The St. Gallen House of digital business

Leimeister et al. (2014) presented in a working paper the key idea and the principles of the research program “Digital Business & Transformation IWI-HSG”. The project is inspired by the impact of ICT on the life of the people and the effects of the ‘digitalization of life’, which provides many new business opportunities or requires the adaptation of business companies and the transformation of their models to the challenges of the digital society.

The proposed architecture (‘St. Galler House of Digital Business’) is depicted in figure 2.5. As a research approach, the project follows the principles of ‘user, use and utility’ research agenda and puts the digital user at the center of the stage. Being put at the roof of the ‘house’ (i.e. approach), the concepts of the user, use and utility become the epicenter of the research interest. The foundations are on the area of information systems architecture (IT), enhanced with organsaitional (Business Processes & Organizational Structure) and business concerns (Business Strategy). The Managerial Functions address the management of business operations. Products & Services refers to the business offering to the digital users. Data is ubiquitous and of essential importance for enterprises in the digital age. As digitalization leads to accelerating innovation cycles, it has an impact on all phases of the service and product lifecycle.

Figure 2.5: The St. Gallen House of Digital Business

This project is still under development and further research outcomes have not been published yet. However, it is obvious there are certain similarities in the motivation and the intended research outcomes of this thesis, that is the development of an architectural framework for the analysis of businesses operations through the prism of the new role of the digital users and the challenges of the user, use and utility research agenda.

Chapter 3. A framework for the study of service systems

In the previous chapters we analyzed the major challenges and the current state of the art of service research in information systems. Service value and the role of the user in value co-creation are distinguished as core concepts for the development of new interdisciplinary knowledge and research approaches for the study, the analysis and design of service systems. However, the concept of value is still considered to be basically a business concern and certain value-related concepts have been introduced in the research domain marginally, inconsistently and rather ineffectively. As a result, there is still a lack of general knowledge and adequate approaches for the analysis of the value aspects of service systems. In addition, the needs of the digital user are highlighted in the literature, but the analysis and design of service systems does not include the user’s perspective in the use of services in the daily life practices.

In this chapter we address the need to develop an integrative and interdisciplinary research approach for the study of service systems. At first we propose a three-domain framework for the study of service systems that includes the usage aspects on service, next to the technological and the business process aspects, and highlights service value as the underlying concept that transcends technological architectures, business processes and service usage by the customer. The proposed framework marries together concepts from information systems engineering and service value and addresses the need to close the knowledge gap between technological and business aspects in the study of service systems. We also relate the proposed three-domain framework to the OASIS SOA Reference Architecture Foundations (2012) and discuss the opportunity for a possible extension in SOA that would reflect the expanded perspective of the three-domain framework.

3.1 A three-domain framework for the study of service systems

The service engineering tradition regards service systems as technological infrastructure and computing functionality that is applied in service operations.

This view on service systems is incomplete because it ignores significant aspects about the service offering, its use and value in the real world. We consider people use ICT-enabled services as an integral part of their life practices. Hence, the concept of service integrates human activities, business models, technologies and the natural and virtual environments, with which people interact and which form the service context. This perspective relates the computing/ digital world to the real world of services for businesses and for individuals and can contribute to the analysis and design of innovative approaches in the interactions between service users, providers and technologies, which is a key priority of the current research in service information systems. The proposed three-domain framework for the study service systems is depicted in figure 3.1.

Figure 3.1: A three-domain framework for the study of service systems

The Technology Domain refers to the software and network technologies and infrastructures that are used in the development and operation of service systems (e.g. standards, protocols, tools, platforms, devices, etc.). Technologies are used first and foremost for the development of service. In addition, they are also used to support the implementation of the service provision models and to facilitate the user in accessing and using the service. The concept of service refers to computing services and resources that are exchanged and used in the operations of information systems (e.g. Papazoglou and Van Den Heuvel, 2007).

The Technology Domain is diverse and expanding with the continuous development of new technologies and methods. We will not analyze the Technology Domain, because this is the subject of a plethora of works and projects. Our interest in this paper lies on the application of technologies for the provision and use of service by the user.

The Business Domain refers to the service process and the service offering that is provided to the user. The key activity here is the provision of service and the key concepts are the service as the business offering and the business models that are employed. Service provision can be supported by a variety of methods, ranging from person-to-person interaction to automated processes (Glushko, 2010). The concept of service is defined in the real world, as an activity that is performed for the benefit of another entity (Vargo and Lusch, 2008). A variety of business modeling approaches are used to describe analytically the service process, as well as the roles of the different actors (e.g. providers, intermediates, users, etc.) and the relationships and interactions among them.

We will not emphasize on the Business Domain either, as our interest lies specifically on the interaction with the user and the use of service by the user.

