344
E-Business Reference Models
cannot be made without more such frameworks,
and without more detailed analysis and assess-
ment methodologies.
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This work was previously published in Reference Modeling for Business Systems Analysis, edited by P. Fettke and P. Loos, pp.
241-265, copyright 2007 by IGI Publishing (an imprint of IGI Global).
347
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Chapter 2.3
Building and Managing Modern
E-Services
John Hamilton
James Cook University, Australia
ABSTRACT
This chapter addresses the development cycle
of recent ‘services’ models. It considers that all
products involve services and consequently maybe
be considered as service systems. First, the issue
of ‘services’ is described; next, the enhancement
of ‘services’ via value creation is described, along
with the progression from supply and demand
chains, to value chains, to service value chains,
DQG¿QDOO\WRVHUYLFHYDOXHQHWZRUNV7KLVSUR-
gression pathway has developed over time, and
has enabled ‘service’ and ‘e-service’ businesses
to deliver and further develop competitive busi-
ness solutions. The combinations of integrated,
highly competitive, e-supply chains delivering
WKH ¿QDO µVHUYLFHV¶ VXLWH WR WKH IURQWOLQH EXVL-
ness seller moves the e-supply chain model to a
more advanced level.Today, the recent concept

of utilizing service value networks offers a key
to future competitive solutions. Service value
networks house fully integrated e-demand and
e-supply chains working in harmony to the de-
liver both services and e-services. They are also
KLJKO\DJLOHDQGRIIHUFXVWRPHULQGXFHGÀH[LEOH
business solutions to customer requests. This
chapter highlights the progression to service value
networks. In addition it also offers the manager
a balanced scorecard structural mechanism via
which management controls over e-services and
service value networks may be developed and
maintained.
DEFINITION OF SERVICES
'H¿QLWLRQVRIZKDWFRQVWLWXWHVDVHUYLFHKDYH
varied across the service sector. Clark (1940)
divided all economies into three sectors: pri-
mary (agricultural), secondary (manufacturing),
and tertiary (services). The service sector used
three partsdomestic related services (food and
348
Building and Managing Modern E-Services
lodging), business services, and others (includ-
ing recreation, health care, and education)to
focus on involvement and improvement of the
customer relationship. The services industry
provides services, not goods (Hughes, Mitchell,
& Ramson, 1993).
In 1870 the service sector employed slightly
more than 20% of the U.S. workforce, while by

2002 it employed in approximately of 82% of the
U.S. workforce, and 81% of the private sector GDP
(U.S. Bureau of Labor Statistics, 2002/2004).
Services management is a ‘trans-functional’
research area (Kamarkar, 2002). It covers areas
including service quality (Chase, Jacobs, & Aq-
uilano, 1996), services encounters (Cook, Goh,
& Chung, 1999), and service execution (Nie &
Kellog, 1999). Services operations management
and services marketing provide still other per-
spectives to services.
'H¿QLWLRQV RI VHUYLFH KDYH UDQJHG IURP WKH
narrow to the broad. In 1960 the Committee on
'H¿QLWLRQVRIWKH$PHULFDQ0DUNHWLQJ$VVRFLDWLRQ
GH¿QHGVHUYLFHVDV³$FWLYLWLHVEHQH¿WVRUVDWLVIDF-
tions which are offered for sale, or are provided, in
connection with the sale of goods.” (p.21)
Examples of a service include: accommoda-
WLRQEDQNLQJHGXFDWLRQHQWHUWDLQPHQW¿QDQFH
medical areas, real estate servicing, transporta-
tion, as well as the individual services provided
by a barber shop, a piano tuner, a beautician, and
assistance areas like repair, maintenance, and
after-sales services, through to support services
institutions like credit rating bureaus.
Judd (1964) and Rathmell (1974) believed in
the service sector of the economy and emphasized
the true nature of services. Murdick, Render, and
Russell (1990) and Quinn, Baruch, and Paquette
EURDGHQHGH[LVWLQJVHUYLFHVGH¿QLWLRQVWR

