The first theme of the course deals with the service economy and productivity in services. World economies have since the 18th century shifted in their composition from agriculture to manufacturing to services, which now account for three quarters of GNP in modern economies. This does not mean there would be less food and gadgets in the world, it is just that their production requires less labor, and that services contribute more value.
The expansion of the service economy coincides with diminished productivity growth. This is the Baumol’s disease, which postulates that (a) productivity grows slower in services than in manufacturing, (b) in a free market wages in the service sector follow those in manufacturing, from which follows that (c) the prices of services increase relative to goods. This in turn has a profound impact on consumption, labor markets, and the global division of labor. Baumol’s disease is not destiny. The mission of Service Operations Management is to investigate the nature and dynamics of service production to create a knowledge base upon which productivity improvement becomes possible. Productivity, after all, is the relation between input and output. When productivity improves, more can be had for less. Therefore, productivity is a key element in sustainability.
The definition of services has been debated intensively. The current view is that services can be defined from three perspectives: (1) immaterial offerings (IHIP); (2) valuable state changes; and (3) producer-customer interactions (resource integration, co-creation of value).
After this module you should understand the role of services in the economy, main characteristics of service economy, how services can be defined, nature of productivity in services and the challenges of productivity in services – and how these relate to managing service operations with customer-induced variability in open production systems.
WEDNESDAY 20.1: Service economy and productivity
Pre-learning podcast: Paul Lillrank & Mikko Heiskala, Services, Service Economy and Service Productivity (Intro and Outro music: clip from 15-youtube-kanalteaser-sounds by Sascha Ende (CC 4.0 license)).
The presentation material for the day is: 21.1.20 TU-E2013 Service economy.pdf
After participating in the day's session, please take the quiz to test your learning.
WEDNESDAY 27.1: Service economy in open productions systems + case HUS (tbc)
Pre-reading and presentation article presentation: "Frei (2006) Breaking the trade-off between efficiency and service". You can assign yourself into the presentation team here.
After reading the article and watching the article presentation and reading the slides (available on Tuesday 26.1. 10 am), do a peer-review of the presentation (for those NOT participating in the presentation team).
Additional supportive learning articles include:
Then, write a LEARNING DIARY on service economy: Write a short reflective online learning diary on the key topics and your learning on the service economy module.