The User Domain refers to the use of the service offering in the context of the life practices of the user. The key activity here is the use of service and the key concept is the resulting service value. The service is defined in the real world, as a direct benefit/ support for the everyday life practices of the user (e.g. Heinonen

and Strandvik, 2015) or as an input for the collaboration and co-creation of value between the user and the provider (e.g Vargo and Lusch, 2008). The context of the user is multidimensional and includes social aspects (e.g. relationships), behavioral aspects (e.g. use patterns), cognitive aspects (e.g. preferences), environmental aspects (e.g. space and time), and virtual aspects (e.g. various technologies and devices that support the user in his life practices). The life practices of the user take place in this context, as habits or routines that are related to the execution of specific tasks and activities (Heinonen and Strandvik, 2015).

The proposed framework for the study of service systems integrates the technological, the business and the user domain. Computing services are part of the technological domain. In the Business Domain computing services support the development and provision of real world services and are connected to the business models employed for the provision of service, the interaction with and the support of the users. In the user domain, users use real world services in their daily life practices to create value and achieve their personal objectives.

While the first link (technologies to business processes) is already quite well established in the service systems literature, the second link (business models to service usage and value) is rather implied – and the complete view that integrates technologies to business processes and to service usage is missing or undefined. The proposed three-domain framework aims to outline exactly this complete view on service systems.

3.2 The value perspective in the study of service systems

The three-domain framework adopts a value-driven perspective for the study of service systems: service value is used as the underlying concept that transcends, interrelates and provides meaning to the activities performed in each domain. Technologies and business operations do not create value, directly, but they offer value propositions and contribute to the creation of value, by supporting the development and provision of service and facilitating the access at and the use of service. Value is manifested and determined at the end of the process, when the service is used by the user. However, all the prior conditions for the use of service and the creation of value occur previously, first, in the technology domain, which enables the development and provision of service, and then in the business domain, which provides the business models for the provision and access to service and offers opportunities for customer interaction, co-creation and support. Hence, value is created in a progressive way along the phases of service development, provision and usage, through the direct or indirect interaction of technologies, service providers and users. The proposed value perspective that emerged from the three-domain framework for the study of service systems is depicted in figure 3.2.

Figure 3.2: The value perspective in the three-domain framework for the study of service systems

This perspective contributes to the establishment of the concept of service value in the analytical framework of service systems. Service value is used as the underlying concept that transcends the technological, the business and the user domain. It can provide meaning to the activities of all the constituents in service systems, it is a common denominator of their efforts and, hence, can become the right basis for the integration of the different concerns about the development, the provision and the usage of service.

Service value is approached from the user’s point of view, according to the premises of the recent service management literature, and not in terms of a cost-profit relationship, such as in traditional economics or traditional service engineering. Technologies and business operations contribute to the creation of value by supporting the development and provision of service and facilitating the usage of service. Their value potential is included in the value proposition of the service offering to the user. These interactions can explain the co-creation of value as a fundamental concept in service science.

We consider it is the concept of value, not of service, that provides meaning in service systems and can offer the right basis for the integration of the different concerns and finally the development of an integrated view that includes the user in the study of service systems. The concept of service is related to the business offering. It can provide purpose and direction to the activities of the technology and service providers only, because their concerns are related to the development and the provision of the service offering. But when we arrive at the user, the service is only a means for attaining personal objectives that acquires meaning (i.e. value) when it is used. The service offering conveys potential value only (Vargo and Lusch, 2008a), which can be realized in many different ways with regard to different usage patterns and according to the preferences, the prevailing conditions, the knowledge and the skills of the users. The concept of value, on the other hand, is related to the use of service. Next to the inherent interest of the users in service value, the activities of the technology and service

providers have a value dimension too, that is reflected on the value proposition they convey to the user through the service offering. Technology and service providers may look at service value from different angles and through different lenses from the users, but their concerns about value exist. For this, we assume the interactions between the various constituents in service systems can be based on the concept of value as a common denominator of these different concerns.

3.3 The relationship between the three-domain framework and the OASIS SOA Reference Architecture

A Service Oriented Architecture (SOA) is an architectural paradigm that has exercised great impact on the implementation of information systems and has gained the attention of the business community. It adopts a service-based terminology (e.g. service is described as capability that can be used to solve another’s problem and a SOA-based system as the mechanism by which needs and capabilities are brought together), but the focus is on the technological domain and on computing services (i.e. web services) that provide business functionality.

The recent OASIS SOA Reference Architecture Foundations (2012) introduced several concepts that seek to bridge the area between IT and business. For instance, the concept of Service Ecosystem is used to describe an environment in which people –organized in ‘social structures’– conduct business operations with the use of SOA-based systems. Service implementations in SOA-based systems utilize computing capabilities to provide business solutions and bring real world effects.

