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Key Dimensions of Service Systems
in Value-Creating Networks
Cristina Mele and Francesco Polese
Abstract The aim of this chapter is to identify the key dimensions of service
systems and to describe how they interact in the process of value co-creation.
The four key dimensions identified in the analysis are: customers; people (including
employees and other stakeholders); information; and technology. The chapter also
characterises the value-creation process in service systems as consisting of three
related stages: value proposition; acceptance; and fulfilment. The main conclusion
of the chapter is that the four key dimensions interact at all three stages in a network
of relationships that co-create value through the integration of resources. In details,
the interactions between the key dimensions shape two kinds of nets: (i) a social
network; (ii) a technological network. These nets are the basis for a greater value-
creating network aimed at increasing stakeholder value. Conclusions have practical
implications for managers and theoretical implications for researchers.
Keywords Value Network Customers People Information Technology
1 Introduction
Service science is the study of the creation of value within and among service
systems, which are complex adaptive systems, integrating resources and interacting
with other service systems via value propositions which may form stable relation-
ships in extended service networks (IfM and IBM 2008; Maglio and Spohrer 2008;
Vargo and Akaka 2009). The aim of this chapter is to contribute to the development
of service science by analysing the capability of service systems in fostering value
creation. In particular, the chapter analyses the interaction of four key dimensions
of a service system in building a value-creating network. In doing so, an interactive
F. Polese (*)
DIAM Dept, University of Cassino, Via S. Angelo, Loc. Folcara,
03043 Cassino (FR), Italy
e-mail: polese@unicas.it
H. Demirkan et al. (eds.), The Science of Service Systems,
Service Science: Research and Innovations in the Service Economy,
DOI 10.1007/978-1-4419-8270-4_3, #Springer Science+Business Media, LLC 2011
37
research method (Gummesson 2003) was adopted: the work combines literature
review, theoretical insights and empirical analysis. The chapter assumes an essen-
tially theoretical perspective, not with a normative orientation, but in terms of a
positive basis for service systems and service science; some practical cases are
described to provide examples that illustrate the theoretical framework.
The chapter is organised as follows. First, service systems and the concept of
value co-creation are described in order to introduce various perspectives on the
notion of “value” (such as “customer value”, “supplier value”, and “stakeholder
value”) (Sects. 2 and 3). Second, the chapter analyses the key dimensions of
a service system (Sect. 4): (i) customers (Sect. 4.1); (ii) people (Sect. 4.2);
(iii) information (Sect. 4.3); and (iv) technology (Sect. 4.4). Later the chapter
focuses on the value process as consisting of: (i) value proposition; (ii) value
acceptance; and (iii) value fulfilment (Sect. 5). The roles of the identified key
dimensions in this value process are then described (Sect. 6). Subsequently, the
analysis points out the interactions between the key dimensions shaping two kinds
of nets (Sect. 7): (i) a social network (Sect. 7.1); (ii) a technological network
(Sect. 7.2); these nets are the basis for a greater value-creating network aimed at
increasing stakeholder value (Sect. 7.3). The chapter concludes with a summary of
the main findings and implications for managers and researchers (Sect. 8).
2 Service Systems and Value Co-creation
The contemporary notion of a “service” implies an activity (or series of activities) in
which various resources are utilised by a supplier in interaction with a customer
in order to develop a solution to certain needs (Gr€
onroos 2003; Alter 2008).
In accordance with this view, Vargo and Lusch (2006, p. 283) define service as:
... the application of specialized competences (operant resources – knowledge and skills)
through deeds, processes, and performances for the benefit of another entity or the entity
itself.
It is thus apparent that the notion of “service” implies the existence of both a
provider and a client who seek to provide value by finding a solution to need (Lusch
et al. 2009). The relationship between the provider and the customer can be viewed
as a simple service system – that is, a systematic interaction of parts that functions to
perform a service. The smallest service system is a single person; the largest is the
global economy.
Any service system is not simply the sum of its parts; rather, the interactions of
the parts form a higher-order construct. As Maglio and Spohrer (2008, p. 18)
observe:
A service system is a dynamic value co-creation configuration of people, technologies,
shared information (language, value, measures) and other resources connected via value
propositions.
38 C. Mele and F. Polese
According to this view, the underlying logic of a service system is value creation
for itself and value-co-creation for other parties through the proposing, acceptance,
and realisation of value propositions. The notion of value co-creation is one of the
fundamental ideas of service-dominant (S-D) logic and service science, both of
which explicitly recognise the importance of collaboration in sharing and integrat-
ing resources. The various actors involved (customers, suppliers, partners, and so
on) are seen as “resource integrators” (Vargo and Lusch 2008b) in a network-based
stakeholder perspective (Gummesson 2008b). As Cova and Salle (2008, p. 272)
point out: “co-creation is carried out in a many-to-many approach between a
supplier and [its] network in interaction with a customer and [its] network”.
Service Systems and Value Co-creation
A tour operator designed and managed its packages by involving its custo-
mers in new opportunities for the co-creation of value. It did this by incor-
porating customers’ views as communicated through an e-platform that
allowed customers to design their own tourism experiences according to
their preferences. The tour operator uses the e-platform to increase contacts
with customers and create interactive opportunities which foster value
co-creation.
3 Concepts and Perspectives of Value
The notion of “value” has been variously applied to such concepts as “customer
value”, “firm value”, “stakeholder value”, and “network value” (Mele 2009b).
