Saturday, 21 November 2009

Values get together? - personal, communal and corporate

It has been said many times already in this blog that innovation is about the effect of changing values. Whatever influences the current values of users, customers or markets for me counts as innovation.

A value system - as I understand it - is what people use to base there decisions on. As usual Wikipedia both helps to clear things up and also makes things more complicated. Here is what it says about value systems:
A value system is a set of consistent ethic values (more specifically the personal and cultural values) and measures used for the purpose of ethical or ideological integrity. A well defined value system is a moral code.
Words like ethics, integrity and code in essence sound positive to me, but I fully realize they also apply in case a value system is not so well-intentioned. But let's leave that as an aside for a moment and take a look at what Wikipedia tells us next:

One or more people can hold a value system. Likewise, a value system can apply to either one person or many.

  • A personal value system is held by and applied to one individual only.
  • A communal or cultural value system is held by and applied to a community/group/society. Some communal value systems are reflected in the form of legal codes or law.
I guess we all recognize both forms. Yes, at time you seems to have other values that others and yes, at times, one really recognizes ones values in that of the group you are with. And some groups indeed have codes or "laws" that at times seem to work for you and that you would like to change a others.

A bit further down it says:
As a member of a society, group or community, an individual can hold both a personal value system and a communal value system at the same time. In this case, the two value systems (one personal and one communal) are externally consistent provided they bear no contradictions or situational exceptions between them.
So people can have and act in two value systems as long as these can "go together". In between these two quotes Wikipedia also explains corporate value systems:
Fred Wenstøp and Arild Myrmel have proposed a structure for corporate value systems that consists of three value categories. These are considered complementary and juxtaposed on the same level if illustrated graphically on for instance an organization’s web page.
  1. The first value category is Core Values, which prescribe the attitude and character of an organization, and are often found in sections on Code of conduct on its web page. The philosophical antecedents of these values are Virtue ethics, which is often attributed to Aristotle.
  2. Protected Values are protected through rules, standards and certifications. They are often concerned with areas such as health, environment and safety.
  3. The third category, Created Values, is the values that stakeholders, including the shareholders expect in return for their contributions to the firm. These values are subject to trade-off by decision-makers or bargaining processes. This process is explained further in Stakeholder theory.
I'll have to study this a bit further, but for the moment I wonder: people can hold two value systems when they go together, but when we add a third, the corporate value systems .... can they hold three? And if they can, do the three go together?

A hunch tells me there are sources of trouble here, can tell where, why and when. I'll dive into it. Suggestions very welcome.

Wednesday, 30 September 2009

The end of process

Processes in general and Business Processes in particular are very popular notions today. Popularized by writers like Hammel and heavily marketed by all sorts of software, systems and consultancy firms, process now seems to have conquered the vocabulary of business and government alike. If anything goes wrong the usual response is "we need to look closely at our processes" and (ofcourse) Process Improvement projects flourish abundantly.

All this process-thinking and focus started to annoy me lately, but I couldn't tell why. Until I saw this slide by Dave Snowden:

In it he explains three waves of management practice. The first, scientific management, led to the industrial revolution, where - inspired by military forms of organization - the organization was managed and optimized by function: purchasing, production, sales, marketing, service, HR, etc. Life was simpel then, processes were siloed and controlled by function. The ability to mass-produce was the result of this new form of functional organization.
This lasted until the '60s when it turned out it had become a bit more complicated. No longer mass but mass-customized production became the norm. To achieve that one had to look at the organization as system that turned customer demands (multiple) into targetted delivery. All this based on information such as demand expectation, strategic planning, scenarios, production planning, etc. So there was a clear need to exchange information between the silos. Many organizations "tumbled over" to become process oriented (often disguised as becoming customer focussed). ICT became a very important factor as information in general and process information in particular became prime suspect as a source for optimization. The ability to control information became the key to business succes.
In todays world information is still seen as key, but is it really? If we listen to the process-addicts it is. It is all there is. How to make sense of the very high variety found in todays consumers and citizens. And can we separate those. 9 to 5 has gone. We can be a citizen for 3 minutes, a consumer for the next 3 and go on as an employee for a while after that. Mass collaboration creates Wikipedia, YouTube and Twitter influences the way small organizations and individual critters lead their productive/commercial lives. Social is back on the agenda, not just in computing but everywhere: eco, care, gov, the list is endless. Why? Well, because it is no longer key to control the information, but key to get things moving. In Dave's words: it is key to situate a network, the ability to create a group of followers and actually do someting with it.
What is all means? Time will tell, but I'm glad that we can forget process. Things aren't neat anymore. Networks dissipate, they don't process. They are resilient, not designed.

Wednesday, 16 September 2009

Not sure this post is about services directly, but hear what happened to me yesterday.

Last week my wife had an MRI scan (no worries, all is fine, thanks for asking) so we went to hear the results and conclusions yesterday. After going trough all the detailed results the docter proposed to try a kind of medicine (no worries, as said, all is fine). She remembered the medicine has some by-effects but couldn't remember them exactly. Something with "orange" and "stripes".

