Organizational and IT Perspectives of Service Systems and Networks

Without question, a competitive service organization is a system that is always well developed, cost-effectively controlled, and efficiently managed. We fully understand that a service organization must be positioned in offering service products to its prospective customers. However, the real value of service is not created until the offered service products are utilized by customers who acquired the services. As discussed in the preceding chapters, to a service provider in today's service-led economy, it is the people (customers and employees) rather than physical goods that must be put first and are at the center of its organizational structures and operations. To the service customers, service satisfaction in light of meeting their meets is what truly matters although the eventual satisfaction is subjective and varies with a variety of factors. Regardless of the size and nature of a service business, the daily operations of a service organization are commonly run and managed through some fundamental while relevant business processes (Figure 5.1).

Because we must focus on engineering and delivering services using all available means to meet the technical functional and socioeconomic needs and hence realize respective values for both providers and consumers, competitive service organizations essentially are social-technical service systems that must optimally leverage both the strengths of people and technologies under given serving circumstances. As discussed in Chapter 3, the fast advancement in distributed computing and interconnected network has significantly increased the role and power of IT and communications, transforming the ways how the service industry operates (Berman, 2012). By using service-dominant thinking while leveraging the increased flexibility, responsiveness, and capability of service business operations and management, service organizations can be realistically operated as effective sociotechnical service systems, improving business operational productivities and delivering new high levels of job and customer satisfaction (Qiu, (2013a).

Before we delve into the insights of system business structure and operations in a service organization or system, let us briefly review some core service science concepts we discussed in the earlier chapters. A service system essentially consists of service providers, customers, service products, and processes. As compared to a producing-goods system, a service system must be people-centric. The value of a service that is created along with the process trajectory throughout the lifecycle of the service largely depends on the sociotechnical dynamic behaviors of the service system that offers, engineers, and delivers the service. When we trace a service trajectory, we find that the service trajectory is nothing but a service encounter chain.

Although technical functions in service are fundamental, service is largely measured using a list of subjective measures, varying with customers and the corresponding service context. On a service encounter chain, a later encounter is inevitably influenced by the immediately preceding one; employees or customers could also be influenced by other previous encounters that they may have had before if those are somewhat functionally or sociopsychologically related. Therefore, a service provider should effectively account for the relevant and correlated Ps from all the 8 Ps at the point of interaction. It is critical for the service provider to ensure that each service encounter can be carried out in a satisfactory manner.

For example, Ramdas et al. (2012) suggest that four different dimensions in service encounters, including the structure of the interactions, the service boundary, the allocation of service tasks, and the delivery location, should be well identified, aligned, and executed in service provision. Mutual values for both customers and providers must be met at the same time. However, conventional wisdom is not necessarily effective and efficient as each interaction at its point of service is sociopsychologically unique. To ensure that each interaction in a service system can become effective and efficient, we have to have the service system developed, controlled, and managed well and with scientific rigor.

To ensure readers to get a comprehensive understanding of service provision in the systems perspective, in this chapter we fully discuss the following areas:

• Service, first and foremost, as an offering of a service system that can fulfill the customer's need through a process of transformation
• Putting people first in a service system: a focus on service interactions and social capitals
• Service system dynamics with a focus on smarter operations: the empowerment of systems and technologies
• Competitiveness, sustainability, and innovation: themes in the social and technical dimensions

When all the above-mentioned areas are well considered in building, operating, and sustaining a service system, each service provision from beginning to end within the service system can thus be performed in a satisfactory manner.

5.1 Service as an Offering of A Service System

First, let us briefly look at the list of some essential daily life services discussed in Chapter 1:

• Restaurant Food Services. Catering service is surely driven by the quality of foods and customer's perceived pleasure and service satisfaction. Frequently word of mouth plays a key role in choosing a restaurant when we plan a dinner for a party. Although many factors would influence the perception of service perceived by customers, there is no doubt that, it is the time and experience the customers enjoy during their stay in the restaurant that matters the most.
• Car Services. For a regular maintenance, we call a car service shop and schedule the needed service. On the scheduled day, we take the car scheduled for service to the shop. After we confirm with a receptionist on the needed maintenance, we drop the car there and leave for work. We will be informed of the completion of the service. We pick up the car after we pay the due. Getting the requested maintenance done well surely is the highest priority for the shop. However, appropriately managing a customer's each interaction throughout the designated maintenance service process plays a critical role in ensuring that the market competitive level of service quality and satisfaction is positively perceived by the customer.
• Residential Gas or Electricity Services. We call a local office of a gas or an electricity service provider we choose and inform the service provider of the date when we move in. When we move out, we simply do the same. We pay the bill based on the monthly usage of gas or electricity. We interact with the service provider only if there would be a problem with power lines, gas pipes, or a discrepancy in a monthly bill statement.
• Resident Education. We register a course and then go to school to attend instructor-led lectures or laboratory sessions as scheduled. We surely work on assignments and take exams or finish projects in due course. It is well recognized that student–instructor and student–student interactions throughout the course are academic and pedagogical engagements that are considerably appreciated by the students.
• Online Training. We register a training course. No matter where we are, we can log on whenever we have time and an Internet connection. We read lecture notes and watch or listen to recorded lectures via a variety of online social media. Without question, online training is quite different from resident instruction-based education. Student–instructor and student–student interactions throughout an online course are often conducted asynchronously over the telecommunication means or networks. The training quality of online training perceived by the trainees is also considerably influenced by the involved virtual interactions.
• Federal Bureaus or State Agencies. Again, we can use a driver license renewal service as a typical example of utilizing state-level governmental services. We fill in renewal forms online. Letters from Department of Transportation of the state we live will arrive in a few days, which informs us of the time and location to have our driver licenses renewed. We show up at the designated office on the date indicated in the appointment letter. A staff at the office will assist us to finish the whole renewal process. Photographs will be taken, our signatures will be required, and accordingly new driver licenses will be issued. Service encounters essentially manifest as a variety of social and transactional interactions.
• Global Project Development. A software project development virtual team has six small groups of people, populating in six different geographic regions. Each group has certain unique skill sets of from 5 to 15 talent employees. A top-level management group manages the entire virtual project team. A project draft specification might be brainstormed when the top-level management group meets with a group of customer representatives. The project specification might be revised and enriched as time goes. Customer representatives could be directly or indirectly contacted by group members if necessary. A series of interactions and coordination, physically and/or virtually, were necessary. Surely each interactive activity in the process of transformation adds a value into the solution in an integral and cocreative manner.
• Health Care Service Networks. The example of an outpatient in Chapter 1 shows how a typical US health care service is performed. Regardless of how many facilities or doctors and specialists the outpatient has to visit, each interaction plays a key role in the patient's recovery process.