The first of these, customer value, has at least two meanings – depending on the
perspective that is adopted (Woodruff 1997; Anderson and Narus 2004). From
the seller’s perspective, “customer value” is defined as a specific customer’s (or a
group of customers) profit contribution; alternatively, from the customer’s point of
view, “customer value” refers to the perceived value by the consumer defined by
Zeithaml (1988, p. 14) as the all-inclusive evaluation of a product’s utility, based
on the perception of “what is received and what is given” (p. 14). More recently,
the understanding of “customer value” has been elaborated to explicitly encompass
specific elements of the concept (Anderson and Narus 2004). For example,
Ulaga and Eggert (2006) have noted that the notion of “customer value” in
business-to-business relationships also includes trade-offs of service, expertise,
time, and social benefits as well as the price and process costs related to the
supplier–customer relationship.
Firm value is usually based on a resource-based view of the value of the
resources that a firm possesses. This form of “value” is thus linked to a firm’s
potential to continue to exist and evolve (Vicari 1991; Stampacchia 2001). Such
potential not only depends on the set of resources that a firm already possesses, but
also on its ability to generate new resources from existing resources on an ongoing
Key Dimensions of Service Systems in Value-Creating Networks 39
basis. In particular, firm value depends on the ongoing enrichment of cognitive
assets, knowledge, and learning capabilities.
The concept of stakeholder value refers to the satisfaction of the interests of
various stakeholders (Christopher et al. 2002; Mele and Colurcio 2006). This notion
of “value” draws on Gummesson’s (2008a,b) conception of “many-to-many
marketing”, in which value is not limited to the supplier and the customer, but
also involves a network of interested stakeholders. In a similar vein, Mele (2009b)
and Mele et al. (2008) have explicitly linked the network perspective to the notion
of value in developing the concept of network value in terms of all the benefits that
network partners create through their actions and relationships.
It is apparent that the various conceptions of “value” described above are derived
from the particular perspective on value creation that is adopted. For example, the
first conception of “customer value” noted above is based on a supplier-centric
perspective (whereby “value” is perceived in terms of what the vendor gets from the
customer), whereas the second understanding of “customer value” is derived from
acustomer-centric perspective (whereby “value” is perceived in terms of what the
customer gets from the purchase). Depending on the perspective that is adopted,
different understandings are generated regarding the main actors involved and the
content of the value that is created. Table 1presents an interpretation of value based
on the particular perspective that is adopted.
The first perspective shown in Table 1is the supplier-centric perspective. The
perspective of supplier centricity is implicitly adopted in most management and
marketing studies that assume a goods-dominant logic. According to this perspec-
tive, the provider is the value creator who adds value to a product and delivers it
to the customer through an exchange transaction. The creative process consists of
value-adding activities along the value chain (Porter 1985). The supplier is thus the
value builder, whereas the customer is the user who functions outside the value
chain. The content of value in this perspective consists of “value-in-exchange”,
which is basically assessed in terms of the supplier’s perspective of value.
The second perspective shown in Table 1is the customer-centric perspective
(Prahalad and Ramaswamy 2004). Womack and Jones (2007) propose a customer
value chain that ranges from supplier-centric lean production to customer-centric
lean consumption. According to this perspective, the customer is conceived as a
Table 1 Perspectives on value creation
Perspective Value content Creation process and main actor(s)
Supplier-
centric
Value-in-exchange Supplier as a creator adding value to a product and
delivering it to a customer
Focus on the Supplier Value Chain
Customer-
centric
Value-in-exchange
Value-in-use
Customer as a prosumer and a value creator
Focus on the Customer Value Chain
Stakeholder-
centric
Balanced
centricity
Value-in-exchange
Value-in-use
Value-in-experience
Interacting contributions from suppliers, customers, and
other stakeholders acting as co-producers and co-
creators of value (through solutions and experiences)
Focus on stakeholders’ interactions and dynamics
40 C. Mele and F. Polese
so-called “prosumer” who plays an active part in the value-creation process, rather
than being restricted to the consumption process. The content of value in this
perspective is understood as “value-in-use”, which clearly shifts the emphasis to
the customer. The supplier thus makes a “value proposition”, which is ultimately
realised through the process of value-in-use by the consumer. Interaction between
the supplier and the customer thus emerges as a joint process of value creation
(Vargo and Lusch 2006).
The third perspective shown in Table 1is the stakeholder-centric perspective.
According to this perspective, the value-creation process is not restricted to a dyad
(such as a supplier–customer dyad); rather, value creation occurs within a network
of relationships among many actors. Within such a “value network”, value is not
created in a linear process involving a sequence of actors in a production chain;
rather, value is co-created in a constellation of networked co-operant actors
(Normann and Ramirez 1994). The final offering that end-consumers receive is a
result of the fulfillment of multiple co-productions within a network of actors who
interrelate to co-create potential value through their experience and knowledge
(Ballantyne and Varey 2006). The content of the value in this perspective is created
through value-in-experience as resources (knowledge, products, services) are
shared and exchanged by all actors to achieve certain aims. This perspective thus
moves from the paradigm of a focal service system managing particular stake-
holders to a paradigm of multiple service systems working together as partners to
co-create value for all stakeholders through a relationship network (Polese 2009b).
