1 Introduction

Service management is a dynamic field grounded in a wide range of theories, concepts, and managerial models. Therefore, there is a need to define and discuss how service management can be understood, both as a management practice and as an academic discipline. This chapter describes ways of defining and framing service management as a relatively new academic discipline in a developing mode within service research.

In its broadest sense, service management has traditionally existed through centuries of a wide variety of activities: taking care of elderly people, providing transportation and healthcare services, and running restaurants, shops, and accommodation services. On the other hand, service management as an academic discipline is relatively new, with little consensus regarding its scope, theoretical underpinnings, and key concepts. This lack of a widely accepted definition of service has consequences for defining and understanding service management implications. This has limited the advancement of a discipline-specific research agenda and teaching practices, thus affecting the development of a scholarly approach to service management. Despite this limitation, service management can be described as a dynamic field that develops responses to important societal and organizational challenges. The reason for this dynamism is that the importance of service in all sectors of modern economies is increasing, including service provided by manufacturing firms. The service perspective also informs general management literature, models, and practices.

Service management can be viewed as an academic discipline, a concept, and a practice, making it even more critical to define and illustrate. Service management as an academic discipline has, in a broad sense, tended to focus on value creation with a specific emphasis on meeting customers’ expectations, the interactions between customers and front-line employees, the necessary supporting processes and structures in the service organization. In this way, the practice of service management has developed and renewed the provision of service to enhance customer-oriented experiences and fulfill organizational goals.

Defining, developing, and using concepts, models, and theories is an integral part of rigorous scholarly practice. Defining concepts is part of a broad academic discussion that provides the prerequisites and foundation for analyzing and communicating about an academic discipline. A concept describes an abstract idea that scholars use in academic dialogues to make sense of the world. Each academic discipline has its own theoretical concepts, which are used to describe, explain, and analyze phenomena of the discipline and investigate a phenomenon, contexts, and issues for the purpose of generating responses or solutions. Thus, each discipline, such as service management, has its disciplinary language (specialist terms), and learning and defining these concepts is essential for successful academic development. Proper operationalization and use of the concepts reveal the relevance of understanding and explaining the phenomena under study. As such, the discipline of service management has developed with contributions from marketing, operations management, and human resources, as well as theories from areas such as communication theory, resource advantage theory, systems theory, social construction theory, value theory, and innovation theory.

It is no easy task to position service management as an academic discipline because it has multidisciplinary roots that are intertwined in various research traditions. Furthermore, many concepts have theoretical roots in management studies that focused on manufacturing firms that were later adjusted to service organizations. However, service management research has also developed based on theorizing on the logic of service, often with close links to service management practice (see, e.g., Shostack, 1977; Vargo & Lusch, 2004). The logic of service, emphasizing value creation, and drawing on value theory have also influenced scholars in other areas, not least healthcare (see, e.g., Porter & Teisberg, 2006).

In response to this brief and multifaceted framing of a dynamic and growing discipline, we present various ways of understanding service management in terms of theoretical underpinnings, concepts, models, and management implications. The nature of service and its implications for management have long occupied service researchers. Their focus has been on service encounters, customer relationships, and quality perception in the firm/customer dyad. More recently, service management has embraced a broader scope, including multiple collaborating actors and the challenges and opportunities present in service ecosystems. This broader scope, beyond the customer/firm dyad and narrow organizational framing, has widened the view of service management during the last 20 years toward a service ecosystem view. This chapter aims to frame service management in terms of this ecosystem view as a discipline by highlighting the three parallel shifts that have shaped the development of the field. First, the academic field is framed and defined. Next, different portrayals and theoretical underpinnings are presented, and, third, three shifts in service management research are discussed.

2 Framing Service Management

2.1 Framing the Discipline

Framing a discipline or defining a concept is typically challenging because it might have different ontological and epistemological underpinnings. We have had many discussions with scholars and reflected on how service management as a discipline is presented in the literature. These discussions on framing the discipline have particularly focused on key concepts, important models, frameworks, and empirical studies and results as a basis for portraying service management. However, we have not been able to summarize these reflections in one agreed-upon understanding. One portrait is not enough. Instead, we suggest that service management as a research discipline can be described as intrinsically diverse and lacking a singular foundational theory or agreed-upon definition. We may also conclude that the discipline has developed over recent decades, starting with the article by Shostack (1977) more than 40 years ago (see Chapter “Service Management: Evolution, Current Challenges, and Opportunities” in Tronvoll and Edvardsson). During that time, service management has borrowed from many related disciplines, such as marketing, economics, human resources, strategy, systems thinking, and organization theory.