Evidently, service, first and foremost, is an offering of a service system that truly has the potential of fulfilling the customer's needs through a customer processing operations (CPO) process with the support of the necessary operational resources. Its value is cocreated through service provision in a systemic and collaborative manner. Offering competitive service has truly become a business goal manifesto in any service organization, while in reality customers deserve better service than most service organizations are prepared to provide them (Fisk, (2009). Offerings that well meet the customer needs require systematic and effective executions of service strategy, marketing, design, and operations in service organizations. Figure 5.2 shows the operational perspective of service, highlighting the systems operations that must be well addressed and supported by smart service systems.

For a service system to be competitive, the real challenge is how its service practices and operations can be always and appropriately aligned with its offerings throughout the service lifecycle. Although we had quite detailed discussions of service system dynamics at a high and abstract level in Chapter 3, in practice we must drill down all operations and interactions in the service system (Figure 5.2), internally and externally, to an operational level at which all actions must be implementable, executable, and controllable.

Figure 5.3 shows that service business practices and operations can be operated and managed by adopting an end-to-end process-driven approach (Qiu, (2013a). As analyzed earlier, an offering of a service system truly has the potential of fulfilling the customer's needs. However, by the end of a day, it is a CPO process with the support of the necessary operational resources that governs the value cocreation of service during service provision in a systemic and collaborative manner. In other words, all operational actions in phases throughout the lifecycle of service should be well aligned with all operational business processes in a service system. It becomes necessary to explore effective approaches to help us understand and manage service planning, marketing, design, and operations in service organizations. Note that we focus on service offering and essential corresponding supports in a service system in the remaining part of this chapter; we will explore service provision in light of service encounter networks in a great detail starting from Chapter 6.

5.2 Putting People First

No matter what services are offered and how they are delivered, in reality, high living standard with better quality of life is what we as human beings are pursuing. When the communities in which we are living are deeply studied, we understand that our communities are truly IT-driven service-oriented in today's information era. Here are a few daily noticeable, inescapable, and more contemporary service examples that could be on demand at any time and place (Dong and Qiu, (2004); Qiu, (2005):

• A passenger traveling in a rural and unfamiliar area suddenly has to go to a hospital because of his sickness, so local hospital information is immediately needed at the point of need. He and his companions wish to get the local hospital information through their cellular phones. Generally speaking, when travelers are in an unfamiliar region for tourism or business, handy and accurate information services on routes and traffic, weather, restaurants, hotels, hospitals, and attractions and entertainments in the destination region become very captivating and helpful.
• A truck fully loaded with hazardous chemical materials is overturned on a city suburban highway. As the chemicals could be “pretty poisonous,” people on site need appropriate knowledge (i.e., intelligent assistance) to quickly perform life saving and other critical tasks after one calls 911 (in the United States). However, people on site most likely cannot perform the tasks effectively because of the limited knowledge and resources. Situations could be worse if the task is not done appropriately, which could lead to an irreversible and horrible result. Intelligent assistant services are necessary at the point of need. Obviously, the situation demands a quick response from the governmental IT-driven emergency responsive systems.
• Transportation plays a critical role in warranting the quality service and effectiveness of a supply chain. When a truck is fully loaded with certain goods, certain attentions might be required from the driver from time to time, for instance, air, temperature, and/or humidity requirements. Only when the requirements are fully met on the road, can the goods in-transit be maintained with good quality. Otherwise, the provided transportation service could be unsatisfactory. Owing to the existence of a variety of goods, it is impossible for the drivers to master all the knowledge on how the goods can be best monitored and accordingly protected on the highway as many uncertain events might occur during the transportation of goods. On-demand services to assure the warranty are the key for an enterprise to lead the competitors. As manufacturing and services become global, more challenges are added into this traditional service.
• The growing elderly population draws much attention throughout the world, resulting in issues on the shortage of labors and more importantly the lack of effective health care delivery methods. Study shows that elder patients (65 or older) are twice likely to be harmed by a medication error because they often receive complex drug regimens and suffer from more serious ailments that make them particularly vulnerable to harmful drug mistakes. Outpatient's prescription drug-related injuries are common in elder patients, but many could be prevented. For instance, about 58% adverse drug events could be prevented if the continuity of care record plan and related health care information systems are adopted for providing prompt assistant services; over 20% drug-related injuries could be prevented if the given medication instructions are provided at the point of need so that the instructions are adhered by the patients.

