Research Questions on Service Value Networks

1. Research Questions onService Value Networks Christos N. Nikolaou Professor Transformation Services Lab CSD UoC Transformation Services Laboratory http://www.tsl.csd.gr

2. Motivation • Bridge the gap between business strategy and business models from one side and design and implementation of service value systems (networks) on the other side • Develop a comprehensive methodology for developing, monitoring measuring and optimizing SOA-enabled business processes and supporting infrastructure, in Service Value Networks. Transformation Services Laboratory http://www.tsl.csd.gr

3. Service Systems or Networks • Rapid expansion of service systems or service networks around the globe (millions soon billions). • Growing interest in studying them, analyzing, modeling, predicting, designing… • Service Systems are hybrid (mixed) systems: both humans and human-made systems, such as information, robotic, sensor/actuator, manufacturing/supply chain systems participate. • We therefore need interdisciplinary approaches (or a new science) to study them – emergence of Service Science. • Some Service Systems are successful some are not – can we predict which are successful and which not? • Ultimate criterion is value (commercial, quality of life, etc.) brought to community/society. • Need models of service systems value that are interlinked to service systems design and deployment. Transformation Services Laboratory http://www.tsl.csd.gr

4. A first formulation of the problem • A service provider wants to provide a new service – market research has shown that this would be useful (would have utility) to a market (or society) segment. • The new service could be provided through vertical integration by the service provider alone, or through a network of service providers – by outsourcing some “elementary services” to them, and then composing the final service offering. • What should the service provider do? If the choice is the network which network? What should be the strategy of the other network participants? • How is such a service network deployed, on what resources (including clouds) so that customer requirements of the customers are met, as well as sustainability (e.g. profitability)? • Once deployed, how is the network monitored, checked for achieving objectives? • If changes are to be made. At what level should they be made: strategic (structural) or operational? Who decides these changes? Transformation Services Laboratory http://www.tsl.csd.gr

5. The Enhanced BPM lifecycle • The enhanced BPM lifecycle comprises the following phases: analysis, modeling, rationalization, IT refinement, deployment, execution and monitoring Transformation Services Laboratory http://www.tsl.csd.gr

6. Research on Service Value Systems (not an exhaustive list) • Seminal work by Verna Allee: ValueNet Works™ analysis, using the intuitive HoloMapping™ method, which is a methodology for analyzing the dynamics of value in value networks at the operational, tactical, and strategic level. • The e3Value methodology and tools (Gordijn et al.) provide formal models, visualization, value estimation for value networks • Network formation by (economic) agents has been studied in the literature, (Jackson, Bloch, Currarini, Morelli). The objective there is to form both effective and stable networks, which in general is difficult to achieve. • Social networks work and their correlations with economic networks (Wakolbinger, Nagurney). • Value Net research from a business administration perspective (Iansiti, Parolini). • Research work on services at IBM Almaden Research (Spohrer, Maglio) • Recent work in Karlsruhe on service value networks: design SVNs based on maximizing customers’ utility function (Blau et al.), interaction between service systems and platforms (Fischer et al). • Recent work in Stuttgart on new SVN metamodels (Danylevych et al). Transformation Services Laboratory http://www.tsl.csd.gr

7. Recent Work at S-Cube and TSL on SVN • D. Dubois, C. Nikolaou, M. Voskakis, “A Model Transformation for Increasing Value in Service Networks through Intangible Value Exchanges”, ICSS 2010, Beijing • K. Zachos, C. Nikolaou, P. Petridis, G. Stratakis, M. Voskakis and E. Papathanasiou. *Enhancing Service Network Analysis and Service Selection using Requirements-based Service Discovery*. In proceedings of 1st International Conferences on Advanced Service Computing, Service Computation 2009/, Athens, Greece, November 2009. • M. Bitsaki, O. Danylevych, Willem-Jan van den Heuvel, G. Koutras, F. Leymann, M. Mancioppi, C. Nikolaou, M. Papazoglou, “An Architecture for Managing the Lifecycle of Business Goals for Partners in a Service Network”, ServiceWave 2008. • M. Bitsaki1, O. Danylevych, W.J.A.M. van den Heuvel, G.D. Koutras, F.Leymann, M. Mancioppi, C.N. Nikolaou, M.P. Papazoglou, Model Transformations to Leverage ServiceNetworks, WESOA, Sydney, 2008. • Branimir Wetzstein, Olga Danylevych, Frank Leymann, Marina Bitsaki,  Christos Nikolaou, Willem-Jan van den Heuvel, Mike Papazoglou, “Modeling and Runtime Support for Key Performance Indicators in Service Value Networks”, MONA, ServiceWave, 2008. • C. Nikolaou, M. Bitsaki, G. Iacovidis, P. Mazzoleni, J. Sairamesh and S.Tai “Estimating Value in Value Networks: A Case Study from Pharmaceutical Industry”, 16th Annual Frontiers in Service, October 4-7 2007, San Francisco, USA. • G. Iacovidis, C. Nikolaou, S. Tai, M. Bitsaki, P. Mazzoleni, J. Sairamesh. "Estimating Value in Value Networks - A Case Study from Pharmaceutical Industry". Accepted in the 16th Annual Frontiers in Service Conference, San Francisco, California, Oct. 2007. • “Estimating value in service systems – A case study of a repair service system”, N. Caswell, C. Nikolaou, J. Sairamesh, M. Bitsaki, G. D. Koutras and G. Iacovidis, IBM Systems Journal, Vol. 47, Num. 1, 2008 Transformation Services Laboratory http://www.tsl.csd.gr

