanded business models based on usage
• Have product life cycle
• More ethnographic research come together with market research
• Move from design as people who come in late to make things pretty, to those who engage to customers and create early insights

[Jaakko Villa, CEO, Villa Academica Oy]

Have some customers come and say they have new technology, but don't know what they do with it

• Went to China with ethnographers and anthropologists
• Took 5 to 10 people into a room, and co-created a service

Oval Time: a place in your life

• Triangle
  • Linear thinking
  • Disruptive thinking, e.g. service innovation
  • Visionary ways of working, managing innovation
• Dimensions:
  • Time
  • Order to chaos

Have engaged 10 CEOs

• Are you using techniques balanced in the triangle?

Doing work with an Indian-based company on a web interface

Six months, with prototype with 10 CEOs, and then will expand

[Ursal Oesterle, Swisscom Mobile, Vice-President]

Swisscom is telecom company

• Does a lot of scouting for best practice

Telecom used to be a simple business, just voice

• Everyone wants integrated services on multiple service platforms
• How to adapt to Web 2.0?

CEO started Service Champion 08:  good is nowhere good enough for us

• Want to be undisputed #1 in service

Execution is crucial

• Customer value, but want to consist across the company

Bottom-up initiative:  Future 2.0, need a disruptive step

• Get a service culture throughout the business
• Both internal and external

Big project, budget $2.5M

• Brought service providers to Silicon Valley

Created some meeting places, whiteboards across whole room

• Watering holes: where animals that usually fight, all go together
• Structured meetings where someone can present for feedback
• They like this, feedback, not not judgement

Work more with customers

• Swisscom Mobile Labs: put Web 2.0 applications out, and the non-popular ones will die out rapidly
• We can't master them all
• e.g. 50 other applications that were like MySpace
• Do customer observations, rapid prototyping (like Ideo Deep Dives), get customer feedback in homes
• Rule: all employees have to spend 2 days per year in stores for interaction with customer

[Questions]

Some people want self-service, not experience

• Less is more.
• Want to understand what customers are looking for

Cases when services break down, then need empowered customers engagements, don't want to point a customer on hold

• Swisscom had 20 second respond time

Incentives

• Swisscom:  All managers, simultaneously

Executive development, support

• HP: Good support, had senior executive sponsorship
• Did learning journeys: 2 days workshops, 25 VPs, created common ground understanding of the opportunity
• Didn't know a lot about these spaces, what do we need to learn?
• Who are the best of breed people who do this, e.g. customer relationship management, went to visit Harrah's
• Balance between immediate commitments and transformation

Main findings in the Tekes report?  Extent to which findings are industry-specific?

• Address this offline
• A lot of findings at the entrepreneurial level

2007/04/27 17:25 Jim Spohrer, "Steps Toward a Science of Service Systems"

2007/04/27 17:25 Jim Spohrer, "Steps Toward a Science of Service Systems", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Jim Spohrer, IBM Research

What we're thinking about service science these days

Service Innovation

• High Talent
• High Tech
• 2 people at Wikipedia enable 36,000 contibutors
• eBay, 13000 employees, 724,000 people have primary or secondary source of income from eBay
• Lots of platforms, like Second Life

High talent and high tech miss understanding customer intimacy and partner value networks (shared information and trust)

• Credit cards are a great service innovation, lots of people had to change behaviours

Bigger:  Regulatory, Institutional and Social Context changes

• Think of a world without mass education

Why does IBM care?

• Look at profit margins in the two service businesses (29% to 23%), compared to software (83%)
• Scaling problem

We need some more shared vocabulary

• Service systems ... value propositions
• Service systems are designed
• Service systems evolve, they're complex systems
• Service systems have scale-emergent properties

Purpose of service systems ais value co-creation

• Prisoner's dilemma, we'd like win-win
• Has been a lot of different names: North economic institutions, Barnard's cooperation systems; Trist socio-technical systems; Englebart augmentation systems; Normann's value creation systems
• Value is in the eye of the beholder; trust matters, transaction costs matter

There's a lot of relationships (Gadrey, 2002)

Working on:  how to invest to get systematic improvement in services?

• Think of benefits of Moore's law, which is an investment model
• What if we could create a Moore's law of innovation systems

Barnard, 1930s:  Cooperative Systems, hard to read, but good

Richard Normann

Universities, hospitals, call centres, data centres, cities, nations

Trying to understand service systems:

• Design
• Improvements
• Scaling
• Profits scales up in information rapidly, but it's slow in labour

IBM Service Research Agenda

Study: Designing IT-enabled B2B services

Service Research and Innovation Initiative, May 30 in Santa Clara

• IBM and Oracle

Michigan Tech got NSF Funding to help develop new undergrad curriculum

[Questions]

Service systems as a way to start, because if you leave integration to the end, it's hard

Role of research in services?

• IBM invests $150M per year in services research, which is 1/6 of IBM after 4 years
• Lots of low-hanging fruit
• Practitioners are gravitating to this profession

Biggest challenge

• Trust
• People don't have the knowledge and experience to do the right thing

Moving ahead the research agenda on services?

• If you don't have business impact, it doesn't matter
• Still publishing in too many different journals, no sense of community

Service systems, moves us away from centering on firms.  But when you get to systems, how to delimit.

• There are many types of service systems
• Paul Seaburg, the companion of strangers

2007/04/28 08:30 Papers on "Services in the 21st Century Economy"

2007/04/28 08:30 Papers on "Services in the 21st Century Economy", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Discussant: Kristian Möller, Helsinki School of Economics

Papers:

• “Services Innovation in the 21st Century”, by Goldhar, Braunstein and Berg
• “Information Services in the US Economy”, Apte, Karmarkar, and Nath
• “Creating new markets through service innovation”, by Leonard L. Berry, Venkatesh Shankar, Janet Turner Parish, Susan Cadwallander, Thomas Dotzel
• “The Service Myopia: New Recipe for Client-Provider Value Creation”, by Möller, Rajala, and Westerlund

“Information Services in the US Economy”, Uday Apte, Uday Karmarkar, and Nath

Dichotomy more helpful that product / services

• India just passed 200 million mobile phones
• Information - material dichotomy
• Machlup 1969, Porat 1977, Apte and Nath 2004

How economy splits across information and material

• Follow Porat's definition, i.e. iPods are part of this economy, as they do nothing but process information
• Study at level of SIC code

Similarly, split in employment across information and material

• Paper to come in a few months

Product versus services, lots of issues in definitions

• To blunt discussion, look at information content of services, going a different direction, and it's a dominant factor
• Nature of transaction and delivery, form, production function

Industry level data from IO, SIC and NAIC codes

• Some work to reconcile
• Differences are mostly lag, particularly in the time it takes to get input-output tables

Double Dichotomy

• x-axis:  Delivery form: products, services
• y-axis: End product: material, information

Bucket the data

• Movement to services is well known
• Split between information and non-information going up, has been going on since Machlup
• Will see what happens with 2002 data this summer
• Information economy is a bigger part of the economy, and information services supersector is the biggest piece
• This is what management does, and all of us do
• Problem in information services: services are growing because of low productivity
• What happens when productivity in information services improves?  Will look at employment level
• Can look at SIC level, firm level, and job level
• Crossing segments, e.g. Disney is in 3 sectors

Analysis with Korean partners: Choi Rhim Park

• Definitions are not exactly the same in government statistics, but similar trends

Decline in share of traditional manufacturing

• In physical services, there's growth in GNP, but its share is falling
• These are systems-oriented large, e.g. retailing, water, electricity, construction, some of health care (that splits across information and non-information)
• This means in the trend towards services, there's chunk that is not growing
• 1967-1982 decline in computer, then growth in 1992-1997, no explanation yet, only conjectures
• What happens with service industrialization?  Good analogy with industrial revolution, call it the services revolution

Not just a shift to services, but also services and information

• Growth in information side

Jobs and wages, done at a different level, Bureau of Labor Statistics, month to month

• Physical services sector has always been a big chunk of the economy, don't know where it's going in the future
• Wholesale trade and retail trade, don't know where it's going
• Splits between information and non-information aren't clear
• Average wage in dollars/year, discrepancy between information and non-information
• There's better job matching, leverage in information

[Questions]

Porat versus information jobs?  Explains different

• GNP has secondary information sectors
• Have returns to capital and returns to labour
• If company is highly automated, e.g. web sites, it's not going to show up on labour
• Physical services used to be big for labour; was expecting to see declines in information services sector, but also saw declines in physical information sector
• Goes back to Machlup criticisms:  Data means that we go ahead with Porat definition

Skew because hedge fund trader makes more than a trader

• Yes, different level

Medical care costs going up, where does it appear

• Have to estimate splits between information and physical
• Machlup and Porat both come close to 50/50, 49/51
• e.g. nurse:  is that information or physical work
• Radiologist is mostly information work
• If a person has to be near a machine, then call that physical work; radiologists from Sweden move to Spain

“Services Innovation in the 21st Century”, by Joel Goldhar, Yale Braunstein and Daniel Berg

Paper is old, when it was written, it wasn't yet 21st century

• IIT, UC Berkeley, RPI

Will try to be a service product

• After yesterday's talk, scrapped the more formal presentation

Think piece, to start some theory building, and be contrarian

• Contrarian is above full professor; then curmudgeon; and then crank, before coming emeritus

Come from business school, am concerned about narrow slicing of the field

• In teaching, need to worry more about convergence of ideas
• May be more helpful to students about what services mean, as compared to factories
• Convergence between human work and machine work
• Strategy, structure, technology
• Innovation, profitability

Game: lists of companies

• Which are services, which are factory "operations"
• A play? Have a script that you follow, have to be in a place where the light hits

Confusion comes from point of view:

• Marketing, or operations, or strategic points of view
• X-axis: Product Type - Production Point of View:  tangible, information, experience
• Y-axis: Product Types- Marketing point of View:  relationship, durable, convenience

Think about linkages, physical versus organizational.

