Service Design

On Management

noreply@blogger.com (guillermo m wechsler) — Fri, 16 Feb 2007 18:48:00 +0000

Managers are in the game of organizing work for the sake of delivering recurrent value to a set of customers and constituencies:

Managers design organizational structures, cross-functional horizontal processes, extended open networks, action pathways, management systems & a wide variety of business practices.

Managers design, implement, and develop business roles.

Managers mobilize action by exchanging commitments, caring for others' concerns, anticipating breakdowns, re-interpreting contexts, and assuring customer satisfaction on-time and on-cost.

Managers declare priorities, declare breakdowns, manage risks, and reconfigure capabilities.

Managers develop trust and cultivate productive and creative moods.

Managers contribute to their communities by mentoring people, developing meaningful work, and honoring ethical principles of extended communities.

All that managers do happens in conversations, in a dance of speaking and listening. Productive conversations produce productive managers, and vice versa. Management is fundamentally based in traditions of historical linguistic practices.

Ontological Design

noreply@blogger.com (guillermo m wechsler) — Thu, 15 Feb 2007 22:30:00 +0000

In the early 80s, an engineer captivated by the emergence of PCs and networks, working at Stanford University and completing his PhD at Berkeley University, produced a historical philosophical insight. After many years of working with his theoretical breakthrough, he hesitated on how to name it. He tried “hermeneutic pragmatic”, and after a while “pragmatic hermeneutics.” He abandoned both, and never persevered in creating a definite name for his contribution.

His work wasn't particularly theoretical or abstract. On the contrary, he chose very practical issues as the terrain to develop his thinking: software design, management, organizational & processes design, education & skill development. In engineer Fernando Flores' view, most of the difficulties related with productivity, quality, and innovation were rooted in modern understandings of work. His critique didn't target particular management traditions, such as bureaucratic administration, scientific management, rational decision making, or the cybernetic approach. His critique was directed at the philosophical underpinning of all those theories at once.

Inspired by Martin Heidegger – or better, by Hubert Dreyfus' interpretation of Heidegger – and by John L. Austin – in professor Searle's version – Flores claimed that modern understanding of work missed one fundamental piece: a phenomenology of action. It sounded simple, but with that claim, he was turning up-side down a wide variety of management assumptions, organizational development criteria, and software design principles. Furthermore, he was spotting a historical cognitive blindness.

As an illustration, I'm going to point out a few of his claims. He claimed that the essence of work is communication, that human communication in a business context is about engaging in conversations and exchanging commitments, and that commitment always happens in the listening of the involved actors (including the situations in which I'm listening myself). Consequently, he developed a wide variety of theoretical papers that reinterpreted traditional thinking, putting at the center this new perspective language and human coordination. He and his team wrote on a wide variety of subjects including: managing networks of conversations, linguistic ontology of organizations, conversations for action, conversations for possibilities, ontological reconstruction of discourses, team leadership, focalization of strategy, and even subjects that seem closer to psychology than to business, like cognitive emotions and moods.

While exploring the possibilities of his theoretical insight, Flores assembled a diverse team that included computer scientists, biologists, physicians, philosophers, politicians and a variety of business professionals. Among the most active contributors were Francisco Varela, Michael Graves, Richard Owen, Rachelle Halpern, Chauncey Bell, and Bob Dunham. They simultaneously built a company – Logonet, Inc., set up a lab for designing networked social practices (Ontological Design Course ODC), and created a discipline that they named Ontological Design.

In many respects, Ontological Design was a reaction to a pervasive orientation in education, psychology, and management unbalances to be extremely prolific in explaining the past, and extremely weak in shaping futures.

The basic premise of Ontological Design was that the primordial foundation of human realities and human existence is the historical stability of patterns in a wide variety of interplaying and autonomous phenomenological domains. Using technology and networking for distinguishing patterns, observing patterns, assessing patterns, and creating new patterns was at the core of the game.

Flores' insight was that there are a set of linguistic patterns configured and evolved out of human social life, that allowed human beings to share historical worlds and to create new worlds. He called those patterns commitments, and he distinguished four basic forms: Request, Promises, Declarations, and Assertions. The original intuition on this matter came from previous works of Adolf Reinach and John Austin; however, Flores hermeneutic interpretation of these linguistic patterns gave them whole new dimensions. Probably, the change is equivalent in magnitude to what Karl Marx did in reinterpreting G.W. F. Hegel's dialectic.

These linguistic patterns – commitments – become the primordial principles of Ontological Design. Basic human practices like communicating, learning skills, managing a team, dealing with money, or developing careers were complex unities whose components were simple commitments. Consequently, those practices were reconstructed as structures of recurrent conversations built out of commitment.

