Service Value Ecosystems
Although the move into a services economy has been underway now for many decades the reality is that we are still far from understanding all of the implications of this. What exactly a service is and what a true services economy would look like is very much open to debate. Much of our thinking surrounding business and the economy is still very much rooted in a product based paradigm as businesses try to go on selling services as if they were products; our thinking has been slow to adapt to the new reality of the services economy and its opportunities.
Products and services are fundamentally different things, winning in a services economy really requires understanding services, how they work and building organizations and solutions around this; in so doing becoming truly aligned with the new possibilities enabled by the services economy. This shift in what the economy is and does, in turn, necessitates a major recalibration of business models. Businesses are evolving from our traditional conception of the closed organization trying to maximize profit through internal process efficiency, to super- businesses, massive large networks that harness the resources of many external to the core enterprise.
More and more the most successful companies create services that deliver value by simply orchestrating the assets and capabilities of others. The iPhone, for example, is dependent upon a telecommunication network that is provided by other companies, it is built by outsourcing to manufacturing companies in China, and much of the end user value comes from app developers all over the world, Apple simply designs and coordinates all these components to deliver the value. Marketing and supply chain management, in general, has been moving from models and objectives focused on goods to becoming more focused on partnerships, service provision, value networks, and value creation. There is an ongoing redesign and increasingly sophisticated view of the supply chain as a learning resource, as a source of innovation, as a source of data and information, as sources of access to customers, and competitive advantage. The most developed of these initiatives form into large networks or platforms of collaboration in a service delivery ecosystem.
Existing business and market models are not designed for this new economy characterized by the provisioning of complex services, one where different systems are networked together to provide a seamless experience to the end user; intelligent services that understand the end user’s context. The tradition model for value creation has been either through market mechanisms or within formal organizations. However, information technology platforms now offer us new ways of coordinating individuals and organizations within loosely coupled networks. This enables the coordination between members and organizations in a flexible fashion around shared interests, opportunities, and challenges. As a consequence, business networks are increasingly seen as the optimal form for today’s highly dynamic and complex business world. Business networks evolve from a source of horizontal as well as vertical business partnerships. In this, way they differ both from strategic alliances, comprising only horizontal business partners, and supply chains, of purely vertical relationships.
In this paper, we look at the nature of this new form of services economy, how vertically integrated, service providers now tend to engage in networked value creation in ecosystem-like environments – what can be called service value networks (SVNs) and how this development requires new cooperation forms in loosely-coupled structures of autonomous organizations.
