Determinants and Effects of Service Design in Enterprises

Download or read book Determinants and Effects of Service Design in Enterprises written by Yeolyong Sung and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The service industry has been expanding in the world and its structure is being gradually advanced today. Among developed countries, the service industry now employs more workers than the manufacturing sector and contributes more value added. In the manufacturing industry, manufacturers expand their businesses toward services rapidly, providing a variety of services related to products. Manufactured products are sold as commodities bundled with services, or related services are sold before and after sales of the products or provided free of charge. In terms of the market structure, the purchasing power of consumers has increased considerably due to the increase in real wages, and the market power has shifted from suppliers to the consumers due to excess supply. Therefore, suppliers have been able to survive by diversifying products according to consumers' preferences, rather than employing mass production strategies as in the past.In marketing, business administration, and engineering, innovation has been focused on the efficiency of production and sales, productivity improvements, and creation of demand through product development from the standpoint of enterprises (that is, suppliers). However, the tendency of industry servicification is now shifting the foundation of industry from technology and suppliers to humans and consumers. As a result, innovation requires new perspectives based on demand side by grasping the behaviors of customers, and service design is attracting attention as an alternative for innovation.The concept of service design was first introduced by Michael Erlhoff and Birgit Mager in Germany in 1991, and the first service design company, Livework, was established in the U.K. in 2001. In the U.K., service design has been developed by the Design Council in the public sector such as education, transportation, and health care. In the U.S., on the other hand, service design has been actively utilized in the private sector, especially in the information technology (IT) industry. The IT-based service industry has grown tremendously by utilizing design in doing business. A lot of firms were co-founded by IT specialists and designers; CEOs with “design minds” recruited competent designers or acquired design companies to create new business models.Since 2010, Korea's Ministry of Knowledge Economy (now the Ministry of Trade, Industry and Energy) and Korea Institute of Design Promotion have been carrying out service design projects in the public sector and applying service design to a number of government R&D projects. During that time, the pilot projects were carried out in public services such as energy, health care, industrial complexes, and traditional markets. In the private sector, service design was introduced first in the financial and medical industries. In the manufacturing industry, service design is being applied systematically mostly in large corporations. In 2014, the Industrial Design Promotion Act was amended to add service design as an area of industrial design. This amendment has been in force since July 2015.As the proportion of services in the industry increases, service design is attracting attention. There have been already a considerable number of successful examples of service innovation led by design in the private sector as well as the public sector. However, there is little in the way of literature on the specific effects of service design on firm performance. Instead, there are a number of studies on the effects of design on firm performance. Sung and Ro (2017) survey the literature and analyze the effects of quantitative and qualitative design competence on firm performance, based on survey data on 200 companies in Korea. They show that both quantitative and qualitative design competence have positive effects on corporate sales. The effects of a company's quantitative design competence, measured by design investment, are more significant for large firms, manufacturers, and listed companies, firms with foreign affiliates, firms employing inhouse design, and firms holding intellectual property rights. The qualitative design competences shown to have significant positive effects on performance turn out to be equipment and facilities, design education and training, and the ownership of intellectual property rights involving design.This study determines what factors prompt an enterprise to use service design and how service design affects the performance of an enterprise that invests in design. The extant literature on the effects of service design on enterprises or industries is scant, and previous studies on service design are limited to national or local public services. This study focuses instead on the effects and values of service design in corporate businesses. We first examine the concept of service design from the perspective of industry, including both the manufacturing and service sectors, and how service design applies to specific tasks within individual enterprises. Then, we analyze the factors that determine whether an enterprise applies service design, and the quantitative and qualitative outcomes derived from the service design. For the econometric analysis, we use survey data collected from 499 Korean enterprises.