The evolving science of services

The W. P. Carey School, through its pioneering Center for Services Leadership, has been at the leading edge of research concerning the services sector, which now accounts for 75 to 80 percent of the U.S. economy. Recently, academics outside of business schools are beginning to take an interest in learning about the dynamics of services. This rising interest in what is being termed "services science" not only signals a new appreciation for the vast influence of services on the global marketplace, but also hints at the possibility of exciting new interdisciplinary research that could help solve problems both in the business world and elsewhere.

The business world has known the importance of services for decades. Ever since industry powerhouses IBM and General Electric got into the services game — and proved that business services were not only crucial to survival but also a potential source of huge profits — business academics and top executives have been working to unlock the secrets of services success.

Now, it seems, academics in other fields are taking notice. Longtime researchers in business services say they are seeing a wave of new interest in their work — and note that this interest is coming from academics outside the business world, in such diverse fields as computer science and design, education and the social sciences.

This rising interest in what is being termed "services science" not only signals a new appreciation for the vast influence of services on the global marketplace, but also hints at the possibility of exciting new interdisciplinary research that could help solve problems both in the business world and elsewhere.

"I think what we've been doing could definitely be subsumed within this larger umbrella of services science, but our primary focus has been on the business discipline," says Mary Jo Bitner, a professor of marketing at the W. P. Carey School of Business whose work in the field has helped put Arizona State University on the cutting edge of services leadership. "The difference now is that faculty from outside of business are looking at services as a field that they can contribute to, too."

Redefining terms

The definition of services has been evolving over the past 20-odd years. The term originally meant customer service; smart businesses have always realized that no matter how great their product is, customer loyalty depends heavily on the quality and outcomes of their contacts with the company. An approach that is customer-focused and responsive is still the bedrock of most successful companies.

Next came value-added services, which augmented the physical products a company sold. Services like training, help-lines and software enhancements are part of the revenue stream. Then many companies saw opportunity in developing new service businesses within the organization. These businesses are separate from the product line, but related to the firm s core competencies.

An example is a medical supplies company that expanded the service it offers to hospital customers to include management of their complete supply chain. IBM is widely credited with starting the services boom, but scores of other companies later followed Big Blue's path. So many, in fact, that the services represent the largest sector of the U.S. economy. Manufacturing and agriculture, those longtime staples of the American financial engine, aren't even close.

"If you look at IBM, about 50 percent of their revenue now is coming in from services, and they project that to be even higher as they go ahead," says Stephen Brown, marketing professor and founder of the Center for Services Leadership. "Furthermore, depending on how you're looking at it, services now account for 75 to 80 percent of our economy. For all developed countries, that's up over 50 percent, too."

The question is whether research in this field has gone deep enough. The past two decades have brought valuable studies about everything from customer satisfaction to service encounters, from employee-customer interactions to technology and services.

Digging deeper

But even though university centers such as the Center for Services Leadership have helped push services research forward, the practice of services in the real world has far outpaced academic research into those practices. Such topics as outsourcing of services jobs and the impact of technology on services, Brown and Bitner say, demand more attention.

But while the business world, pushed along by cutting-edge leaders like IBM, keeps calling for that attention, universities and government continue to fall short. "In our own country, our government has been very, very slow to recognize the importance of services," Brown said. "If you look at government funding for research, there are far more dollars for agriculture than for services. And yet agriculture now accounts for less than 5 percent of our economy."

"It's kind of interesting," adds Bitner. "We've known about services for a long time, but now it seems that the phenomena that are drawing people's attention are, for instance, the outsourcing of our services jobs and the things that are going on in India and China. We think, 'Oh, we here in the U.S. are a services economy,' but then those jobs go elsewhere around the globe and that raises people's awareness." In short, the world of services has changed — and continues to evolve — faster than researchers can get a handle on it.