So she went on the hospitals portal to find the drug leaflet, found it and .... no hit. The by-effects were not mentioned. Hmmmm.

So she went on to the manufacturers website to find more specific details and ... no hit. Some by-effects mentioned but not this one. Hmmmm.

As a last resort, she tried Google, typing in the full name of the diagnosis, four very scrabble-worthy Latin-like words and .... lets try the first hit. Hmmmm, no succes.

Meanwhile she muttered, I guess I will have to go to Wikipedia and indeed the 5th hit was a Wikipedia page on exactly the abovementioned scrabble term. And indeed, there is was. The by-effect was neatly desribed and the advice was "propably you won't like the taste of Cola anymore". Hmmmm.

So I got very curious and asked her: does this happen often? The reply was as expected. Yes, wikipedia-pages are often more accurate than the internal hospital system, simply becuase thousands of medical professionals share facts and insights this way.

Hmmmm. What does this example mean for services innovation or innovating services. It looks like the docters service to us depended on a good piece of EXTERNAL infrastructure that was built by a collective effort of thousands of very serious professionals. I would love to hear more of these kind of examples of services being dependent on efforts of external networks.

Monday, 7 September 2009

The Services Sector does not exist

After a long pause, I finally came over the barrier that kept me from posting. It was a sentence I read just five minutes ago about a professors whose chair is named "Economy of the Services Sector".

It is not the word economy that got me fired, not even the words Services or Sector, but the combined notion of the latter two: Services Sector. How long will it take before we finally get rid of this incorrect use of the word Service?

Lets face it, who speaks of the product sector? Nobody isn't it? We have PC's, cars, tiles, gasoline, even software licences, but these do not form the product sector, they are part of sectors like Oil & Gas, Consumer Tech, or Automotive.

But for some strange reason the term Services Sector continues to creep in from time to time. And that simply annoys me. Especially because the solution is so simple: every economic activity has a services part, even product-related activities.

Aroujo and Spring have been very clear on this: products alone cannot be sold so mankind invented the product/service combination to make things transferable. Economic goods are goods because they can be traded like a good.

And ofcourse there are examples where trading does not work. Not in the sense that a certain good is traded. When that happens, when the customer does not know in advance what he or she will get, one can be very sure services are near! For the rest, its a combi. Every product has a services lining. And almost every services comes with a product. Isn't that what economists call complementaty consumption?

Wouldn't that be a good title for a chair "Professor of complementary product/service consumption". Any suggestions who is willing to sponsor that Chair are more than welcome :-)

Thursday, 9 April 2009

From points to patterns and crosses

The 15 services sold and the 4 different implementations found in the previous post are quite unrelated to each other, both the initial 15 and the current 4 implementation have little links between them. 

This inspired me to have new look at Dave Snowden Cynefin model to see if there was anything in there that would help understanding what is going on and find hints at how to proceed from here. 

Than I remembered a question Dave asks quite often: what does a paratrooper do when he jumps from the plane above the forrest? Well, for the first part of the journey downward the only thing he can do is look out for any signs of human activity (smoke, movement, etc), but normally during wartime everyone makes sure no such signs are present during daytime. So the paratrooper gets no valuable information at all. Not even about any shooting going on as he can't hear because of the falling speed. But as soon as he lands (hopefully still alive), what is the first thing he does? ..........

Well, he acts, he moves behind the first tree in sight, then he listens if there is any shooting going on and what direction it comes from. And if it comes from his side of the tree, he changes sides.

This chain of events, act-listen-change, is a well known combi in the Cynefin model, where it reads, act-sense-respond and belongs to the chaos domain. So lets have a look at the Cynefin model (Snowden/Kurtz, The new dynamics of strategy: Sense-making in a complex and complicated world, IBM SYSTEMS JOURNAL, VOL 42, NO 3, 2003): 

In the lower left corner (the chaos domain) we find four dots (in our case the 15 services sold) and when we follow the lines we find that two of them lead to the cross (they fail) and two of them lead to a bleu dot (a pattern is established). So our 4 implemented services can be understood as 4 new patterns.

By following the line we have also crossed the chaos-complex boundary which tells us that our 4 new services are alive, but far from business-as-usual. They are only 4 tiny little operations in a big sea of other concerns. How to handle this situation and achieve/build some more sustainabillity is the subject for next time.

Wednesday, 1 April 2009

Perspectives on Services Innovation

After dumping my SIM model in the previous post it's time to start rebuilding. 

One of the major mistakes I've made over and over again is to see new services from the perspective of a developer. It is so entrained to say "oh, there is a need for (something new) at customer X, we need to start a project to develop it. WRONG!

There are numerous examples where new services or modifications of existing services arise naturally. Sometimes from the daily operations, in other cases by delibarate efforts of the services people. If have found that for R&D people it is very difficult to acknowledge that new stuff emerges without them.

But the facts are there. Recently we found that over 15 instances of new services were sold in our organisation without any central decision to develop the business in that direction. From this we can learn (or see) that in distributed organisations - and many services-operations are distributed - where there is enough autonomy to develop new practices a variety of initiatives will lead to an increased diversity in the services field. 