• X-axis:  Physical Links: connected, disconnected
• Y-axis: Organizational Links: disconnected disconnected

	Connected Physical Links	Disconnected Physical Links
Connected Organizational Links	True service	Supply chain or distribution channel
Disconnected Organizational Links	An "experience"	"Traditional factory"

• McDonalds more factory than Burger King
• Barbers that wait for you versus appointments

Services that look like products, and vice-versa, starting with Levitt's productionization of services

• Can't do things until you get economies of scale
• Traditional factory is double decoupled; true service is double coupled
• True service: customer gets involved in design, pricing

What's interesting is the ones that are half-coupled

• Supply chain
• Experience products, not part of it, but have to be there

Digital world to an analog world

• X-axis: Intensity of information of information technology

Ideas on innovation: table of variables

• Innovation and services is easy, not hard
• e.g. new financial services (or are they financial products)
• New financial innovations come up all of the time? Between 30 seconds and a few days
• Few entry barriers, few switching costs
• Easy innovation, but can't make money on this, sustainable, have to do something to make it scalable

[Questions]

Arch slide:  how do you map FedEx tracking system?

• It's at the top of the arch
• You're not part of their organization, but more than the post office
• FedEx, you're physically linked, not part of the organization

A pure service that is double connected?

• Having my own masseur on my payroll
• They're part of my system, I control their rewards, you have to physically be there, and they have to be available when I want it
• True services are rare and expensive
• Reliable babysitter had better be a family member

Doesn't scale, babysitters and masseurs

• Grew up in a grocery store, 1949, technology was a telephone
• Customer would phone, would deliver on bicycle or car
• Had a clientele that was captive, because no other store was willing to do this

Any spot on the curve should be equally profitable

• Ford Modelling will provide a digital runway, to scale up a pure service

“Market-creating service innovation”, Leonard L. Berry, Venkatesh Shankar, Janet Turner Parish, Susan Cadwallander, Thomas Dotzel

Venkatesh Shankar, Texas A&M (howdy)

This paper is already published in Sloan Management Review

• Want to use it to create new ideas and extend, dialogue

Why are some new services successful, and others not?

• e.g. FedEx
• Not the first, but the most efficient, became a market leader, and then adjoined other spaces
• Compared to dot-com services that fizzle out overnight
• Why can some create new markets, and sustain them?
• Looked at 100 case examples

Definition: market-creating service innovation

• Exploits an idea
• Fulfills a need 
• Perceived by csutomers as new benefit
• Changes customer behaviours
• e.g. Cirque du Soleil

How do MSCIs different from good innovation?

• Some service people use the term product, e.g. banking, hence use "good"
• Labour-intensive, interactive services means that providers get embedded into the innovation
• Inseparable, e.g. Fed Ex
• Co-produced: Cirque du Soleil, involvement of customers, part of the production
• No tangible product

Create two dimensions

• Type of benefit offered:
• Core benefit: gives an underlying reason for a customer to buy, e.g. FedEx ability to transfer a package
• Delivery benefit: convenience of access and experiencing core benefit, e.g. NetFlix, delivery of video as convenient
• Degree of separability:
• Separable: time and place of service production differ from time and place of consumption, e.g. health services, you have to be there
• Non-speparate

4 types of market creating service innovation

	Core benefit	Delivery benefit
Separable	Cell 1: FedEx's Flexible Solutions	Cell 2: Google's Controllable Convenience
Non-separable	Cell 3: Starbuck's Comfortable Gain	Cell 4: Ball Memorial's Respectful Access

Cell 1: FedEx was designed to be more reliable and efficient, as other competitors weren't

• Absolutely, positively
• Then they came up with supply chain management, B2B
• Then ground to ground
• Company tried to reduce uncertainty in services
• Other examples in this cell:  eBay, CNN (first 24 hour challenge)

Cell 2: Google wasn't first to provide search engines, e.g. Alta Vista

• Google was first for page rank, got a business model based on page search

Cell 3:  Starbucks for experience, not just latte, but also CDs

• Emphasis on inseparable, e.g. tables are circular because they're aren't threatening, but are closed

Cell 4:  Bell Memorial's emergency room

• How to best deliver service, lessening aggrevation
• Atmosphere like entering a hotel lobby

Findings:

MCI

• Have innovation champion
• Offer superior customer benefit
• Affordable
• Continuous strategic innovation
• Brand differentiation

MSCI

• Scalable business model, e.g. H&R Block has gone on web, converting nonseparable to separable
• Customer experience management, e.g. Cirque du Soleil, former Olympian, 
• Continuous operational innovation

Management takeaways

• Make the service easy to use and convenient to access
• Create a trusted brand
• Know you cell
• Create a culture for innovation

[Questions]

Intersection between brand and innovation

• Brand building, companies had to spend

“The Service Myopia? New Recipe for Client-Provider Value Creation”, by Chris Möller, Risto Rajala, and Mika Westerlund

Helsinki School of Economics

Empirical background

• More scientific title:  different modes of service innovation

There's a certain amount of hype, that services are the value earners

• Thinking more in terms of hybrids, instead of pure services or pure products
• Emphasis on processes between provider and client may be operational, when we're talking about strategic

Think of basic contingencies influencing the three generic modes of value production, not only within services, but also in value options

		Level of determination
		High level of determination: order		Low level of determination: chaos
Value modes		Established business e.g. Dell, McAfee, Ikea Can specify activities, how to combine lego bricks	Incremental servce innovation e.g. Google, TVU Networks Both exploration and exploitation	Radical service innovation e.g. Skype, Bluetooth More exploration
	Value creation logic
	Exchange and relationship structure
	Value create

Value modes:

• Not static, movement from radical to incremental to established

Modes of value co-creation

		Service provider's strategy
		Established service	Incremental service innovation	Radical service innovation
Client's strategy	Established service	1. Balanced	2. Provider-driven	3, Implausible
	Incremental service innovation	4. Client-driven	5. Balanced	6. Provider-driven
	Radical service innovation	7. Implausible	8. Client-driven	9. Balanced

What are the different types of client-provider relationships?

Try to understand the recipe

		Client-driven

Merging radical and incremental innovations ... mixing them up in the first version

Conclusions:

• Value always rendered by customers, but what resources are used
• Network value production
• Market governance isn't enough, need to understand network and relational governance

[Questions]

Patterns on technology, talent in networks?

• Not enough data, only a few cases so far
• In radical service innovation, can be different drivers, e.g. Bluetooth
• Want to raise the discussion in abstraction

Does the service innovation always start from the radical?

• This is a highly abstract sense-making tool for what's happening in the services world
• Radical service innovations are starting a lot from science

2007/04/28 10:30 Papers on "Applying Services to Business"

2007/04//28 10:30 Papers on "Applying Services to Business", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Discussant: Mary Jo Bitner, Arizona State University

Papers:

• “Service-Logic Innovations: How to Innovate Customers, Not Products”, Michel, Brown, and Gallan
• “Managing Service Ideas and Suggestions – Information Systems in Innovation Brokering”, Ahonen and Lietsala
• “Service Innovation Using Design Patterns”, by Robert Glushko and Christo Sims
• “Service Blueprinting: A Practical Tool for Service Innovation”, by Bitner, Ostrom, and Morgan

“Service-Logic Innovations: How to Innovate Customers, Not Products”, Stefan Michel, Stephen W. Brown, and Andrew S. Gallan

Steve Brown, Arizona State University

Premises that may be provocative

• We feel that all innovations, whether to service processes or products are service logic innovation
• Argue that service logic innovation innovate customers
• To have an innovation, a customer must be involved in co-creating the service

Thinking about significant innovations in our time, they would be difficult to explain to traditional innovation literature

• Google
• Netflix
• Ikea
• European free fast-read newspapers in major cities

Contrast a goods-logic approach from a service-logic approach

• Will illustrate with 26 case studies

Goods-logic innovation, goods-dominant perspective

• Lusch & Vargo introduced Service Logic, leads to this
• 9 postulates ... including:
• Goods are distribution mechanism for service provision: goods are a means to an end
• The customer is always a co-creator of value, e.g. Google needs user
• All that a firm can do is make value propositions, it's up to the customer to see whether they generate value

Goods logic versus service logic (table)

[Stefan]

Looking for things we don't understand, collected cases, looking for a pattern

Found service-dominant logic was helpful to understand these

Categories:

• Buyer
• Customer's role
• Co-creator of value
• Uses Sheth and Mittal 2004:   sometimes can be in multiple roles simultaneously

Innovating:

• Smart offerings:  embed know-how and skills into products
  • This doesn't make sense in the traditional goods-dominant logic
• Value integration: what does the customer do versus firm
• Value constellation: reconfiguring, number of players increased

3x3 matrix, always at least a change in the customer role, and the firm's value creation role -- although there's sometimes more, so they're not exclusive

		Change of Customer Role
Change of firm's value creation

Glucose monitoring system: intelligence of doctors embedded into product, so customer can do itself

U. of Phoenix: targets market that traditional universities can't, less integrated resources

Multiplex cinemas: doesn't change the user role (same movie), but the way the users buy movies (go to a theatre, and see what's playing)

Pitney Bowes: offers a different value integration that changes all three roles, having started from selling meters for stamps, evolving to taking over whole logistics of mail, insourcing all mail, changing the user role, the buyer role and payer

Ikea:  Ikea catalog has high circulation worldwide, next to the bible!