According to this view, the customer is one of the beneficiaries, but not the only
one. All stakeholders effectively contribute to the co-creation of value while also
expecting value in return for themselves. It is therefore more accurate to speak of
stakeholder centricity in terms of balanced centricity (Gummesson 2008a,b), as
a host of interests have to be taken into account in the analysis of the value
co-creation process. This relational pattern suggests the deepening of network as
powerful concept declining service systems behaviour and logics.
Towards a Value-Creating Network
A local public transport firm decided to introduce more technology into its
interactions with customers, partners, and suppliers. Vehicles and stations
were equipped with touch-screen PCs that enabled passengers to verify
information about connections, traffic, fares, future bookings, self-ticketing,
and so on. The screens also placed maintenance staff in direct contact with
suppliers for the ordering of components and spare parts. Similarly, drivers
were able to provide real-time information about traffic and weather condi-
tions to a central monitoring unit, which was connected to the national
highway patrol system and the national weather bureau.
By providing such a network, all stakeholders (providers, partners, and
customers) were able to play a role that contributed towards the shared goal of
distinctive value-creating network.
Key Dimensions of Service Systems in Value-Creating Networks 41
4 Key Dimensions of Service Systems
The capacity to create stakeholder value is dependent on the possession and
development of well-attuned resources by each stakeholder. According to Barney
(1997, p. 143), resources can be defined as:
...all assets, capabilities, competencies, organizational processes, firm attributes, informa-
tion, knowledge, and so forth that are controlled by a firm and that enable the firm to
conceive of and implement strategies that improve its efficiency and effectiveness.
In service science, “all nameable things can be classified as one of four types of
resources: physical-with-rights (e.g., a person), not-physical-with-rights (e.g., a
business), not-physical-with-no-rights (e.g., shareable information or documents,
such as a description of a patent), and physical-with-no-rights (e.g., a technology or
part of the natural environment)” (Spohrer et al. 2008a, p. 3).
Cai et al. (2008) propose a so-called “service map” for service science, which
is arranged in three layers: (i) service needs; (ii) service competencies; and
(iii) service resources (see Fig. 1). The first of these, service needs, refers to the
provision of attractive user experiences and the reduction of user sacrifices by
enhancing the availability of service systems and the efficiency of service delivery.
The second, service competencies, concerns the “capabilities of a service provider
to provide high-quality services to its service consumers” (Cai et al. 2008, p. 4);
these are divided into vertical competencies (related to the service process) and
horizontal competencies (related to various stakeholders). The third, service
resources, refers to the items or assets required to foster interaction and value
creation (information, people, processes, physical assets). They can be internal or
external valuable resources (Bowman and Ambrosini 2007) in the sense that they
contribute to the value creation process; indeed, by leveraging service resources,
service systems can strengthen their service competencies in order to respond to
service needs, increasing the value created.
SERVICE NEEDS Value needs, experiences, reduced sacrifices
SERVICE COMPETENCIES
Vertical capacity to perform processes
Horizontal capacity to manage and provide for
several stakeholders
SERVICE RESOURCES
Valuable/Useful resources for interaction and value
creation
Source: Adapted from Cai, Chung and Su (2008)
Fig. 1 Service map
42 C. Mele and F. Polese
In services-dominant (S-D) logic, two kinds of resources are distinguished:
(i) operand resources (which are physical resources upon which an operation or
act is performed to produce an effect); and (ii) operant resources (which are the
knowledge, skills and core competencies that produce the effect) (Vargo and Lusch
2008a,c). According to Lusch et al. (2008, p. 7), there has been a paradigm shift in
services management such that “producing should be transformed into resourcing”;
in other words, the emphasis has shifted from goods and services being posited as
units of output to their being now perceived as potential input for services and
experiences.
In service science, a crucial role is performed by knowledge as a “meta-resource”
(Mele 2003) – that is, a primary factor that is capable of activating the development
of other resources. From this perspective, the service system is understood as being
primarily a cognitive system, which depends for its existence and performance
on its own understanding and know-how (Vicari 1991; Rullani 1994). Moreover,
as a cognitive system, it creates information and activates knowledge to produce
new knowledge through continuous learning processes. As knowledge and compe-
tencies become more complex, firms become sets of micro-specialisations that must
integrate and transform their resources into a higher order of service potential
(Lusch et al. 2007).
Resources and learning processes are thus the foundation for the value-creation
processes of service systems. Four key dimensions can be identified in the resources
that enable such learning processes: (i) customers; (ii) people; (iii) information; and
(iv) technology (see Fig. 2).
4.1 Customers
The active role of customers in value creation is well established in the marketing
and management literature; indeed, customer knowledge is now recognised as a
crucial element in improving the processes, products, and services that are offered
in a business context.
Fig. 2 Key dimensions
of service systems
Key Dimensions of Service Systems in Value-Creating Networks 43
According to Karni and Kaner (2006), a service system can be distinguished
from other types of systems precisely because the customer’s involvement is
distinctive. These authors noted that customers can play some or all of the following
roles in a service system:
lInitiator and receiver of the service
lSetting the primary objectives for the design and operation of the service
lInput (as a client upon whom the service is to be performed)
lOutput (as a client upon whom a service has been performed)
lParticipant in the process
lHuman resource in the process
lProvider of physical resources to the process
lProvider of knowledge to the process, and
lSetting constraints or standards for acceptable service levels
The central and distinctive role played by customers in service systems means that a
“customer orientation” is the reference dimension in the deployment of all other
elements in the system. Mele and Colurcio (2006) note that the customer is both the
input and the output of any value-creation process.
