Discussion about UST Paradigm for Service Science

For the mail UST Paradigm page click here.

The definition seems to leave out business to business services which is of major importance to IBM - or can the client be a whole business?

No problem. The “Paradigm long form” subsection emphasizes that “Consumers and producers can be individuals, organizations, or information technologies.”

The focus on process is helpful, but we deal more with networks of businesses than we do internal processes. So the notion of value creation system (Richard Normann, Reframing Business) is a bit closer to what we deal with day to day - not to say internal processes are important and we do spend a lot of time improving other businesses processes (and our own occasionally as well !)

I consider networks to be structures of relationships between entities, and in the case of services we are talking about consumer-producer relationships. The service value creation system is a set of consumer-producer relationships that operates to satisfy the needs of various consumers within the system. The network view can easily be grafted in to the consumer-producer interaction paradigm.

Service systems can exist as value co-creation networks of business (outside the firm), as value co-creation networks of business components (inside the firm).

The UST paradigm imposes no restrictions on where the consumer-producer interactions occur (within the firm or between firms). We might distinguish between “internal services” and “external services.”

How would you redo your proposal if people, business components, firms, and value networks of firms were all types of service systems? Service systems all can produce and consume services – they are all prosumers in the current jargon. So what do you call the entities that can produce and consumer service – do you want to limit it to individual people, groups of people, firms, networks of firms? IBM's business requires the notion of service system to be a person one minute, a component of a business the next minute, and a whole firm or government agency the next minute.

If I understand correctly, it is not necessary to redo the paradigm, but rather to emphasize the generality.

The UST paradigm also does not impose restrictions on the entities involved in the delivery of services. We have “consumers” providing “inputs” to “production processes” which are controlled by “producers.” The consumers can be people, firms, data systems, or other things. The “inputs” can be physical objects (that need fixing), business processes (that need fixing), ideas (that need fixing), or other things. The production process is the service process when it acts on (or interacts with) with the customer inputs. The producers may also be people, firms, data systems, or other things.

It is true that entities are prosumers within a value network. You may have read my articles on service supply chains ^{1) 2)} which describe how services exist as supply chains and within supply chains. A central idea of that writing is that service supply chains are bidirectional, which leads to the formation of complex networks of “prosumers.” Nevertheless, in specific instances of value creation an given network entity may be either a producer (serving the needs of another for compensation) or a consumer (the recipient of the value) or both (as is the case with co-production and self-service).

(modified question) What do you see the role of Service Science? New discipline? Meta-discipline?

Here is a technology metaphor… I see Service Science as providing an API between various disciplines which are “legacy systems.” These legacy systems are all coded differently, even to the point of being “written” is different languages (discipline jargon) and running on different “hardware” (schools of thought). Service Science is middleware that allows the these legacy disciplines to interact for common purposes relating to the understanding of services.

Under this middleware perspective, participants are required to interface via an agreed-upon protocol. The protocol is quite general and not too restrictive. Complying with that protocol is therefore necessary if one wants to participate in Service Science.

I am proposing that the “protocol” be “consumer-producer interactions.” The goal is to graft in contributions from various disciplines pertaining to customer-supplier interactions. I come from a service operations management perspective, but I can understand and benefit from the contributions of computer scientists (as one example) who describe computer services in terms of consumer-producer interactions. As long as ideas are explained in terms of consumer-producer interactions, I believe we all can understand it and relate it to our discipline-specific conception of services.

The idea is that if everyone speaks in terms of consumer-producer interactions, we will be much easier to synthesize ideas for mutual benefit. That is my vision of Service Science.

Isn't the consumer-producer interaction concept the same as co-production which has been studied extensively?

Here is an excerpt from an article I have written on the subject (where I call it the “customer-supplier services paradigm”)…

The customer-supplier services paradigm is related to yet distinct from the well-studied concept of customer “co-production.” In the services literature, customer co-production is defined in various ways including “buyer-seller social interaction” (Wikstrom 1996, p. 10), customers serving as “partial employees” (Mills and Morris 1986), and customer “effort… before, during, and after” service encounters (Youngdahl, et al. 2003, p. 109). Generally, co-production refers to actions or efforts performed by customers.