And that happened to us too. We also found that under the same notion (in this case digital mailroom) at least 4 completely different implementations were found (and counting). 

Ofcourse there was at least one thing similar: mail was opened and scanned, but the reasons to do that, the operational proces, the purpose, the hardware used, the types of documents scanned and the way the digital mail was delivered gave little evidence that these four implementations lived under the same name.

From an R&D perspective the development of these new services seemed to be totally chaotic and unrelated. And yes, maybe they are unrelated but chaotic? Not for the services people and customers involved. For them the services were simply fact of life.

This observations must - I think - form a basic ingredient for the new SIM model that is under construction.

Monday, 23 March 2009

Very quiet for too long

My last post is over a month old. Far too long to still call this a blog I'm afraid. And the reason is also of  the wrong type: doubt.

My last three posts were about frontstage-tools, KEBS and safe-fail experiments. All three share a common trait that I call "distributedness", the fact that the frontstage, operational activities in knowledge-extensive organizations and safe-fail experments do occur in multiple locations and often timewise uncorrelated from each other.

Realizing that made me question a model I had coined around 2002 for Services Innovation. I call it SIM (Services Innovation Method) and here it is:

SIM, as you can see, is a circular model wherein (in my view) the red arrow tagged operation is the most important phase in the services innovation lifecycle. After all, it the service is not, or does not become operational, no service exists!

But let's say we have an operational situation at a certain customer and that customer shows signs (stimulated or not by the providor) that there is a need for a new service, or that the current services are becoming less fitting to the customers' needs.  Clever services operations managers together with services sales and or business development will at least start an investigation on what is going on, what has changed, etc. Some form of business or document consultancy: 

In some cases, a project will start specifically for that customer leading to the implementation of a new service. As I strongly believe one implementation cannot count as an innovation I have named the green arrow Inception, indicating that the one-off implementation of the service is comparable to a baby, a little helpless creature in dear need of nurturing before it will mature.

An so the SIM method continues and takes the process into the Elaboration phase where two pilots put more experience to the bones of our baby service, making it stronger to stand on its own feet. Next, a few test-implementations are done to get the toddler service into adolescense after which it is - with great effort of the parent(s) - plunged into adultness via a Productizing and Transition phase.

Sounds good? Well partly, I still like the Productizing and Transition phases, but Inception and Elaboration are no longer music to my ears as the distributedness mentioned above means that there is no single point of origin for a new service, but there are multiple, often not even correlated changes in the services operations (and the customers they serve) that eventually lead to the emergence of a new service.

So for today I leave you with my favourite picture of a services field, to which I will only add tha one (a) never knows where the conception starts, (b) will only know later on how many newborns will emerge and (c) that it is all a matter of sense-making to discover these early signals:

So, I did it. I dropped a bomb on my own model. Lets see what will emerge in the coming days.

I'll be back, hopefully sooner this time.

Wednesday, 18 February 2009

Service Innovation Part 4: Safe-fail experiments

Although not exclusively applicable to services, experimentation plays a vital role in the development of new services. 

Traditionally however, experiments were associated with Labs, where people - often nerdy white-coated chaps (and few girls) - built heaps of new knowledge doing interesting things with stuff. These days are not completely gone, but for the sake of the argument, lets says that the golden days of this approach are behind us now.

Contemporary services literature in general and the services marketing and services design literature in particular approach services either as an extention of product (and can thus be designed in advance) or as innovation that somewhat magically emerges from customer interaction. I believe that both perspectives are fundamentally flawed for two reasons:
  1. Although a lot of effort is put into "user-interaction design" when developing a product, still most users must spend considerable effort before they feel "at home" when using the product. Towards the services-end of the spectrum it becomes less and less possible to design the user interaction as the output of the service becomes more and more determined by the customer/client/user. Any up-front design activities will limit both the services-recipient and services-provider in their flexibility to co-create value.
  2. In daily services operations, unexpected customer requests, or other non-plannable circumstances are a fertile source of ad-hoc experimentation. Quite often best efforts of all involved lead to good (and regularly co-created) solutions that satisfy the urgent needs. This way real-time, ad-hoc and to a lesser extend on-demand novel practices emerge on a daily basis in the front-stage. But also on a less heroic level projects that deliver customer-specific systems (products, services, hardware, software, etc.) are in fact often producing novelty on a regular basis by going from one customer to the other and fror one context to the other.
The lattter form of "creation" in my view is one of the most fertile source of innovations. Things that work for customer #1 are varied upon for customer #2, #3, #4 and maybe than #1 again, thereby creating a group of costomers that each have a somewhat similar/somewhat unique incarnation of a system for which no marketing material exists.  This way of creating an installed base in fact "innovates" a group of customers one by one, learning-better while doing. 

From a developers perspective each project in the series can also be seen as an experiment to develop a better version of "the solution". But since the customer pays, it is also quite safe to do, because one failed project only harms one customer, not all. This is one of the principles behind the Safe-Fail approach: multiple tries where one failure doesn't disrupt the whole while variation between the experiments increases the chances to achieve/find/stumble upon real breakthroughs. This is how a large part of the creative/implementative part of services industries works.

