SERVICE VALUE NETWORKS:VALUE,PERFORMANCEAND STRATEGY FOR THE SERVICESINDUSTRYAbstractServices maybe investigated frommanyperspectives.They encapsulateover65%ofglobal business,yet many gaps in the services knowledge base exist- particularly from areas including informationtechnology, operational, customer targeting.and services provision This research investigates anemerging and truly disruptive business scenario-the service value network, from a marketing, anoperations and services approach. The service value network is defined as the flexible, dynamic,delivery of a service, or product, by a business's coordinated value chains (supply chains and demandchains working in harmony), such that a value-adding, specific, service solution is effectively, andefficiently,deliveredtotheindividualcustomerThe'physical and virtual service value network customer-business encounter model is developed.Impediments to the development of a service value networks are investigated. Eight key areas relatedto website customer encounters are offered as investigationareas.The customer'touch-points'acrossthevirtual service encounteroffersa raftof newresearchpossibilities and possible newpathways tocompetitiveadvantage.ApproachestomeasureservicenetworkencountereffectorsareexplainedCurrent and future areas ofbusiness research are described. This paper frames the research agenda forservice value networks.Keywords: Service value networks, services, web services, value, network, virtual service encounterbalanced scorecard, customer performance1.IntroductionThe services industry provides services not goods (Hughes and Mitchell et al., 1993). This industry ismoving towards globalization (Kathawala and Abdou, 2003). In 1870 the service sector employedslightly more than 20% of the U.S. workforce, whilst by 2002 it employed in approximately of82% ofthe U.S. workforce, and 81 % of the private sector GDP (US Bureau of Labor Statistics, 2002 and2004).Service Management is a'transfunctional research area (Kamarkar, 2002).It covers areasincluding service quality (Chase and Aquilano et al., 1996), services encounters (Cook and Goh, et al.1999), and service execution (Nie and Kellog 1999). Services operations management and services
SERVICE VALUE NETWORKS: VALUE, PERFORMANCE AND STRATEGY FOR THE SERVICES INDUSTRY Abstract Services may be investigated from many perspectives. They encapsulate over 65% of global business, yet many gaps in the services knowledge base exist- particularly from areas including information technology, operational, customer targeting, and services provision. This research investigates an emerging and truly disruptive business scenario-the service value network, from a marketing, an operations and services approach. The service value network is defined as the flexible, dynamic, delivery of a service, or product, by a business's coordinated value chains (supply chains and demand chains working in harmony), such that a value-adding, specific, service solution is effectively, and efficiently, delivered to the individual customer. The `physical and virtual service value network customer-business encounter model' is developed. Impediments to the development of a service value networks are investigated. Eight key areas related to website customer encounters are offered as investigation areas. The customer `touch-points' across the virtual service encounter offers a raft of new research possibilities and possible new pathways to competitive advantage. Approaches to measure service network encounter effectors are explained. Current and future areas of business research are described. This paper frames the research agenda for service value networks. Keywords: Service value networks, services, web services, value, network, virtual service encounter balanced scorecard, customer performance 1. Introduction The services industry provides services not goods (Hughes and Mitchell et al., 1993). This industry is moving towards globalization (Kathawala and Abdou, 2003). In 1870 the service sector employed slightly more than 20% of the U.S. workforce, whilst by 2002 it employed in approximately of 82% of the U.S. workforce, and 81 % of the private sector GDP (US Bureau of Labor Statistics, 2002 and 2004). Service Management is a `transfunctional' research area (Kamarkar, 2002). It covers areas including service quality (Chase and Aquilano et al., 1996), services encounters (Cook and Goh, et al., 1999), and service execution (Nie and Kellog 1999). Services operations management and services
marketingprovideotherperspectivestoservices.Definitions of service (and what constitutes a service)range from the narrow to the broad. In 1960the Definitions Committee of the American Marketing Association (1960) defined services asActivities,benefits,or satisfactionswhichareoffered forsale,orareprovided,inconnectionwiththesale of goods'.Examples ofa service include: amusements, hotel service, electric service, transportation, theservices ofbarber shops and beauty shops, repair and maintenance service, and the work ofcreditratingbureaus.Judd (1964) and Rathmell (1974) promoted the service sector of the economy, and the true nature ofservices. Murdick and Render, et al., (1990) and Quinn and Baruch, et al., (1987) broadened servicesdefinitions to include all economic activities where output was not a physical product or construction,and was usually consumed when produced, and delivered as an intangible, added value to thecustomer.forexample,travelcomfort.Againserviceswere redefined.Services are deeds, processes, and performances' (Zeithaml, Berry, et al, 1988), but they may also betangible.Czinkota and Ronkainen, et al., (2005) split services into tangible areas involving:1)people (fitnesscentres);or2) possession processing (like freight transportation), and intangible areas involving3) mental stimulus like (education and religion); and4)informationprocessing(likebanking,data processing)Often services are integrally enmeshed with manufactured goods, or to the delivering (or enabling)of goods. Thus the distinction between goods and services is imprecise, and no clear boundarybetween manufacturing and service firms exists (Berry and Parasuraman, 1991). According to Levitt(1972), There is no such thing as a service industry. There are only industries whose servicecomponents are greater or less than those ofother industries. Everybody is in service. Taken to itslogical conclusion, it could be suggested that all manufacturing is indeed a service, as it deliverssomething!Encyclopedias including Britannica, Columbia, Encarta; and dictionaries including Oxford andMacquarie, offer a range ofdefinitions of service. To meet these diversities we follow Rust andMetters (1996)'topologies’ approach to group some ofthe complexities of services down ontomodels