Managerial standpoint:

• How to change the customer role outside in; versus firm role inside out
• A lot of marketing literature focuses on buying, not using:  dangerous
• Find out what customers stay away (Drucker)
• Eliminate waste in the buying process
• Change the payer (e.g. executive education is great, but students can't pay, so maybe should get a bank to pay for a financial services course)
• ...

Inside-out service logic innovation

• What are the value constellations
• Increase the density of your offering
• Integrate more to relieve your customer
• Integrate less to enable your customer

[Questions]

End is not the provision of the service, but consumption of the service.  Business value, how to capture?

• Try to avoid consumption, because it means destroy
• Difference is between value in use, and value in exchange
• Traditional marketing is focused on value in exchange, which is economic
• Shift from buyer to how it creates value
• Value that the customer can co-create leads to willingness to pay
• Should be more open on willingness to pay
• e.g. newspapers provide podcasts, but can't charge for that
• Looking at the three roles of the customer, make it more accessible for managers

Resource-based view, looking at value, means customers are willing, would get a price level.  Value constellation is more difficult to copy.

• Was reviewing a paper on SD logic, and asked how it links to RBV, still waiting for this.

Vargo & Lusch are relabelling a few things

• Particularly in the book

“Managing Service Ideas and Suggestions – Information Systems in Innovation Brokering”, Miko Ahonen and Katri Lietsala

Miko Ahonen, U. of Tampere, Hypermedia Laboratory (that does games research, open source research)

Focus on information systems and brokering

• Intermediaries are like brokers
• Have evaluated 3 services with a certain brokering model, from Hargadon and Sutton

Kelley & Storey 2000, were focused on service firms in the UK

• After 150 companies, found no systematic innovation process for the companies
• Could those information systems or marketplaces be used in developing services?

Open Innovation (Chesbrough 2006), question of intermediaries

• Many variations coming with this
• No single path, companies have to work with partners, consumers, sometimes sell and negotiate IP
• Is a middleman needed, or a person, or can an information system do the job?

It's much about trust

• Wolpert 2002: Intermediaries work between companies
• Can information systems be trusted?

Hargadon & Sutton 1997 knowledge broker (technology brokering)

• HBR article easier than the ASQ article
• How to extend this to social media?
• 1. Capture good ideas
• 2. Keep ideas alive
• 3. Imagine new uses for old ideas
• 4. Put promising concepts to the test

Innocentive as a case, can only support 1 or 2 of Hargadon & Sutton

Looked at del.icio.us, as it captures good ideas with an open API

Interest in collective creativity, Hargadon & Bechky 2006 (analysis of consulting companies)

• Should be some reflective reframing that goes on, but many systems are just request and proposal
• How can collaborators develop ideas?

Social media is about online technologies, sharing in certain formats

Success factors of Web 2.0 services

• 1. Early entry / first mover: getting a user base, really fast
• 3. Localization important
• 6 ...

Company or firm perspective, working as an intermediary

• Not much communication between innnovators and company
• Innocentive, from company to innovators
• Ideawicket starts from innovators
• Del.icio.us would be of this class

Future work:

• Will do some interviews, need to choose many innovation marketplaces
• Are developing a mobile tool, using the knowledge brokering model
• Will look at Steven Alter's work system framework

[Questions]

Study inside companies, e.g. Nokia

• Main financier is Ericsson

How do Innocentive and Ideawicket make money:

• Innocentive is a middleman, takes a certain amount of money
• Ideawicket claim that they will seek out financier, and will also take some money, but their challenge is to get a user base and enough interested companies
• Ideawicket is well-built as an information system

9sigma is under Innocentive

“Service Innovation Using Design Patterns”, by Robert Glushko and Christo Sims

Bob, Silicon-valley refugee

Working with a graduate student, Christo Sims, working not just person-to-person, but also web-based services, machine-to-machine

• Frameworks are not abstract enough
• More computer science background, to generate new service ideas

Will survey, talk about some patterns

• Plastered on the wall, thinking about them
• Want to get to a large selection of patterns to see what works
• Trying to invent patterns, and select the ones that are good

Thinking about design spaces:  8-space

What do services have in common, when we're talking about web services and person-to-person services

• Customer and supplier, then not much
• If abstract, could manipulate in head or on a machine

Pattern: generable, adaptable, and worthy of imitation so that it can be reused

• Patterns can be used description, as a situation for solution
• Could be used to encourage best practices
• As abstract, they can help invention

Some patterns, in a stack at levels of organizations, down to individual services

Example: Betancourt and Gautschi:  25 patterns of production, distribution and consumption activities

• e.g. education can be produced, delivered and consumed as a brainstorm session, lecture, posted on a web
• Can see which ones make sense

MIT business patterns, Tom Malone

• Four kinds of assets:  financial, phyiscal, intangible, human
• Archetype: creator, distributor, landlord, broker
• Can zoom through a pattern explorer
• e.g. see where Amazon fits (as "distribute books via electronic store")

In consulting firms like IBM, looking at components

• Component Business Model, a description of how the business works
• Perspectives (executive roles ....) vs. activities
• Best practices
• Could outsource one of the components

Supply Chain Operations Reference model (SCOR)

Drop shipment pattern, most common on the Internet

• Retailer, banker, credit authority, delivery service

Front stage and backstage

• Things invisible to the customer and things they see

Apte and Mason (early paper): information intensity, customer need, ...

• Carve them out

Glusko and Sims: looking at design framework for services, 8 dimensions

• Who gets responsibilities for delivery?
• Covers not just person-to-person, but also machine to machine
• Knowledge /expertise
• Cognitive capability
• Physical capatiblity
• ...
• Technolgy and captial
• Disposible resources
• Encoded information

[Questions]

There's lots of other dimensions.  How decide those that are more or less important

• Want a small number, e.g. 8, but 25 is too many

Value capture?

• Will generate an infinite of services, and let you figure out what is important
• A framing for designers not evaluators

Does Malone look at value capture?

• Yes, but at the granularity, firms do multiple things

Christopher Alexander patterns

• In document-centric domain, have done this down to document patterns
• Haven't gotten to do this in the more general sense of patterns, yet

Copenhagen Business School: similar framework comparing airlines as components

“Service Blueprinting: A Practical Tool for Service Innovation”, by Mary Jo Bitner, Amy L. Ostrom, and Felicia N. Morgan

Mary Jo Bitner

Something different from what I usually present

• Have done a lot on service encounters
• Today, will show a tool, has evolved over 20 years
• A practical tool for customer-focused service innovation

There's a need for innovation in services, but we don't have a lot of tools

• Have used this with different companies

There's little written about service blueprinting

Service blueprinting can help ...

• processes
• customer experiences
• Service development and design

Service is blueprinting

• A tool for simulaneously depicting
• processes
• points of contact
• evidence of service
• from a consumer's point of view

Start from customer activities, and then work backwars into contact employee, backstage and support processes

• One response: customers have no idea what we're doing for them, because there was no tangible evidence of the service

e.g. one night in a hotel room.

• (It looks like process swim lanes!)

Cases of companies that have used blueprinting

Yellow Transportation, has been working with ASU ten years ago

• YRC worldwide
• Ten years ago, ranked as worst company in industry
• For last five years, have been ranked as first
• They used service blueprinting in many ways
• Used blueprinting to design new services, e.g. Exact Express guaranteed services, that no one else had done this
• Also used it for core service improvements
• A-ha:  20,000 Teamsters needed to understand the value provided to customers
• Introduced a customer-centric change program

2007/04/28 13:00 Papers on "Service Innovation in Software and Financial Services"

2007/04/28 13:00 Papers on "Service Innovation in Software and Financial Services", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Discussant: Antti Ainamo

Papers:

• “eInsurance – Novel Services in the Electronic Environment”, by Ahonen, Salonen, Kivisto-Rahnasto, Jarvinen, and Silius
• “Building SaaS Business on Top of Open Source – Economic and Legal Considerations, by Oksanen, Helander, Seppanen, Puhakka, and Laine
• "Issues in Shifting from a Product-Based Business Model to a Service-Based Model", by Mironov
• “Services Innovation: Sourcing In Lessons from True Professionals”, by Antti Ainamo and Marc Ventresca

Note: (power failure in audio recording)

“eInsurance – Novel Services in the Electronic Environment”, by Ahonen, Salonen, Kivisto-Rahnasto, Jarvinen, and Silius

Tampere

Insurance concept for insurance, to help consumers get more familiar with insurance in an electronic environment

Most electronic use in insurance has been just in getting information

• Surveys show that customers are interested in operating in the environment

Challenges:

• Complex nature
• Transaction frequency low, e.g. compared to banking
• Physical service component is missing

Tekes research project

Focus group results:

• Customers not interested in service, maybe because current service is underdeveloped

Have been doing usability evaluation, compared to British web sites

Practical results for safety and insurance provider

User interface: Drag-and-drop family members into house

Results: "Insurance Selector" service launched by Pohjola Non-life Insurance Company

Feedback that results have been useful

[Questions]

Drop out?