Following the same approach, valuable historical disciplines like management, finances, education, manufacturing (TPS), politics, software design, among others, were reinterpreted as discourses and practices whose essential value rested in its capacity to synthesize patterns of commitment, and by that, able to disclose possibilities and disclose action pathways to effectively address specific business, social, political, spiritual or any other historical human concern.

The notion of commitment empowered the Ontological Designers to put most of their attention on inventing patterns to shape the future, and to overcome the often wasteful explaining-the-past habit.

The notion of commitment seems obvious, and for that reason is most of the time unnoticed or overlooked. Commitment patterns have some very striking aspects.

Commitments are social practices that allow us to bring forth new futures, by virtue of being celebrated in the present, based in past consensual conventions. We produce action in social networks based in our capacity to invent and celebrate commitments. Basic patterns of commitment are few; they exist in every culture – in their own way; they exist with independence of idioms; and they produce enormous simplicity and focus at the moment of producing action.

Commitments are at the heart of language, and make us sensitive to the facticity that, in speaking and in listening, we are never describing an objective-independent world. To the contrary, we are socially co-configuring – better to say disclosing – a shared world based in consensual distinctions and a shared background of practices and habits.

The ultimate grounding of our commitments is our communal humanity that grants modern human beings the freedom to bring forth commitments – out of traditions, nothingness, and will – and the obligation to cope with the consequences.

So, going back to our story on Ontological Designers, I said that the core of their design work was designing commitment-based practices, and exercising them. In doing so, they produced new practical skills. They were able to build paradigmatic practices to modify individual and collective styles or cultural orientations – a rather existential exploration, and they were able to articulate – reconstruct, and make visible – and modify social habits, emotional patterns, and moods.

There are three valuable sources for this story: Understanding Computers and Cognition by Terry Winograd and Fernando Flores, Disclosing New Worlds, by Charles Spinosa, Fernando Flores, and Hubert L. Dreyfus, and Building Trust: In Business, Politics, Relationships, and Life by Robert Solomon and Fernando Flores

I was an early participant in this experiment and I will share with you my view about what was produced in that prolific social lab and I will also elaborate on what I have produced out of my work with ontological design.

Software as Services

noreply@blogger.com (guillermo m wechsler) — Tue, 13 Feb 2007 20:54:00 +0000

Everything is about services. Products are mere service platforms. Good products are ready-to-hand capacities, without the associated risks, logistics issues and maintenance of the "thing". Take a look at this post: I Love Software as a Service.

Universal Health Care: A New Business Paradigm?

noreply@blogger.com (guillermo m wechsler) — Wed, 07 Feb 2007 06:54:00 +0000

I recently went to a discussion on Universal Health Care.

Ronald Preston, Former Secretary of Health and Human Services in Massachusetts, brought that sharp humor that evaporated the romanticism which can be dangerous when you are trying to overcome real problems. He warned people not to think that universal coverage was only a humanitarian initiative to make health accessible to people. He also said that, essentially, this initiative is trying to save an industry that is in an acute crisis with an explosive mix of rising costs, over-capacity, and decreasing quality. In summary, he said that more insurance may help to keep this expensive industry alive. That's why we need more people inside the system. On the opposite end, Ruth Liu, Associate Secretary for Health Policy in California, glamorized the human side of Schwarzenegger's proposal.

The complexity of the challenge looks overwhelming with the variety of concerns and the different actors. What nobody in the forum seems to tackle is how poring more resources into the system that has already produced the negative results we are seeing is going to produce a different system than the one we have. The predominant service design principles underlying the discussion seem to be that health care needs to be managed top-down by the insurance companies, health care providers, and HMOs, keeping the government and politicians as the arbitrators of this complex system. I asked many of the participants, including Mary Ann Thode, President of Kaiser Northern California Region, and Ronald Preston, about the Teisberg/Porter approach on redefining health care by empowering the patient to make health conditions life-cycle value-based decisions in transparent, open markets with homogeneous quality measures and by ubiquitous access to medical records. Olmstead & Porter built their proposal from radically different theoretical design principles. Unfortunately, their book and their approach wasn't known, even though, after a short conversation I discovered that some speakers of the forum were sympathetic to it.

Although interesting, this universal health care debate lacked a radical new perspective able to simplify the overwhelming complexity of a highly regulated, hierarchical and opaque system.