In summary, as also emphasised by the basic principles of quality management,
the customer should be seen as the mainstay of all strategic processes and decision-
making for a service system.
4.2 People
Networked service systems involving many-to-many relationships cannot afford to
relate positively only with customers. Every interested party – including employees,
consumer groups, local associations, pressure groups, and individual citizens –
needs to be part of the pursuit of common goals based on cultural interests, common
values, and shared rules and constraints. In the development of a value-creation
process, various people contribute different skills and knowledge that are vital to
service systems. As Maglio et al. (2006, p. 83) observed, “the challenge lies not
simply in formally modelling the technology or organizational interactions, but in
modelling the people and their roles as knowledge workers in the system”.
In this regard, the empowerment of employees with the necessary authority
to make decisions and undertake appropriate service actions has the capacity to
increase significant value potential to customers. Ensuring the autonomy of
co-workers facilitates service innovation through the creative use of the knowl-
edge that they possess (about service, quality, clients, etc.). In particular, front-line
employees play an important role in the implementation of innovative service that
differentiates a service system from competing services (de Jong and Vermeulen
2003). Specific attention should be focused on talented employees who have the
knowledge and competencies to realise superior performance (Hiltrop 1999).
44 C. Mele and F. Polese
In this context, a crucial role is played by the tools and systems that firms adopt to
foster creativity (Goldenberg and Mazursky 2002). Creativity can be understood as
the ability to leverage, exploit, and re-combine knowledge with the aim of generat-
ing new ideas that are original, unexpected, and even astonishing (Colurcio 2009;
Mele 2009a). In terms of value creation, such creative imagination can be oriented
and managed with a view to shaping new value propositions. To achieve such
directed creativity (Colurcio 2009; Mele 2009a), a service system requires the
contributions of all organisational members and network partners within a culture
that encourages learning processes directed toward fostering creative innovation.
To foster such creativity, a service system needs to become a learning organisa-
tion in which new knowledge and new methods are enabled to invigorate its
cognitive and methodological practices. In this regard, learning by experience
assumes a key role in increasing the capabilities of individuals. Seeing service
systems as learning organisations involves the development of shared mental
models and the creation of common knowledge throughout the organisation
(Senge 1990; Nonaka and Takeuchi 1995).
In summary, service systems’ competitiveness has its main source in intellectual
capital. People involved with a service system are the most precious resource that
the system has at its disposal. By activating learning processes, the service system
can stimulate value-generation processes that foster its immediate success and long-
term sustainability.
4.3 Information
Information is crucial to the decision-making and performance of the actors
involved in any service system. Both customer and provider require basic informa-
tion about the life cycle of the service, and in the value-creation process there is a
process of transfer and sharing of knowledge that influences service processes and
ultimately determines service quality.
Spohrer et al. (2007) identify three types of shared information in service
systems: (i) language; (ii) laws; and (iii) measures. Shared language is required to
begin any dialogue (Ballantyne and Varey 2006) and to coordinate actions. Shared
laws are required to create and maintain complex systems because coded routines
enable people to interact efficiently, thus reducing risks and unnecessary workload.
Finally, four types of shared measures can be identified: quality, productivity,
compliance and sustainable innovation. According to Spohrer et al. (2008a, p. 6):
“Each of these corresponds to a stakeholder perspective: customers evaluate
quality, providers evaluate productivity, authorities evaluate compliance, and
competitors evaluate sustainable innovation”.
An open organisational culture fosters service innovation because such a culture
encourages the exchange of ideas (De Jong and Vermeulen 2003). Sharing infor-
mation has a positive effect on the workforce’s potential to generate ideas and
Key Dimensions of Service Systems in Value-Creating Networks 45
the capacity of the service system to solve problems and prevent mistakes in the
development of new services.
In summary, information is the basis for organisational learning and continuous
improvement within service systems. The store of knowledge possessed by a
service system determines its capability to improve service provision and value
processes.
4.4 Technology
The processes within service systems are increasingly becoming more technologically
complex as information infrastructures have provided enhanced capacity to strengthen
computing productivity (Demirkan and Goul 2006).Informationtechnology(IT)not
only facilitates interactions between customers and suppliers, but also between
consumers themselves. Customers and/or users can thus effectively provide informa-
tion that stimulates change and development, and managers can evaluate suggestions
for improvement from consumers and implement the best of them. The technology
now being routinely used on the world wide web (referred to as “Web 2.0”) has
enhanced collaboration and interactivity among users by facilitating information-
sharing. As a consequence, the popularity of web-based communities has grown
quickly, and software developers are increasingly providing social networking sites
for users.
Within a service system, technology can support the development of organisa-
tional knowledge, in terms of shared mental models or organizational memory, by
fostering the transformation of tacit knowledge into explicit knowledge, which
represents a vital step in the “knowledge spiral” cycle of Nonaka and Takeuchi
(1995). According to Johnson et al. (2005), technology can facilitate this process in
three ways. First, technology can be utilised to remove routine activities of low value
from employees, thus freeing them to be assigned activities of higher value.
Secondly, technology can improve the speed of the decision-making process;
moreover, it can improve the quality of its output by providing ready access to
sorted and organised information. Thirdly, new and emerging technology will foster
tacit interactions and extend their breadth and impact; technology can thus support
talented people in their work and personal development (Johnson et al. 2005).
