Unit 1.

The Service Economy

Nguyen Manh Tuan

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 AGENDA

1. Roles of Service in an Economy

2. Economy Evolution
3. More on Service Sector
4. Experience Economy
5. Service Definitions
6. Emergence of Service Science

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 Learning Objectives

 Describe the central role of services in an

economy
 Identify and differentiate the 5 stages of
economic activity
 Identify the features of preindustrial, industrial,
and postindustrial societies
 Identify the features of the experience economy
 Describe the definitions of service
 Note the emergence of service science

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1. Roles of Services in an Economy
dịch vụ không phải là hoạt động ngoại vi, mà là phần không thể thiếu trong nền kinh tế
 Services are NOT peripheral activities but
rather integral parts of economy
dịch vụ: là nguồn lực then chốt cho sự thay đổi nền kinh tế toàn cầu ngày nay
 Service: crucial force for today’s change toward
a global economy
sự liên thuộc ( tương quan) giữa khu vự sản xuất và dịch vụ:
 Interdependency between manufacturing and service
sectors
 Services in support of the distribution of manufactured
goods
 Integration of downstream services
 Exploiting value added services
 Service Definitions
Fitzsimmons & Fitzsimmons 2006

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1.Roles of Services in an Economy (cont’)
Fitzsimmons et al 2014

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1.Roles of Services in an Economy (cont’)

Teboul 2006

Teboul 2006

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1.Roles of Services in an Economy (cont’)
Bryson & Daniels 2008

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1.Roles of Services in an Economy (cont’)
Spohrer & Maglio 2008

macro level

The economies of the world are becoming one large service

system
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1. Roles of Services in an Economy (cont’)
Spohrer & Maglio 2008

micro level

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2. Economic Evolution

The three-sector hypothesis is an

economic hypothesis which divides
economies into three sectors of activity:
extraction of raw materials (primary),
manufacturing (secondary) and services
(tertiary).
The increase in quality of life, social security,
blossoming of education and culture, higher
level of qualifications, humanization of work,
and avoidance of unemployment.

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2. Economic Evolution (cont’)

Spohrer & Maglio 2008

 2M years as hunting clans/bands

 10K years as farm families Kwan 2011
 200 years as factory workers
 60 years as knowledge workers in organizations and now digital networks
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2. Economic Evolution (cont’)
Fitzsimmons & Fitzsimmons 2006

For the first time in 2006, more people worked in the service
sector worldwide than in either the manufacturing or agricultural
sectors
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2. Economic Evolution (cont’)
Primary sector An agrarian society structured around
farming and subsistence living

Life as a game against nature (weather,

soil, water ..)
Pre-industrial
society Muscle power and tradition

An extended household, low productivity,

little technology, high underemployment

Fitzsimmons & Fitzsimmons 2006

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2. Economic Evolution (cont’)
Secondary A society dominated by factory work in mass
sector production industries
Life as a game against a fabricated nature
Industrial (cities, factories, tenement ..)
society Society is energy bond, machine paced and
dominated by rigid schedules and time clocks
Making more with less, measured by quantity
of goods
Marketplace with bureaucratic and hierarchic
organizations and persons treated as things
Individual as social unit

Fitzsimmons & Fitzsimmons 2006

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2. Economic Evolution (cont’)
Tertiary A service society in which people engaged in
sector information, intellectual, and creative-intensive
activities
Post- Life as a game against persons
industrial Success measured by quality of life with
society services (health, education, recreation ..), social
rights, political claims, environmental protection
Central role is professional persons with
information rather than energy is key resource
Community rather than individual as social unit
Interdependent & global features of
development

Triple bottom line (TBL/3BL):

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2. Economic Evolution (cont’)

http://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needs
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2. Economic Evolution (cont’)

A ‘Manuservice’ economy?
(Service Worlds, Bryson & Daniels 2008)
 the ‘Services Duality’ and the rise of the
‘Manuservice’ Economy
 notion of a separate ‘service sector’ is an arbitrary
outcome of classification procedures designed for
other purposes - a ‘chaotic conception’
 manufacturing is also service driven and services are
also manufacturing driven.
 2 sectors of the economy become one discourse of
production and consumption and of consumption and
production.