There exists a possibility that the action of providing component inputs might be considered a special case of co-production, or that customer effort is a special case of component inputs. Indeed, Larsson and Bowen (1989, p. 217) extend Lovelock’s list of selves/belongings/information customer inputs by adding customer “actions participating in the service production”. However, for clarity we distinguish between customer action (i.e., co-production labor) and supplying component inputs (customers’ selves, belongings and/or information).

This delineation between component suppliers and labor is clearer under traditional manufacturing. The usual contribution of “suppliers” to the production process is the provision of components such as raw materials or parts. Labor does not normally provide component materials or parts, but provides effort. The concept of co-production identifies customers as effort-providing actors, whereas SP8 identifies customers’ selves/belongings/information as things to be acted upon. SP8 defines services as production processes acting on customers’ selves/belongings/information regardless of whether or not the customer is participating in the execution of the action.

That having been said, it is difficult to imagine a situation where customers are co-producers in a narrow sense (actors in production) but otherwise do not provide any self/belonging/information inputs to be acted upon. The closest example the author can imagine is the production process of a local cannery that produces canned goods for the poor and needy. Should the cannery be classified as a service? The cannery is primarily staffed by volunteer labor, which may or may not be the consumers of the resulting canned goods. The process appears to be a non-service manufacturing process, even when staffed by needy volunteers. For one thing, staffing and production does not appear to be based on demand or even forecasted demand, but based on the arrival of food raw materials. Yet, many individuals volunteer for mental and spiritual benefits, so from their perspective the cannery is providing a service.

Customer actions outside of production have also been called co-production (Chervonnaya 2003; Kellogg, Youngdahl, and Bowen 1997; Youngdahl, et al. 2003). With the exception of providing inputs, customer actions before and after production are not unique to services, but occur with all types of processes (Lengnick-Hall 1996, p. 802; Lovelock and Gummesson 2004, p. 26). Customers save money and do product research to prepare to purchase manufactured goods (or services). After production, consumers extract value from products that came from production, be it service or non-service production. This post-production consumer action is at the center of arguments that everything is a service (Vargo and Lusch 2004b). Although the broad use of “co-production” as a defining characteristic of services is precarious, a narrow view (see Lovelock and Gummesson 2004, p. 29) has merit.

One challenge with including even a narrow view of customer co-production in the set of customer inputs is the impact on process analysis. A useful way of analyzing any production process is assessing how inputs are transformed into desired outputs (Chase and Aquilano 1995, p. 6). Production processes are value adding processes, as compared with consumption processes which are value extracting (Merriam-Webster 2006). SP8 implies that services are production processes which add value to customer inputs – transforms their bodies, minds, belongings, or information into something of greater value to the customer. Those customer inputs are what Constantin and Lusch call operand resources, defined as “resources on which an operation or act is performed to produce an effect” (Vargo and Lusch 2004a, p. 2). Labor, on the other hand, is an example of an operant resource, “which [is a resources] employed to act on operand resources (and other operant resources).” Arguably, customers patronize services to have their operand resources transformed in a value-adding way. Their operant resource, i.e. their co-productive labor effort, is consumed during service production; customers would be unlikely to pay for the expenditure of their labor operant resource were it not for the fact that value is simultaneously being added to their operand resources.

The consumer-producer interaction paradigm seems to focus on specific process interactions. However, those processes exist within larger systems. Would we be better off by considering a broader scope of service systems?

It is true that these interactions exist within systems, and that the system-level of analysis is valuable. One problem is that systems often include service elements and non-service elements (and, as I have said, if we call everything a “service” the whole idea of a Service Science will implode). Therefore, I think we ground Service Science at the process-level where it can exist in a pure form, then consider how it fits into broader systems.

This was addressed in a 2006 article³⁾. The following is an excerpt…

“In the past, companies and even entire industries have been categorized as services (e.g., Kellogg and Nie 1995; Schmenner 1986), yet such can lead to convoluted analysis with unclear or incorrect conclusions (Verma and Young 2000). It is like trying to study a sidewalk painting from the top of a skyscraper: although one can make general observations about color and form, it is difficult to appreciate the details. It is no wonder that some casual observers conclude that “all businesses are service businesses,” even though it would be naïve to assume that all business processes have similar management characteristics and concerns. When we observe a business process from a thousand feet up, at the company or industry level, it is difficult to accurately differentiate between service processes and non-service processes.