Furthermore, the discipline has been informed by management practices in a wide range of service organizations in many industries. Service management has both influenced and learnt from many sectors of the economy, including manufacturing firms, government organizations, and other public service providers. Thus, the dynamic development of service management over 50 years or more has influenced specific sectors such as healthcare, hospitality, and information communication technology (ICT), including software development and platform-based organizations. A search for the term “service management” reveals more than 530,000 search results in Google Scholar and more than 15,000 articles in the academic database EBSCO when the search is limited to business and academic areas (as of July 2021).

An essential component of the development of the discipline of service management has been the Journal of Service Management (JoSM), which is currently in its 32nd year of publication and has become a highly appreciated and valuable journal. As the JoSM website states, “As economies across the world have become more service oriented, the importance of studying and understanding all aspects of managing service has increased. This presents new opportunities to undertake cutting-edge research within various industry sectors. … All require new knowledge, skills, and abilities to meet the changing marketplace.” Nonetheless, JoSM is not the only academic journal in the service management field. Many journals have been established over the years to address service management issues, including the Journal of Service Research (JSR), The Service Industries Journal, Journal of Service Marketing, Service Science, and Journal of Service Theory and Practice.

In a widely cited book, Normann (1984) provided a service management framework that stressed a streamlined service management system that focuses on strategic service management practice. The critical components of his framework are market segment, service concept, service delivery system, image, culture, growth strategies, and the nature of innovation. Normann emphasized using image and culture as management instruments as well as compelling and persuasive communications. For their part, Sasser et al. (1991) presented a wide range of case studies that focused on “breakthrough” service providers that dramatically transformed the industry. They argued that these firms had transcended the established rules of service by consistently meeting or exceeding their customers’ needs and expectations. These breakthroughs fostered growth, productivity, and profitability, and these service providers became role models for many other service organizations.

A few years later, Christian Grönroos (1994), also using real-world examples from both service and manufacturing firms, focused on the fact that most firms face service competition. Hence, managing services becomes of strategic importance for service firms and manufacturers of goods alike. Schneider and Bowen (1995) argued that companies that master the rules of the service game can outperform the competition. The key to winning, according to them, is understanding that the customer experience is the foundation for how an organization is managed, extending to how employees are treated and the condition of the physical facilities. They emphasized that people (i.e., customers, employees, and managers) are a prominent key to success in service and that this should be fully recognized in the increasingly technical sophistication of service science (Ehrhart et al., 2011). These scholars also argued that service management requires an understanding of the cocreation of value by and for people. This occurs when an appropriate psychosocial context is created for people to produce, deliver, and experience a service process. Thus, service management requires understanding the complexities of people as cocreators of service in often complex and interdependent systems. We can therefore conclude that these early, influential scholars often had a management interest and emphasized people, processes, and systems. Case studies and management practice influenced their work, while in-depth theorizing was less emphasized.

The field of service management concerns what are traditionally known as “service organizations” and constitutes a future paradigm for organizations in general (Gummesson, 1994). The division of goods and services, in its traditional sense, was outdated: “it represents a myopic production view, while the service economy is an expression for customer-oriented and citizen-oriented, value-enhancing offering” (Gummesson, 1994). Johnston and Clark (2005) offered a similar view in their article on service operations management by suggesting a window of opportunity for operations academics to engage in the service arena. Service scholars can apply their knowledge and skills to answer fundamental questions in the areas of quality, productivity, and efficiency, and thus exercise their expertise in business services as well as the voluntary sectors. These opportunities have been explored and exploited in service management research by responding to emerging societal and organizational management challenges.

Christian Grönroos (2015), in Service Management and Marketing, examined management in the arena of service competition. He drew on decades of experience to explain how to manage any organization as a service business and move closer to current and future customers. He argued that service management is all about customer-focused, outside-in management and that current academic research and business practice can be used to make organizations more successful in the service-based economy. Although the discipline has taken a giant leap since the late 1970s, we are just beginning to see a new era of service management that will become the basis for value creation and economic survival.

2.2 Framing the Concept

A useful definition could prevent the reader from misunderstanding the term “service management” or aid understanding of it in the case of unfamiliarity. One way to define “service management” is to individually define the two words “service” and “management.” However, it is often not enough to define the separate words because combining the two words results in more than the sum of its parts. Many scholars have defined both of these terms in recent decades, but no definition has achieved dominance.