include all economic activities where output was
not a physical product or construction, was usually
consumed when produced, and was delivered as
an intangible value-add (like travel comfort) to
WKHFXVWRPHU7KXVWKHVHUYLFHGH¿QLWLRQPRYHG
again. Zeithaml et al. (1988) believed services
were intangibleslike deeds, processes, and
performancesbut could also be tangible (e.g.,
health care). Czinkota, Ronkainen, and Moffett
(2005) split services into tangible areas involving
SHRSOH¿WQHVVFHQWHUVRUSRVVHVVLRQSURFHVVLQJ
(like freight transportation), and intangible areas
involving mental stimulus like (education and
religion) and information processing (like bank-
ing and data processing).
Often services are integrally enmeshed with
manufactured goods, or to the delivery (or en-
abling) of goods. Thus the distinction between
goods and services is imprecise, and no clear
boundary between manufacturing and service
¿UPVH[LVWV%HUU\3DUDVXUDPDQ/HY-
LWWVXJJHVWV³7KHUHLVQRVXFKWKLQJDVD
service industry. There are only industries whose
service components are greater or less than those
of other industries … Everybody is in service.”
Czinkota et al. (2005) also partially support this
approach. Thus it may be suggested that all manu-
facturing is indeed a service, and that services
may be considered from a range of viewpoints.
One approach to draw such diversities of opinion

together is provided by Rust and Metters (1996).
They use a ‘topologies’ approach to group some
services complexities into models. Their topolo-
gies approach, built upon other recent service
LQGXVWU\PRGHOVPD\DVVLVWLQWKHLGHQWL¿FDWLRQ
of key knowledge and research gaps.
As the service industry has continued to move
towards globalization (Kathawala & Abdou, 2003)
and incorporate more electronically based delivery
systems, it has become possible to deliver a value
chain, e-service operation. France, Da Rold, and
Young (2002) recognized the importance of the
µVHUYLFHYDOXHFKDLQ¶VWDWLQJWKDW³WRVDWLVI\FOLHQW
demands holistic solutions will require focused
providers cooperating along services value chains.”
Thus ‘e-service value chains’ may offer a pathway
to delivering enhanced customer value.
349
Building and Managing Modern E-Services
SERVICE TYPOLOGIES
From an operations and marketing perspective,
topology schemes for services have generally
lacked empirically tested works, but they offer
a useful mechanism to draw together the con-
stituent components applicable to the delivery of
services. Empirical works (Verma & Boyer, 2000;
Akkermans & Vos, 2003; Chen & Paulraj, 2004)
offer some key exceptions, but overall empirical
services related research is in its infancy. A topolo-
gies approach, based on recent service industry

PRGHOVLGHQWL¿HVNH\NQRZOHGJHJDSVDQGHVWDE-
lishes possible empirical research areas.
SERVICE MODELS
Figure 1 presents Rust and Metters’ (1996) view of
services. They grouped service models as customer
models (external) or service provider models (in-
ternal). Each model was then segregated, as shown
in Figure 1, into two of the three models:
• Customer behavior models, incorporat-
ing dynamic models of customer retention
(like loyalty), stochastic models of customer
behavior (like satisfaction), and customer be-
havior models (like churn rate or a customer
lost through a single service encounter).
•
Service Quality impact models, incorporat-
ing aggregate models (like customer satisfac-
tion effects) and disaggregated models (like
¿QDQFLDOLPSDFWVRIDVHUYLFHFRPSRQHQW
•
Normative service models, housing orga-
nizationally focused marketing models (like
incentive schemes and trade-offs between
satisfaction and productivity) and operations
models (like queuing).
In 1999, Cook et al. developed the ‘integrated
schematic representation of services’ matrix. Figure
2 displays this integrated services schematic.
Cook et al. (1999) recognized that services
could be split into marketing (product) or opera-

tions (process) orientations. They believed that
LQGHOLYHULQJD¿QDOµFXVWRPL]HG¶VROXWLRQWKHUH
remained a need to integrate and interact with
Figure 1. Mathematical models of service (Source: Rust & Metters, 1996)
Service
models
Ex ternal
Customer
Models
Internal
Service
Provider
Models
Customer Behaviour Models
•Dynamic Models of Retention
•Stoc hastic Models of Behaviour
Service Quality Impact Models
•Aggregate Models
•Disaggregate Models
Normative Service Models
•Marketing Models
•Complaint Management
•Cust omer Satisfaction
•Quality-productivity trade-off
•Operations Models
Service
models
Ex ternal
Customer
Models