“For this reason, the Unified Services Theory considers the unit of analysis to be the process, versus the firm or industry. The firm itself is a mixture of service and non-service production processes. It is important to remember that processes involving customer inputs are fundamentally and managerially different from non-service processes. Firms differ widely in composition of service and non-service processes, and therefore differ widely in relevant managerial principles. Further, service processes differ widely in terms of customer inputs, even with processes in similar businesses. Full-service investment brokers and discount brokers share many things in common, but differ in intensity of customer inputs. However, processes involving even slight customer inputs differ dramatically from processes devoid of customer inputs.”

Entities are interacting for a purpose? what purpose?

An important question. I would argue that the purposes for consumer and producer are similar yet distinct. The consumer purpose is to have SPECIFIC needs filled. The producer purpose is to receive compensation. It is true that compensation is for the filling of needs, but it is for the filling of GENERAL needs.

A simple example: I go to the dry cleaner – my purpose is to have cleaned garments so that I will be presentable in public (which is a component of my well being) – the dry cleaner's purpose is to be able to pay the mortgage, pay the employees, pay the owners, etc. I go to the dentist – my purpose is to have a cavity filled (since tooth decay detracts from my well being) – the dentist's purpose is to be able to pay the mortgage, pay employees, pay himself/herself, etc. In each case the service delivery system is designed by the producer around the needs of the *consumer* who (as a customer) decides whether or not to proceed with the service delivery.

(A fundamental premise of market economies is that consumers–or technically customers–decide whether or not service delivery will occur. Producers decide on the design and configuration of the service offering. I make no attempts to address concerns of command economies.)

Wouldn't it be better to avoid categorizing service players as “consumers” and “producers” and instead realize that individual entities can simulteneously be producers and consumers (“prosumers”). For example, consider arrangements where the money flows from both or in the opposite direction. This would lead to an alternate paradigm as follows:

• “Service science is the study of value co-creation interactions between a range of entities, people, businesses, and governments, that sometimes fall into producer-consumer roles, but not always - both entities have resources they must deploy to mutual benefit of both”

The following are examples: Any partnership where two co-investors try to co-create value – venture capitalist and entrepreneur, for example – in many cases - both put money and skin in the game. Also, taxpayer and government agency – the money flow is different. When someone collects trash or bottles and returns them for money. How is the person collecting the bottles the consumer? Husband and wife interactions - who is the producer and who is the consumer – they are co-creating value. Advertising also has some interest reverse or intermediated flows of dollars.

That is a very interesting question. The short answer is that there is great and essential value in differentiating between the roles of consumers and producers, and how it impacts interactions. In some situations the roles may overlap – in particular, consumers often but not always assume some role in production. However, in almost all situations the roles are significantly different, and the gain by collapsing roles is small compared with the benefit of considering the roles, IMHO. The following are some examples of differences between consumer and producer roles…

1. Producers provide specific fulfillment of needs, consumers provide generic compensation.

This thought comes from the prior section on “Purposes of entities” – producers and consumers each work to satisfy the needs of the other (i.e. improve each others' well being), however, service providers are usually specialists where as consumers are generalists (as far as ability to satisfy the needs of producers). The needs of producers are satisfied via the compensation received from consumers, which compensation is usually generic (e.g., “I don't care what customer the dollar came from – a dollar from one customer is as good as a dollar from another customer”). The needs of consumers are satisfied via the provision of producers with specific skills – you do not go to a dentist to have your house painted. Service providers are specialists. See Adam Smith for more information.

I am not saying that producers cannot fill generic needs of consumers, or that consumers cannot fill the specific needs of producers – but those occurrences are the exception in market economies.

2. Producers make decisions about the service offering, consumers make decisions about the transaction.

A primary responsibility of service producers is to make decisions about the scope and function of service offerings. That is not to say that consumers cannot participate in configuring the design – but they can only do it within the bounds provided by the producers. Web 2.0 provides many examples – consumers can decide on the content of their Facebook profiles, but only within the scope of technology provided by the Facebook service provider.