Apparently, the real-time flow of information and quick delivery of relevant information and knowledge at the point of need from an information service provider/system is essential for providing quality services to meet the on-demand needs described in all the above-mentioned scenarios. Putting people first surely is the norm. Noah (2010) argues that “well-established research on the service-profit chain—the link between companies with a reputation for excellent service and profit—married with the assertion that happy staff equals happy customers, is disputed by few.”

Obviously, putting people first in a service system is the natural response to the shift from manufacturing to service. The philosophy of putting people first essentially promotes the people-centric concept. Indeed, we have been cultivating the concept of people-centric service systems from Chapter 1. Hence, focusing on service interactions and leveraging social capitals are fundamental tasks in building, operating, and managing today's service systems.

According to Pfeffer and Veiga (1999), research, experience, and common sense all increasingly point to a direct relationship between an organization's success and its commitment of treating people as the most important in business operations. However, lacking effective mechanisms of capturing people's behavioral dynamics in real time made organizations difficult in directly connecting people in organizational management practices before. Promisingly, the significant advances in networks, telecommunication, and computing technologies have made it possible for us to have effective mechanisms of capturing people's behavioral dynamics in real time.

Because of the pervasiveness of networking and information technologies, people, organizations, systems, and heterogeneous information sources now can be linked together more efficiently and cost-effectively than ever before. We all have witnessed that the quick advances of IT has significantly transformed not only science and engineering research but also people's expectation on how to live, learn, and work since the turn of this new millennium. Surely life at home, work, and leisure gets easier, better, and enjoyable (Qiu, (2007).

As a variety of devices, hardware, and software become network aware, almost everything is capable of being handled over the network. Thus, many tasks can be done onsite or remotely, in the same manner so are a variety of services provided, or even self-performed over the Internet. In the business world, because of the enabled rich information linkages, the right data and information in context can be delivered to the right user (e.g., people, machine, device, software component, etc.) in the right place, at the right time, resulting in the substantial increase of the degree of business process automation, continual increment of production productivity and services quality, reduction of services lead time, and improvement of end users satisfaction. At the end of a day, end users or consumers do not care about how and where the product was made, by whom, and how it was delivered; what the end users or consumers essentially care about is that their needs are met in a satisfactory manner (Qiu, (2007).

5.3 Controllable and Tractable Service Systems in Pursuit of Smarter Operations

Enterprises are eagerly embracing for building highly profitable service-oriented businesses through properly aligning business and technology and cost-effectively collaborating with their worldwide partners so that best-of-breed services can be generated to meet the ever-changing needs of customers. To be competitive in the long run, it is critical for enterprises to be adaptive, given the extreme dynamics and complexity of conducting businesses in today's global economy. In an adaptive enterprise, people, processes, and technology shall be organically integrated across the enterprise in an agile, flexible, and responsive manner. As such, the enterprise can quickly turn changes and challenges into new opportunities in this on-demand business environment.

IT as a service is a high value service area, which also plays a pivotal role in support of business operations in a service-oriented enterprise. The delivery of IT service for a service business requires knowledge workers who have sound and deep understandings of IT, organizational structures, and behavior, as well as human behavior and cognition science in general (IBM, 2004). For IT systems to better serve a service enterprise, service-oriented business components based on business domain functions are necessary (Cherbakov et al., (2005). However, the real question to us is what a systematic approach and adequate computing technologies will ensure that engineered IT-enabled service systems can lead to the success of building an adaptive and people-centric enterprise, resulting in that competitive service engineering, operations, and management across the business can be realized.

The remaining parts of this section briefly discuss how enterprise service computing is evolving (Qiu, (2007). The quick advances of enterprise service computing make possible enable IT to control, manage, and empower service systems in a cost-effective and adaptive manner. Hence, IT-enabled service systems can be truly people-centric while computational, resulting in the realization of smarter service business engineering, management, and practices.

5.3.1 Overview of Enterprise Service Computing

Computing technologies (e.g., software development) unceasingly increase their complexities and dependencies in order to capture and help maneuver the increased complexity of business operations within and across enterprises because of the accelerated globalization economy. For instance, aiming to find a better approach to manage complexities and dependencies within an IT-enabled system, the practice of software development has gone through several methods (e.g., conventional structural programming, object-oriented method, interface-based model, and component-based constructs). The emergence of developing coarse-grained granularity constructs as a computing service allows components to be defined at a more abstract and business semantic level. Technically, a group of lower level and finer grained object functions, information, and implementations within software objects/components can be choreographically composed as a coarse-grained computing component or service. As a result, deployed computing services can support and be well aligned with daily operational activities conducted by employees or customers.

The componentization of a business is the key to the construction of best-of-breed components for delivering superior services to customers. Successful operations of a componentized business require seamless enterprise integration. Technically, a service-oriented IT-enabled system makes more sense in support of people-centric service businesses as it is able to deal with more types of people-centered interactions among heterogeneous while interconnected computing components. As a result, a service-oriented IT-enabled service system is more flexible and adaptive than an IT-enabled service system based on other approaches.