Christian Grönroos (2007) defined “service” as a process consisting of a series of more or less intangible activities that normally, but not necessarily always, take place in interactions between the customer and service employee and/or physical resources or goods and/or systems of the service provider, which are provided as solutions to customer problems. Meanwhile, Kotler et al. (2009) defined “service” as any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything. On the other hand, several researchers, textbook authors, and English language dictionaries have defined “services” as acts, deeds, performances, efforts, or processes (Hoffman & Bateson, 2006; Rathmell, 1966; Wilson et al., 2012). This definition of service implies that acts are performed after customers and firms finalize a deal, that sellers or agents perform acts, and that acts are physical. At its core, the definition regards economic activity as more accurately conceptualized in terms of service-for-service exchange, with “service” defined as using one’s resources to benefit oneself or others (Vargo & Lusch, 2004).

“Management,” on the other hand, has been defined even more broadly, with different intentions and from different theoretical perspectives. When “management” is described in academic literature, it often refers to the skills, habits, motives, knowledge, and attitudes necessary to manage people and resources successfully. When developed, management competencies promote improved leadership and contribute to business success. Moreover, an organizational goal is always related to creating value for actors engaged in the service ecosystem, such as shareholders, employees, customers, partners, suppliers, and society. A shift in attention toward the notion of a service ecosystem, defined as a “relatively self-contained, self-adjusting system of resource-integrating actors connected by shared institutional arrangements and mutual value creation through service exchange” (Vargo & Lusch, 2016, pp. 10–11), is also influencing the conceptualization of service management.

Some definitions of management are very focused and may denote the optimal way to accomplish tasks and achieve goals (see, e.g., DuBrin, 2009; Kurtz, 2011). A similar view is suggested when defining management as an act of engaging with an organization’s human talent and its resources to accomplish desired goals (Sen, 2019). Although the concept of “service management” could give the impression of being rooted in the management field, management and organization theories have had relatively little influence on the development of the term, assuming that “management” is understood as the coordination and administration of tasks to achieve a goal. Such activities, often grounded in organization theory, include setting the organization’s strategy, linking activities in processes, and coordinating the efforts of staff to accomplish these objectives through the application of available resources, control, and follow-up activities.

Traditionally, management has been defined by focusing on the planning perspective, which defines management as the effective and efficient utilization of resources to attain the set objectives through planning, organizing, directing, and controlling organizational resources (Michalisin et al., 1997). In contrast, Koontz and Weihrich (1990) focused on the process perspective and defined “management” as the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected tasks. Other scholars have emphasized the strategic perspective by defining “management” as the bundle of tactics and strategies that actors devise to articulate this power, to resist power, to act in conflicting situations, or to cope with uncertainty (Crozier, 1964), or by using a practice perspective, as Drucker (1954) did when he defined “management” as the commonly understood practice of organizing an organization’s resources to achieve agreed-upon objectives and overall purpose.

Other management scholars have emphasized the key role of competencies or core competence (see, e.g., Prahalad & Ramaswamy, 2000). For instance, Bogner and Thomas (1994) elaborated on value creation and exchange value in relation to competencies and management. They focused on value creation that resulted in use-value, exchange value, and value capture. Use-value denotes customers’ perceptions of the usefulness of a product, service, or other offering. Exchange value refers to the amount paid by the buyer to the seller for the use-value. Value capture relates to the realization of exchange value by economic actors (firms, customers, resource suppliers, or employees). We use this as a way to connect management, competencies, and service, with service being understood as a perspective on value creation (see, e.g., Edvardsson et al., 2005; Vargo & Lusch, 2004) and not only service as intangible offerings. We also assert that management has always focused on value creation and specifically on customers, owners, employees, and other stakeholders. Furthermore, service management is not only about possessing or having access to resources but also how these resources are integrated and used by engaged actors in relation to their intended individual and collective goals. Therefore, service management focuses on value creation in the context of service ecosystems, in which the engaged actors’ competencies or sets of competencies play a crucial role.