• Insurance isn't high involvement, it's not where people go when they're trying to find something interesting

“Building SaaS Business on Top of Open Source – Economic and Legal Considerations, by Oksanen, Helander, Seppanen, Puhakka, and Laine

Of team, am a lawyer working at SoberIT

How to manage open source in a corporate environment

http://www.coss.fi/ossi

"Community Created Content" book available on web site

What is SaaS (aside from the hype)?

• Chong and Carraro (2006), it's something between a service provider and a customer
• Four levels
• Level 1: ASP, service provider offers online application
• Didn't take off, as not seen a reliable

At the moment moving to Level 4:  scalable, configurable, multi-tenant-efficient

• Large server farm

Intellectual property rights:  there aren't any, on services

Copyleft

Affero's addition to GPL license

GPL v3

Have created an opensource license checker

[Questions]

Business method patents?

• Don't have business method patents in Europe

"Issues in Shifting from a Product-Based Business Model to a Service-Based Model", by Rich Mironov

Practitioner, consulting to companies that want to move to service models

Software business models:

• Product / licensing model
• Subscription service model
• Transaction service model

Service models force "shared succcess"

Survey, pulse of the market

• http://www.mironov.com/more/survey_results
• If in the product model, still slanted towards large enterprise and government, they're coming up from the bottom of small and medium businesses
• If selling a service, subscription is 33% faster, and nearly 50% faster if selling by transaction models
• How to tell what the users are using?  Licensing models mean that transaction logs are at the customer site, but subscription services have transaction logs and 75% of them aren't looking at them
• Service product managers have userids and passwords, but they use product registration cards, so they're not using the data they have
• Almost all companies in Silicon Valley are overdesigning the software, because they guess that users use 50% of available functions

Findings

• SaaS slows down revenues, and increases early capital requirements, because there's a tasting model where they try it, and then might eventually take more
• They don't have people that understand uptime, customer requirements, etc., so they need to change the structure of their firms

Industry metaphors:

• Licensing software firms are grocers
• Service firms are chefs
• Service based pricing (check, please)
• Operational metrics: meat thermometer

[Questions]

Quality is more obvious in SaaS

• Most companies will fail, as they're missing the capabilities

Types

• Different slices
• Will see people tossing out a few critical functions

Why do it?

• New entrants
• People who will lose with new entrants

“Services Innovation: Sourcing In Lessons from True Professionals”, by Antti Ainamo and Marc Ventresca

Why not look at the people who do services only, and don't have anything to do with material products

There's a lot of manufacturing products

Services literature

• More tangible
• Consumption
• Standardized
• Customers in the core
• Absence of inventory

Differences across services, Zeithaml 1981

• High in search qualities
• High in experience qualities
• High in credence qualities, e.g. legal, dental
• Interest in credence offerings

Collected some data in Silicon Valley, Britain and Finland

• Case studies under way
• 1. Service marketing
• 2. Segments
  • Medical diagnosis
  • Law
  • Consulting
  • Advertising
  • Architecture
  • Design
• 3. The sociology of status ordering

Case study: Roschier Wallenius legal services in 1990s

• Legal company, small business, rules that were broken by the leading partner
• Problems and solutions would rise to the partner
• Limited scale

Case: Ideo

• Intra-organizational network, work in small groups, geographically distributed
• They use computers, but that's not the essence of growth
• John Kelly has written books, as a way to diffuse messages
• Douglass North: Until have clearly specified rules, high uncertainty means "personalized exchange" person to person

Services mindset

• Partner is the platform
• Goods and supporting technologies as optional value-added

Partnership model

• Reificiation: serving on a personal basis clients of high importance
• Diffusion (books, mediat atttion) and emergence (problems, solutions)
• Blueprinting (delegating to lower salary)

Implications

• e.g. HP and Nokia or IBM and Nokia have "exclusive" strategic partnerships for different things
• Multiple layers of hierarchies
• Dedicated account managers

[Questions]

New? Ideas of branding

• Target publication wasn't to introduce very new
• Sociology of status, search qualities

Service innovation or service marketing?

• Trying to show organization design for service innovations

2007/04/28 14:50 Papers on "Hybrid Innovation and New Product Development in a Services Context"

2007/04/28 14:50 Papers on "Hybrid Innovation and New Product Development in a Services Context", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Discussant: Marja Toivonen

Papers

• “Hybrid Innovation Management – Lessons Learned from Mobile TV Development”, by Kirsimarja Blomqvist, Kaisa Henttonen, Pia Hurmelinna-Laukkanen, and Paavo Ritala
• “Creating and Managing Hybrid Innovations”, by Shankar, Berry, and Dotzel
• “New Product Creation Process of KIBS Firms: A Case Study”, by Salmi, Torkkeli, Ojanen, and Hilmola
• “Innovation Processes In Professional Business Service Firms: Their Drivers, Nature And Management Challenges”, by Marja Toivonen and Anssi Smedlund

“Hybrid Innovation Management – Lessons Learned from Mobile TV Development”, by Kirsimarja Blomqvist, Kaisa Henttonen, Pia Hurmelinna-Laukkanen, and Paavo Ritala

Kirsimarja and Paavo

Lappeenranta

Hybrid has a different meaning

Mobile tv markets

• Finns are good in technology, but what about services?

Hybrid as multiple forces, e.g. competition-collaboration

Singapore and Italy have mobile tv ahead, e.g. Italy as 400,000 subscribers, ahead of Finland

• DVD-H technology, low battery consumption and faster than 3G
• Consumers want to watch, but also want to be interactive, e.g. voting, video blogs

Includes Nokia, carriers, broadcasters

• Forum Virium Helsinki, uses open innovation paradigm

Turning point

Contradictions and paradoxes

• Sequencing: one extreme at a time, e.g. R&D, then marketing
• Layering: have to rise above, picturing the whole market perspective
• Taking a third perspective: bring in a third party

Old boys network on technology development

• Bonding
• Need to  bridging to build social capitals
• Also link

Project manager can act as boundary spanners

Technology-based service development plus service development as a new capability

Have to find new networks

• In Finland, can use trust, as don't have governance

[Questions]

Lobbying?

Legislation is falling behind

• Forgot to invite people to work out IPR, a mistake

“Creating and Managing Hybrid Innovations”, by Shankar, Berry, and Dotzel

Hybrid as combination of product and service innovations

Quotation from Embarq, spun off from Sprint:  "bundled package of products and services"

Examples:

• Tivo, the digital video recorder, plus controlled live tv
• Xerox: copier, printer, supplies, plus maintenance, configuration and user support

Definition of hybrid innovation

• Utility of purchasing and consuming goods and services increase with each other
• Firm sells both
• Good and service are combined in a way unique to the firm
• Not tying in, so don't violate Sherman Act

Good-Service Continuum

• Goods dominant ... to services dominant
• Balanced: contract IT

Economics

• Three zones
• Dead zone, when price is below total unit cost, when scaling up
• Likely sweet spot zone: price about cost
• Nirvana zone: making so much money

For a service innovation ...

• Dead zone is shorter
• Likely sweet spot zone longer but thinner
• In the Nirvana zone, don't make as much profit

If combine product and service, may be able to get a better curve

Dimensions:

• Degree of complementary: Combining good and service to improve utility
• Degree of independence: Extent of availability

Taxonomy

	High complementarity	Low complementarity
High independence	Flexible combo	Controllable bundle
Low independence	Twin Gain	Forced bundling

Have studied 50 hybrid innovations, found success drivers

• Greater degree of commoditization, the higher the value of hybrid
• Solution centricity
• Revenue and profit potential
• Scalability, how long can you prolong
• Importance of branding
• Order of customer choice, whether customer chooses good or service first, e.g. cell phone North America picks service first, Europe picks product first

[Questions]

Like curves.  Fixed or variable costs?