Scaling Innovation in Biotech

noreply@blogger.com (guillermo m wechsler) — Tue, 06 Feb 2007 22:24:00 +0000

The Berkeley HAAS School of Business did very interesting work at their annual Business of Health Care Conference. In one day, they pass you through a variety of interesting topics, with super speakers on the future of biotech, VCs and innovations in healthcare, healthcare policy, IT or HCP strategies for improving health, as well as a panel on universal health care, which opened a discussion about Schwarzenegger's health proposal. Dr. Craig Parker, head of Biotechnology Equity Research at Lehman Brothers conducted an interesting conversation with Suzy Jones from Genentech, Erik Bjerkholt from Sunesis Pharmaceuticals, Ajay Bansal from Tercica, and Mark McDade from PDL BioPharma, on the topics of scalability of innovation. He framed the discussion with simple questions: What is innovation? How do your companies promote innovation? How can we measure innovation?

Overall, the obvious consensus was that innovation is any new offer that increases value to patients. So innovation can come from basic science, improved business models, or new services, but the test unvariably will be differential value-added to customer. The other interesting consensus is that the biotech industry is already a mature industry. This means that there isn't much room for disruptive changes. Only innovative products will drive growth and revenue. So the challenge for the biotech companies will be to expand product and service innovations with shorter life-cycles of development and more efficient processes. Producing innovation with an efficient operating model becomes a key issue.

Perspectives on Innovation

Dr. Parker pointed out that, after reviewing the industry, he discovered that the innovations per employee are significantly lower in biotech companies that have grown based in acquisitions in comparison to biotech companies that have grown organically. A key example of this is Genentech.

Suzy Jones' story about Genentech was simple and powerful. She said “We're innovative because we know how to partner with scientists, the academic community, and with other interesting small companies doing good research. We are just starting our Genentech Fund to promote interesting research with our network of partners. There are a few design principles that are relevant to expand these collaborations:

First, Genentech is not willing to buy patents and then to dispose of the scientists' teams that produced them. Genentech is recognized as a respectful partner willing to enhance good research and good scientists' teams.

Second, Genentech is very reluctant to establish formal processes that can rigidify relations between institutions and produce contractual straight-jackets in relations and conversations that should remain vital and creative.

The model has paid off. They invariably receive the first call of their partners informing them about potential interesting ventures. High quality networking, based in what Yochai Benkler could articulate as the best traditions of collaborative production, has been leveraged by this not-too-young company which has this unusual mix of scientists in top business positions.

Another angle was brought by Erik Bjerkholt, who plays in a smaller company. One of the points that caught my attention is that he is trying to build a business model in which he can leverage expertise in the basic components of the biotech business by building global partnerships. One of the strengths of his company is a manufacturing facility that, instead of being coupled with the research department and headquarters like in Genentech's South San Francisco facilities, is being built in India where they have an extremely talented and vigorous partner. So, he brought up the subject of decentralization, major partnerships, and focalized innovations. His approach has resemblances to Michael Dell's early discovery that the computer industry was mature, that vertical integration is a dangerous liability, and that the horizontal, flexible organization of the supply chain was a fundamental dimension of a new business model.

Ajay Bansal and Mark McDade somehow reinforced Erik's perspective in the sense that they made two or three important assessments. One is that the opportunities for them are not in basic research but in discovering niches in the industries in which they can develop innovations that enhance treatments or services that were created by the big players of the industry, or in co-investing or buying patents from the big players that have been postponed by strategic priorities in the portfolios of the major players.

The charismatic Kevin Young from Gilead Sciences, a keynote speaker of the event, added a new perspective, claiming that in order to keep Gilead's super performance and innovation, the company should focus on leading the social networks that support their business, and adjust their research, products, and services as much as they need to to increase value to the customer. They are actively involved with a wide variety of constiuencies promoting price reductions based in scaled market needs, payment capacities, and aggressive prevention. One example he gave was an HIV program in the prison system -- requiring tests upon entrance and exit from the jail -- which puts some responsibility on the prisons to prevent the spread. Another example he gave was they opened up an operation in Turkey to prevent Hepatitis B. Young claims that innovating to promote change in practices in vast social networks is a fundamental capacity.

I left that discussion with a feeling that the spirit of science and academics, which fueled the emergence of the collaborative culture of the Internet, is also renewing critical dimensions of our health care industry.