Thus, the core of service management is carrying out meaningful and vital tasks, solving problems, and realizing outcomes of value for customers, firms, and other engaged actors. Outcomes refer to creating favorable experiences, avoiding service failures to secure intended value-in-context for customers and other engaged actors. Service management is focused on actor-driven processes and outcomes, organized in ecosystems and shaped by available resources, norms, rules, and habits. We may argue that actors need to possess or have access to different competencies when managing service activities, interactions, and collaboration between actors to form and realize value-creating processes and outcomes. Thus service management is about managing value creation processes that result in intended value outcomes for engaged actors. Based on this understanding, we have defined service management as “a set of competencies available for actors in the ecosystem, enabling and realizing value creation through service.” This definition emphasizes the crucial role of actors—individuals and firms as well as other organizations—and their competencies for service provision, including creating value for themselves and others. Furthermore, value is created and assessed in ecosystems and results from the collaborations of actors. Thus, service denotes a perspective on value creation rather than a specific market offering, which is different from managing the production and delivery of physical products or goods. With the above view on service management, we emphasize the creation of value for customers and other engaged actors. In brief, service management is about “getting things done”: the focus is on realizing value outcomes by managing the necessary supporting prerequisites, structures, competencies, and resources.

3 Shifts in the Service Management Perspective

Independent of how “service” and “management” are defined, we argue that service management has developed from a customer/firm-centric and dyadic understanding to a multi-actor and systemic perspective. Service organizations today are part of or embedded in many other systems and structures, including digital infrastructures. In addition, the extensive collaborations with external partners have changed the focus of service management to include the topics and research questions that service management scholars emphasize. Organizations as legal entities are a too narrow scope and limit the understanding and manage value creation, and thus for understanding service management. Digitization, service robots, smart technology, and platformization have begun driving transformations in many service industries in recent years. This development not only enables the shift from a narrow focus on the service encounter or a standalone organization or firm, but it also makes it necessary to embrace and manage access to resources and collaborations in ecosystems (Tronvoll, 2017). We suggest, however, that collaboration in service ecosystems requires managing specific sets of competencies for value cocreation and value capture. This can include and integrate customer competence (Prahalad & Ramaswamy, 2000).

We also assert that three parallel shifts have changed the focus and understanding of service management away from the traditional management approach. These shifts are as follows:

  • A shift from a narrow focus with an inside-out perspective (departure from the need of the firm selling its products, including service offerings) to an embracing of the outside-in perspective (departure from the customer’s needs, preferences, and relationships). This means that the scope of service management has been extended from focusing on the firm’s effectiveness to emphasize customer satisfaction, loyalty, and experiences, and, over time, to promote long-term relationships in which the customers are at the center. The centrality of the customer does not imply a passive role or focus but rather an actively engaged and orchestrated role in mobilizing the customer’s competencies and providing support that enables value cocreation to its full potential. Moreover, value creation is not limited to being embedded in units of output, such as services. Managing service delivery is broadened to encompass value creation, thus including the customer’s competencies, other resources, and collaborations with multiple actors in the customer’s service ecosystem.

  • A shift from a focus on the product, resources, and structure (static view) to a focus on activities, interactions, processes, and experiences (dynamic view). This shift implies that focusing on the dyad of the product/service (offering) and structure are insufficient for managing service. Service management must also include often-interdependent, parallel, and sequential processes, multiple outcomes, and a wide range of individualized customer experiences. Furthermore, these processes do not always result in intended value-creating outcomes and favorable customer experiences. Service management, therefore, must also include complaints management (Knox & van Oest, 2014) and service recovery (Van Vaerenbergh & Orsingher, 2016; Xu et al., 2014). However, studies have shown that, often, the same service failures recur, are inbuilt, and require service management attention and collaborative approaches (Arsenovic et al., 2019) to resolve them and avoid value codestruction (Echeverri & Skålén, 2011)

  • A shift from focusing on the direct relationships between customers, front-line employees, and other touchpoints linked to a firm to a systemic approach to understanding service and service management. The systemic approach emphasizes multiple processes, activities, and interactions within direct and indirect relationships among all involved in the service ecosystem. Many actors (e.g., focal firm, suppliers, government bodies, and organizations) can play a critical role in creating value with the customer. Businesses and other organizations, including public service providers and governmental organizations, form loosely coupled and self-adjusting systems centered on value cocreation among multiple actors (Meynhardt et al., 2016). The overall focus is on mutual value creation, and the ecosystem strives for long-term viability (Barile et al., 2016; Vargo & Lusch, 2016). However, various actors within the service ecosystem might have different purposes (Meynhardt et al., 2016). At the same time, they are both individually and collectively able to adapt when confronted with change while maintaining their uniqueness and distinctiveness (Lusch & Nambisan, 2015). This can result in service management breaking free from the firm/customer dyad and the organization as the unit to be managed, to a focus on routines for resource integration and management of multi-actor collaborations in service ecosystems (Tuominen et al., 2020). Moreover, value cocreation is often enabled by digitization and smart technology (Mele et al., 2021).