(to be continued)

Monday, 16 February 2009

Service Innovation Part 4: KEBS

After "clusters" and the "frontstage" today I want to introduce you to one my favourite new terms: KEBS. Those familiar with the Services Innovation literature might suspect a typo since KIBS is a well-known acronym in those circles.

KIBS stands for Knowledge-Intensive Business Services, i.e., Services that require highly-educated people: architects, consultants, laywers, medical doctors, etc. Some of these expertises work in solo groups. Architects for example can do their "thing" from relative isolation, but the medics are surrounded daily by scores of people in more or less supportive roles: cleaning, nursing, labo-testing, catering, etc.

That kind of work is what I call KEBS: Knowledge Extensive Business Services. And KEBS are LARGE - no even HUGE - in economic terms. Back-of-the-envelope calculations easily show that besides the 20% in Manufacturing and Agriculture, less than 10% of the economy is KIBS. For example, have a look at these numbers from the Dutch Bureau of statistics:

Probably illegible (and in Dutch), but on the left are the largest services sectors of the Dutch economy in 2000: wholesale, healthcare, construction, trade, banking, legal services, employment agencies and post/telecommunication are the only sectors that score more than 2% of the BBP (Bruto Internal Product).

It might be a somewhat naïve view, but of these 8 sectors only healthcare, banking and legal have substantial KIBS activities, but even there large chunks can easily be described as KEBS: nursing in healthcare, administrative processes in banks and dossier management in Legal are clear KEBS examples, just like cleaning, facility management and mail processing in all three. Overal my estimate is that KEBS represents over 90% of the 80% that we call the services economy, that is >70% of our economy!

This silent majority is the main target for service innovation in my view. How to facilitate nurses to a an even better job? How to bring about more cooperations between healthcare and wellfare silo's to improve the service to citizens? And lets not forget the governments too! How to improve the functioning of all those public bodies? These are the real Services Innovation/SSME topics that need to be adressed in the forthcoming years. And solutions need to be implemented in those overwhelmingly large KEBS based activity systems.
So that is my next favourite acronym, KIBS-SI-KEBS-S:
Knowledge Intensive Business Services for Services Innovation in Knowledge Extensive Business Services Systems
Wow, what a bullshit-bingo term! But for the moment I don't have better one. Suggestions?

Saturday, 14 February 2009

Service Innovation Part 3a: Frontstage Tools

At times Lady Fortune seems to exist. Just after finishing my previous blogpost I learned that the Civil Services in Singapore has started a narrative sensemaking project to better understand their employees' perception of working in the Civil Services

So what is going on there? Well, we are all used to surveys to dig deeping into problems. Questions like "how would you rate our service" or "please indicate which problems/items belong to you as a Civil Servant" are routinely asked. Such an approach assumes the researcher is supposed to know what problems to look for. He/she has probably formulated an hypothesis or a set of hypotheses of possible problems in the target group.

And no wonder - lo and behold - this is what the result will look like too. Some hypothesis are proven, others are discarded, thereby  supposedly confirming or discarding the hypothesis, often accompanied by some statistical proof about the validity of the results. But what is the hypotheses are wrong upfront. What if there are other issues in the target group. What about weak signals (that only a few respondends fill in under the "what else do you want to share with us box") that are signored because that box is hard to interpret or suppressed by the statistical methods used to analyse the results (that in general look of majorities, not minorities)?

In such cases (and in my view this is always the case), one should use research methods that are in the pre-hypothesis class: no up-front problem list, no upfront filtering.

This is the approach taken by the Singapore Civil Service. They state:

This project will collect stories from a wide variety of College and other civil service staff, capturing their perspectives on work life within their organisations. The project is expected to reveal insights for new initiatives that influence staff engagement and will provide deeper meaning to the existing climate surveys already in place.

And that is how it works. These methods are attached to an existing practice of surveying to "provide deeper meaning" and "reveal insights for new initiatives". Both are achieved because pre-hypethesis research methods always easily surface new issues that surveys cannot pickup by design and they also provide real-time insight into how people as a collective respond to developments, even if these are from outside the organisation. 

Next, trough a process of emergence, patterns are formed from the narrative input, thereby producting of meaningful results in which the weak signals are showing up too.

If you want to know more about how such methods can be applied in the front-stage of your organization, please have a look at the Cognitive Edge website or contact me for more information.

Friday, 13 February 2009

Service Innovation Part 3: Frontstage

In my previous post on this subject I have first given definition for both service and innovation in Part 1 and gave my take on the breakdown of the services economy in Part 2. I argued that we should forego the idea of economic sectors and instead focus on clusters of similar activities and we should also give up the product/service devide and use a transaction/transfer perspective instead.