Cross-disciplinary research

Services science, however, could close that gap: By bringing together researchers from several disciplines, the field may deliver renewed vigor, and new techniques, for studying the ways services impact the global marketplace. "Services represent close to 80 percent of our economy, and that cannot be confined to one discipline," Brown says. "So when we're thinking about services, I see them everywhere. I can see the benefits to working with marketing folks and computer scientists, operations people and even anthropologists."

"We're getting involved in a cross-disciplinary way with computer scientists, with social scientists," Bitner added. "I just recently spoke at a conference at Carnegie Mellon University for services design a conference for design-oriented folks. There's just a lot more interest in services across disciplines, and we're in the middle of it." Now only one challenge remains: Overcoming the long-standing obstacles within academia that have stifled cross-disciplinary work.

University researchers are rewarded for work accomplished in their own field, not in others, and professionals who are trained in one discipline often have trouble translating their work — whether because of clashing methodologies or differing terminology — into the realm of another. As a result, academia has not fostered or supported sufficient cross-disciplinary work.

"We in our business schools have often chided corporations and written about the problems with corporations that are too 'siloed,'" Brown explains. "But universities are more siloed than businesses and corporations. Most of the reward systems in universities are attached to an academic discipline. So if I write something for a computer science journal, that's less prestigious and less accepted than if wrote something in a marketing journal."

At universities around the nation, including ASU, those old walls are slowly being taken down, as administrators and college presidents increasingly see the value in the exchange of ideas. That trend could provide the impetus for the continued growth of services science, a field that demands cross-disciplinary cooperation. "The cross-disciplinary idea is something that university leaders around the country are struggling with," Brown said. "Fortunately at ASU our president is a very dynamic leader who is really pushing this very strongly."

A good example of how services science can tackle problems outside the business world comes from Bitner's own cross-disciplinary experience — recent research she conducted in conjunction with W. P. Carey marketing professor Amy Ostrom and psychology faculty at Arizona State University's Prevention Research Center.

The Prevention Research Center, located within the university's Psychology Department, has a long history of research focused on at-risk children who have endured any number of traumatic life events, everything from poverty to death of a parent to divorce. The center has spent decades devising treatment options to help these children cope with their stress and, hopefully, live a healthy and happy life afterward.

But Bitner observed that, for the Prevention Research Center to be successful in introducing its treatments to the mental health community, customer service was essential. She wondered if applied services science might help the center's staff develop psychology treatments that would be successful in community settings.

"We got together with them to see if we could look at what they were working on from a more services-oriented perspective, rather than a clinical or psychological perspective, and then think about how their interventions could be more successful and have an impact in the real world," Bitner explains.

The result of the work was a "hybrid model" of services that incorporated ideas and strategies from both fields. The research was so successful that it resulted in a paper later published in a major community psychology journal. "We were able to bring to them some of our models for services and new services development, and ways of how you could approach these psychological services from a business perspective, or a marketing perspective, and bring it into their realm," she says.

Wide implications

The work illustrates in a tangible way how a deep understanding of services can be put to use in other fields, Bitner says. It also hints that there may be countless other problems, in any number of sectors, that may also be investigated in a similar way. The possibilities for applying services science, Brown and Bitner say, really do appear endless.

"I think there are certainly opportunities for a similar kind of thing, and other types of research where people would maybe say, 'Here's an unsolvable problem,' like some of our major health care issues," Bitner says. "But then you can say in response, 'Maybe if we could just bring together people from different perspectives, maybe we could come up with a more innovative approach than if we simply all sat in our own little cubicles.'"

Bottom Line:

• The services sector now accounts for 75 to 80 percent of the U.S. economy.
• The definition of services has been evolving: Originally the term meant customer service; next came value-added services, which augmented the physical products a company sold; and now many companies are developing new service businesses within the organization, separate from the product line, but related to the firm s core competencies.
• The practice of services in the real world has far outpaced academic research into those practices.
• Services science, however, could close that gap: By bringing together researchers from several disciplines, the field may deliver renewed vigor, and new techniques, for studying the ways services impact the global marketplace.