The role of services in business intelligence: a study.

Author:Tanaka, Kimihito
Position::Report
 
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INTRODUCTION

Business activities can be understood as activities that "provide value to customers and ensure customer satisfaction." Many types of values are provided to the customer, and they can differentiate the company that provides the values. There have been many studies on the role of services. For example, Senoh (2011) showed that the ways of creating customer values have been diversified dramatically and classified the relationship between goods and services into three categories: substitution (change from the possession of goods to the usage of services); complementation (enhancement of the value of goods by services); and synergy (between goods and services). In an empirical research on semiconductor trading companies, Murayama and Osada (2007) indicated that the focus of architects in semiconductor trading companies has been changing from the semiconductor itself to the optimal combinations of semiconductors or components in order to realize the required performances and functions, as it is called a "solution." Further, they showed that some semiconductor trading companies that understood the importance of a "solution" have had highly profitable performance. Using many case studies, Cusumano (2004) indicated that software companies cannot avoid changing their business model from providing software to providing services, including consulting services. He also mentioned that the required organizational capabilities are quite different for software companies and service companies, and that it is quite difficult to own both capabilities.

Johnston and Clark (2008) categorized the attributes of services into two parts, "Result" and "Experience". The former includes the adequate fulfillment of customer needs, emotional engagement of customers, and satisfaction with the result, and the latter is affected by their treatment in the service process (which consists of the depth of interaction, responsiveness, flexibility, strength of friendship, accessibility, feelings of importance, abilities, and politeness). As mentioned by Sasser et al. (1978), the characteristics of services that differ from those of goods consist of IHIP (Intangibility, Heterogeneity, Inseparability and Perishability), and these have been used widely throughout the world. However, due to recent changes caused by the Internet, for example, Lovelock and Gummesson (2004) have added Ownership to IHIP.

In a discussion of the relationship between services and goods, Shostack (1977) argued that there was no pure distinction between goods and services and that every product is like a molecule which consists of a combination of goods and services--an idea later taken up in Kotler and Armstrong (2001). These days, however, goods have been given primacy, with services regarded as a subsidiary, and it was insisted that goods required additional services in order to maximize goods' ability, with the combination of goods and additional services becoming the basis of products. A few researches have nevertheless treated services the same as or more similar to goods (e.g., Rust and Oliver, 1994), but after the publication the work on "Service-Dominant logic" (S-D logic) by Vargo and Lusch (2004), the theoretical framework for the treatment of goods and services as whole services expanded dramatically. In S-D logic, competences such as knowledge and skills, or the service itself, are exchanged for services. In "Goods-Dominant logic" (G-D logic), economic units for exchange are the goods themselves. In S-D logic, on the other hand, competency it considered to have been embedded in the goods during production process, and goods produce an effect by being used. In terms of the customers' role, customers are the recipients of goods in G-D logic, whereas they are co-creators of services in S-D logic, and marketing activities are conducted as an interaction with customers. Additionally, in terms of value, the value is defined by the producers in order to maximize the prices of goods in G-D logic, whereas the value depends on the context of the service offered and recognized by customers through utilization in S-D logic. As explained above, service innovation is realized by the bidirectional and cooperative relationship between company and customers in S-D logic, and the optimal combination of goods, people and services has become of vital importance.

These previous studies indicate that the importance of services, which were considered "complementary activities" in the past, has been increasing dramatically, and that the superiority of the way in which these services are added into business model can change the profitability. In this paper, the specific roles of services in order to realize profitability will be extracted from some case studies.

OBJECTIVE

Suarez and Cusumano (2009) identified five roles of services in the platform business. Examples of platforms in this paper are the chassis systems of cars or the operating systems of computers, which are the backbone technologies that create customer value. The study raised an issue that there are few prior studies on the role of services for success in the platform market. The study identified five roles of services: (1) reducing the contingency and complexity when the customers select a platform at the early stage of the market; (2) obtaining feedback from the customers in order to improve the services; (3) upgrading the platform's values by combining a product with complementary or competing products; (4) subsidizing the customers; (5) becoming a resource of profit instead of relying on profits from the product. Further, the study proposed two criteria that measure the expansion ranges of service providers, namely, the level of "product-specificity" and the level of "industry-specificity." The former is defined as the percentage of total industry services that are exclusively related to the industry's product. The latter is defined as the percentage of total industry services provided by the firms in the product segment of the industry. In the study, three factors that affected these two criteria were introduced: technological uncertainty and complexity of the product; evolution phase of the industry; and the degree of modularity of the product.

Suarez and Cusumano (2009) explained the roles of services and the expansion ranges of service providers based on several prior studies of many industries and products. However, they did not demonstrate the extent to which the roles of services and the expansion ranges could work in the range of one product because they used disjoint case studies. Additionally, the relationships between each...

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