marketing provide other perspectives to services. Definitions of service (and what constitutes a service) range from the narrow to the broad. In 1960 the Definitions Committee of the American Marketing Association (1960) defined services as Activities, benefits , or satisfactions which are offered for sale, or are provided, in connection with the sale of goods'. Examples of a service include: amusements, hotel service, electric service, transportation, the services of barber shops and beauty shops, repair and maintenance service, and the work of credit rating bureaus. Judd (1964) and Rathmell (1974) promoted the service sector of the economy, and the true nature of services. Murdick and Render, et al., (1990) and Quinn and Baruch, et al., (1987) broadened services definitions to include all economic activities where output was not a physical product or construction, and was usually consumed when produced, and delivered as an intangible, added value to the customer.for example, travel comfort. Again services were redefined. Services are deeds, processes, and performances' (Zeithaml, Berry, et al., 1988), but they may also be tangible. Czinkota and Ronkainen, et al., (2005) split services into tangible areas involving: 1) people (fitness centres); or 2) possession processing (like freight transportation), and intangible areas involving: 3) mental stimulus like (education and religion); and 4) information processing (like banking, data processing). Often services are integrally enmeshed with manufactured goods, or to the delivering (or enabling) of goods. Thus the distinction between goods and services is imprecise, and no clear boundary between manufacturing and service firms exists (Berry and Parasuraman, 1991). According to Levitt (1972), `There is no such thing as a service industry. There are only industries whose service components are greater or less than those of other industries. Everybody is in service.' Taken to its logical conclusion, it could be suggested that all manufacturing is indeed a service, as it delivers something! Encyclopedias including Britannica, Columbia, Encarta; and dictionaries including Oxford and Macquarie, offer a range of definitions of service. To meet these diversities we follow Rust and Metters (1996) `topologies' approach to group some of the complexities of services down onto models
2.ServiceTypologiesFrom an operations and marketing perspective topology schemes for services have generally lackedempirically tested works. Empirical works (Verma and Boyer, 2000, Akkermans and Vos, 2003, ChenandPaulraj,2004),offersomekeyexceptions,butoverallempirical servicesrelatedresearchisinitsinfancy.A topologies approach, based on recent service industry models identifies keyknowledgegaps, and establishes possible empirical research areas.3.ServiceModelsFigure 1 presents Rust and Metters (1996) view of services.They grouped service modelsas customer models (external) or service provider models (internal).Each model was then segregated, as shown in Figure 1, into two of the three models:1)customer behavior models dynamic models ofcustomer retention (like loyalty)and stochasticmodelsofcustomerbehavior(likesatisfaction),andofcustomerbehavior(likechurnrateorlossofaspecific customer during a single service encounter);2) service quality impact models'-aggregate seance models(like customer satisfactioneffects)and disaggregated models (like financial impacts of a service component);3)'normative service models'-organizationally focused marketing models'(like incentiveschemes and trade-offs between satisfaction and productivity), and operations models (like queuing)In 1999, Cook Goh and Chung developed the integrated schematic representation of services'matrix. Figure 2 displays this integrated services schematic.They recognized that services could be split into marketing (product) or operations (process)orientations. They believed that in delivering a final'customized' solution their remained a need tointe grate and interact with both orientations. They suggested research in the interaction andintegration' area may articulate strategies and tactics for improving services.Roth and Menor (2003) delivered a further addition to the services topologies. Their'service strategytriad' (displayed in Figure 3) separated the 'what, the "how, and the 'who' of service encounters. Itoffered a newperspective to advance an understanding of services operations management.Thewho'was the right customers (and not just a customer segment). These targeted customers could be definedby techniques like Forrester's 'technographics', 'psychographics, and psychographic profiling groupsofcustomers.Theinterpretationof suchtarget markets provided a means to enhance both service and performance standards, and to allow thebusiness to competitively align its chosen degree ofcustomer targeting with its offered