As computing technologies evolve over time, adaptive and semantic computing services that represent and align business functions and activities meet the needs of developing service-oriented IT-enabled service systems. Indeed, when computing components manifest themselves as operational and support services at the business level, an IT-enabled service system becomes a component-based network, fundamentally illustrating a logic assembly of interconnected service computing components. “The need for flexibility across the value net requires that the component network be flexible; that is, the enterprise can ‘in-source’ an outsourced component and vice versa; replace, on demand, a current partner with a different partner; change the terms of the contract between the two components, and so on” (Cherbakov et al., (2005).

A generic service-oriented IT computing architecture in support of the development of a component-based service network (i.e., enterprise business-level services) is illustrated in Figure 5.4. The top two layers represent service operations from the business process perspective while the bottom three layers show the value-added service processes from the computing perspective. Apparently, how to optimally align enterprise-level business strategies with value-added operations/activities is the key to the success of the deployment of an agile enterprise service-oriented IT-enabled service system (Qiu, (2007).

However, the exploitation, establishment, control, and management of dynamic and inter- and cross-enterprise resources that are highly related and significantly contribute to the realization of the agility of a service-oriented IT-enabled service system require new methodologies, technologies, and tools. The remaining discussion hereafter focuses on the following three evolving synergic IT research and development areas, aimed at providing some fundamental understandings of the emerging methodologies, technologies, and tools in support of the deployment of IT-enabled services. Indeed, the following methodologies, technologies, and tools are essentially consisting of and delivering the adaptive enterprise service computing discussed in this section.

• Service-Oriented Architecture (SOA). SOA is considered as the design principle and mechanism for defining business services and computing models and thus effectively aligning business and IT.
• Component Process Model (CPM). Component business process model facilitates the construction of the business of an enterprise as an organized collection of business components (Cherbakov et al., (2005).
• Business Process Management (BPM). BPM essentially provides mechanisms to transform the behaviors of disparate and heterogeneous systems into standard and interoperable business processes, aimed at effectively facilitating the conduct of IT-enabled system integration at the business semantic level (Smith and Fingar, (2003).

5.3.2 Service-Oriented Architecture

According to Datz (2004), “SOA is higher level of [computing] application development (also referred to as coarse granularity) that, by focusing on business processes and using standard interfaces, helps mask the underlying complexity of the IT environment.” Simply put, SOA is considered as the design principle and mechanism for defining business services and computing models and thus effectively aligning business and IT (Figure 5.5) (Newcomer and Lomow, 2005).

On the basis of the concept of SOA, a deployed service-oriented IT system can establish a standard framework for cost-effectively and efficiently managing and executing distributed heterogeneous services including human tasks within an enterprise and across service networks. To properly implement service-oriented IT systems that are well complied with SOA principles, three major levels of abstraction (as shown in Figure 5.4) throughout collaborated IT systems are necessary (Zimmermann et al., (2004):

• Business Processes. A business process typically consists of a set of business actions or activities that are aligned with specifically defined short- and long-term business goals. A business process thus requires a variety of computing services. Service invocations frequently involve business components across the formed service network. Examples of daily business processes could be: initiate new market campaign, sell products or services, coordinate projects, and order fulfillment management.
• (Computing) Services. A service represents a logical group of computing operations at a designated organizational level. For example, if customer profiling is defined as a service, then, lookup customer from data sources by telephone number, list customers by name and postal code on the web, and update data for new service requests could represent the associated operations.
• (Computing) Operations. A computing operation represents a single logical unit of computation. In general, the execution of an operation will cause one or more data sets to be read, written, or logically processed. In a well-defined SOA implementation, operations have a specific, structured interface, and return structured responses. An SOA operation can also be composed of other SOA operations in support of high level structures and enhanced maintainability.

Technically, SOA as a design principle essentially is concerned with designing and developing integrated systems using heterogeneous network addressable and standard interface-based computing services. Over the last decade or so, SOA and service computing technologies have gained tremendous momentum with the introduction of Web services (a series of standard languages and tools for the implementation, registration, and invocation of services) (Thomas, (2005). Enterprise-wide integrated IT systems based on SOA ensure the interconnections among integrated applications in a loosely coupled, asynchronous, and interoperable manner. It is believed that BPM (as transformative technologies) and SOA enable the best platform that can fully leverage existing information assets while facilitating enterprises in positing their IT systems capable of adapting to the future investments in an amenable way (Bieberstein et al., 2005).

5.3.3 Component Process Model

Given the increasing complexity and uncertain dynamics of the globalized business environment, the success of a business highly relies on its underlying IT systems to support the evolving best practices in an organization. In adaptive enterprise service computing, the appropriate design of IT-driven business operations mainly depends on well-defined constructs of business processes, computing services, and operations. Hence, to make this promising SOA-based component network architectural model implementable, it is essential to have a well-defined process-driven analytical and computing model that can help analysts and engineers understand and optimally construct the operational model of an enterprise with a consideration of its implementation of needed IT supports.

A business process typically consists of a series of computing services. As a business process acts in response to business events, the process should be dynamically supported by a group of services that are invoked in a logic sequence. To ascertain the dynamic and optimal behavior of a process, the group of underlying computing services should be selected, sequenced, and executed in a choreographed rather than predefined manner according to a set of dynamics business rules. A computing service is made of an ordered sequence of computing operations. Therefore, in support of adaptive enterprise service computing across an enterprise, CPM serves as a design and analytical method and platform to ensure that well-designed operation, service, and process abstractions can be characterized and constructed systematically (Cherbakov et al., (2005); Kano et al., 2005; Zimmermann et al., (2004).