We can find several similarities and analogies between the OASIS SOA Reference Architecture Foundations (RAF) and the proposed three-domain framework. First of all, the OASIS SOA-RAF has the goal to merge the technological and business concerns in the analysis and implementation of SOA-based systems, which coincides with the research objective of the three-domain framework to provide an integrated approach for the study of service systems that incorporates the technological, the business and the user’s concerns.

To achieve this goal the OASIS SOA-RAF introduced the concept of SOA Ecosystem that integrates the technology-centered SOA-based systems and the business-centered Social Structures. The proposed three-domain framework begins with a similar motivation, but it has a wider scope. As we mentioned in section 3.1, the link between technologies and business operations is already well-established in the information systems literature and, therefore, our objective would be to enlarge the focus in order to include in the study of service systems the aspects of service usage in the domain of the end user.

Another similarity is that SOA-based systems deliver services that bring real world effects; these services are used by Social Structures in order to meet their needs or find solutions to their problems. While there is some conceptual analogy between real world effects in SOA and service value in the

three-domain framework, as well as between social actors in Service Ecosystems and the digital user as the individual that uses digital services in the realm of their daily life practices, these concepts have certain differences. OASIS SOA-RAF emphasizes on Social Structures (i.e. “peer groups, communities of practice, associations, enterprises, corporations, government agencies, or entire nations”), rather than on individuals. People as natural entities are organized in Social Structures and they participate in SOA Ecosystems as ‘stakeholders’ of the SOA-based systems. Hence, the behavior of the individual is related to its specific role in a Social Structure and the particular ‘stake’ in the SOA-based system. On the contrary, in the three-domain framework we consider also the digital user as a human entity and the use of digital services he makes on the physical world.

The real world effect has a rather technical character in SOA and refers to changes in the conditions of the real (business or physical) world, but not to changes in the situation of the user and the value of service to the user. For example the OASIS SOA-RAF describes the real world effect produced in two cases as “the book order has been placed” and “more light is available in the room”. However, the service value for the customer in the case of the book order would be related to the use of the book, either to read it and receive cognitive value, or to offer it as a gift and receive emotional or social value; or in the case of turning the lights on, the service value for the user would derive from the tasks he can perform now (e.g. reading).

In sum, SOA-based systems refer to computing operations for the implementation and delivery of computing services. The focus is on the technology domain and the development of business solutions. The OASIS SOA-RAF enlarges the focus and enriches the conceptual domain with business-related concepts that cover both the Technology Domain and the Business Domain and refer also to the provision of service. The OASIS SOA-RAF provides, hence, some conceptual foundations and guidelines how to bridge the IT and the business concerns. The proposed three-domain framework, on the other hand, regards the end-to-end service interactions that begin from the Technological Domain for the implementation of services, continue to the Business Domain for the delivery of services and end at the User Domain for the consumption of service and the creation of service value. The relationship between the OASIS SOA-RAF and the three-domain framework is depicted in figure 3.3.

Figure 3.3: Relationship between the OASIS SOA-RAF and the

three-domain framework

In figure 3.3 we present also a potential extension of the OASIS SOA-RAF in order to include the concerns of the digital user, next to the IT and the business concerns. The proposed extension would enable the end-to-end analysis of service systems and would support the analysis of service usage and service value. In parallel, in OASIS SOA-RAF the possibility for the analysis of service value remains at the level of the value proposition of the technology and the business providers and the potential value carried by the technological functionality and the business offering, respectively (see figure 3.2). However, the service users may make different evaluations of the value propositions, or may adopt different use patterns than the proposed ones. The focus on the functions at the Technology Domain and the Business Domain and the related value propositions causes myopia in the study of service systems: the providers deliver technological solutions and services, but they do not know how they are used by the digital users – and as a result they do not care about it. On the contrary, the inclusion of the User Domain and the user’s concerns in the analysis of service systems would enable better understanding of the use of technologies and services and better approximation of their value, as well as the evaluation of the potential and the future prospects of current and emerging

In figure 3.3 we present also a potential extension of the OASIS SOA-RAF in order to include the concerns of the digital user, next to the IT and the business concerns. The proposed extension would enable the end-to-end analysis of service systems and would support the analysis of service usage and service value. In parallel, in OASIS SOA-RAF the possibility for the analysis of service value remains at the level of the value proposition of the technology and the business providers and the potential value carried by the technological functionality and the business offering, respectively (see figure 3.2). However, the service users may make different evaluations of the value propositions, or may adopt different use patterns than the proposed ones. The focus on the functions at the Technology Domain and the Business Domain and the related value propositions causes myopia in the study of service systems: the providers deliver technological solutions and services, but they do not know how they are used by the digital users – and as a result they do not care about it. On the contrary, the inclusion of the User Domain and the user’s concerns in the analysis of service systems would enable better understanding of the use of technologies and services and better approximation of their value, as well as the evaluation of the potential and the future prospects of current and emerging