• That was for typical innovation, across 50 innovations

“New Product Creation Process of KIBS Firms: A Case Study”, by Pekka Salmi, Marko Torkkeli, Ville Ojanen, and Olli-Pekka Hilmola

Marko, Saari

Lappeenranta University of Technology

Research in 2004 and 2006, developed framework for multimedia and technology

• Focus on processes

Productization, bringing more tangible features to services

• Advantages

Few scholarly works

• Gronroos 2003 introduced a process model
• Vaattovaara 1999 model, based on case studies in an engineering consulting company

Concept of a service package

• Standard part
• Optional modules
• Customized parts

Case: Aptual Ltd., small KIBS firm specializing in Internet communications, founded in 2000, employs 7 people

• Core: Jalusta technology, helps company to design new web pages

Productization process

• 1. Determine the starting point, what does the customer need?  What technology core?
• 2. Define the service package: standard part, module 1, module 2, integrated communication service
• 3. Development of the service package: build features, develop expertise

Conclusions:

• Need a clearly-defined service package
• Can reuse knowledge on an ongoing basis

[Questions]

Choice of firm?

• Started working with company 4 years ago, natural approach, constructive approach where company had a problem and we had theory
• Happy that company hasn't gone into bankrupcy

“Innovation Processes In Professional Business Service Firms: Their Drivers, Nature And Management Challenges”, by Marja Toivonen and Anssi Smedlund

Innovation Management Institute, Helsinki University of Technology

Also KIBS research, but use "professional services" phrase that is more common in the U.S.

Have selected professional business services firms, because they tend to be at the edge of innovation

• Clarification of the concept of service innovation, applying the Schumpeterian perspective
• Multiple case studies

Service innovation have had limitied definition, Schumpeter had a broad view that helps

• 5 types of innovation
• Helpful, except that can't separate out products and processes, since a service product constitutes a process in its basic nature

Criteria for innovation

• 1. Innovation is carried into practice, must be applied
• 2. Innovation is reproducible, i.e. not that every time they have a new client, it's innovation
• 3. Innovation leads other companies to follow, with competitors, possibly not a creation but could be diffusion
• 4. Innovation means a break in business-as-usual, discontinuous

Problem that innovations are discussed both as an outcome and a process

• Have tried to define service innovation as an outcome
• Innovation involves insecurity, so also need to consider processes that don't lead to an innovative outcome

Nature of innovation processes, four drivers

• Usually market pull and technology push, that are useful
  • During past 2 decades, impact of IT
  • Market pull as more business like
• In professional service firms, also
• 3.  impact of societal development
• 4. ideas emerging in the professional community

Innovation processes, three approaches

1. Stage-gate model: planned

• Black box

2. Nordic school of service marketing, modeling the service, Edvarsson

• Service concept, service process, and service system

3. Analyzing the nature of innovation, Lille School, Gallouj and Weinstein 1977, what changes can be made

• (a) can improve innovation
• (b) add innovation
• (c) recombine (architectural)
• (d) formalization

Multiple case study approach, blending the three approaches

• 12 cases
• Interesting 5a started 12 years ago, now 5b same case

Found all four innovation drivers in study

Most common model was rapid application:  not separate testing or piloting stage

• Most important reason, the issues are so complex, that if you try to develop your service in-house, you can't find all of the important questions

Also found open innovation is important

• Big-four accounting firm developing service with partners in Finland

Conclusions:

• Former successful innovation can give birth to a new innovation process
• Now moving to a new project so know how a new innovation can be managed

Summarizing:

• Many drivers for innovation, 4
• Stage-gate models don't always apply in professional service firms, so speeding up with rapid application helps
• Innovation without any planning

[Questions]

Innovation begets innovation.  This is the finding in product innovation.  However, a technology push will generate 3 or 4 market pull innovations, but market pull won't generate technology push.

• One case not even market pull, it was in-house pull

If you find your customer's hidden needs, could you find a radical innovation?

• Common, leads to better business

One case where innovation recognized a posteriori?

• Maybe the way we collected data

Innovation with dedicated resources?

• Yes, at least some

2007/04/28 16:20 Discussion on Research Priorities

2007/04/28 16:20 Discussion on Research Priorities, Innovation in Services Conference, Berkeley, California, Friday, April 28, 2007, 10:30 a.m.

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Discussion led by Henry Chesbrough

What are the research priorities?

Theory

• Oxford conference
• Serious debate as to whether there is innovation in services
• Intangible input, intangible output

At the talks over the past 2 days, there was research into innovation, and research into services, but not innovation in services

• Berkeley perspective:  opportunity in IT
• IT is a major input into innovation in services
• Issues in getting to scale, reproducibility

What needs to be done?  Research opportunities and priorities

[Responses]

Distinctions between innovations and inventions.

• Patents?

To the venn diagram of innovation, services, IT, add customer to reflect coproduction

Investments, because not a lot of venture capital in services, due to non-scalability

Vocabulary:  what do we say that is useful to business people

Ecosystem, including public sector, to deal with market failures when we talk about services

Metrics and measurements, to communicate value to management

Value recapture, since we talk of coproduction, but who will make money: which combines to business models

Metrics for quality, productivity

Diffusion models for services rather than products

Adoption process

Services for underdeveloped countries, different patterns

Capabilities, organizational, e.g. IT-enabled innovation services

Need more failure cases, as well as successes

Initialization

Healthcare

Internally-directed and externally-directed services

Practices: product people vs. services people in selling

Business schools would be better to be organized like medical schools, where you have research people and then clinicians

• If someone dies in clinical, it causes research to change
• In business, clinical has been outsourced to consultants, but this causes the breakdown in feedback loop
• e.g. principal agent theory, feedback loop isn't tight
• Then we would need teaching companies, like we have teaching hospitals

1969: SIAR: Scandinavian Institute of Administrative Research ... eventually led by Richard Normann

• Clinical research in management
• Richard Normann wrote the article in ASQ in 1971
• Successful in the 1970s, but then personal conflict
• Cultural school of management

Sustainable development

Intellectual property

Connection to RBV

Broaden information technology to technology

2007/06/01 08:35 Thomas Stewart, "The Wealth of Knowledge"

2007/06/01 08:35 Thomas Stewart, "The Wealth of Knowledge", Rotman Lifelong Learning Conference, Toronto

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

[Roger Martin]

Have received the largest grant to a Canadian business school from the Ontario Government

Thomas Stewart

• Runs Harvard Business Review magazine
• Had written Intellectual Capital, second book Wealth of Knowledge

[Editor-in-Chief and Managing Director, Harvard Business Review; Author, The Wealth of Knowledge: Intellectual Capital and the Twenty-first Century Organization (Currency, 2001); Intellectual Capital: The New Wealth of Organizations (Currency, 1998)]

[Thomas Stewart]

Iconic CEO, in a hotel in New Orleans:  where am I, and why am I here?

Theme of conference as thinking to win

• Thinking is to business as justice is to military
• Shouldn't deny intellectual streak
• When Harvard Business School started:  is business something that should be taught in universities?
• Bias to action

Ted Levitt: 

• Faculty is bad writers, use passive voice, never telling interesting stories
• Business people are impatient readers, want bullet points
• HBR is a magazine by people who won't write, and people who don't want to read

It's a paradox in business

Make an economic case for thinking:

• If take it serious, it changes the way do you do business, manage

Two questions:

• What is it that will make a company successful over 20 to 30 years?  
  • Capital, assets, things that appear on the balance sheet, as source of competitive advantage, or things not on a balance sheet, e.g. relationships
• How many think that the primary role of managers and leaders in companies over the next 20 to 30 years to drive change or preserve continuity?
  • When people manage continuity better, they have less reason to manage change
  • Change is extremely important
• Talents and skills matter more than physical and financial assets

Chart: commodity prices go down

• Commodity trap, e.g. Nigeria has oil
• Wealth extracted from a place isn't as valuable as wealth created in a place

Chart: Wages in Europe

• Pre-industrial revolution, 1500-1800, odds doing better than mother or father weren't good
• After industrial revolution, wages go up
• Pattern changes, as people applying brainpower, and start using industrial machinery
• Revolution of 1848, and social unrest, as things are changing, and generally for the better
• See price of food, it costs less to eat, and people eat a lot more

Ideas are capital, and everything else is just money

Four steps:

• Role of money in what we buy and sell
• Knowledge separates winners from losers
• Knowledge defines work
• Returns to knowledge should produce larger returns

Follow the money

Neil Workman: started a company collecting debt from Maine fishermen

• Small fisherman, with a few large companies (e.g. Disney buys lots of fish), and small restaurants with no assets (e.g. can't collect after a few days)
• South Street Seaport restaurant, got a bullhorn and told diners that fish hadn't been paid for
• Better:  prevention
• Could know who didn't pay bills, and who did
• Then started collecting data on changing in restaurants, e.g. a new CFO at Long John Silver, or new manager at Disney Orland
• Clients said: if you knew this, why don't we?
• Fax was new, created SeaFax
• Sold naughty list, nice list, and directory
• Similar to poultry for fish
• Then published on CDROM, as a yellow pages
• Then Neil Workman was selling half a dozen knowledge products, while still collecting debts: really selling knowledge

Three generic ways to sell knowledge:

1. Install knowledge:  put knowledge into a product

• e.g. mobile phone, compared to old dumb phones
• Can put knowledge into automobiles, into computers

2. Distill knowledge

• e.g. Neil Workman
• e.g. Maritime insurance, also knows customs and maps, for Miller's Encyclopedia on when you get through ports

3. Black box knowledge:  can't tell it, but you can hire me

• Consultants

Consider. GE, under Jack Welch

• Engines, also sell repair and services
• Service strategies that go with product strategies
• Similar at IBM

There are companies that don't think about this

• Have to trade off commoditization over scale
• Risk of just good enough

Worry about Google:  don't need HBR, just need enough data to get through the day

Black box strategies:  advantage of high prices, but star players may get hit by a bus or raided

Roger Martin: capital versus talent

Should have this discussion openly

• Glue on cardboard boxes, but being paid by the pound, and had no way to monetize to go to Unilever
• We've found a well to sell you less of our product, can you help us find a way to make a return at this?