Internal
Service
Provider
Models
Customer Behaviour Models
•Dynamic Models of Retention
•Stoc hastic Models of Behaviour
Service Quality Impact Models
•Aggregate Models
•Disaggregate Models
Normative Service Models
•Marketing Models
•Complaint Management
•Cust omer Satisfaction
•Quality-productivity trade-off
•Operations Models
350
Building and Managing Modern E-Services
Figure 2. Integrated schematic representation of services (Source: Cook et al., 1999)
Services
For Profit
Private
Not-for-Profit
Public
Product
Process
Interaction and
integration
Customization
(9) Quality

Marketing Orientated
Tangibility (2)
Differentiation (10)
Objec t of se rvice(5)
•People
•Goods
Type of Custom er (11)
•Individual
•Institutional
Commitment (8)
Operations Orientated
Customer Contact (1)
Capital Intensity (4)
•People-based
•Equipm ent based
Cust omer involvem ent (3)
Produc tion Process (12)
Em ployee Directions (6)
Organizational
Ownership (7)
Macro View Micro View
Socio – Economic Environment
Services
For Profit
Private
Not-for-Profit
Public
Product
Process
Interaction and

integration
Customization
(9) Quality
Marketing Orientated
Tangibility (2)
Differentiation (10)
Objec t of service(5)
•People
•Goods
Type of Custom er (11)
•Individual
•Institutional
Commitment (8)
Operations Orientated
Customer Contact (1)
Capital Intensity (4)
•People-based
•Equipm ent based
Cust omer involvem ent (3)
Produc tion Process (12)
Em ployee Directions (6)
Organizational
Ownership (7)
Macro View Micro View
Socio – Economic Environment
Figure 3. The service strategy triad (Source: Roth & Menor, 2003)
Service Concept
What is the product
bundle offered?
Service Delivery

System Design
Choices
How w ill services
be delivered?
Service
Encounters
What happens
w hen service and
cust omer m eet and
interac t?
Target Market
Wh o a r e the r i ght
Customers?
Service Concept
What is the product
bundle offered?
Service Delivery
System Design
Choices
How w ill services
be delivered?
Service
Encounters
What happens
w hen service and
cust omer m eet and
interac t?
Target Market
Wh o a r e the r i ght
Customers?

351
Building and Managing Modern E-Services
both orientations. They suggested research in the
‘interaction and integration’ area may articulate
strategies and tactics for improving services.
Roth and Menor (2003) delivered a further
addition to the services topologies. Their ‘service
strategy triad’ (displayed in Figure 3) separated
the ‘what’, the ‘how’, and the ‘who’ of service en-
counters. It offered a new perspective to advance
an understanding of services operations manage-
PHQW 7KH µZKR¶ GH¿QHV WKH ULJKW FXVWRPHUV
and not just a customer segment! These targeted
FXVWRPHUVFRXOG EH GH¿QHG E\ WHFKQLTXHV OLNH
Forrester’s ‘technographics’, ‘psychographics’,
DQGSV\FKRJUDSKLFSUR¿OLQJJURXSVRIFXVWRP-
ers. The interpretation of such target markets
provided a means to enhance both service and
performance standards, and to allow the business
to competitively align its chosen degree of cus-
tomer targeting with its offered service products
and delivery systems.
5RWKDQG0HQRURSHUDWLRQDOO\GH¿QHG
WKHLUµVHUYLFHVWUDWHJ\WULDG¶LQWR¿YHHOHPHQWV
1.
Supporting facilities (physical and struc-
tural resources)
2.
Facilitating goods (materials and supplies
that are consumed)