The responsibility for the transaction decision rests with the consumer, not the producer. That, alas, is the power of the consumer in free markets – the ability to decide whether to patronize a given service provider.

Of course, the counter-example people may think of is government services or other monopolies. However, I would argue that even those situations do not deny customers the decision prerogative. (I may decide not to register my car with the DMV, and instead choose instead the prison system as my service provider. )

One counter-example of a producer making a decision about a transaction was Samson from the Bible. His barber, Delilah, decided to cut Samson's hair when he was asleep. It didn't go well, and we conclude that it is better to leave the transaction decision to the consumer .

3. Partial employees are not the same as regular employees.

In cases of customer co-production, consumers act as partial employees of the service organization. Think of how dramatically these partial employees differer from regular employees of a service provider. The following are some examples:

1. Employee selection. Regular employees are selected by the service provider through an application and interview process. Partial-employees self-select. Counter-examples are rare.
2. Employee job description. Regular employees are given specific duties to perform, whether they want to or not. Partial-employees are encourage to do their part in service delivery processes, but compliance is not assured. It is difficult to ask customers-employees to do things they don't want to do. Counter-examples are rare.
3. Employee training. Regular employees can be required to attend training seminars. Partial-employees are normally “trained” by a customer-friendly process design (signage, layouts, etc.) Counter-examples are rare.
4. Employee compensation. Regular employees are primarily compensated through monetary means, and secondarily compensated through culture and social benefits. Partial-employees are usually paying customers, receiving greater benefit than the effort they provide.
5. Employee reprimand. As a normal course of business, regular employees are put on probation and dismissed if they fail to comply with policies. Despite the occasional hype about “firing your customers” that hits the press, partial-employees can get away with a lot before they are reprimanded by the service provider. Real, sustainable counter-examples are rare.

The point is that partial-employees are more akin to volunteers than they are to regular employees.

4. We cannot have a “customer focus” without delineation of consumer-producer roles.

Leading researchers from various disciplines have emphasized the need for “customer/consumer/user focus,” which requires a clear identification of that role.

My proposal for Service Science is that it is about how to be better service providers, not (necessarily) about being better consumers.

5. Co-production examples can usually be fit within a consumer-producer model.

The argument was made that a consumer-producer model does not fit all cases. That may be true, however I think I can be still be adapted to provide value even in cases of bidirectional cash flow and intense co-production. Let's consider your examples:

• Venture capital is interesting because, according to my model, the entrepreneur is the “producer” and the VC is the “customer,” since the VC compensates the entrepreneur for acting on the VC's money. Yet, VC's often take an active role in reducing risk, so there is a high degree of co-production. However, the roles described above are still manifested. For example, the entrepreneur primarily decides on the offering and the VC primarily decides on the transaction. Entrepreneurs typically treat VC's like “customers” and not like employees (unless some contract put the VC on the board, which makes them employees).
• I pay taxes, I get public schooling for my kids. My kids consume, and the school district produces. It is a monopoly of sorts, although I can _choose_ to move to a different school district. I can give my opinions about how education should be delivered, but the school district is mostly responsible for deciding on delivery.
• The person collecting trash or bottles and returning them for money – seems to have the person as the producer and the recycling center as consumer. The unusual thing about this example is that the producer decides whether to engage in the transaction. However, we might argue that this is not even a service example, since the producer can collect bottles completely independent from the recycling center, and only interact at the point of “sale” (i.e., cashing in the bottles). (A related example I have written about is a volunteer canning facility near my home, where people produce canned food for the poor.)
• Husbands and wifes indeed co-create value, but their roles are distinct. Perhaps that is a quintessential example of a non-monetary exchange system, which makes it an unusual application of the UST model. However, I think the greatest value in studying the spousal relationship is understanding implicit or assumed roles of each partner.
• An advertising example might be “spiffs”⁴⁾ and other joint advertising ventures, where a manufacturer pays a retailer for advertising of goods. That is interesting because the retailer indeed pays for products, but the manufacturer pays for the joint advertising. I would argue that these are two different relationships involving the same parties. The UST paradigm emphasizes a process focus – composite processes may contain contain elements of service and non-service sub-processes.