More technically, we articulate that CPM provides a framework for organizing and grouping business functions as a collection of business components in a well-structured manner, so the components based on business processes can be modeled as logical business service building blocks that can appropriately represent corresponding business functions as desired. Figure 5.6 schematically illustrates a simplified components process model for a service provider (Cherbakov et al., (2005). Just like many business analysis diagrams, CPM can also be refined in hierarchy. In other words, a process can be composed of a number of refined processes in a recursive manner.

As CPM can accurately model the business operations using well-defined computing services in SOA terms, CPM helps to analyze a business and develop its componentized view of the business. Furthermore, the developed model for the business will define components that clearly describe the interfaces and service-level agreements between coordinated and collaborated services. Promisingly, each business component will be fully supported by a set of IT-enabled services, while meeting the requirements of the deployment of adaptive enterprise service computing (Cherbakov et al., (2005).

5.3.4 Business Process Management

BPM emerges as a promising guiding principle and technology for integrating existing assets and future deployments. BPM is new in the sense that it can orchestrate among existing disparate and heterogeneous systems by promoting business process services to increase business agility when it is applied to conducting IT system integration; it differs from other approaches that simply focus on integrating those systems using EAI (enterprise application integration), API (application programming interface), Web services coordination, etc. By providing mechanisms to transform the behaviors of disparate and heterogeneous systems into standard and interoperable business processes, BPM essentially aims at enabling a platform effectively facilitating the conduct of IT system integration at the semantics level (Smith and Fingar, (2003). As an SOA computing service at the system level essentially is the business function provided by a group of components that are network addressable and interoperable, and might be dynamically discovered and used, BPM and SOA computing services can be organically while flexibly and choreographically integrated, which is schematically illustrated in Figure 5.7 (Newcomer and Lomow, 2005).

In essence, BPM takes a holistic approach to promote and support enterprise service computing from the business process execution perspective, substantially leveraging the power of standardization, virtualization, and management. BPM initiatives include a suite of protocols and specifications, business process definition metamodel (BPDM), business process modeling notation (BPMN), and business process execution language (BPEL). By treating business process executions as real-time data flows, BPM provides the capability of addressing a range of choreographic business challenges, encompassing people-centered services, and supporting business operations execution in real time.

BPDM is defined for modeling complex business processes. Using the BPDM specification to describe the business process metamodel of an enterprise provides the abstract model of the enterprise. The abstracted model is programmatically structured and represented using extensible markup language (XML) syntax to express the defined executable business processes and supporting entities for the enterprise. Relying on business process diagrams, BPMN provides the capability of defining and understanding internal and external business operations for an enterprise. Through visualization it gives the enterprise the ability to communicate these modeling and development procedures in a standard manner. BPEL for Web services then defines a standard way of representing executable flow models, which essentially extends the reach of business process models from analysis to implementation through leveraging the power of Web service technologies.

The emergence and evolution of BPM enable an innovative platform for conducting IT system integration. BPM enables service-oriented IT systems over the interconnected networks to be able to dynamically and promptly coordinate the behaviors of disparate and heterogeneous computing services across enterprises. It is the BPM that business agility is retained while the return of IT investment gets maximized. Most importantly, BPM with the supports of SOA and CPM can surely make IT-enabled service organizations truly people-centric and computational. Hence, service science can be well applied in the realization of smarter service business engineering, management, and practices in the service organizations.

5.4 Competitiveness, Sustainability, and Innovation: Systems Approaches to Explore The Sociotechnical Natures of Service Systems and Networks

Dynamic changes and uncertainties are prevalent in the business world. Whether a service organization (or simply called a service system) can fast adapt to the changes and uncertainties relies on approaches that can be applied effectively to address competitiveness, sustainability, and innovation issues in its corresponding business practice and operations. According to Becker et al. (2001), General Electric (GE) had a team to identify such an approach by looking into hundreds of team-based problem-solving and employee empowerment programs (i.e., project development services) within GE in the late 1980s and early 1990s. The team found that a high quality technical solution was insufficient to guarantee success. As a matter of fact, an extremely high percentage of failed programs had excellent technical strengths. The team further identified that paying little attention to the challenges in the sociopsychological dimension actually derailed the programs.

GE's exploration resulted in the so-called change effectiveness equation, , which is widely used as a model to describe a solution to address change acceleration phenomena. Essentially, the effectiveness () of a solution to meet the changing needs of end users is equal to the quality () of the technical attributes of the solution and the acceptance () of that solution by the end users. Our service value diagram absolutely matches GE's change effectiveness model (Figure 5.8). The service value equation, , means that paying attention to the people side of the equation (i.e., acceptance by end users) is as important to success as the technical side (i.e., quality of technical attributes).

If the service value equation () is further drilled down from the viewpoints of both providers and customers (Figure 5.9), we will have the following refined equations:

• For Service Providers. , is a set of technical attributes that defines the service, and is a set of socioemotional needs that contribute to job satisfaction.
• For Service Customers. , is a set of utilitarian requirements that satisfy the agreements and specifications understood by the customers, and is a set of sociopsychological perceptions that significantly contribute to customer satisfaction.

Therefore, in both organizational and operational perspectives, service organizations must allocate right resources and operate their businesses in such a way that the service value equation reaches an optimal value by maximizing the overlapping areas of and defined in Figures 5.8 and 5.9.