On Dell: The American Company Able to Emulate TPS...and Beyond?

noreply@blogger.com (guillermo m wechsler) — Wed, 24 Jan 2007 09:50:00 +0000

Michael Dell founded his company in 1984, after following a natural path that started with an innocuous practice of upgrading and enhancing his own computer and - more often - his friends' computers. Soon after that techno-social activity, and almost without noticing it, he was receiving requests from friends-of-their-friends. Even more interesting, he was pricing his upgrading services with good margins, and subcontracting other hackers to deliver his services. Thousands of guys like him were doing the same thing in high schools and university campuses all over America. Many had the intuition that scaling the business was worthwhile. But only Dell built Dell.

I. The Relevance of Spotting Emerging Practices

In the middle of dealing with the practicality of satisfying his customers, Michael Dell conceived of an original Business Model for his industry, and persevered in designing and adjusting the Operating Model to make it increasingly valuable: Building Products to Order, Selling Directly to Customers, and Enhancing Customer Experience. Almost 14 years later, he had a $12 billion company. Today, he has a $50 billion revenue company, valued in $100 billion.

At the time he was starting, in 1984, the PCs were in the market for more than ten years. The Internet was thriving - although circumscribed to a few universities - out of the talent and vigor of governmental and academic communities. The core of the Information Technology centered around connectivity, LANs, proprietary systems, and communication. California was plagued with Toyota cars, and many companies were asking “just-in-what?”. The “Reengineering Process” business fashion, announced by Hammer & Champy's book, “Reengineering the Corporation: A Manifesto for Business Revolution” was not even imagined; it was preceded by Dell's practices by at least a decade.

II. Conceiving the Space for Design

Dell was familiarized enough with the historical inadequacies of his overly vertically integrated industry - and maybe with the Toyota Production System (TPS) - to be intolerant of coordination waste or inventories. He was also aware enough with IT -networks to be opened to add layers of intermediaries in his supply chain. Consequently, he conceived of his Virtual Integration business model.

Michael Dell's articulation was powerful and simple. It was something like this: "I am thriving in a young industry in which early generation of companies - IBM, DEC, Compaq - were obliged to produce a wide variety of the components of their own products. That is not the case any more. Today, there are dozens of innovative and efficient suppliers of any component required to build a high quality/high value-to-customer PC. What should I do? Compete with them? Or work with them?" The answer to these questions came later in a HBR interview: “We concluded that we are better off leveraging the investments others have made and focusing on delivering solutions and systems to customers.” Beyond that, he spotted a debilitating inertia in his early-generation competitors. He called them “engineering-centric” companies, leaning heavily toward the “we-have-to-develop-every-thing” culture/mentality.

Human beings - as experienced industrial designers claim- relate with artifacts in four ways: they conceive, design, produce, and use objects. The Virtual Integration business model of Dell is powerfully anchored to each phase of this product life cycle.

The structural relation between Supplier-Manufacturer-Customer is supported by a robust architecture of Data Linkages that increases coordination speed, monitors critical value measures, and allows early warnings in quality issues or market opportunities. Virtual Integration produces less variability, less inventory, lower cost, and lower risks. In terms of scalability and growth, the model is appealingly more efficient than the traditional vertically integrated competitors.

III. Design Principles

Kevin Rollins, Dell's CEO, has played a key role in furthering the company's developments and implementing a solid Operating Model. In a certain way, he has been the guy thinking and articulating what Michael Dell is about, and transforming the sensitivities of an individual into sensitivities embodied in a vast and rich network of business practices. He credits Dell's achievements in years of obsessive care for impeccable execution in delivering value to customers, plus some strategic and management principles. Among them are:

Do not invest in Defensive R&D.

Do not set standards in patent offices, but in the marketplace.

Not delivering promised value to customer is bad; Not saying that you are failing and not asking help is very bad; Hiding your problems is unforgivable.

Use technology to leverage collaboration and allow people to work together.

Build as few partnerships as you can, and keep them as long as they are leading their markets.

Focus only on what delivers real value to customer experience.

Simple and powerful. They “hammer” these principles into their peoples' heads. However, they don't take these questions lightly, they are already thinking about what “hammering” is about, and how it is connected with human phenomenon. In other words, how they can improve the speed at which they affect their vendors' and suppliers' mindsets, and how they can increase the speed at which they are affected by others.

Very cool company. In its 2005 fiscal report to the board, Michael Dell said, “We're proud of both what we're accomplishing and how it's being done.” Not only that, they are active in shaping what they call “global citizenship”. Very ambitious guys, putting themselves in the middle of historically crucial problems.

A New Perspective on Health Care Challenges

noreply@blogger.com (guillermo m wechsler) — Thu, 11 Jan 2007 02:13:00 +0000

My experiences in the health care industry are limited. I helped a market research group for AstraZeneca to develop a strategy for a new cancer drug (I learned a lot about what happens in markets with sharp asymmetric information -between patients, patients' families, drug producers, physicians, health providers...-and with highly fragmented, conflicting, and largely denied role identity struggles in physicians' professional environment).