2. Service Typologies From an operations and marketing perspective topology schemes for services have generally lacked empirically tested works. Empirical works (Verma and Boyer, 2000, Akkermans and Vos, 2003, Chen and Paulraj, 2004), offer some key exceptions, but overall empirical services related research is in its infancy. A topologies approach, based on recent service industry models identifies key knowledge gaps, and establishes possible empirical research areas. 3. Service Models Figure 1 presents Rust and Metters (1996) view of services. They grouped service models as customer models (external) or service provider models (internal). Each model was then segregated, as shown in Figure 1, into two of the three models: 1) customer behavior models' dynamic models of customer retention (like loyalty) and stochastic models of customer behavior (like satisfaction), and of customer behavior (like churn rate or loss of a specific customer during a single service encounter); 2) service quality impact models'-aggregate séance models(like customer satisfaction effects)and disaggregated models (like financial impacts of a service component); 3)’normative service models’-organizationally focused marketing models’(like incentive schemes and trade-offs between satisfaction and productivity), and operations models (like queuing). In 1999, Cook Goh and Chung developed the integrated schematic representation of services' matrix. Figure 2 displays this integrated services schematic. They recognized that services could be split into marketing (product) or operations (process) orientations. They believed that in delivering a final `customized' solution their remained a need to integrate and interact with both orientations. They suggested research in the `interaction and integration' area may articulate strategies and tactics for improving services. Roth and Menor (2003) delivered a further addition to the services topologies. Their `service strategy triad' (displayed in Figure 3) separated the `what', the `how', and the `who' of service encounters. It offered a new perspective to advance an understanding of services operations management. The `who' was the right customers (and not just a customer segment). These targeted customers could be defined by techniques like Forrester's `technographics', `psychographics, and psychographic profiling groups of customers. The interpretation of such target markets provided a means to enhance both service and performance standards, and to allow the business to competitively align its chosen degree of customer targeting with its offered
service products and delivery systems.CustomerBehaviourModelsDynamicModelsofRetentionStochastic Models of BehaviourExternalCustomerModelsServiceQualityImpactModelsServiceAggregate ModelsModelsDisaggregate ModelsInternalServiceProviderNormative Service ModelsModelsMarketingModelsComplaint ManagementCustomerSatisfactionQuality-productivity trade-offOperationsModelsFigure1Mathematicalmodelsof serviceRothandMenoroperationallydefinedtheirservicestrategytriad'into5elements:I)thesupportingfacilities(physicalandstructuralresources),2) the facilitating goods (materials and supplies that are consumed);3)thefacilitating information (supportingthe explicit services):4)theexplicit services (customer experientialand sensualbenefits);5) the implicit services (psychological benefits).Theyrealized the total service concept by the customer, may differfrom the service offered by theserviceprovider.To overcomethis, a feedback loop (execution,assessmentofgaps, renewal)wasproposed
service products and delivery systems. Roth and Menor operationally defined their `service strategy triad' into 5 elements: 1) the supporting facilities (physical and structural resources); 2) the facilitating goods (materials and supplies that are consumed); 3) the facilitating information (supporting the explicit services); 4) the explicit services (customer experiential and sensual benefits); 5) the implicit services (psychological benefits). They realized the total service concept by the customer, may differ from the service offered by the service provider. To overcome this, a feedback loop (execution, assessment of gaps, renewal) was proposed
OrganizationalMarketing OrientatedOwnership(7)Tangibility (2)Differentiation (10)Object of service(5)-PeopleForProfit-GoodsType of Customer (11)-IndividualProduct-InstitutionalCommitment(8)Interaction andintegrationPrivateServicesNot-for-ProfitCustomization(9) QualityOperations OrientatedProcessCustomer Contact (1)Capital Intensity (4)-People-basedPublic·EquipmentbasedCustomer involvement (3ProductionProcess(12)EmploveeDirections(6)MacroViewMicroViewSocio-EconomicEnvironmentFgure2Integrated schematic of servicesRoth and Menor's'service delivery systems architecture' model, displayed in Figure 4, allows aframeworktoinvestigatethreeinterrelatedanddynamiccomponentsofservicedeliverysystems1) the strategic service design (portrayed as structural, infrastructural and integration, and basedon choicesbetween time-phased content portfolios ofmajor supply,2)the service deliveryexecution system (exemplified byprograms,policies and behavioralaspects deliver complimentary areas of customer focusl, possibly using balanced scorecardapproaches;3)the customer perceived value of the total service concept (intangibles and other effectivenessaspectsofthe service)These features, delivered upstream by the external integration ofthe service supply chaincombined with the linked internal integration of the operational functional areas, and the adaptivemechanismsavailabletotheintellectual capabilitiesprovidenewavenuestoperceivedcustomervalueHere the artificial learning and intelligence capabilities of the system, the fuzzy logic approaches toapproximate answers, and the rapid absorption of skilled human capital talents may deliver targetedboundaries which offer enhanced potential to the service encounter The assessment execution and
Roth and Menor's `service delivery systems architecture' model, displayed in Figure 4, allows a framework to investigate three interrelated and dynamic components of service delivery systems: 1) the strategic service design (portrayed as structural, infrastructural and integration, and based on choices between time-phased content portfolios of major supply; 2) the service delivery execution system (exemplified by programs, policies and behavioral aspects deliver complimentary areas of customer focus], possibly using balanced scorecard approaches; 3) the customer perceived value of the total service concept (intangibles and other effectiveness aspects of the service). These features, delivered upstream by the external integration of the service supply chain, combined with the linked internal integration of the operational functional areas, and the adaptive mechanisms available to the intellectual capabilities provide new avenues to perceived customer value. Here the artificial learning and intelligence capabilities of the system, the fuzzy logic approaches to approximate answers, and the rapid absorption ofskilled human capital talents may deliver targeted boundaries which offer enhanced potential to the service encounter. The assessment execution and