In practice, competitive and innovative service delivery models are essentially derived by working closely with customers to cocreate creative and unique solutions best meeting customer inevitably changing needs. According to Rangaswamy and Pal, a competitive service business model for an enterprise should be clearly described using a service innovation framework in organizational perspective (Figure 5.10). “The framework can guide the creation of customer value and demand, and the processes and organizations that deliver services successfully—all of it catalyzed by emerging technologies” (Rangaswamy and Pal, (2005).

In Chapter 2, we discussed the complex relationships between employee satisfaction, customer retention, and profitability and emphasized that we must rethink service encounters and find scientific ways to build and manage people-centric, information-enabled, coceration-oriented, and innovative service organizations in the service-led economy (Heskett et al., (1994); Lovelock and Wirtz, (2007); Chesbrough, (2011); Qiu, (2013b). Given the increasing complexity and variation from service to service, vertical service domain knowledge of modeling and frameworks should be first investigated. Only when a better understanding of a variety of services domains is accomplished, can an integrated and comprehensive methodology to address the services model and innovation framework across industries be explored and thereafter acquired. Vertically or horizontally, there is a need for a systematic approach to address how such a service innovation framework and modeling shown in Figure 5.10 can be optimally applied in practice, which is what we mainly discuss in this section.

Systems approaches to manage and control service systems essentially are methodologies for assisting us to make optimal decisions of transforming service business practices while reducing corresponding transformation risks. Competitive edges can be created for a service system only if we can deliver closed-loop and real-time controls of service business engineering, management, and practices. Figure 5.11 illustrates such a desirable systems approach, which is derived from Figure 4.4 with a focus on operational specifics in practice, technically and managerially. The following closed-loop steps highlight how we can manage and control a service system in real time by leveraging the technological advances as of today.

1. Loop Step 1. The dynamic, collaborative, and connected working practices with the support of computing and networking technologies are monitored and captured. As a result, data relevant or irrelevant to service provision become available.
2. Loop Step 2. Data are overwhelming. Hence, the collected big data must be processed in order to feed into the models that are mainly driven by the decision-making and business analytics across the operated service system.
3. Loop Step 3. Both service rendering actions and organizational transformation procedures for improving systems' competitiveness and sustainability and service innovation are recommended.

As soon as the recommended service rendering actions and organizational transformation procedures are executed, a new loop with innovations starts over.

In summary, service organizations must offer and deliver innovative services in order to stay competitive and sustainable. As service attributes reveal across sociopsychological and technical dimensions, we must explore service systems in both social and technical dimensions. A well-defined services model and innovation framework will effectively guide and enable service organizations to design, develop, and execute not only their daily business operations but also their well-defined long-term growth strategic plans. Simply put, by executing right service management and engineering practices throughout the service lifecycle, they can ensure that they perform SMARTER service operations than their competitors.

5.5 Final Remarks

In complying with the developed concept and principles of service science in the preceding chapters, in this chapter we presented organizational and IT perspectives of service systems and networks. First, we articulated that service is as an offering of a service system in fulfilling the customer's need through a process of transformation. In order to foster people's interactions and leverage social capitals in service, we then emphasized that we must put people first in any given service system. We further discussed that the empowerment of systems and technologies can facilitate desirable service system dynamics with a focus on smarter management, engineering, and operations. Finally, we concluded that the themes of competitiveness, sustainability, and innovation in service systems must be fully described and well addressed in both the social and technical dimensions.

Historically, we know that rules of thumb have been quite effective when applied to a variety of business situations. In particular, at a time when situation information cannot be monitored and captured in real time, empirical studies surely make sense and prove extremely effective. For instance, the Pareto principle is one of the rules of thumb, which has been widespread applied in many causal analysis and decision-making circumstances. The Pareto principle (a.k.a., the 80–20 rule, the law of the vital few, and the principle of factor sparsity) essentially articulates that, for many situations, about 80% of the effects come from 20% of the causes (Koch, (2011).

Koch (2011) provides many good evidences and further argues that the stated empirical distribution has been roughly correct in a descriptive manner under many circumstances, ranging different aspects from business management, product engineering, to business operations. Some convincing examples in a service business organization could be as follows:

• About 80% of profits earned by the organization come from about 20% of the customers the organization served.
• About 80% of complaints come from 20% of the customers.
• About 80% of profits come from 20% of the time the organization spent.
• About 80% of sales come from 20% of products provided by the organization.
• About 80% of sales are generated by 20% of sales staff in the organization.

Truly many businesses have applied this rule of thumb to improve their profitability. The outcomes were dramatic when the known effective areas were considerably scrutinized for improvements. Indeed, the available resources could be fully leveraged when the rest was appropriately eliminated, ignored, or retrained. However, the rapid change in today's business world gradually shrinks the role of rules of thumb as we are confronted with significantly more sophisticated competitions than ever before.

As discussed earlier, service organizations offer service products to their prospective customers. The total value of a service is created only if the offered service is completely consumed by its designated customer. The service value equation described as is then applied in evaluating the outcome of the completed service. It is clear that the service value depends on service products' technical attributes, that is, performed service functions that meet the customer's functional needs, and also the systemic behavior of its transformation process that satisfies service provision participants' socioemotional and sociopsychological needs.

In today's service sector, it is the people (customers and employees) rather than physical goods that must be put first and are in the center of the organizational structure and operations. As the value of a service lying along the process trajectory throughout the lifecycle of the service largely depends on the sociotechnical dynamics of the service system, we must track and trace the service trajectory, which is nothing but a service encounter chain as discussed in the preceding chapters. The interconnected service encounter chains created within a given service system essentially forms a corresponding service network.

