CHAPTER 2 LITERATURE REVIEW
2.1 Background
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integrative approach can be considered as an innovative technology for designing service experiences. Finding the effective way to export and duplicate this technology and realizing the adoption effects of this technology are essential issues. Therefore, technology spillover will be addressed in detail. Finally, we will make a conclusion on implications of reviewing literatures.
2.1 Background
This study is to propose a systematical and integrative approach for expectation-based service experience and operation design and management which can not only aid service providers to understand customer mental states but also to match customer needs. Hence, service providers and customers can co-create values through this approach. The major objective of the service science discipline is also to create and provide values with people involved in the service system through particular arrangement and implementation of people and technologies, thus this research is in accordance with the discipline of service science. Furthermore, service-dominant logic is an important characteristic of service science that also emphasizes value creation and customer involvement within the service system.
Consequently, service science and service-dominant logic are the fundamental research background, and then we will address the details and relations between two critical notions and our research.
2.1.1 Research on the Service Science Discipline
In the era of experience economy, the importance of services has been paid much attention throughout the world. The service industry plays a key role of economic activities, especially in developed countries. According to the Office of Economic Cooperation and Development (2005), services have expanded rapidly over recent decades and accounted for 70% of total OECD value. Meanwhile, market services (i.e.
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wholesale and retail trade services, transport and communication services, and finance, insurance, real estate and business services) accounted for 50% of the total OECD value. Furthermore, service industries reached for more than 60% of the global GDP and employed more than 30% of the human labor throughout the world (OECD, 2005). Therefore, in the twentieth-first century, it is obvious that the service industry will influence the quality of life of human beings given the services have been the necessities in the daily life.
In order to focus on the growth trend of service sectors, IBM launched many service research groups and Service Science, Management, and Engineering (SSME) (namely, service science) in the world since2002 (IBM, 2004; Chesbrough and Spohrer, 2006; Spohrer and Kwan, 2009). From that moment on, there have been a lot of researchers, companies, and countries diving into the oncoming area of services.
Hence, there are several definitions of Service Science which this study would like to adopt as follows.
According to Spohrer et al. (2007) and Spohrer et al. (2008), the definition of Service Science is
“Service science aims to understand and catalog service systems and to apply that understanding to advancing our ability to design, improve, and scale service systems for practical business and societal purposes. A service system is a dynamic value co-creation configuration of resources, including people, organizations, shared information (language, laws, measures, methods), and technology, all connected internally and externally to other service systems by value propositions.”
According to Bitner et al., (2006), the definition of Service Science is
“Services Science is an emerging discipline that focuses on fundamental science, models, theories and applications to drive innovation, competition, and quality of life
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Wikipedia (http://en.wikipedia.org/) definition is
“Service Science, Management, and Engineering (SSME) is an interdisciplinary approach to the study, design, and implementation of service systems – complex systems in which specific arrangements of people and technologies take actions that provide value for others. More precisely, SSME has been defined as the application of science, management, and engineering disciplines to tasks that one organization beneficially performs for and with another.”
Consequently, according to the above definitions, service science is a new multidiscipline which aims to propose innovative approaches to create and capture values based on abundant knowledge through services. For instance, when service firms try to design or deliver services for customers, they don‟t only consider the quality and the functions of services; they also need to design the efficient delivery process, plan the promotion activities, or analyze the business model of selling services. In other words, service providers may face many variable problems rather than only one difficulty while considering services. Service firms have to build and own the multi-dimensional perspectives and knowledge to cope with service matters for an integrative resolution in order to achieve business goals. Hence, service science provides researchers and service firms with a definite guideline for solving service issues in the dynamic and complicated environment nowadays.
Figure 2-1 also represents a coarser model of the SSME discipline which includes three characteristics: science and technology, business models and processes, and people and culture. The feature of people and culture is to identify and understand the states of stakeholders. For the external aspect of service firms, service firms have to define customer needs and problems by analyzing their
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background, service preferences, or psychological state. On the other hand, service firms also have to estimate their capabilities (such as the quality of employee, resources, or capital) and business cultures for designing appropriate services.