Over the years of presenting and teaching the UST paradigm to various groups, including MBA and Masters of Public Administration students, I have yet to come across an example where the UST model did not provide useful insight. My conclusion is that great values comes from understanding the differences in consumer and producer roles, and what those differences imply for service interactions.

Consider the ISPAR model, where a service system includes the following steps:

1. Interaction (initial contact between parties)
2. Service interaction
3. Proposal communicated (the value offering)
4. Agreement (agreement to engage in co-creation of value)
5. Realization of co-created value

(This is a simplification of the ISPAR model, since there are side-paths in the model.)

A service interaction requires communicating a value proposition (maybe just as simple as a big sign in front of a pizza shop) from one service system to a second service system, then an agreement between the service systems (perhaps as simple as walking into the pizza shop and walking up the counter and speaking an order), and then a period of value realization (money is exchanged, a pizza is delivered, the pizza is eaten, the person leaves the shop).

Don't forget to make and cook the pizza (which may be included in “pizza is delivered”).

The ISPAR model considers co-production to be part of the Realization step. It that consistent with the UST Service Science paradigm?

For my understanding I would describe an/the ISPAR model as:

1. Introduction - customer is introduced to the service provider (through word of mouth, advertising, prior experience, etc.)
2. Selection - customer decides to receive service (and producer agrees to deliver).
3. Provision - customer provides their input elements: specifications, requests, belongings, information, etc.
4. Acceptance - service provider agrees to accept the customer-provided elements (e.g., it is considered within the scope of what the service provider can and wants to deliver)
5. Realization - effort and resources is expended to realize value, but that would be expanded into essential sub-steps…

• Payment: “money is exchanged”
• Production (transformation of resources to create value potential): pizza is cooked, may also include “a pizza is delivered”
• Consumption (value extraction for the realization of consumer benefits): “the pizza is eaten”
• Disengagement: “the person leaves the shop”

Without these steps, the ISPAR model seems to be a marketing model, focusing on the sales and marketing dance. Forgive the stereotype, but marking views often trivialize production processes – its the old “operations people don't care about customers” and “marketers don't care about efficiency” rubbish.

The expanded Realization has important implications for service design (i.e. specification of the value offering). For example, the Realization steps could occur in different order: pay after you eat, leave before you eat, etc. – different ways of providing value.

Also, as I have argued, production tends to be producer-lead and consumption is consumer-lead. That means that producers have options of producing back-stage or front-stage, of fully customizing or assembly from limited components, of producing components in advance or at the time of demand, etc. A whole different set of options pertain to the consumption stage, but those options are limited by the interests and willingness of the consumer.

For example, Papa John's produces custom “take and bake” pizzas. They have extensive procedures to control production of their pizzas. However, their control over the consumption of the pizzas is limited to three lines of baking instructions: preheat, bake, cool. Papa Johns has little or no control over how those consumption steps are accomplished, if at all. (People can eat it raw if they care to, and even eat it with the wrapping on.)

Again, co-production seems to me to correspond to a part of the realization of value stage of the service-system-interaction-episode.

So, by exploding Realization, we observe different occurrences of customer involvement.

• during payment - high customer involvement and high producer involvement.

• during production (transformation of resources to create value potential): customer involvement varies from 0% and up. At most pizza shops the customer is not involved in pizza production (0%), but at some customers fill their own drinks. Again, an important “level of service” design issue is the appropriate amount of customer involvement in production.

• during consumption (value extraction for the realization of consumer benefits): very high customer involvement; producer involvement may vary from 0% and up.

• during disengagement: may involve the customer leaving the service provider, or the service provider leaving the customer (e.g., pizza delivery)

So, this is a big point about “co-production” “co-creation” or whatever we are referring to. If “co-production” refers to customer involvement in any stage of value Realization, then indeed, co-production occurs in every service. However, if “co-production” refers to customer involvement in the production/transformation stage, then co-production is not an element of all services, but rather is an important design consideration.