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3. More on the service sector

Service industries as the source of

economic leadership
Blue-collar workers  white-collar ones
 25% US total employment in high skill services
(professional, business, healthcare, educational, social
assistance) (Bureau of Labor Statistics, 2009)

Recession-resistant nature of services

Services not inventoried
Service demand as usual in recession

Fitzsimmons et al 2014

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3. More on the service sector (cont’)
 Social trends: Fitzsimmons et al 2006
 Aging of the (US) population
 The growth of two-income families
 Increase of single peoples

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3. More on the service sector (cont’)
 Service career - Advantages of new work:
 More career opportunities for everyone.
 Freedom to choose from a variety of jobs, tasks, and assignments.
 More flexibility in how and where work is performed, i.e., telecommuting.
 More control over your own time.
 Greater opportunity to express yourself through your work.
 Ability to shape and reshape your life's work in accordance with your
values and interests.
 Increased opportunity to develop other skills by working in various
industries and environments.
 Self-empowerment mindset.
 Allows you to create situations or positions where you can fill a need in
the world that is not being filled.
 Opportunity to present yourself as an independent contractor or vendor
with services to offer.

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3. More on the service sector (cont’)

 Service Career Spohrer & Maglio 2008

Services tend to create good entry-level jobs
(average ability in superior environment) and
then provide growth paths that lead to high
talent or jobs associated with high technology
performance
 Linking the growth of information and communication
technologies (ICT) in an economy to the growth of
service sector and the growth of GPD per capita
 Technology, business, and work innovations co-
evolve

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3. More on the service sector (cont’)

Innovation

Brown et al 2005
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4. Experience Economy

 Gilmore and Pine’s theory was that in

economies of mass affluence, people are more
interested in paying for an experience than
paying to own things.
 The memory of the experience becomes the product.
 An stage of economic evolution in which added
value is created by engaging and connecting with
the customer in a personal and memorable way
 Pine and Gilmore say that the evolution of an
economy is analogous to the stages of a
birthday cake.
Gilmore & Pine 1999

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4. Experience Economy (cont’)
1. Agrarian Economy Gilmore & Pine 1999
 Parents made cakes from scratch, mixing
inexpensive ingredients from their farm.
2. Industrial Economy
 Parents paid a few dollars to buy premixed
ingredients in a box thus showcasing the goods-
based industrial revolution.
3. Service Economy
 Busy parents paid significantly more, ten to
fifteen times the ingredients’ price, to order a
cake from a bakery or grocery store.

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4. Experience Economy (cont’)
4. Experience Economy
 Parents outsourced the entire birthday event at a local
venue that creates a memorable experience for kids.
They spend hundreds of dollars for the experience
and the venue includes the cake for free.
Social/ Social Experience Economy ???
 The birthday kid crowdsources with friends where
their experience should be held. Their friends have
more influence over their decisions than their family
does.
 During the experience, the birthday kid’s friends take
pictures and videos, posting them online and tag the
celebratory guest

Gilmore & Pine 1999

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4. Experience Economy (cont’)
4. Experience Economy
Social/ Social Experience Economy ???
 Parents are not left out of the Social Economy.
Parents now live stream the entire experience to
family members that cannot attend. They take
pictures and videos that they immediately upload to
their social networks.
 People carry their friends in their pockets and are
always sharing their experiences with them. They
text, chat, share digital “face time,” and showcase
visual images whether through video or pictures
 The sharing and connecting with others about the
experience becomes the product.

Gilmore & Pine 1999

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4. Experience Economy (cont’)

Gilmore & Pine 1999

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4. Experience Economy (cont’)
Typologies of Services in 21st century
         
Core Experience  Essential Features Examples
Creative  Present ideas Advertising, theater
Enabling  Act as intermediary Transportation, 
communications 
Experiential  Present of customer Massage, theme part
Extending  Extend and maintain Warranty, health check
Entrusted  Contractual agreement Service/repair, portfolio 
mgt. 
Information  Access to information Internet search engine
Innovation  Facilitate new concepts R&D service, product 
testing 
Problem solving  Access to specialists Consultants, counseling
Quality of life  Improve well‐being Health care, recreation, 
tourism 
Regulation  Establish rules and  Environment, legal, 
regulations  patents 
 

Fitzsimmons et al 2014

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5. Service Definitions Định nghĩa dịch vụ