I also worked with AstraZeneca to deliver a proposal to develop a Multicultural Marketing Capability able to develop customized services and drugs for different ethnicities with distinctive patterns of health conditions. And there was a project to improve some product development practices at Genentech, alongside a few other projects with health providers.

Health care industry is a captivating place to spend professional energy. It produces simultaneously incredibly value and astonishing waste, visionary ethical leaders and opportunistic mercenaries, social recognition and social criticism. It is the space in which the discourses of science, medicine, engineering and business compete in leading to a better future. But as happens in any conversation, the wrong framing can produce bad consequences.

Many months (years?) ago, I read a HBR article by Michael Porter and Elizabeth Olmsted Teisberg, published as a book in 2006, “Redefining Health Care.” They made a magnificent contribution to understand the “framing” problem in thinking about the health industry. Simple and powerful. They made a thorough diagnosis of what they characterize as a wrong structure of competition in the industry (zero-sum competition) and they proposed a set of design principles that could shape a space in which new valuable service practices could thrive. I strongly recommend the book and will be happy to engage in conversations about it. The starting point of good service design is achieving a rich articulation of the underlying anomalies producing the mess, declaring a set of design principles to create the adequate orientation and language, and conceiving a new possible reality that unsettles current complacency. They did all of that.

Service Design Wiki

noreply@blogger.com (guillermo m wechsler) — Wed, 06 Dec 2006 23:53:00 +0000

Come get involved in the service design wikis out there and shape the conversation around Service Design. One is on Wikipedia and the other is an independent wiki in a Service Design community.

Redefining Customers in CRM

noreply@blogger.com (guillermo m wechsler) — Mon, 04 Dec 2006 05:17:00 +0000

Doc Searls is holding an Internet Identity Workshop Dec 4-6 to discuss how to build a vendor-customer relationship system that takes care of the customer.

I am not able to attend but I suggest checking out the site's wiki to see what comes from this conference. Building new toolsets that will change the role of the customer and vendor could change the way the service industry works and what concerns all customer service tasks are oriented to.

Interesting questions to consider in these conversations are what is customer? How do companies using CRM understand customers and what kind of customer-vendor relationship does this understanding bring? And how can techonology be used as a tool to bring about a new understanding of customers?

Services as Tangible Capacities

noreply@blogger.com (guillermo m wechsler) — Mon, 30 Oct 2006 05:00:00 +0000

Let's explore the following thread. Services are not vague, intangible, or subjective. Services seem intangible because of our lack of adequate distinctions to make them intelligible and designable.

Let's start with the following distinction: Services are a specific capacity for action that is specified in a contractual exchange and transferred to a particular customer. The tangibility of a particular service rests in the timely capacities that it delivers to a particular customer.

Information Services such as Reuters offer assertions of events, which expand the capacities of their customer to make interpretations of opportunities or assessments of risks. Educational Services, such as UC Berkeley, promise that after a training period, their students will be able to make and fulfill new valuable promises. Financial Services, such as Intelligent Finance, promise to reorganize the temporal structure of financial obligations and assets of their customer, so they can participate in future exchanges. Auction Services, such as eBay, promise to display your offers, support your transactions, and create performance records to allow risk assessments and reputation building among buyers and sellers. In order to deliver competitive services, the crucial capacity is the understanding of networked customer's identities, and the development of networks of production and delivery.

Technology in Service Growth

noreply@blogger.com (guillermo m wechsler) — Thu, 19 Oct 2006 22:29:00 +0000

During the last thirty years, services have been continuously increasing their share of the world's GDP. At the beginning of the seventies, services accounted for 53% of the global output. Today, services exceed 70% of the global output (World Bank 2004). Many IT innovations have modified the business landscape to propel this explosion of services.

The PC emerged in the late seventies; LAN appeared in the eighties; the Internet erupted with formidable force in the nineties; and we have the collaborative Open Source practices of software development not only running the vast majority of the Internet servers and key applications in the Corporate world, but also influencing the style in which people work together in any sphere of activity.

Technology that expands the capacity of Networking in Networked Networks (NNN) is at the essence of the Service explosive growth.

In the middle of all these changing trends, there are two important issues to notice. First, we do not have an understanding of service beyond the traditional economic theory that articulates it as the “intangible benefit.” Second, notions such as networking, networks, and networked are articulated in multiple ways and in general, in a vague and metaphorical fashion.