Besides Araujo and Spring another source for the same idea is the book Services is Front Stage - We are all in services ... more or less by James Teboul. There is a lot of interesting stuff hiden in that book, but one of the most clarifying is the picture on page 8:

In it Teboul compares the customer-facing activities (front-stage) and production-like activities (back-stage) of three types of restaurants. First McDonalds on the left. Their backstage is enormous. The raise pigs, convert them into hamburgers in their own factories, run their own distribution fleet, are famous for their minite kitchen operations and run their business is very standardized outlets. That is the backstage. The customer facing part of McDonalds is quite meagre. A small front desk with trained employees that are all equally friendly, serving standard meals on trays, with self-seating in the "restaurant" where also the famous "ball and slide area" is situated and that must be looked over by the parents.

In  the middle we find a gourmet restaurant that has a kitchen that buys its own stuff from local sources, that prepares meals on order and that can handle special wishes like "done" or "half-done" or "bacon with egg, but please replace bacon with ham". That is the backstage, a lot smaller than in the McDonalds case. The frontoffice is quite big. Often it is a nicely fitted area with waiters that know their job, can advice customers on dish/wine combinations.

On the right we find the Benihana type restaurant. To my knowledge an unkown type in Europe, but maybe it best compares with the Japanese style restaurant. The backstage is very small in that type of restaurants. Food is sourced from "the best" sources and preparation is little as most of the work is done by chefs that prepare the food on the table, in full sight of the customers. They do their work in a way that we can truly speak of a dining experience.

Overlooking the three types of restaurant we see that the backstage is getting smaller and less organized, and the front-stage is getting bigger, but also better equipped with staff, luxury and increased dining experience. It will come as no surprise that Teboul argues that all three types of restaurants are in services, but for the Japanese/Benihana type the services part is much much bigger than McDonalds'

To me the front-stage/back-stage example nicely demonstrates the economic clustering idea.

Tuesday, 10 February 2009

Service Innovation Part 2b: Clusters revisited

Oops, I didn't write a word on this blog for almost two weeks now. This way this is more a column than a blog.

And it seems I'm not the only one. Colleague blogger Samuel Driessen seems to be quilty of the same sin. Is it our location (Netherlands), it is the economy, Obama politics, shared employer, the weather? No clue, but in my case my unhappyness with my previous blog clearly added to the delay. For a while however I couldn't figure out what was wrong with it, but last weekend I found out where the bug was.

The title was OK, economic clusters. But somewere halfway I changed the subject to transactions and transfers as economic entities. So where did the cluster part go? Well, nowhere, so here it is. Finally.

The point I was trying to make by citing the Araujo/Spring article was basically that products are not transactional in economics terms when they are not accompanied with or even covered in some form or services such as warrenties, retailing, installation, insurance, after-sales services, etc. And when combined both physical and non-physical products can be well described as transactionable goods. So far, so good.

But, economists clearly classify the insurance, retail, installation and construction industries as services industries leaving only manufacturing and agriculture as product industries. Hence the rapid growth of the services percentage in the GNP figures. Araujo and Spring offer another alternative by focussing on the transactionality of the economic entity thereby effectively realising that a car with warrenties,and a dealer network becomes a transactionalable entity just like 8Mbit ADSL for one month from Vodafone. So Goods Rule!

But what to make of this example - a little story ....

I already told about my visit to the Frontiers of Services conference in San Fransisco last year. One day I was listening to a lecture by Walter Ganz from Fraunhofer Institute in Germany and he asked the following question: suppose BMW decides to outsource its canteen to Sodexho, what will happen to the services share of the economy? Before the outsourcing the canteen is figured into the numbers of the manufacturing industry, and afterwards it is in the catering industry which is accounted as services! Meanwhile, Walter stated rightly, nothing changed!

These two points (goods rule! and nothing changes through outsourcing) are the key reasons I believe we should stop accounting our economy by sectors:
  1. By looking at the transactionabililty of an economic activity we can overcome the difficulties associated with the product/services dichotomy. Instead we can focus on transactionable goods and transferable services. This will largely blur away the strict sectoral boundaries between OEM manufacturers and retailers, between insurance/banks and ICT companies and between architects and the building industry. It think it would be fairly easy (but still a formidable task) to break our economical statistics into transactionable goods and transferable services. If we could break down the revenues and profits of the current sectors into these two numbers a lot of the confusion raised by the product/service classification will be cleared.
  2. If we would to the same thing Dave Snowden suggests to do for narrative and clusters the activities of organisational entities on a wide range of opposing scales (for example efficiency focussed operational versus freaky controlled managerial) we would obtain a multidimensional dataset in which clusters of similar economic patterns (for example maintenance, selling, displaying, giving advice, helping achieve, counselling) will appear that were previously spread over multiple industries. It will also turn out that the same activity will be part of multiple clusters when displayed using different axes. And indeed, work done on a factoryline is both a production activity and a way to have social interaction with colleagues. This way we will enable ourselves to have multiple perspectives of the same activity which will also greatly enhance our understanding of what is really going on in our economy.
Well, I guess this one is covered, finally.

Thursday, 29 January 2009

Service Innovation Part 2: Economic Clusters

For a long long time we are being educated by economists that our economy has sectors.  The roughest devides it into Agriculture, Manufacturing and Services. But with 2%, 16% and 82% the Services sector is a bit too big to consider it a sector anymore. 