Defining services is not easy:

 an activity or series of activities provided as solution to customer
problems (Gronroos 1990); cung cấp các dịch vụ giải quyết vấn đề của khách hàng
 all economic activity whose output is not physical product or
construction (Baruch et al. 1987); tất cả các hoạt động kinh tế có đầu ra không phải là sản phẩm vật
chất hoặc công trình xây dựng
 intangible and perishable created and used simultaneously (Sasseret
al. 1978);
 a time-perishable, intangible experience performed for a customer
acting in the role of co-producer (Fitzsimmons & Fitzsimmons 2005);
 a change in condition or state of an economic entity (or thing) caused
by another (Hill 1977)
 deeds, processes, and performances (Zeithaml & Bitner 1996);
 application of competencies for the benefit of another entity
(Vargo & Lusch 2004)
Spohrer & Maglio 2008

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5. Service Definitions (cont’)
Spohrer & Maglio 2008
Defining services is not easy:
 pay for performance: what the provider does for
the client is essential, as opposed to exchange
of an artifact or a good being essential
 pay for performance in which value is co-
produced by client and provider
 at least 3 types of performance to providers:
 high talent performance (trained chef),
 high technology performance (ordering dinner from a
website), and
 routine performance supported by superior environment
(service personnel with average abilities, a good cookbook,
and a well-equipped kitchen)

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5. Service Definitions (cont’)
Spohrer & Maglio 2008
Defining services is not easy:
 pay for performance in which value is co-
produced by client and provider:
 Firms can invest in talent, invest in technology, or
provide a superior environment for performance:
 Talent allows for the opportunity to provide the widest range
of services for a client with the greatest levels of unique
customization.
 Technology allows for the greatest efficiencies to be achieved
for highly standardized or well-scoped alternative
configurations.
 Environmental supports allow for the greatest flexibility on the
part of the provider in finding employees who can perform
well for clients with some degree of customization

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5. Service Definitions (cont’)
Spohrer & Maglio 2008
Defining services is not easy:
 Considering a teacher telling a student to read a
book and work a problem set (exercises) or a
doctor instructing a patient to eat certain foods
and exercise more
 Providers perform certain activities, but clients must
also perform activities that transform their own states
or else the benefit/value of the service will not be fully
attained
 In business services, if client does not install the
new IT systems and train the necessary people
in the reengineered process, client will not
receive the benefit of the service

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5. Service Definitions (cont’)
Spohrer & Maglio 2008
Defining services is not easy:
 The provider must negotiate to monitor and assess that
the client is performing adequately on the client’s
responsibilities, and, of course
 The client needs to determine that the provider is likewise
applying satisfactory effort and quality controls in the
performance of the provider’s tasks
 A time-perishable, intangible experience performed for a
client who is acting as a co-producer to transform a state
of the client
 The client plays a key role in co-production activities (the
client has responsibilities) and in the co-creation of value
(transformed state of the client)

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6. Emergence of Service Science (cont’)
 Academic interest in services has been growing
slowly and steadily, with more and more
disciplines rethinking their curricula and research
agendas in light of the growth of services
 Nevertheless, most academics and government
policy makers are still operating in a
manufacturing paradigm rather than in a service
paradigm
 The content of course shifts over the last 100
years - toward more balance among human,
technical, and business concerns
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6. Emergence of Service Science (cont’)
 2000s, IBM’s effort to advance the research and
teaching of service, identified as service science,
management, and engineering (SSME), or
Service Science for short
IBM had played a major role in helping to
establish the discipline of computer
science in the 1950s
 Service Science, Management and Engineering
(SSME) or, SSMED with the inclusion of Design
to take into account factors important to the user
experience of services.

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6. Emergence of Service Science (cont’)
 Vargo & Lusch (2004): a service-dominant logic (SDL) in
marketing to replace the goods-dominant logic
 “Service" as the application of competences for the benefit
of another entity
 “Service" (singular), which is a process >> “Services“
(plural) which implies "intangible goods"
 “Operant resources" (value in use, verbs) >> “Operand
resources" (value in property, nouns)
 Marketing with (relational) >> marketing to (transactional)
 Value is always co-created
(blurring the goods-service/producer-consumer divide)
 All economies are service economies, and all businesses
are service businesses

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6. Emergence of Service Science (cont’)

Vargo, Lusch & Akaka 2010

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 THE END

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