Figure 2 - 1 A coarser model of the SSME discipline (IBM Research, 2004) The feature of business models and processes is to represent feasible approaches, which include processing logics, methodologies, or revenue models for services and resolutions. In order to co-create values and achieve goals with customers, service firms attempt to find out the effective and systematical ways to design and develop quality services. The other feature is science and technology which is to define the theoretical approach and advanced technology to favorably support the improvement or empower the creation of services and resolutions. Put differently, the existing and empirical theories and technologies can be regarded as a fundamental clue to sustain the feasibility of proposed solutions and services.
In summary, service science offers a clear and helpful research direction for researchers to follow and also to lead researchers to have multi-dimensional perspectives thinking of service issues in quality of life. Furthermore, service science also emphasizes the three characteristics (science and technology, business models and processes, and people and culture) that researchers should take into consideration
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In this research, we aim to analyze the importance key factors of service experience and attempt to propose a systematic and integrative approach for service experience and operation design and management. The issue of service experience and operation design and management would compose service providers and customers (i.e. people and culture), systematical and integrative approaches for service experience design (i.e. business models and processes), and existing and empirical theories and technology (i.e. science and technology). Consequently, this research is highly not only correlated with three major characteristics of service science but also to followed the research directions and concepts of service science according to the definition and the features of service science.
2.1.2 Service-Dominant Logic
Although the service science discipline includes the concept of service-dominant logic for value co-creation between service providers and customers in the service system, this study still attempts to address the importance and necessary of service-dominant logic in detail. According to Vargo and Lusch (2004), Vargo and Lusch (2008a), and Lusch and Vargo (2008), there are two main perspectives for the considerations of services which include goods-dominant logic (namely, G-D logic) and service-dominant logic (S-D logic). G-D logic focused on the end products that are tangible (goods) and intangible (services) units of output. In addition, G-D logic is centered on the physical and static resources, so-called operand resources, which need manufacture processes to make them valuable. The fundamental nature of G-D logic is that values of units of output are inset in the production processes. In other words, consumers can principally acquire values and fulfill their needs through purchasing tangible products. Businesses of G-D logic aim to get profit maximization by selling their products. Consequently, the transactional concept is the major thought of G-D
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However, as the main trend of the globalization extremely influence the world economics, the service mindset gradually becomes more and more important in the twentieth century. S-D logic can be considered as a new direction for enterprises to get high competency. Comparing to G-D logic, S-D logic regards services as a process which deals with something for another object. S-D logic usually utilizes the intangible and dynamic resources, so-called operant resources, to create values.
Human skills, knowledge, and experiences are the main resources to generate services.
Accordingly, not only enterprises actively provide their internal operant resources but also consumers involved to be co-creators during production processes.
Businesses need to pay attention to the relate environment in order to face the emergency of a global situation and cooperate with consumers. Furthermore, S-D logic sees the businesses as continuous stream of economic processes. The marketplace feedback is an important feature of services improvement to constantly achieve high financial success. Consequently, the main characteristics of S-D logic are different from good-dominant logic by above analysis (as shown in Table 2-1).
Table 2 - 1 Service-dominant logic vs. goods-dominant logic
Service-Dominant Logic Goods-Dominant Logic
Services Goods
Intangible Tangible
Operant Resources Operand Resources
Value Co-creation Value Added
Relational Transactional
Financial Feedback Profit Maximization
Source from Lusch and Vargo (2008a) According to Vargo and Lusch (2008b), operant resources are the fundamental source of competitive advantage in services. Furthermore, from the service-systems
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orientation of service science (Spohrer et al., 2008), technology is an important resource engaged in the dynamic value co-creation configuration of resources. In other words, technology can be considered as one of the important operant resources to drive the service competition. This work tries to propose a systematical and integrative approach of service experiences and service operations design and management which utilizes the advanced technology for promoting the value of S-D logic. In conclusion, this study not only applies the notion of service science but also employs the concept of S-D logic to build an innovative approach for customer involvement.