Knowledge assets create this type of value, and monetize

Assets: something that transform inputs

• Not the definition of accountants:  who think assets are something you own
• There are non-physical assets, e.g. recipe for cola
• Transform physical assets into something of higher value
• Can also transform information assets into something of higher value, e.g. lawyer
• Assets without application are a waste

Need a process of identifying knowledge assets that are useful

• Norwegian advertising agency:  something is valuable in that it's valued by a customer, and it's unique
• If's a grain of sand on the beach, not valuable
• If it's a curio, may not have value

Intellectual assets:  what do we sell that is unique and valuable?

• Ask executives, workers, customers
• If responsive and innovative, then how do we create that innovativeness and responsiveness?
• This gets to the intellectual capital question
• Are we responsive because of computers? because of customers?

Three types of assets

1. Human capital:

2. Structural capital, e.g. patents, things that don't go home at night

3. Customer capital: relationship capital, talk and communicate with clients

Can think about 3 different types of restaurants

• Alice Waters, Chez Panisse:  You go there because of the chef
• McDonald's:  formula
• Local pub or diner, where food is bad, but the waiter calls you "hon": for the warmth and experience

Each company has all of these types of assets, but they go to companies different ways

• McKinsey:  smartest people
• Accenture: modules that can be assembled
• Bain: never leaves

If I want to change my strategy, how do I change my intellectual capital?

• Where to invest?
• How to manage the company?

Managing knowledge workers

• Drucker:  what's the job, and the knowledge base to do the job?
• Industrial jobs, job decided by supervisors
• Today, every day, decide, what is the job?
• If this is what I need to do today, how to I provision things to do the job today?

Xerox: automated call centre

• Tried case-based reasoning
• No one used it
• Tried instead financial incentives for people who used it best
• Winner was Carlos: cowboy, knew everything, he never went near the software
• Runner up was Trish: mother who came to work, didn't know copiers, they didn't use the software, she sat next to Carlos
• Knowledge management problem:  who can sit next to Carlos
• The most valuable knowledge isn't what you can get from software or a manual, it's tacit knowledge
• Tacit means silent, but close to tactile
• German: feeling that that you get in your fingertips

How to get to the most valuable knowledge, and share it?

• Not just by sitting next to Carlos, but getting stories from Carlos circulating in the company

If returns to knowledge greater, than improbable romance between the suits and creatives

• How do you create this conversation?
• Publishing: hate the financial people

Three ideas

1. A company that wants to be a thinking company has to take off the suits, and allow people to be in your face

• Richard Florida: Creative Class, a tolerance for the others
• A city's ability to allow creative
• How to enable this in a company?
• G.E.: Strong finance, but it's an informal company
• Informality is hard
• Mike Zafirosky talking with Jack Welch:  honest conversations
• Celebrate differences, ask people who don't speak at meetings

2. Two idea in innovation:  innovation as a machine (Thomas Edison, eureka to a process) and innovation as a magic garden (3M, give people 10% of the time)

• Both are true
• Teresa Amabile: brain freeze when someone has to be creative
• Too many companies think it's one or the other

3. Time and place

• Thinking matters, and have to validate the person when it's thinking
• It takes 10-15 years for someone to become an expert, so why are moving people around every 18 months?

[Questions]

Open source.  Mozilla, and other companes that open up knowledge

• Open source not just in software
• P&G, connect and develop, for more chemists that we can employ
• Eli Lilly
• An emerging phenomenon
• How to use open source to create proprietary advantage?  A paradox
• When should I do it and not?
• Should add to portfolio selectively, it's a solution to some problems

Waking: Open source collaboration.  Beyond black box strategies?

• Creating a knowledge community
• Traditional black box community puts the knowledge community inside the firm
• Another strategy, opening it up, as an open box, community of practice

Knowledge offshore is cheaper, how much to invest there?

• Seeing more and more high-end work going offshore
• Long run, wages will equalize
• For certain jobs in India, could pay someone cheaper in North America
• It's a standard make-or-buy question:  what are risks, opporunities?  How much control do I want?
• Engineers in Detroit, felt as it they too little control over workers in Bangalore
• How close do you need to be to that person?
• Intellectual capital trilogy: human capital, structural capital, customer capital
• How to create the experience?  Then want to create it at low cost, secondary consideration

2007/06/01 09:50 Howard Gardner, "Five Minds for the Future"

2007/06/01 09:50 Howard Gardner, "Five Minds for the Future", Rotman Lifelong Learning Conference, Toronto, June 1, 2007

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

[Roger Martin]

Howard Gardner has written 21 books

• Changing the idea so that there's multiple types of intelligence
• Harvard Graduate School of Education
• Macarthur Foundation award winner

[Hobbs Professor of Cognition and Education, Harvard University; Author of 20 books including Five Minds for the Future (Harvard Business School Press, March 2007) and Changing Minds: The Art and Science of Changing Our Own and Other People's Minds (Harvard Business School Press, 2004)]

[Howard Gardner]

Disclaimer:  there are 8 or 9 intelligences, and five minds don't matter on intelligences

• Intelligences, as how the mind has evolved, and how it's organized now
• Instead of having a single computer in the skull, have 8 or 8
• IQ is language and logic
• Have spatial, informational

Five minds for the future is written as a policy-maker

• If I was a czar, and could have an influence over learning, there are five kinds of minds that I would nurture

Background as psychology and education

• These are minds that we should nurture in children
• But should also look for these in organizations, hiring
• In addition, should think about self:  if don't have the mind, can you hire it, or nurture it in the self

Images: Clone, Ginal Kolata

• James Watson's genome has been published

Image: McDonald's, brands

Image: stock exchange

Image: intelligent machines

Image:  virtual reality, Second Life

Image: lifelong learning

Image: auto-didacticism, for Dummies

Can't just treat people traditional knowledges, finish at age 20 to 30, and then rest on laurels

• What minds will be valuable in the future?
• Five minds

What was the greatest invention of hte last 2000 years?

• Said classical music, Mozart
• Gave this answer, because wanted to be quoted

More serious answer:  the Disciplines (#1)

• Scholarly, but also arts, crafts
• We take disciplines totally for granted
• Disciplines are invented by human beings, over eons, and they might have never been invented
• A lot of things depend on the disciplined mind

Three sense of disciplines:

• 1.  Keep working on stuff, it gets better
• 2.  Thinking in scholarship
• 3.  Becoming expert in something:  an art, craft, profession
• All three senses of discipline are important
• If don't have discipline, will work with others

Basic argument for the disciplined mind

• Learning discipline is learning a language
• Listening to two experts, there's knowledge that you can't poach on
• Now, so much is interdisciplinary, so knowing one discipline isn't enough

For each discipline, false

• There's no cigar, i.e. knocking down a kewpie doll

Arthur Rubenstein, prodigy in 20s

• Became a sybarite:  carouse, didn't practice
• Played with flourishes, but wasn't getting better
• In his 30s, got married, and decided to practice 4 to 6 hours
• If I don't practice for a day, I know it; if I don't practice for a week, the orchestra knows it; if I don't practice for a month, the audience knows it

Hyper-discipline:  changing dinner table into a courtroom

• Shouldn't see everything through a disciplinary lens
• e.g. rational choice theory is useful, but not everything

2. The synthesizing mind

• Darwin:  spent 5 years observing, then next 30 years communicating, then produced the Origin of the Species
• A book more valued the farther north you go, don't go too far south

All of us are inundated by information

• The synthesizing mind decides what to pay attention to, and what to ignore
• Puts things together so an individual can retain it
• Then the synthesis needs to be communicable to other people
• Murray Gell Man:  In the 21st century, the most valuable mind will be the synthesizing mind

Psychology:  nothing on the topic of synthesizing

• May be ways of teaching it, but no formal literature on this
• In book, talk about how this would work

If want to synthesize, need to know what will happen at the end

• Then where to start, where to go:  what position papers, movie, state of the art
• Then what disciplines will you draw on, that is relevant?
• Then what method to bootstrap the synthesis, so that the synthesis off the shelf can be improved
• Don't wait until the last night:  try provisional synthesis, and people will tell you what's missing
• Then here it is, and move on

Believe that there will be whole schools that will teach synthesis

• Bill Clinton:  What presidents need is a synthesizing mind

Syntheses that don't work take in too much

• Are else they're eccentric, and don't fit
• Two books:  Ken Wilber, Griesen
• What makes a good synthesis

3.  Creative mind

• Einstein, Virginia Wolff, 
• Have spent much of life thinking about what creativity is

Can't be creative unless have mastered a discipline

• Kid's drawings won't go into a museum
• Takes 10 years
• Also need to know what's been done before
• Can think outside the box, but need to know what the box is

Creator raises good questions, new questions, finds problems (not just solves)

• Creating is as much about institutional power as computing power
• Creative person has to be willing to step out and do thinks that haven't been done before
• When ridiculed, have to pick self up, and try something else

Freud came to America in 1909, couldn't stand U.S.