According to Demirkan and Goul (2006, p. 549), service systems can enhance the
potential role of technology by adopting a so-called “service-oriented architecture”
(SOA), which they described as:
... a paradigm for organizing and utilizing distributed capabilities that may be under the
control of different ownership domains. It provides a uniform means to offer, discover,
interact with, and use capabilities to produce desired effects consistent with measurable
preconditions and expectation.
Such an SOA can utilise IT to map business processes and provide measures
to support service systems in developing a service-oriented enterprise (Demirkan
et al. 2008).
46 C. Mele and F. Polese
Key Dimension of Service Systems
The practical application of the four dimensions of service systems described
above can be illustrated in the case of contemporary waste management,
which increasingly requires a value-creating network that aims for sound
environmental policy and sustainable behaviour.
Customers: The primary customers are obviously the citizens, but other
customers of the service system include businesses that produce waste,
municipalities which are responsible for waste disposal, transport firms,
treatment works, and so on.
People: All people in the community, including ordinary citizens and those
involved in business, have an interest in separating and managing every piece
of waste that they produce in order to ensure that the whole chain functions
efficiently in a sustainable fashion.
Information: Appropriate information on waste management must be com-
municated effectively in many-to-many interactions within the network. In
this regard, information technology of many kinds can be used to ensure that
every actor has an opportunity to maximise the benefits of effective waste
management.
Technology: Technology is required for wise product design and the appro-
priate choice of materials and components in the service system.
5 Value Proposition, Acceptance, and Fulfilment
Service systems take on three key activities in order to develop value creation
process (Spohrer et al. 2008b): (1) proposing value, (2) accepting a proposal, and
(3) realizing the proposal. A value proposition can be defined as a firm’s promise to
deliver resources able to spread out a potential value through customer’s activities
(Ravald 2010). Such value is defined by the beneficiary; that is, the value proposi-
tion that a service system develops should be based on the needs of the beneficiary
that must be satisfied (Mele 2007). However, because value is a dynamic multi-
dimensional construct that includes functional and emotional benefits (de Chernatony
et al. 2000), any value proposition is subject to continuous reformulation and
innovation (Parasuraman 1997;Mele2007).
The value proposition defines the mix of various resources (economic, func-
tional, emotional, social, technical) that is promised to the customer (and/or other
stakeholders). The nature of this mix depends on the beneficiary’s perceptions of
the value inherent in the use of the promised resources.
All service systems aim to develop superior value propositions; however, it is
usually necessary for the provider to demonstrate that a particular offering really
does offer superior value. To achieve this, the supplier must understand how it can
Key Dimensions of Service Systems in Value-Creating Networks 47
contribute to the customer’s value-creation processes and must be able to show the
customer that it has the capability to do so (M€
oller 2006). The crucial question is
how the provider’s value elements compare with those of competitors as assessed
by the customer. In addressing this question, the basic “building blocks” of a value
proposition are described by Anderson et al. (2006) as: (i) points of parity;
(ii) points of difference; and (iii) points of contention (see Table 2). A recognition
of these “building blocks” enables the supplier to substantiate the value proposition
by demonstrating its potential value in terms of the benefits (and reduced sacrifices)
that it promises for the beneficiary.
The value proposition enables the co-creation of value because it contains “...
the promises and contracts the entities agree to” (Spohrer et al. 2008a, p. 4).
Based on these promises, service systems interact and connect themselves to
other service systems to enable a reciprocal capacity to co-create value with each
contributing its own resources and activities. The acceptance of a value proposal
can thus require a process of dialogue and negotiation in which entities shape the
proposed solution to match their aims, knowledge, and skills. The agreements
regarding the value proposition let the relationship proceed, and the experience
continues to be lived.
As noted above, it increasingly recognised that value realisation involves
customer participation (von Hippel 2005; Mele et al. 2008). Value fulfilment thus
requires the involvement of the customer’s resources to realise the potential
value of an offering through usage (Vargo and Lusch 2008a,b). As Gummesson
(2007, p. 137) points out:
A supplier has a value proposition, but value actualization takes place during the consumer’s
usage and consumption process. Suppliers and customers are co-creators of value.
6 Roles of the Key Dimensions in the Value Process
All of the key dimensions identified above perform crucial roles in every phase
of the value process (see Table 3).
As shown in Table 3, the customer contributes information, knowledge, skills,
and other resources that help to shape the value proposition. The client is thus not
only the beneficiary of value but also a proposer of value. If the customer decides to
Table 2 Building block of a successful value proposition
Points of parity Element with essentially the same performance or functionality of the next best
alternative
Points of
difference
Elements that make the supplier’s offering either superior or inferior to the next
best alternative
Points of
contention
Elements about which the supplier and its customers disagree regarding how
their performance or functionality compares with those of the next best
alternative
Source: Anderson, Narus, van Rossum (2006)
48 C. Mele and F. Polese
Table 3 Value processes and key dimensions
Dimension
Value process
Proposing value Accepting proposal Realizing proposal
Customer Can contribute
information,
knowledge and other
resources (labor,
property) to the
provider
Can ask for a proposal
The decision-maker Can contribute resources
(labor, property,
knowledge, skills)
Uses resources to prepare
a context in which to
use or experience the
proposal (solution)
People Work and interact to
develop promises and
contracts
Define the solution
Exchange and integrate
resources (internal
and external)
Build a relationship
network
Act to support
customer in his/
her decision-
making
Contribute their resources
(knowledge, labor,
etc.)