On the other hand, large chunks of these 82% have strong product characteristics. The energy, telecom,  rail and retail sectors are all good examples of services industries that primarily sell on a transaction basis: kWh, minutes, km and package are exact measures of what customers have to pay for.

These examples show that what contemparary economists reckon under services is a whole lot different that the defininition of my last post suggest. This is not a problem, but a fact one has to be aware of when talking about services.

One of the best - be it quite difficult - articles I've read so far that explains the difference between the "transactional" type of services and "real" services is an article titled Services, Products and the International Structure of Production by Luis Araujo and Martin Spring in Industrial Marketing Management 35 (2006).

Next to "transactional" services they put forward "transfer-based" services, i.e. services that are carried out without knowing in advance what will be the benifit / costs for both parties.  A good example is a consultancy meeting. None of the parties knows in advance if the time and money spent on the consultancy will be worth the money.

Furthermore they stress that it takes a lot of effort to make products transactionable, because the product itself is not transactionalble. For example, who would buy a car without warrenty? Who would buy one without a good networks of dealers to maintain it etc.

The same holds in my view for transferable services,  if they can be made transactionable, it will only be with a lot, a whole lot of effort.  And indeed, we notice that some consultants try to make "packages" of for example "change projects".  Often this still doesn't mean one knows in advance what change will achieved, but at least the time and the pricing can be set in advance. So, in fact, the services is still largely a transfer, not a transaction.

It would take a long story to go into a detailed analysis of Araujo and Spring's work, but as long as the take-home message "there are transactionable and transfer-based services" has landed, my goal for today has been reached.

Friday, 23 January 2009

Service Innovation Part 1a: Definitions explained

Hooray! Someone (named Bart) commented on my previous post. He said:

Interesting definition, though I do not get it yet. Could you specify what you mean with the design of the output and management of the process? Preferably with some (simple) examples?

When we take a closer look at the services definition we see it demands three properties:

  1. the process is the product
  2. the customer/user is in control of the design of the output/outcome
  3. the customer/user is in control of the management of the process
Lets have a look at all three properties.

The process is the product - In a classical manufacturing business the production-process of the product lies fully in the hand of the producer. The producer can specify how the product is manufactured in advance . In services this is not the case, the services process is created over and over again on the spot. An example:

When I take my family to a pancake restaurant (pancakes are a local specialty, beloved by young and old) the process that the restaurant staff and "us" go through from the moment we enter the parking lot to the moment we leave it, has not been designed in advance but is co-created by both. If the staff is friendly, reacts well on the presence of my kids and guide them in a smart way to the playground, it all starts well. But when I enter the restaurant disturbing the experience of other guests by shouting "Hey, get me a table for five, we are hungry" this will certainly affect the course of events to happen during the stay.

So the product that is created by our interaction is the process. This also rebunks the idea that the services proces is owned by the services provider. Noop! The process is mutually produced - co-creation - but the process is not owned by the provider. More on this later.

The customer controls the design of the output - At first sight it is confusing to have a product and an output. This is not very "normal" in the product world. There product and output are the same. At least when they leave the factory. But as soon the product enters the channel and comes into the retail phase, the services aspect start to kick in. And in real services industries the product is customized to the extend that one can ask: who designed this thing? Two examples:
  • In the same pancake restaurant, the second thing I do is taking a look at the menu so see if they serve "ginger-bacon". If they don't I look if they serve "bacon" and "ginger". So far I have not found a pancake restaurant that don't have the second set. So when they don't serve "ginger-bacon" as a combination I ask the waiter for exactly that. Saying "I see you serve "bacon" and "ginger" pancakes. Can I have the combination? The answer has always been "yes" so far. An the bill is usually one or two Euros higher than "normal bacon". Who cares?
  • Anyone who ever saw "American Chopper" on TV must have noticed that some customer pop in during the build phase. Most come out of curiosity, but it is very clear that when the customer would say "hey, can this frame be redone, I want it shorter/longer/higher/wider, his wishes will be fulfilled. And the poor guy that works on the frame for 2 weeks (and spend the last 3 polishing it) will happily shred the frame and start anew.

In thse example it is clear that the customer controls the output. Of course it starts with the fact that I decide which pancake to order from the list of usually 60 to 80. And next I "reconfigure" the output by ordering a version that is not on the menu. So again, I'm in control of the output (of the kitchen). The same holds for the bike example.

The customer is in control of the management of the process - In agricuture and manufacturing the producer manages the production proces (altough I guess some farmers will disagree). They specify when the factory runs (when the crop is harvested), what products are produced (what to grow this year), how may people/machines are employed (harvest quick or slowly), etc.