Thus, the field of service management has moved toward a system perspective on value creation, in which engaged actors integrate resources and benefit from collaboration. This requires a system-informed management mindset and service logic focus that differs from applying conventional manufacturing-oriented management theories and models (Christian Grönroos, 2015; Vargo & Lusch, 2004). Service management emphasizes the importance of humans and the differences among collaborating actors with complementary competencies to address ecosystem complexities. More specifically, managing specific challenges and tasks in service provision to shelter the customer experience and the viability of the service ecosystem becomes important (Gummesson et al., 2019). Furthermore, a service management perspective requires that a firm knows its customers, both as individual actors and as groups or communities, to fulfill their specific needs and support their individualized value creation.

The ecosystem perspective on service management also embraces the opportunities provided by digitization, digital service platforms, and enablers such as sensors, streaming technology, and various interactive solutions. These opportunities open up the global marketplace, both for firms and for customers. As such, service management has become more technology-driven, which implies that adopting and managing smart sensing technology, service robots, and artificial intelligence (AI)-enabled management practices is becoming more common. However, we believe this automation will never replace the importance of the personal service encounter and the human touch. Rather, the task becomes balancing technology and the human touch (“high tech and high touch”) to successfully develop service management. Thus, the central requirement of management in service competition is to adopt and embrace the systemic service perspective as a strategic approach to service technology and the digital workplace.

The ability to work anywhere, anytime is no longer something that is simply “nice to have.” Enabling work-from-anywhere has become an essential tool in service management. For example, service providers that lacked digital workplace solutions prior to the outbreak of the COVID-19 pandemic experienced serious challenges. New solutions were developed very quickly to mobilize their workforces and allow them to connect to the workplace and customers from any location as well as to work efficiently with little or no reduction in productivity. Service management developed the sets of employee competencies and supporting toolsets to provide service with the same level of quality (functionality, speed, and accessibility) when it is desirable to work remotely or impossible to work in the traditional workplace. To succeed in this endeavor, service technologies must be fully integrated with all digital customer and partner systems. Changes in behaviors make this imperative as physical interactions decrease, engagement via alternative digital channels rises, and the Internet of Things (IoT) scales automation. In a world of service, in which refrigerators automatically order goods when needed and television suggests new programs based on previous viewing behaviors, service management solutions must now manage the scale of resources and new opportunities, including the service touchpoints that are present in trillions of devices.

The current changes in service ecosystems toward digital service management necessitate transformation of how service processes and service provision are carried out. Artificial intelligence (AI) and machine learning proactively support digital service provision. Customers no longer have to wait for someone to notice a service degradation. Instead, technology can identify and remedy a situation before it influences customers. At the same time, customers increasingly interact with social robots, chatbots, and virtual agents, which free employees to work on issues that are more complex as well as to explore innovation opportunities. Issues that cannot be resolved automatically are detected and automatically diverted to the most appropriate human resource for resolution.

In these ways, service management will increasingly embrace digital transformation as practitioners cocreate value with and for customers, employees, and all other engaged actors. A cultural shift into a digital mindset is under way to facilitate the widespread adoption of new and more efficient practices. We therefore conclude this chapter by illustrating the shift in service management toward a digital service mindset with the transformation in the financial industry. Since modern banks were first established, all customer services were conducted by a teller at a brick-and-mortar location. Over time, the proliferation of bank branches and the management of many employees have become expensive. Thus, bank operators began to ask themselves, “how can we better service our customers and reduce overall costs?” This question gave birth to online banking and, eventually, mobile banking, in which customers can access their bank information, pay their bills, buy shares, and receive many other services anywhere and at any time with just one or a few clicks.

We can conclude that service management is still at a point where dynamic technology fosters new opportunities, but the initial focus on servicing customers remains a core task. Service management currently focuses on improving customer and employee engagement by creating more personalized service. This is done using self-service and self-help technologies, which can boost value for customers as well as employee productivity. However, transforming the provision of service also requires a more sustainable value cocreation that emphasizes the 3Ps (people, planet, and profit), which we believe will be a priority for all service managers in the future. Therefore, we argue that defining service management as “a set of competencies available for actors in the ecosystem, enabling and realizing value creation through service” will be a useful compass when managing the challenges of tomorrow.