Exchange and integrate
resources (internal and
external) among them
Interact with the customer
to exchange and
integrate resources
Let the network’s actors
perform the solution
Information Basis of the value co-
creation processes
Main starting input of the
service process
Enable risk assessment for
service provider and
other stakeholder
Enable the learning
process
Element of the
decision-making
process
Factor of the trust-
building process
Enable risk
assessment for
beneficiary
Enable the learning
process
Allow people’s
interaction in order to
achieve the offering
Enable risk assessments
for the service
provider, beneficiary
and other stakeholders
Enable the learning
process and the
development of
a shared mental model
Technology Support personalization
proposal
Support entities’ (people,
customer, other
stakeholders)
interactions
Enable relationships
Foster information
exchange and
conversation with
customers and
between people
Support the sharing of
information and
knowledge
Support the learning
process
Foster acceptance,
acting on time
Support the sharing
of information
and knowledge
Foster contacts with
customer and between
service system entities
Allow the achievement of
personalized solutions
Foster information
exchange and
conversation
Enable work flows
and interaction
Increase efficiency
E-relationships
Support the sharing of
information and
knowledge
Support the learning
process
Key Dimensions of Service Systems in Value-Creating Networks 49
accept the proposal, he or she then can contribute resources to the fulfilment of the
value proposition as a co-producer of the solution. The customer can also become a
partner in the distribution of the solution; for example, by developing a retail
community of like-minded consumers. In most cases, the beneficiary decides
when and where to use the offering and live the experience (e.g., where and for
what occasion to cook a meal) and also prepares the context (e.g., setting up a
room – painting, etc. – before furniture delivery).
Table 3also shows that (employees and other stakeholders) define and develop
the proposed solution by exchanging and integrating resources. Their interaction
fosters the building of a relationship network, which becomes the high-order actor
in the value process. People thus facilitate the creation of potential value and the
realisation of value-in-use by providing resources in a process of resource integra-
tion (Vargo and Lusch 2008a,b; Mele 2009b). They can also co-develop experi-
ences with beneficiaries (for example, in sports tourism and cultural events) and/or
provide a context that allows customers to live an experience (for example, in
entertainment and amusement parks) (Caru
`and Cova 2007). By interacting and
integrating resources in this way, customers and other people co-create experiences
and strengthen relationships. Other stakeholders (such as local communities, gov-
ernment, and the wider society) can also affect the value process during each phase.
This is especially the case in certain complex service systems – such as health,
transportation, and public administration – which have a peculiar logic that requires
the specialised input of such actors in their diversified systems.
Information is both the major initial input of the service process and the main
enabler in the subsequent phases. Information has been described as the foundation
of intangible resources (Itami 1987) or operant resources (Vargo and Lusch 2008a,c);
for example, relationships are established and developed through continuous inter-
action and information exchange (Hughes and Chafin 1996). Shared information
enables people and customers to become familiar with the service maps of different
service system entities and to understand their needs, resources, and competencies.
This facilitates the identification of the best pattern for creating value from a
network-based stakeholder perspective. Moreover, shared information facilitates
risk assessments for service providers, beneficiaries, and other stakeholders.
Finally, shared information is the basis of the learning processes that occur during
the value-creation process. The development and sharing of shared mental models
fosters the creation of a shared vision that provides consistency of purpose to the
activities that develop the value aims of the service system (Senge 1990,1992;
Mele 2003).
Finally, Table 3shows that technology facilitates the information-sharing
process by enabling people and customers to interact without the constraints of
time, place, and space. Technology can also assist the value-creation process by
organising data and information, supporting the sense-making process, and creating
(and using) knowledge at the individual, team, and organisational levels. It is thus
an enabler of explicit knowledge (Nonaka and Takeuchi 1995) and a means of
enhancing individual talent. As Johnson et al. (2005, p. 22) observed: “Machines
can help managers make more decisions more effectively and quickly”.
50 C. Mele and F. Polese
It is thus apparent that each of the identified dimensions plays a role in the value-
creation process; however, it is also apparent that it is the interaction of these
dimensions that ultimately enables a service system to develop superior value
creation process. Customers and other people share information during their inter-
actions. In addition, they also utilise their tacit knowledge to make “complex
decisions based on knowledge, judgment, experience and instinct” (Johnson et al.
2005, p. 21). In these processes, technology facilitates information-sharing and
interaction in various complex, non-linear ways (such as B2B, B2C, C2B, and
C2C) (Gummesson and Polese 2009).
Service Processes as Value Propositions, Acceptance, and Fulfillment
Tourism-destination services represent a good example of a value process
that incorporates value propositions, acceptance, and fulfillment. The desti-
nation acts as an integrator of resources. Its natural and contextual points of
attraction, along with the complementary resources of related businesses in
non-tourism sectors, are included in the proposition of a distinctive package
of services and products. The message to the market must be efficiently
communicated as a valuable offer if the destination is to reach its potential
by satisfactory levels of acceptance in the market. Finally, the tourists who
arrive at the destination must be satisfied by the fulfillment of the value
proposition. Without this process of value proposition, acceptance, and ful-
fillment, any tourist destination will lose its attractiveness over time and be
transformed into a failed value proposition.