8. Start from the value proposition – an offering-centric SVN • A set of offerings: • Products • Services • …offered to the market by a network of providers to consumers that creates value for all of them. • Examples: • The “ultimate coffee drinking experience” (Cinzia Parolini, Illy Café) • A new standard • A new banking service • The car repair service network Transformation Services Laboratory http://www.tsl.csd.gr

9. Offering-Centric Definition of Value Networks (VNs) • A Value network is a pair of two Directed Acyclic Graph (DAG), the offerings DAG and the revenues DAG. These two DAGs: • Have a common set of nodes • economic entities (firms, cost centers, individuals, …) • The offerings DAG has links • Service or goods contracts (relationships)over some pairs of economic entities • The revenues DAG has links over some pairs of economic entities denoting a revenue flow • If there is a link from node a to node b in the offerings DAG then there is a link between b and a in the revenues DAG. • There is a set of root nodes (raw materials respectively raw services nodes) that have no incoming links. • There is a set of leaf nodes (customers nodes) that have no outgoing links. • Associated with the Value network is a set of value equations that associate value to nodes, links and the whole Value network. Transformation Services Laboratory http://www.tsl.csd.gr

10. Concepts (1/4) The Service Network Metamodel Transformation Services Laboratory http://www.tsl.csd.gr

11. A Business Entity Event Handler Regulator Metrics Compliance Offering Delivery Cost Revenue A Role Offering Enablers (telecom, cloud Providers?…) Business Enablers (VCs, lenders) Revenue Enablers (bank, collection agencies) Transformation Services Laboratory http://www.tsl.csd.gr

12. Inside a Business Entity • Message • Exchange • Pattern Resources OO/LC/SA/PA Consumes Transformation Engine Choreographies/ Orchestrations (the internal ecosystem Defined recursively: It recurses to e.g. BPEL or BPEL4People Or atomic WS) Transformation Services Laboratory http://www.tsl.csd.gr

13. A Proposal to define the “Value” of a Value Net • V(t) = ∑ of all the revenue flows – ∑ of all the cost flows + ∑ of the value of all service contracts (relationships) • Relationship Value: expected service sales of the provider over the next time period to a particular consumer • Expected service sales: look into the recent past, modulate by customer satisfaction index • … similarly for the value of a partner participation to an SVN – for customers, value is utility of service provided Transformation Services Laboratory http://www.tsl.csd.gr

14. Why is the above useful? • Because value computations can be linked to KPIs - examples: • LOB sales to relationship values • Market share to charting the business ecosystem, predicting formation of new relationships (based on anticipated value), new products that fill the quality-product space, and related market research about customer requirements and their clustering in the Q-P space • Because “business pains” can be translated to: • Either redesign of business processes (service engineering), • and/or to redesign of the Value Net (Value Net Analysis and Engineering) • Because value net computations can be used for value net comparisons: • How are my competing value nets doing (do they have higher value)? • What if I (a value net partner) added/removed/modified links? • What if I participated in another value net? • Are there opportunities for forming new value nets around new value propositions? Transformation Services Laboratory http://www.tsl.csd.gr

15. … related to the first formulation of the problem: • in two directions: • Analytics/simulations: • start with an initial structure of the SVN, e.g. through customer utility optimization as in Blau et al., • understand KPOs of SVN partners, recursively apply same methodology to internal SVNs to satisfy KPOs or outsource to infrastructure providers. • test establishment of SLAs between them, if failure then restart with other initial SVN structure • Simulate (as a dynamic system) the operation of the SVN, test compliance to SLAs and contracts between partners of SVNs – if problems, redesign. Research Questions… Transformation Services Laboratory http://www.tsl.csd.gr

16. … cont • Deployment/Monitoring/Reporting: • Deploy business processes derived from SVNs under the KPOs/SLAs constraints; • Deploy choreographies/orchestrations derived from business processes preserving constraints; • Operate SVN, monitor performance, report to SNAPT. • If no problems detected go to next monitoring period. • Otherwise start focusing on partners that deviate from KPOs/SLAs: • Should these partners be replaced (strategy)? • Should business processes in them be changed? Transformation Services Laboratory http://www.tsl.csd.gr

17. the Dynamics of Emergent Service Value Networks • Capturing the dynamics of the SVNs (emerging markets and business models, networks, consumers, regulators, etc.) is to a large extent an open problem today. • Special interest in analyzing and predicting how existing market interactions can give rise to emergent SVNs, with possibly business sector specific patterns: • develop models of value creation and destruction in networks and of value optimization. • Use game theory to understand behavior, evolution of competing SVNs • show how the drive for value optimization and the constant change of the environment (new businesses enter the ecosystem and others die, innovative services and products appear, etc.) push the network to waves of restructuring in order to remain competitive. • develop criteria and indicators of change that can serve as input for business process and alliances redesign and realignment. Transformation Services Laboratory http://www.tsl.csd.gr