In services this is different. Whatever the interaction between services providor and customer, it is always free for the customer to say things must be done different, stop the process for a while or even walk away. This is less true for the services providor. If one says to provide a service one should do that (to best effort). A few examples:

  • In the pancake restaurant I can say to the staff that I want a new pancake because this one arrived cold, that I want the bill now, that we will skip coffee (or even stop halfway the main dish) or that we are leaving right away because on of the children got sick. Actually I don't have to explain at all why we are leaving. Ofcourse, when you ordered a 4 stage meal you have to pay the full amount, but still you can leave.
  • If you ordered a hotel stay and the hotel notices that you will be the only guest for that night, they can do two things: stay open and serve you or cater for a good (read normally better) place to stay. They cannot (or better shouldn't) run away from their hospitality obligations.
  • Last week we left a lunch-restaurant after waiting for over 45 minutes because our orders for two simple buns hadn't arrived yet and I was given bad service by the waitress too. So we left without notice.
  • In a taxi you can always say to the driver. Please stop, I've changed my mind, I want to continue my yourney on foot (to see that park).

Bullet 1, 3 and 4 show that it is the customer who manages the proces. He/she can speed up, stop, change the service-interaction. Bullet 2 shows that the "production" can be relocated (to another hotel), but this decision is customer-focussed, not production focussed. Imagine what happens when the customer says "no, I don't want to be relocated".

So in general the process is managed by the customer, he/she owns the process, where "owning" means full control over entering, delaying, speedin, stopping or changing the services interaction.

So "Bart" I hope things are a bit clearer now. If they aren't, please let me know, else I will continue with Part2.

Wednesday, 21 January 2009

Service Innovation Part 1: Definitions.

As a notion, Service is probably among the most undefined. But surely Innovation of Services is even worse as Innovation is undoubtedly the most (mis)used word today.

Following Schumpeter (yes, the guy from the 1930's) I'm a stubborn advocate of the following definition:

Innovation changes the values onto which the system is based 

A clear example of a changing value system, and the gale of destruction that made Schumpeter famous, is the storm that is raging today through the (American) car industry. Big = out, economic = in, design rules stronger than ever.

It is interesting to note that the changes in the customer value system are not caused by competitors but - for a large part - by a wider move in society towards green, sustainability and ofcourse the mounting pressure from relatives and the general public to act environmentally sound. So the gale has origins outside the car industry, which probably explains my stubborness to a large extend.

Now on to service. What is it? Ever since Lusch and Vargo busted four populars myths about services being intangible, heterogenous, inseparability (of production and consumption) and perishability (see JOURNAL OF SERVICE RESEARCH / May 2004)  it is clear that services involve or even consume products. Anyone who ever visited a restaurant will see that this is clearly the case. 

I must admit it remained a mistery to me too until I met two old scolars in San Fransisco last year: Joel Goldhar and Daniel Berg. I really think their definition has potential to become a classic:

It clearly is a service when the process is the product and the customer/user is in control of both the design of the output/outcome and the management of the process

To me this definition has a lot of potential to take away most of the current confusion around the services notion as it neatly defines who is responsible for what and it ends the confusion around the role of (physical) products as it clearly states that the process is the product.

I think that coming up with an even better definition for "service" would be tough nut to crack. So I won't attempt and use this definition and the one for innovation above to move on next time to the subject of Innovation in Services. 

Tuesday, 20 January 2009

How to buy a service?

Last week I visited Interpolis a large (I would almost say dominant) insurance company together with a group of people interested in SaaS (Software-as-a-Service). After a tour around around their building (reknown in the Netherlands for their free-seating policy) two presentations were given by Interpolis staff.

The first one is relevant for the topic of this blog: how to buy a service as it focussed on a proces-improvement for handling window damage of cars. And given the type of weather we had lately over here the timing was perfect. It turned out that the number of broken windows had risen to 600 a week lately.

But well, let's concentrate on the case. The dominant player in the local market is Carglass, which is a worldwide player too. Carglass had approached Interpolis about options to speed up claim coverage checking, that is the part where the insurance company tell Carglass who should pay the bill: Interpolis or their customer.

After implementation, effectively Carglass is now able to automatically check coverage in the Interpolis system, bringing down costs on both sides and also dramatically reducing the troughput time between claim and payment (from 4 months to less than 2 weeks). 

Here's the catch: because everything is automated, all the costs on the Interpolis side are incurred by the IT department, not by the business. Where formerly the call center did the communication and the administraters of  the business unit did the majority of paperwork a lot of costs were invisible or easily charged (f.e. 60 calls on the call centre). But now that everything has been reduced to bits and data-traffic  running on virtualized infrastructures, the overhead costs in the business units are zero and all costs fall with IT and are exactly visible but impossible to allocate because the internal organization has been split into operations units with separate P&L's and all refuse to pay the (low) bill!

A second phenonenon is that now that costs are visible, it turns out that Carglass is by far the most expensive for Interpolis. This fact caused a lot of discussion in the group as those of us that reacted as clients (customers)  said: well, that is OK, since the service we recieve from Carglass is far superior. Eventually this led to the conclusion by the Interpolis people that they had no way of "buying services", they still purchased "window replacement" as if they were buying "windows". 