3.
Facilitating information (supporting the
explicit services)
4.
Explicit services (customer experiential
DQGVHQVXDOEHQH¿WV
5.
Implicit servicesSV\FKRORJLFDOEHQH¿WV
They realized the total service concept by the
customer may differ from the service offered by
the service provider. To overcome this, a feedback
loop (execution, assessment of gaps, renewal)
was proposed.
The ‘service delivery systems architecture’
model of Roth and Menor (2003), displayed in
Figure 4, allowed a framework to investigate three
interrelated and dynamic components of service
delivery systems:
•
Strategic service design (portrayed as
structural, infrastructural, and integration,
and based on choices between time-phased
content portfolios of major supply).
•
Service delivery execution system (exem-
SOL¿HGE\SURJUDPVSROLFLHVDQGEHKDYLRUDO
Figure 4. The service delivery systems architecture (Source: Roth & Menor, 2003)
‘Structural’
•Facilities and Layout
•Tec hnology and Equipm ent

•Aggregate Capacit y
Planning
•Service Produc t-Process
Interfaces
‘Infrastructural’
•People
•Policies
•Prac tices
•Processes
•Performance System s
‘Integration’
•Operations Organizat ions &
Coordination
•Service Supply Chains
•Integration t echnologies
•Learning and Adaptive
Mechanism s
Realized
Se r v i ce
Delivery
Sy stem
Cu s tome r
Perceived
Value of
the Total
Se r v i ce
Co n cep t
Execut ion
Assessment
of Gaps

Re n e wa l
Strategic Design Choices
‘Structural’
•Facilities and Layout
•Tec hnology and Equipm ent
•Aggregate Capacit y
Planning
•Service Produc t-Process
Interfaces
‘Infrastructural’
•People
•Policies
•Prac tices
•Processes
•Performance System s
‘Integration’
•Operations Organizat ions &
Coordination
•Service Supply Chains
•Integration t echnologies
•Learning and Adaptive
Mechanism s
Realized
Se r v i ce
Delivery
Sy stem
Cu s tome r
Perceived
Value of
the Total

Se r v i ce
Co n cep t
Execut ion
Assessment
of Gaps
Re n e wa l
Strategic Design Choices
352
Building and Managing Modern E-Services
aspects delivering complimentary areas of
customer focus), possibly using balanced
scorecard approaches.
•
Customer perceived value of the total
service concept (intangibles and other ef-
fectiveness aspects of the service).
These downstream features, delivered up-
stream through the external integration of the
service supply chain, combined with the linked
internal integration of the operational functional
areas and the adaptive mechanisms available to
enhance the intellectual capabilities, may provide
new avenues to perceived customer value.
SERVICE MODELS ANALYSIS
The above models have moved the complex
concept of services delivery beyond that of
the immediate services business. The models
indicate that the delivery of services requires
the business to adopt both an internal and an
external perspective. Rust and Metters (2003)

showed services to be complex in nature. They
showed that a variety of approaches had been
adopted, leading to the development of three
key areascustomer behavior models, service
quality impact models, and normative service
models. Cook et al. (1999) showed services may
be considered from a marketing or an operations
focus. They suggested it may be possible to hold
the service product constant and investigate the
effects of the service process (and vice-versa).
Results could then be compiled, and combined, to
gain further insights into services. Roth and Menor
(2003) proposed that business-customer service
encounters may be considered as combinations of
three functional areasthe customer, the service
product, and the service delivery system. Hence,
enhanced business-customer service encounters
could possibly be induced when one or more of
these functional areas improved. In particular, an
improved business-customer service encounter
may arise where the customer perceived improved
customer value with the services provided or in
the services package being delivered.
To deliver quality business-customer service
encounters, the business’s supply chain became an
integral delivery toolIR U W K H ¿ Q D O X S VW U HD P V H U Y LF H 
provider. In addition this supply chain needed to
be capable of delivering customer expectations.
This required sound supply chain integration and
management, the integration of the above func-