Vargo and Lusch have proposed a Service-Dominant Logic which “is focused on the interaction of the producer and the consumer and other supply and value network partners as they co-create value through collaborative processes.” ⁵⁾ Quotes from their 2004 article ⁶⁾ include:

• “the purpose of the firm is not to make and sell units of output but to provide customized services to customers and other organizations”
• “investment in manufacturing technologies constrains market responsiveness” and “firms will increasingly become more competitive by outsourcing the manufacturing function.”
• “[S-D logic] implies that the goal [of firms] is to customize offerings, and to strive to maximize customer involvement in the customization to better fit his or her needs” (p. 12).
• “Ultimately, the most successful organizations might be those whose core competence is marketing and all its related market-sensing processes” (p. 13)

So, should “the goal” of firms be to “maximize customer involvement?”

Although some firms may attempt to increase customer involvement, maximizing customer involvement is a dangerous goal for most organizations. One reason is the inefficiencies produced by interaction. As Chase observed, potential operating efficiency is an inverse function of customer contact (interaction) ⁷⁾.

Consider the example at http://en.wikipedia.org/wiki/Service_system ⁸⁾):

“For example, if a heating and air conditioning equipment manufacturer views itself in the temperature control business, then it could decide to sell climate control for a building rather than just mechanical devices. It could charge per cubic foot of climate maintained on a monthly or annual basis and/or through a payment plan involving gain sharing, in which costs are reduced as system performance rises, thus benefiting financially both the firm and the customer. A seller entering into such an arrangement has an incentive to look at everything about the building that will influence heating and cooling costs.”

One problem with this example is that it trivializes production concepts. It gives the impression that manufacturing competencies and service-provision competencies are similar, which is an inaccurate and dangerous assumption. I am so very thankful that HVAC manufacturers design HVAC units based on general market needs and produce them in China without any customer interaction – otherwise we probably could not afford them. And if I was going to start a “climate control” service I would much rather hire a manager from Servicemaster than a plant manager from Carrier.

Even for services, more interaction is not always (or not often) a wise goal. Unavoidable market pressures towards commoditization will kill service providers who over-server the market – i.e. provide interactions that incur costs greater than the value of those interactions to customers. This is a service equivalent of Clayton Christensen's “Innovators Dilemma” model (see http://en.wikipedia.org/wiki/Innovator%27s_dilemma), which talks about product manufacturers over-serving the market with more and more product features, until an innovator enters the low-end of the market and takes over the market.

Under that logic, the UST model (and Chase's model taken with Christensen's model) would have predicted that:

• Dell would fall into hard times, since their PC production required interaction and HP's did not.
• IBM would have to get out of the notebook computer business, since IBM's competence is in high-interaction production, not commodity production.
• Ritz-Carlton would go bankrupt or be acquired (which happened, by Marriott), since they had provision for interaction at a level much greater than the target market demanded.
• That the trend in investment services would shift to discount brokers at the expense of full-service brokers (who offer interaction at a level consumers are not willing to pay for).
• That the growth in retail would be primarily be in the Costco and Wal Mart segment, which requires/provides minimal interaction.

More interaction is good for new and innovative service value propositions. As products or services mature (i.e., move towards commodity status to some degree), less interaction (or at least less human interaction) is usually better.

What does the UST Service Science paradigm say about service innovation?

The UST Service Science paradigm has service innovation focus on facilitating interactions between service providers and service consumers. This may include service technology systems which “allow relatively inexperienced people to perform very sophisticated tasks quickly – vaulting them over normal learning curve delays.” ⁹⁾ (cited by http://en.wikipedia.org/wiki/Service_system).

If you have more interest on this topic, I have a manuscript titled “The Seven Supply-Chain Roles of Service Customers and Implications for Service Innovation.”

What about a proposal that “Service Science be the science of the cooperative creation of value?” Does that capture the same idea?

Cooperative creation of value is broader than “producer-consumer interactions” since cooperative creation may allow any group of partners to create value. It may include employee-management relations within a factory, for example, which has been well-studied in the field of industrial psychology. “Cooperative creation of value” is extremely broad, perhaps too broad.