However, a descriptive approach in a qualitative way is not sufficient to meet the ever-changing challenges. In other words, a better understanding of the systemic dynamics of a service network is necessary. Indeed, as discussed in Chapter 4, the holistic or systemic viewpoint is necessary, which allows us to focus on the “big picture,” which is interacting relationships, and long-range view of service network dynamics. On the basis of Figure 4.4 that shows our envisioned qualitative and quantitative approach (Andriessen and Verburg, (2004); Qiu, (2009), in this book we advocate that an innovative, integrative, and interactive approach that is illustrated in Figure 5.12 can transform a service network throughout its lifecycle for competitive advantage.

A prescriptive approach in an integrated qualitative and quantitative manner is adopted to look at both the systemic dynamics of service systems and networks. As shown in Figure 5.12, a service system is considered as a sociotechnical system, which can be modeled as the number of daily business operations. A suite of mathematical models in the form of integrated structured equation model (SEM) and social network analysis (SNA) will then be applied to explain the dynamics of occurred service transformation processes, which ultimately helps to identify optimal transformative actions for service improvements and accordingly prescribe the service networks to be formed from the actions.

As shown in Figure 5.12, a two-step exploratory approach is essentially adopted in this book. A systems approach to gain the fundamental understanding of how a service system as a whole behaves will be first investigated. Specifically, SEMs can be applied to describe the system's performance and/or conduct necessary hypotheses testing and/or confirmatory factor analyses. Service network approaches such as SNAs to explore the interactions and insights of people-centered service networks will be then applied, aimed at understanding how service networks have been formed and behaved and how the service networks could evolve over time. The combined systems and network approach focuses on identifying the areas for service improvements across all service system constituents in a holistic and comprehensive manner.

Computational thinking-based theoretical discussions and applied examples are discussed in great detail in the next few chapters.

Acknowledgment

A significant portion of this chapter is derived from the chapter entitled “Information Technology as a Service” in Enterprise Service Computing: From Concept to Deployment—a book that was published by Idea Group Publishing (Hershey, PA) in 2007, Copyright 2012, IGI Global, www.igi-global.com. Reprinted by permission of the publisher.