tional areas, and quality communications channels
throughout the supply chain network.
SUPPLY CHAIN MANAGEMENT
Management has sought to deliver improved
business-customer service encounters using a
variety of approaches. The supply chain, and more
VSHFL¿FDOO\ VHUYLFH supply chain management,
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end-user through to original suppliers that pro-
vide products, services and information and add
value for customers” (The International Center
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nique for linking a manufacturer’s operations
with those of it strategic suppliers, and its key
intermediaries and customers. It seeks to inte-
grate the relationships, and operations, of both
immediate, ¿UVWWLHUVXSSOLHUVDQGWKRVHVHYHUDO
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supply chain management is to improve timing
and costs in manufacturing through strong vendor
relationships” (An & Fromm, 2005).
Fisher (1977) developed a management frame-
work for product demand, and a supply chain
that could best satisfy this demand. He identi-
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percentage contribution margin, percentage
product variations, average production forecast
error, and make-to-order lead time. Products were

categorized as primarily functional or primarily
353
Building and Managing Modern E-Services
innovative. Each category required a different kind
of supply chain, and mismatches between product
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Lee (2002) further developed Fisher’s frame-
work, and suggested that uncertainties revolving
around the supply side were important drivers
for correct supply chain strategies. He argued
that functional products were more applicable to
a more mature, and stable, supply process. Lee
GH¿QHGWKHstablesupplyprocess, where manufac-
turing process and technology were mature and
‘stable’, and the evolving supply process,where
manufacturing and technology were in early
stages of development and were rapidly chang-
ing. From Lee’s perspective the market challenge
for business was to operate a supply chain as a
responsive or an agile model.
Responsive supply chains, like fashion apparel
or popular music, operated in low-uncertainty,
stable markets and are highly innovative. They
WDUJHWHGUHVSRQVLYHÀH[LEOHµEXLOGWRFXVWRPHU
order’ strategies, and followed the changing needs
of the customer. These responsive supply chains,
where demand and supply communications chan-
nels intertwine, deliver business-determined,
information-based, customer-targeted outcomes
that may be termed e-supply chains.

A business engaging an agile supply chain
structurelike a telecom operating in an evolv-
ing, highly uncertain marketoften remains
highly innovative. It employs highly responsive,
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customer needs-focused strategies, and responds
rapidly to the changing, diverse, and unpredict-
able demands of the customer. Thus demand
uncertainty and supply uncertainty remained a
framework for understanding both supply chain
and e-supply chain strategies.
The agile supply chain model has typically
targeted the high-risk, customer-driven solutions,
while minimizing the downstream risks of sup-
ply disruptions. Hence, the strategic scope of the
business’s supply chain now necessarily included
the ‘internal’ integration within organizations, and
also captured the ‘external’ expansion throughout
various supply chain links.
From around 1994, when standard Internet
browsers became available, the Internet has be-
come a vital strategic management tool. Using
the Internet, appropriately interconnected busi-
nesses, along with their Internet-connected supply
chain partners, have the capacity to freely share
information. This has allowed many competitive
improvements to develop. More accurate supply
and component planning, improved supplier and
business performance, less stock holdings, greater

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recognized (Reid & Sanders, 2005).
THE INTERNET
The Internet (encapsulating intranets [‘internal’
networks] and extranets [‘external’ networks]),
combined with sophisticated interconnected com-
puter networks, has delivered necessary and key
enablers, to deliver responsive and agile supply
chain strategies. This inter-business connectivity
allows for near instantaneous, enhanced informa-
WLRQÀRZV7XUEDQ5DLQHU3RWWHU7KH
Internet has driven new supply chain solutions in
information storage and transmission, e-business,
Web-based customer relationship management (e-
CRM), and supply chain management (Lawrence,
Newton, Corbitt, Braithwaite, & Parker, 2002).
Dell (www.dell.com) and others have delivered
customized e-purchasing across their Web sites,
but the absolute one-on-one ‘customerized’
solution is still not a realistic solution for many
businesses. The pressure to dynamically adjust,
and adapt, the businesses supply chain strategy
to the demands of the customer remains great
(Frohlich & Westbrook, 2002).