7 Building Value-Creating Networks
Service systems networks are defined as service systems connecting to other service
system: “they form network of relationships which may have one or more asso-
ciated value propositions” (IfM, IBM, 2008, p. 18); a service system network puts
certain assets together but it requires the integration of the actors’ resources
according to their expectations, needs and capabilities. As interestingly proposed
by the Viable System Approach (Golinelli et al. 2002; Golinelli 2010; Barile 2008),
every complex system need to seek an equilibrated balance among its sub-systems
and its supra-systems in order to pursue both an efficient valorisation of internal
components and an effective valorisation of external resources. In fact integration
is, indeed, the incorporation of an actor’s resources into another actor’s process
(Moeller 2008). By widening the meaning, resource integration implies an entire
social and cultural process, thus enabling an actor to become a member of a group
(or a network). Service systems therefore act as resources integrators – within the
organization and through the network – due to operant and operand resource
specialization. In all of these situations, firms strive to reach a better matching of
resources, activities, and processes.
Key Dimensions of Service Systems in Value-Creating Networks 51
The integration of resources is idiosyncratic to the partner. Each service system
is born and develops as an original combination of resources and contributes to the
network in a unique manner. The matching of service systems’ resources is crucial
ensuring that the role one entities can play in a network is not the same as that of
another. The value creation potential of a service system does not only arise from
its core competences and distinctive resources, but also from its capability to match,
to insert itself in a network and contribute to its success and evolution.
In order to manage and improve service system performance as resource
integration mechanism, two main factors enable value-creating networks: the social
relations that affect people and customers, and the ICT patterns and tools fostering
their participation in the system. In details, the interactions between the key dimen-
sions shape two kinds of nets: (i) a social network; (ii) a technological network.
These nets are the basis for a greater value-creating network aimed at increasing
stakeholder value.
7.1 The Social Net
People trigger the value process. For this reason, their social relationships, the
dense and articulated set of relations characterizing every individual, are an
important factor. It is apparent that organisations are not autonomous entities;
rather, they are dependent upon individuals and the networks of relationships that
exist among them (Vicari 2007). The research focus regarding social capital has
thus shifted from enterprises as a whole to the individuals who manage and
operate the businesses – because it is increasingly recognised that the values
that these individuals own determine their decisions and behaviour. It is the
person, within an organisation, who interprets and realises the mission, strategic
action, and management practices through their values and cultural identity
(Golinelli et al. 2002; Cross et al. 2002). The social networks embedded in
every organization, and in particular in every individual participating in the
system, are therefore very important and contribute to system performance.
Social relations are not a clear phenomenon. Indeed they are variously intended.
In the perspective here adopted: (a) Social relations do not deal with social
responsibility; (b) Social relations differ from ethics; (c) Social relations involve
all stakeholders; (d) Social relations include personal relationships; (e) Social
relations are many to many relations. In other words, social relations can be defined
as follows: Social relations may be represented by the relational pattern that
characterizes every individual in a business and that involve personal, business
and stakeholders relations (Polese, 2009b).
Managing a social net means fostering the development of social relationships,
as they form the social capital of the service systems (Batt 2008); doing so increases
the potentiality of service system’s value creation potential. Social Network Anal-
ysis can help service systems analyze and manage social nets in terms of their
52 C. Mele and F. Polese
structure (the entity’s position), processes (the entity’s activities and ties), and
resources and service level.
Though still emerging from its academic roots, Social Network Analysis (SNA)
is entering the mainstream thanks to better analytical tools, visualization, comple-
mentary technologies and data availability. In this regard social network analysis
(SNA) has recently emerged as an important aspect of knowledge management.
7.2 The ICT Net
ICT net can be seen indeed as a “nerve systems central to sensing, responding and
learning” in a value-creating network (Lusch et al. 2009, p. 4). It enables external
relationships, inter-system interactions and internal knowledge.
When considering a service system to be constituted by service providers and
clients (individuals/corporations) that work together with support technologies
according to the network paradigm and value co-creation concept, the policy
adopted by the service system in order for it to produce the requested information
is often referred to as the mechanism for the transfer/exchange of infor-
mation (Service Level Agreement – SLA). Today it is aims to support the use of
Web services (designed according to a model of service-oriented architecture –
Service-Oriented Architecture – SOA: Erl, 2005) to ensure interoperability between
different systems in which business and technical components provide reusable,
dynamically discoverable, and complementary services (Demirkan et al. 2008),
allowing the use of individual applications as components of business processes and
ministering to the demands of users (agents and non-artificial).
The ICT net is reliant upon service-oriented enterprises that implement busi-
ness processes through an SOA and that provide frameworks for managing business
processes across a SOA landscape and structuring service patterns for the provision
of services.
In summary, this net is about the ways people engage with computing to execute
processes and refers to the semantics that put people and machines together in new
ways (Demirkan and Goul 2006). Thus ICT net can be considered as a sets of
multidimensional elements, such as relationships (endemic relationships, timely
information), tools (scalable technology solutions, Service Oriented Architecture,
Service Level Agreements,) and perspectives (client usage, system thinking)
(see Fig. 3).
