Self-fulfilling prophesies – Part 2

In an award winning article Ferraro, Pfeffer and Sutton (2005) show how the ideas of economics affected our view of social reality. More specifically, they show how the underlying assumptions of self-interest and market mechanism become part of the language and institutional design, and shape the beliefs about what is appropriate. As a result, language, institutions and values work together to create a social reality, which corresponds to the initial assumptions and ideas of economics. Thus, the theories become true, rather than explain social reality as it is observed.

We discuss this topic here because – as the article demonstrates – the same mechanisms that make theories self-fulfilling permeates managerial decisions and behaviour, business practices and employer-employee relationships. We draw two lessons from Ferraro and colleagues’ article. First, organisational management can recognise these mechanisms and influence the social structures of their business to adopt a different worldview. The way an organisation views the world around it affects its ability to innovate and, hence, compete. Second lesson parallels the blue ocean strategy by Chan Kim and Renée Mauborgne (2005), that suggests that companies can create market space for their offerings rather than compete in the existing markets. In other words, the same mechanisms that are not recognised in self-fulfilling theories, when understood, can be used to advance the competitive position.  That said, it should be mentioned that such mechanisms are not easily recognised and are difficult to manage because of their emergent nature. But the exploration of such processes is part of management research.

Ferraro et al. illustrates when the self-fulfilling mechanisms take root.

  1. ‘To successfully diffuse in a society or an organization, the assumptions and language of economics need to resonate with at least some of the existing norms’ (p.17). When ideas resonate with some critical elements of the culture they engage with the existing cultural and social norms. With time the correspondence between assumptions and existing beliefs will begin to contribute to the definition of the norms.
  2. Although different cultures will have different rate of acceptance of the assumptions of economics their affect is global. This is because ‘contemporary organizations all over the world are increasingly characterized by practices that embody the dominant behavioral assumptions of economics and its language, creating the conditions for the operation of the self-fulfilling process… at a global level’ (p.17). In other worlds, organisations borrow managerial practices from each other thereby defusing them globally.
  3. The existence of explicit or implicit processes of accountability fosters the sense that assumptions are natural and intuitive. ‘Accountability is the implicit or explicit expectation that one may be called on to justify one’s beliefs, feelings and actions to others’ (ibidem). Accountability creates conditions for social actors to personify the behaviour, which is assumed to be legitimate.

Why is this important for service or experience? When organisation sets out to provide a service or create an experience it acts on its assumptions about human nature. For example, an assumption that customers are motivated by self-interest is to design a business model that offers value in accordance with this reality. As a result a company engages customers in the behaviour that corresponds to the prior assumption. Because service and experience exist only while provider produces and customer consumes (Ng and Smith, 2012) ‘motives are learned… from those in the immediate situation’ (Ferraro et al., p.20).

Imperial studies will show how well spread these mechanisms are. But one final point seems to follow from the article. Namely, customer value and motivation is not exclusively exogenous to the organisation but is also endogenous to the organisational activities.

Source: Fabrizio Ferrano, Jeffrey Pfeffer, Robert I. Sutton, 2005: Economics Language and assumptions: How theories can become self-fulfilling. Academy of Management Review, Vol. 30, Issue 1, pp. 9-24.

Kim, W.C. and Mauborgne, R., 2005: Blue ocean strategy: How to create uncontested market space and make the competition irrelevant. Harvard Business School Press.
Ng., I.C.L. and Smith, L.A., 2012: An Integrative Framework of Value, In Stephen L. Vargo, Robert F. Lusch (ed.) Special Issue – Toward a Better Understanding of the Role of Value in Markets and Marketing (Review of Marketing Research, Volume 9), Emerald Group Publishing Limited, pp.207-243. doi: 10.1108/S1548-6435(2012)0000009011.

Digitality in service design thinking

One of the 10 research priorities in service science [1] is service design that can be defined as “shaping services’ functionality and form from client perspective so that a service offering can be perceived useful and desirable from client point of view and effective, efficient and distinctive from service provider point of view [2]”. The essence is to look at the service holistically through the eyes of the customer with a purpose to create new implementable ideas. Channelling those ideas using visualizations and prototypes is the key to communication between the different stakeholders. Service designers speak about fast prototyping and testing of ideas with customers in the early phases of design to avoid spending time on solutions that will not work – an interesting analogue to agile principles and adaptation to changing requirements in software development.

One useful tool in service design is the customer journey [3] where the experienced service is divided into touchpoints that can be seen as points of interaction. These touchpoints can also consist of several companies’ offerings that the customer puts together in order to reach the desired goal. Understanding the customer journey helps the company in designing the service journey – the service from the company point of view and its touchpoints – to connect smoothly, reflect the company’s brand, and carry the customer through the service leaving a positive experience.

Touchpoints can also act as a way into understanding the digitality of service. When talking about digital services the emphasis is on the digital touchpoints of a service – such as software programs, websites, applications, digital advertising etc. Even though the digital touchpoints are only one part of the whole service, in today’s connected and ubiquitous society digitality is in one way or another present in almost any service and the amount of the digital touchpoints is increasing.

In order to get a holistic design for a service and its multiple touchpoints, the viewpoints for it need to come from various experts including diverse groups of employees and business partners as well as customers. To enable this the service providers need to support design thinking. Design thinking is “designer’s sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity” [4].  After a holistic design for a service has been created the action can be directed into individual touchpoints. For example, the computer scientists start to work on the application using methods from the field of software development whereas the interior designers start thinking about colour schemes for the wall paints and furniture placement.

How to ensure that even in this point of separation the designed service overview is kept in mind until the very end of the project and even after it? On what scale is the communication between different touchpoint designers possible and necessary? How can this all be done in practice?

The problem lies in the holistic nature of service design. How to create the common ground for communication between people with various disciplinary backgrounds? Service design has collected methods from several fields but how to create even better tools and methods that support the communication and design? How to know which touchpoints in the entirety would be perceived most valuable and which design options to select? How to enhance the service mentality?

These are just some of the essential questions that need answers. The work is ongoing but much is still left to be done.

References:

[1]  Ostrom A.L. et al. (2010) Moving forward and making a difference: research priorities for the science of service. Journal of Service Research, 13(1), pp.4-33
[2]  Mager B., Gais M. (2009) Service design. Paderborn: Wilhelm Fink Verlag, p 42.
[3]  Stickdorn M., Schneider J. (2011) This is service design thinking. BIS Publishers, Amsterdam
[4]  Brown T. (2008) Design thinking. Harvard Business Review, 86(June), pp.84-93.