References

1. Andriessen, J. E., & Verburg, R. M. (2004). A Model for the Analysis of Virtual Teams. Chapter XV in Virtual and Collaborative Teams: Process, Technologies and Practice, ed. by S. Godar and S. Ferris. Hershey, PA: Idea Group Publishing.
2. Bharadwaj, A., El Sawy, O. A., Pavlou, P. A., & Venkatraman, N. (2013). Digital business strategy: toward a next generation of insights. MIS Quarterly, 37(2), 471–482.
3. Becker, B., Huselid, M., & Ulrich, D. (2001). The HR Scorecard; Linking People, Strategy, and Performance. Boston, MA: Harvard Business School Press.
4. Bell, P. (2005). Operations research for everyone (including poets). OR/MS Today, 32(4), 22–27.
5. Berman, S. (2012). Digital transformation: opportunities to create new business models. Strategy and Leadership, 40(2), 16–24.
6. Bieberstein, N., Bose, S., Walker, L., & Lynch, A. (2005). Impact of service-oriented architecture on enterprise systems, organizational structures, and individuals. IBM systems journal, 44(4), 691–708.
7. Bitner, M. J. (1992). Servicescapes: the impact of physical surroundings on customers and employees. Journal of Marketing, 56(2), 57–71.
8. Campbell, A., Lane, N, Miluzzo, E., Peterson, R., Lu, H., Zheng, X., Musolesi, M., Fodor, K., Eisenman, S., & Ahn, G. (2008). The rise of people-centric sensing. IEEE Internet Computing, July–August, 12–21.
9. Cao, Y., Gruca, T. S., & Klemz, B. R. (2003). Internet pricing, price satisfaction, and customer satisfaction. International Journal of Electronic Commerce, 8(2), 31–50.
10. Chase, R. B., & Dasu, S. (2008). Psychology of the Experience: The Missing Link in Service Science. in Service Science, Management and Engineering Education for the 21st Century, 35–40, eds. by B. Hefley and W. Murphy. US: Springer.
11. Cherbakov, L., Galambos, G., Harishankar, R., Kalyana, S., & Rackham, G. (2005). Impact of service orientation at the business level. IBM Systems Journal, 44(4), 653–668.
12. Chesbrough, H. W. (2011). Bringing open innovation to services. MIT Sloan Management Review, 52(2), 85–90.
13. Datz, T. (2004). What you need to know about service-oriented architecture. CIO Magazine, 78–85.
14. Dong, M., & Qiu, R. G. (2004). An approach to the design and development of an intelligent highway point-of-need information service system. 2004 Proceedings of the 7th International IEEE Conference on Intelligent Transportation Systems, Washington, D.C., 673–678.
15. Fisk, R. (2009). A customer liberation manifesto. Service Science, 1(3), 135–141.
16. Girardin, F., Blat, J. Calabrese, F., Fiore, F., & Ratti, C. (2008). Digital footprinting: uncovering tourists with user-generated content. Pervasive Computing, October–December, 36–43.
17. Guo, B., Yu, Z., Zhou, X., & Zhang, D. (2012). Opportunistic IoT: exploring the social side of the internet of things. 2012 IEEE 16th International Conference on Computer Supported Cooperative Work in Design (CSCWD), Wuhan, China, 925–929.
18. Heskett, J. L., Jones, T. O., Loveman, G. W., Sasser, W. E., & Schlesinger, L. A. (1994). Putting the service-profit chain to work. Harvard Business Review, 72(2), 164–174.
19. IBM. (2004). Service Science: A New Academic Discipline? Retrieved on Feb. 4, 2006 from http://www.research.ibm.com/ssme.
20. IBM. (2011). The Social Business Advent of a New Age. IBM Software Group. Retrieved on Dec. 6, 2012 from http://www.ibm.com/smarterplanet/global/files/us_en_us_socialbusiness_epw14008usen.pdf.
21. Johnston, R. (2005). Service operations management: return to roots. International Journal of Operations & Production Management, 25(12), 1278–1297.
22. Kano, M., Koide, A., Liu, T. K., & Ramachandran, B. (2005). Analysis and simulation of business solutions in a service-oriented architecture. IBM Systems Journal, 44(4), 669–690.
23. Karmarkar, U. (2004). Will you survive the services revolution? Harvard Business Review, 82(6), 100–107.
24. Koch, R. (2011). The 80/20 Principle: The Secret to Achieving More With Less. Crown Business.
25. Korsten, P. J., Lesser, E., & Cortada, J. W. (2013). Social business: an opportunity to transform work and create value. Strategy & Leadership, 41(3), 20–28.
26. Larson, R. (1989). OR/MS and the services industries. OR/MS Today, April, 12–18.
27. Lovelock, C. H., & Wirtz, J. (2007). Service Marketing: People, Technology, Strategy, 6th ed. Upper Saddle River, NJ: Prentice Hall.
28. Menor, L. J., Tatikonda, M. V., & Sampson, S. E. (2002). New service development: areas for exploitation and exploration. Journal of Operations Management, 20(2), 135–157.
29. Newcomer, E., & Lomow, G. (2004). Understanding SOA with Web Services Addison-Wesley Professional.
30. Noah, C. (2010). Putting people first. Rail Professional Magazine, June 2010. Retrieved on Dec. 6, 2012 from http://www.railpro.co.uk/magazine/?idArticles=241.
31. Nunes, D., Tran, T. D., Raposo, D., Pinto, A., Gomes, A., & Silva, J. S. (2012). A web service-based framework model for people-centric sensing applications applied to social networking. Sensors, 12(2), 1688–1701.
32. Pfeffer, J., & Veiga, J. F. (1999). Putting people first for organizational success. The Academy of Management Executive, 13(2), 37–48.
33. Qiu, R. G. (2004). Manufacturing grid: a next generation manufacturing model. 2004 IEEE International Conference on Systems, Man and Cybernetics, 5, 4667–4672.
34. Qiu, R. G. (2005). An Internet computing model for ensuring continuity of healthcare. 2005 IEEE International Conference on Systems, Man and Cybernetics, 3, 2813–2818.
35. Qiu, R. G. (2007). Information Technology as a Service. Chapter 1 in Enterprise Service Computing: From Concept to Deployment. Hershey, PA: Idea Group Publishing.
36. Qiu, R. G. (2009). Computational thinking of service systems: dynamics and adaptiveness modeling. Service Science, 1(1), 42–55.
37. Qiu, R. G. (2013a). Business-Oriented Enterprise Integration for Organizational Agility. Hershey, PA: IGI Global.
38. Qiu, R. G. (2013b). Rethinking service encounters. Submitted to Harvard Business Review.
39. Qiu, R. G., Wysk, R., & Xu, Q. (2003). Extended structured adaptive supervisory control model of shop floor controls for an e-manufacturing system. International Journal of Production Research, 41(8), 1605–1620.
40. Ramdas, K., Teisberg, E., & Tucker, A. L. (2012). Four ways to reinvent service delivery. Harvard Business Review, 90(12), 98–106.
41. Rangaswamy, A., & Pal, N. (2005). Service innovation and new service business models: harnessing e-technology for value co-creation. An eBRC White Paper, 2005 Workshop on Service Innovation and New Service Business Models, Penn State.
42. Rust, R. (2004). A call for a wider range of service research. Journal of Service Research, 6, 211.
43. Rust, R., & Lemon, K. (2001). E-service and the consumer. International Journal of Electronic Commerce, 5(3), 85–101.
44. Smith, H., & Fingar, P. (2003). Business Process Management: The Third Wave. Tampa, FL: Meghan-Kiffer Press.
45. Thomas, E. (2005). Service-Oriented Architecture: Concepts, Technology, and Design. Prentice Hall.
46. WikiPsychometircs. (2013). Psychometircs. Wikipedia. Retrieved on June 6, 2013 from http://en.wikipedia.org/wiki/Psychometrics.
47. Wright, M., Filatotchev, I., Hoskisson, R., & Peng, M. (2005). Strategy research in emerging economies: challenging the conventional wisdom. Journal of Management Studies, 42(1), 1–33.
48. Zhang, X., & Prybutok, V. R. (2005). A consumer perspective of e-service quality. Engineering Management, IEEE Transactions on, 52(4), 461–477.
49. Zimmermann, O., Krogdahl, O., & Gee, C. (2004). Elements of service-oriented analysis and design. Retrieved Apr. 4, 2012 from http://www-128.ibm.com/developerworks/library/ws-soad1/.