7.3 The Integrated Net
The social net and the ICT net are interlinked nets, as the ICT net supports the
development of interconnections of the social net, fostering relationships and
the sharing of information and knowledge. A service system’s key ability is to
Key Dimensions of Service Systems in Value-Creating Networks 53
foster the integration of the social and ICT nets through appropriate management of
the net’s links, within both a single service system entity and within the network
of service system entities. Integrating the nets enables three elements of a service
system’s performance (Spohrer et al. 2007, p. 75):
– Efficiency (plans), things are done in the right way
– Effectiveness (goals), the right things get done
– Sustainability (relationships), the right relationships exist
The actors of a value-creating network are held together by competencies to provide
service, relationships and shared information (Lusch et al. 2009), with the ICT as
nerve system. The integration among different network players is tied to values,
culture, transparency and clear rules. The glue that holds the networks together is
based on shared finality and common purpose (win–win logic). This shared and
participatory atmosphere is a strong promoter of continuous innovation, which in
service systems seems to be crucial for stakeholder value. Managing service systems
means creating and reinforcing a common identity (through a spirit of cohesion
among the participants, a sense of belonging, information about “service systems’
resources”, appreciation of common leadership, and so on). As already Polese
(2004;2009a) has stressed, networks are not based only on formal bounds (contrac-
tual and legal bounds are weak in the long run), but on strong sentimental ties and
cultural affinities as these features guarantee the cohesion, vivid relations, and
vibrant pulses of emotion and energy that build sustainable networks.
The harmonic systemic interaction and integration of the social and ICT nets
necessitate system thinking. Without this, “each component in the service system
tends to seek behaviors that satisfy its local interest. This may bring controversy in
a service company and degrade its customers’ experience” (Spohrer et al. 2008a,
p. 5). With systematic thinking, each business unit will know its position on the
value co-creation map and learn how to be a vital and supporting part of the value
creating network (Lusch et al. 2009) through resource development (knowledge,
competencies, relationships) and compelling value proposition (to customers and
other stakeholders) in order to evolve and survive.
Fig. 3 ICT characteristics in
service networks age
54 C. Mele and F. Polese
Networks for Managing Value-Creating Service Systems
Research clusters (either formal districts or informal geographically close
subjects) are powerful organizational proposals in which distinctive compe-
tences are valorised for common success and innovation benefits. This is true
when competences are contiguous (vertical and specialized in the same sector
for every actor), or if competences are close to the same technology, but
denote different specializations and peculiarities. In both cases the mobiliza-
tion and integration of common resources created common knowledge and
ultimately network value; this is indeed based upon technological support and
targeted to technological innovation, pursued with the contribute of many
actors which are not limited to the participating firms, but may involve
individuals as well as public entities, NGOs and other local actors.
8 Conclusions and Implications
8.1 Main Conclusions
The aim of this chapter was to identify the key dimensions of service systems and
to describe how they interact in the process of value co-creation. The four key
dimensions identified in the analysis were: customers; people (including employees
and other stakeholders); information; and technology.
The chapter has also characterised the value-creation process in service systems
as consisting of three related stages: value proposition; acceptance; and fulfilment.
The main conclusion of the chapter is that the four key dimensions interact at all three
stages in a network of relationships that co-create value through the utilisation of comple-
mentary resources. In details, the interactions between the key dimensions shape two
kinds of nets: (i) a social network; (ii) a technological network; these nets are the basis
for a greater value-creating network aimed at increasing stakeholder value. These conclu-
sions have practical implications for managers and theoretical implications for researchers.
8.2 Managerial Implications
It is apparent from this study that service systems can create a competitive advan-
tage for themselves by improving their management of value co-creation. The
notion of a “competitive advantage” in the context of service science refers to
whether a service system can apply its operant resources to meet the needs of
another service system better than its competitors can do. In other words, the model
of competition in the context of service science refers to efforts by service systems
to improve their management of the process of value co-creation.
Key Dimensions of Service Systems in Value-Creating Networks 55
Managers should therefore seek to establish and maintain service systems that
are both competitive and sustainable. This search is challenging because it neces-
sarily goes beyond the explicit resources and benefits of the immediate entities
that participate in the system. Contemporary managers are dealing with complex
systems involving networks of relationships and systems, and this complexity
means that service systems are difficult to plan, manage, and govern. Nonetheless,
an attempt must be made to address the complexity of such systems in an attempt to
better understand their operations, performance, and effects.
Managers need to identify the factors that enhance the internal cohesion
of the network in aligning the behaviour of the entities towards the realisation of the
system’s explicit goals. In identifying these goals, management should not be motivated
only by economic considerations; rather, managers should focus on the regeneration of
the system’s resources and capabilities. This requires special attention being paid to the
so-called “soft’ issues of systemic integration, information- and knowledge-sharing, and
effective communication among the involved parties. In particular, management must
sustain all relationships with stakeholders that are important to the service system in
providing the vital resources that the system needs.
Managers should also ensure that ongoing service innovation and system reframing
occurs as a means of promoting continuous value generation (Normann 2001). In this
process, managers should be encouraged to think about innovation inside a single
service-system entity (which should be seen as a micro-network), as well as considering
innovation within several related service-system entities (a network) (Lusch et al. 2006).
8.3 Implication for Researchers
This chapter has attempted to identify and systematise the roles of customers,
people, information, and technology in the value-creation processes of complex
service systems. It is apparent from this exploration that extant theory has not
provided adequate models and constructs applicable to these complex issues of
technological, social, and experiential interaction. More research effort is required
to achieve a better understanding of the processes involved in value co-creation.
In particular, researchers should address the need for models of the mechanisms of
service systems that go beyond intriguing organisational and conceptual theory
to provide direction for effective managerial actions in the complexity of the
contemporary service economy.
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