As a community we concluded two things:
  1. Although not a SaaS issue, automating information exchange between organizations can reveal internal weaknesses w.r.t. cost allocation. Previously invisible costs disappear in multiple places while new costs can be allocated precisely but also results in non-sendable bills.
  2. The servitization of our economy poses new demands on organizations to leave the product-centered way of selling and buying and embrace more holistic (management) models. 
To me both point 1 and 2 are at the core of SSME/Services Science as in Services Organization, Opertation and Information go hand in hand.  And changing such a system is a complex endeavor which makes clear the strongly relation between change and Services Innovation. 

I'll scratch my brain meanwhile to blog in the latter subject next time.

Monday, 19 January 2009

Self-organization (for the worse)

This was one of those days that one wished things were self-organizing in another way. Reading books the last years made me feel self-organization was a positive thing, but what if powerful systems organize the wrong way?

What if lots of stakeholders cannot put their stake into the ground and stop the system from self-organizing for destruction. Ever had that impression?

No, I don't mean the financial crisis. I mean around you. The city you live in, the company you work for, the partners you work with, the church you go to.

Lately I'm pondering about ways to intervene in such situation without real power.  Can it be done by an idividual? Do you need a collective? Can it be done via a silent revolution? Can it be painless?

Any suggestion is welcome, reactions on suggestions even more.

Thursday, 15 January 2009


In my previous post I studied Organizational Learning in little detail. One of the major words therein is systems. One can ask someone "what is a system" and from the answer it is most often quite easy to guess the educational or even cultural background of that person.

In general Westerners refer to systems as a "thing". A building, a person, a train, a city. And technologists love to talk about their (harware/software) system too. Often in great detail.

Easterners more often refer to systems in the language of relations. Their community, their company, their family. Often in that order too. They consider themselves to be part of thereby often not even referring to themselves while Westerners would say the system consists of .... me, my friend, etc.

Another perspective on systems is found in pre-modern cultures where actually there is little system thinking as we know it, but people consider their movements during the day in terms of places. It is known that aboriginals talk about going from A to B via resting place C they refer to that yourney only by mentioning C. A and B are said to be not known in their world. I'm not an expert in that field, but can imagine that such a way of talking about traveving can work for groups that know their environment very very well.

In some sciences, sytems are identical with wholes. Parts, relations and interactions (processes) together form the system. And states (like the aboriginals' Place C) are an important concept too.

It is that kind of systems that I'm writing about in this blog. Systems that are not on their own, but related. For example, one cannot be a child without having a father and a mother. Becoming a mother creates the child and v.v. It is exactly what Maturana meant when he wrote: drawing a like creates the necessity to defend it. And as we all know. Lines are a major cause for war. Ask Europe!

And I want to write about the organization and stucture of such systems, knowing that the part can never be well unless the whole is well. Ask society today about the pain it feels from the state its financial part (sub-system) is in.

Wednesday, 7 January 2009

Is there a problem with organizational learning?

At the start of this blog I stated that I would love to see an integration of the ideas from Beer (VSM), Senge (Organizational Learning) and Snowden (Narrative Knowledge Management). I still do and will pursue, but noticed that VSM and NKM are more prominent thus far.

Looking for a reason why I did some soul-searching over the holidays that I want to share here. Ofcourse one of the things I did was rereading the Wikipedia page on Peter Senge. And the first time it all sounded quite plausable to me. But a few days later I felt the urge to reread once more and bang there is was, the last part of the sentence in the first paragraph on Organizational Development:

Senge emerged in the 1990s as a major figure in organizational development with his book The Fifth Discipline where he developed the notion of a learning organization. This views organizations as dynamical systems (as defined in Systemics) in a state of continuous adaptation and improvement .

Now I know what bothers me. It is not OL itself, it is that constant background noise of people saying that organizations should learn and change itself. Some even refer to organizational change.

What I like in particular in the VSM way of thinking (and strongly augmented by the work of Maturana and Varela) is the whole idea that the organization should not change. Living systems don't change their organization over their lifetime. They grow from infact to adult, learn new behavoir, the repair damage when harm is done, over time they change the way they act, they grow old and become unable to do things that were previously easy or harmless (such as skating), but their organization stays the same: all processes such as learning, repairing, (social) behavior, moving are static, but allow for an enourmous variation and adaptability.

For example, the process to organize the repair of a wound has been organized from day 1, long before the would is inflicted. It is there, part of the organization of the whole system, even if the "wound" means "loosing a leg". Maybe the system (the living system) won't survive the disaster, but even then the plan (the organization) to do the repair was present as an integral part of the way the system was organized.

So rereading the phrase once more I discover that Senge doesn't say the organization itself should change. It says the organization is in a constant state of change and adaptation. Am I an optimist when I interpret this as changing offering, changing teams, changing geography and not as changing organization?

Well maybe Senge indeed had this in mind and my initial bad feelings indeed only had an external cause. But on the other had, we can all see a lot of organizations lack at least a fews processes today that are mandatory for survival according to the VSM way of thinking. So even if Senge didn intend this, it is a fact that may organizations should change their organization, even without changing their inputs or outputs. And NKM hands us some very practical ways to discover them.

So lets continue this year with studying how to bring VSM, OL and NKM together in this highly fragmented world.