• Jung came, liked it, sent Freud a note
• Freud said:  what did you leave out?

Creativity is judged by other people in the field

• In business, it's customers or shareholders

Not creative, failed:

• Ether
• Cold fusion
• Most best sellers
• Most biennial art shows

Two additional minds, wouldn't have written about them as a cognitive psychologist

• Respectful mind and ethical mind

Respectful mind: world is diverse, have contact with people around the world

• Need to tolerate people, but respectful mind embraces diversity, give people the benefit of the doubt
• At least as important in commerce and corporate life

Close, but no cigar:

• Kissing up, kicking down:  Bob Sutton, anti-asshole
• Bad jokes, at the expense of others
• Respect with too many conditions:  Kant, people aren't entitled to respect, no matter what they do

Promising instituitions:

• Commisions on Peace and Reconciliation:  people being regretful for what they've done
• Artistic ping-pong:  Mid-east orchestra with both sides playing, silk road orchestra

Changing minds:  Have changed own mind on whether there should be penalties on where should allow scarves in France, and cartoons in Denmark

• Concluded cartoons shouldn't have been published:  too much damage, to indulge a cartoonist
• In a world where everything is connected, we need to have a higher standard for what we share outside our own mind

5. Ethical mind

• Begins at day one, should have respect
• Disrespect from day one leads to bad
• Ethics: self as worker and a citizen
• Not just what are rights, but what are responsibilities (as a manager, lawyer, painter, physician), and how to I carry them out?
• Territory between courtesy and illegality: could get away with it legally, but decide not to

Good work project:  Bill Damon, Czisentmahali

Three E's

• Excellent quality, good discipline
• Engaging, we like to do it 
• Ethical:  moral within work and citizenship

Want people to have all three E's, how do we engender this in young people?

• Martin Luther King, Gandhi

Young people know good work, but a large number know that they can't be good workers when they're young

• Their peers don't want to give up opportunities to get ahead
• Good, but not know
• Augustin:  make me chaste, but not quite yet

No cigar:

• Work that is compromised, people getting away with what they can
• e.g. tests in education, not developing
• Bad work: Enron
• Perplexing:  Lord John Brown of BP, thought of well earlier, but then questions arise about what the company doesn't do
• Full responsibility needs to have a grounded meaning
• Next book: Responsibility in the Workplace

Role of education in nurturing these minds?

• Bring attention to them, at conferences like these
• Know about examples, good and bad
• Be in personal contact with people with these types of minds
• Mentor, tormentors and anti-mentors
• Meaningful work and meaningful life:  fragmentors, taking parts of people
• Even if have all five minds, not certain how to synthesize them
• Have to overthrow mentors, that's why a lot of Asians move to the west

Two questions:

• Aren't there other minds?
• How can you be in favour of censorship?

Martin Luther King:  Education and discipline

Emerson: Character is more important than intellect

Changed mind:  was studying, in an amoral way

• Can justify this as a scientist, but now a citizen, particularly in declining years
• Don't need more of best and brightest, need more people who are decent

[Questions]

How to formulate to create a common standard on the five minds, particularly on respectful and ethical?

• Difficult
• Respect is easier, because disrespect means not giving the other party the benefit of the doubt
• Universals: don't lie, don't hurt; then move to more specific
• Not bribery, but facilitation payments

12-year old daughter being challenged on short-term memory, not on creativity

• As parents, have to counter messages in society that we don't have sympathy
• Put some rules into effect
• Parents have to make an extra effort in the areas
• Patient, rewards don't come easily
• Children observe what is being done
• Sometimes choices of schools and teachers, and may exercise them
• But parents create antibodies for things we don't like
• As parents, also have to help kids, e.g. SATs

Can respective for others and ethical behaviour exist without self-respect

• Reciprocal:  if you treat people respectfully, it creates ways they'll treat you

Consider the religious mind, and ethics?

• Deliberately avoided religion and spirituality, as enemies would find inflammatory
• Good work project, across disciplines
• Impressed by a lot of good workers who emphasize religious beliefs early in life, even when they're not practicising
• When religion turns to intolerance, then it's pathological
• In the U.S., there's a lot of pathological behaviour

Clarify that people don't receive respect?

• Dershowitz:  if next to Hitler, would strangle him myself
• There are behaviours that trump respect
• Removal of people from positions of authority, and shunning signals that people no longer deserve respect
• Penalities have to be over a longer period of time
• Vivian Hailey:  If you don't save, you can't play

2007/06/01 11:00 Roger Martin, "Think Again: How Today's Greatest Business Leaders Think to Win"

2007/06/01 11:00 Roger Martin, "Think Again: How Today's Greatest Business Leaders Think to Win", Rotman Lifelong Learning Conference, Toronto

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

[Thomas Stewart]

Roger Martin has been dean for 9 years, and has renewed

• Harvard graduate
• Monitor Group
• First book, Responsibility Virus

[Dean and Premier’s Research Chair in Productivity and Competitiveness and Director, AIC Institute for Corporate Citizenship, Rotman School; Author, The Opposable Mind: How Successful Leaders Win Through Integrative Thinking (Harvard Business School Press, Fall 2007); The Responsibility Virus: How Control Freaks, Shrinking Violets – and the Rest of Us – Can Harness the Power of True Partnership(Basic Books, 2002); Co-Author, The Future of MBA – The MBA of the Future (working title for Oxford University Press, Fall 2007)]

[Roger Martin]

Will talk about integrating thinking

• For past 7 years, have been interviewing people who are successful
• Not looking at what they do, because it's related to context, but looking upstream
• Have interviewed business rock stars
• The way these people think, and how they got that way

F. Scott Fitzgerald: hold two opposing ideas in mind, and still function

• Central to integrative thinking
• Importance of models and models clash in the world, for leaders and decision-makers
• We make sense of the world
• We often don't realize that we're making sense of the world with models

Clip:  John Sterman:  modeling process happening unconsciously, and you can't turn it off

• What you're seeing  really isn't there
• Question of which model

Our models become reality

• This matters, because as we model, we complete to completely different views of things, that we confuse with reality
• There are clashing models in business all of the time:  low price, shareholder value, ...
• Perpetual model clash

Model clash leads to fundamental choice:  in the face of clashing models, fear and avoid

• The follow a strategy of crush it, or give it:  resulting in no model clash
• Argue most common, because people think that model clash is bad

Alternative choice to seek out and leverage:

• Enjoy it, get a new insight before proceeding

Example:  Izzy Sharp, built the best luxury hotel chain in the world

• Clash between model of first hotel (Four Season Motor Inn on Jarvis, 125 motels, with intimacy) and second hotel (Four Seasons Conference hotel) across from City Hall, with full amenities

Clip:  Izzy Sharp, which hotel most important?

• Four Seasons London:  instant success, always profitable
• London hotel became model:  mid-sized hotels of exceptional quality
• Purpose to be recognized as the best in every location, where we were
• In 1970s, in every Canadian city with a 5-star hotel
• First to offer free shampoo, 24 hour hotels, etc.
• Listened to customers
• Luxury in the 1970s was architecture and decor, decided to redefine luxury as service

Rather than accepting one or the other, took parts of the both models

• Got price premium by paying attention to things that other competitors didn't
• An environment like a home or an office
• Business travellers missed the facilities of the office, and amenities at home
• Became copied by other hotels who didn't know why

Thus, update of F. Scott Fitzgerald's quote:

• (see slide)

How do they do this, by what process of thinking?

• The make decisions differently from other human beings
• Salience --> causality --> architecture --> resolution

Unhelpful:

• Salience:  limit variables under consideration
• Causality: simplify considerations, e.g. straight line between X and Y
• Architecture: sequential or independent consideration of the piece parts
• Resolution:  trade-offs, making tough choices between two things rather than making choices non-tough

Integrative thinkers:

• Think about more features as salient, considering more factors
• Consider non-linear causality
• Architecture:  Keep the whole in mind, while working in the parts
• Search for creative resolution of tensions, as part of their jobs
• When they don't get to a great choice, they go back to the bottom, and think whether they've got the right variables (salience)

It's not that people aren't decisive, it's to search for creative solutions to tensions

• They need to think more

John Bachman, Edward Jones, second largest broker in the U.S., and one of the best places to think in the company

Clip, John Bachman:

• No vertical integration, prefer outsourcing to simplify lives
• McDonald's could be the best bakery, or best potato company, but they're distributors

McDonald's as salient to him, which isn't salient to his competitors

Non-linear thinking is a trait of Jack Welch, even though he portrays himself as straightfoward

Clip: Jack Welch

• Looking at budget, hear the competitors are tough, etc.
• Negotiating targets
• Build trust: how to get competition, and how to do better than prior year
• Have negotiation, because you get paid on that

Relationship between the nature of competition, and dreaming

Saw this, willing to compensate for more complicated relationship

Clip: Nandan Niekani, CEO, Infosys

• Get the parts, grow a strategy
• Multidimensional view of business

Search for creative resolution of tensions

A.G. Laffee, getting more innovation at lower cost, rather than increasing cost

Clip:  Laffee

• P&G principal scientists angry, thinking that wanted less innovation, no wanted more
• Scientists thought about outsourcing innovation lab, no we want to think about improving people's lives
• Now, see that people are picking up innovation
• Were below average on commercializing, from 15% to 65%
• An "and" versus an "or":  anyone can do "or", but not going to win if doing a trade-off game

Take a bad trade-off, blame himself

Case:  1994 Festival of Festivals

• Piers Handling, on what's salient

Clip: Piers Handling

• Different funding structural
• Stratford would go to philantropics
• Festival of Festival would go to business, they've got a product to sell and want to reach an audience
• Risk of selling, that can reduce by having multiple companies

Causality?

Clip: Piers Handling:

• Audience in the community, not just audience, but also directors
• Canadian film industry
• Some criticism of creating a ghetto
• Care and attention comes through to an audience

Architecture?

Clip:  Piers Handling:

• Larger and larger snowball

Key choices:  two competing models, of jury festivals (Cannes, to get Palme d'Or, buzz) versus an inclusive non-jury festival embracing community (with no buzz)

Clip: Piers Handling

• Toronto 1976, three founders
• Didn't want to follow European model
  • Usually 20 films in competition
  • Jury of international experts
  • Large hullabaloo about films
• Non-competitive festival doesn't have the same profile
  • 10 experts are arbiters of taste, 1 film happy, 19 unhappy
• Non-competitive means more involvement
• Key prize is the audience award
• Designed to be inclusive, for the audience
• Festival for the industry came later

Thus, innovation is from award from the audience, which is inclusive

Fundamental choice:

• Fear and avoid or Seek and leverage?

How to become a more integrative thinker

• Your personal knowledge system
• Three important pieces
• 1.  All of us have a Stance, of what we want to accomplish that guides us to create and use ...
• 2. ... Tools ... which add to 
• 3. ... Experiences ...

e.g. MBA prospects sees executives making decisions, need to go back to school to change stance

Stance, three aspects

• Stance on the world, and my place in the the world
• Can leverage opposing models

Example:  Victoria Hale, first non-profit pharmaceutical company, found cure to African black fever

• Saw model of creating medicines for people who can pay, or public health
• Nothing for third world countries that can't pay

Clip: Victoria Hale

• Why not a not-for-profit sponsored pharma company
• Get through development phase

Stance on existing models, they're constructions, not reality

Clip: Victoria Hale:

• Messier

Stance:  models are there to be opposed, not adhered

Clip:  Victoria Hale

• Some people field oriented and relationship, others technically oriented
• Need them to come together

Different points of view are important

Clip:  Victoria Hale

• Dr. Why not?

Self

Clip: Victoria Hale

• As a scientist, should try it

Believe job is to for individuals to find choices, not make choices

Clip: Victoria Hale

• Looking for pieces to put together

Know when have give selves time to find a solution

Clip: Victoria Hale

• Know when I want to know, give it time

Conventional stance versus an Integrative Stance

• (Summary chart)

[Questions]

Individual integrative thinker, role of emotions?

• There are a lot of emotional attributes, researching it right now (with Melanie)
• People are frightened into left and right side, frightened of complexity, and the need to act immediately
• Confidence and calm come with experience

When model runs into tensions, need to rethink it

• First sketch in Santa Cruz, 6 years ago
• Frontier for the work, now working on the stance
• Interested in the phenomenon of the tools and experience for the future, feedback from people

Mindset, Canadians aren't the type to go forward without compromise?  Don't have a culture of innovation?

• Hope you're totally wrong
• In the competitiveness, it's conventional or stylized, e.g. are we going to be like Americans who are too harse and individualistic, versus are we going to be poor and nice
• Part of the task is making sure that policy makers will think more, stew on it, work on more complicated solutions
• Learning experience on competitiveness:  there isn't just one or two policy-makers, getting to the large number is a problem

Strategy about making trade-offs and choices.  Compromise instead?  How to ensure not a sub-compromise.

• It has a lot to do with the experience
• It's absolutely about making choices, but integrative thinkers see an unreasonable choice and will wait
• Not compromise, it's a better model

2007/06/01 13:15 Ellen Langer, "Reinventing Yourself Through Mindful Learning and Creativity"

2007/06/01 13:15 Ellen Langer, "Reinventing Yourself Through Mindful Learning and Creativity", Rotman Lifelong Learning Conference, Toronto

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

[Greeting from Chris Hart, regional manager of the Four Seasons]

[Roger Martin]

Ellen Langer:  academic, yet accessible

• Mindfulness
• Professor of psych at Harvard
• Getting a movie made about her, and she'll be played by Jennifer Aniston

[Professor of Psychology, Harvard University; Author, On Becoming an Artist: Reinventing Yourself Through Mindful Creativity (Ballantine, 2005); The Power of Mindful Learning (Perseus, 1998); Mindfulness (Addison Wesley, 1990)]

[Ellen Langer]

The costs and consequences of mindlessness

Image;  can't see it -- it's a cow -- then can't see anything

• Almost everything we know is wrong
• This limits innovation, health and happiness
• We want to retain uncertainty, and learn how to exploit the power of uncertainty

We learn things in a simple perspective, but then standing in a different place, it becomes something completely different

We learn, and then learn to be mindless

Gorilla video

Roast beef, cutting off slice to put into another pan

Behaviour makes sense at time 1

• Then, at time 2, don't waste time

Skid in car, impulse is to ease on brakes, but with anti-lock brakes, push firmly

Unsigned credit card, then comparing signatures

When you're mindless, you're not there

Airport without passport

Air Florida flight from D.C. to Florida, deicer off, caused crash

• Checklists, but after a while, they become mindless

Believe all of suffering is the direct or indirect effect of being mindless

• In 30 years of research, have been increasing mindfulness
• Increase competence ... increase lifetime

Attention:  object to attention deficit disorder

• Teachers:  when you pay attention to it, stand still
• Compare:  observe what's different about it, actively noticing new things

Define mindfulness without meditation:  active noticing new things

• Puts you in the present
• If you don't, then you don't know that you're not there
• They guide what you're doing

Engagement

• Otherwise, past is over-ruling
• Mindlessness comes by default

Mindlessness coming from doing it over and over again

• Learn basics, so it becomes second nature
• Who's basics?
• If second nature, it's mindless

Saying "use your intuition" says that people go back to their experiences

Work versus play, who decides?

• Have a good time, put in extra time
• Fatigue can be from mindset

Study of chambermaids, asked what exercise they get

• They said they don't get exercise, because it's associated with leisure
• They're doing more than the surgeon general
• One month later, nothing change, except that they see their work as exercise

Don't have the faintest idea of how being trapped in these exercises

Learning conditionally

• Cure is the hard part

e.g. cholesterol:  a measure 12 years ago

Look for familiar in the novel, the novel in the future

Look for universal versus personal attribution, e.g. it's different

Specific cure:

• Try creative mindfulness
• People can see it, we wear our mindfulness or mindlessness

Roadblocks to mindful creativity

1. Stop pretending

• Dolphins swim faster to the trainers who are mindful
• Children know who is mindful
• Adults learning scripts

Started painting

• Don't know what I'm doing, putting heart and soul into it

Is mindfulness in the eye of the beholder, or on the canvas?

• Both
• People prefer mindful drawings

Symphony musicians trained to be mindful

How to become more mindful?

• We have a fear of making mistakes
• Fear in one context is a success in another

A mistake is a cue to be in the present

• Puts you into a different consciousness
• Handmade rugs are more expensive than machine made, with the major difference being the errors
• If don't know where are going forward, will be mindful
• If you make a mistake, incorporate it in

Absolutes:  keep off the grass

• Experience was person-created, and then come into an ontological status
• When we put people into the equation, it's easier to deviate from the status quo
• Become like a 2-year old:  who says so?

Recognizing the social construction of reality, rather than implicitly imputing ontological status, leads to control

When we're not mindfully creating, is there a way that we can enjoy more?

Children:  when we expect them to change, we notice more

• Has to do with stability of the underlying measure

[Questions]

Business calculations in a spreadsheet?

• Numbers are a way to hide ambiguity
• If you want to pretend there's more authority, obfuscate by taking people out of the equation.
• If want the opportunity to engage, all the ways before you were decisions that might not be done today

Measure mindfulness?

• Yes, there's a scale, and it's oxymoronic
• Believe that all people are capable of virtually the same thing, albeit in slightly different ways
• Behaviour makes sense from the actor's point of view
• Things that I have problem changing are things that I value

Golf?

• No matter what you do, it will be better if you're really there.
• If practice and you're aware of what will vary, it won't hurt you.

Fitness and wellness.

• There are both direct and indirect effects to health on mindfulness
• Mindfulness is enlivening