A Practical Guide to Service Design

Posted on December 4, 2022 by Bowen Feng service design

Why am I writing this?

When I started out on my journey with Service Design, I found it difficult getting my head around what it really meant.

I came across lots of new terminology and frameworks. It was hard getting an end-to-end view of the Service Design process. Articles often covered a specific part of the overall lifecycle, such as Service Blueprinting.

So, I’m writing the guide I wished I’d had when first starting out.

It’s a consolidation of my research and experience in the field so far. Aiming to provide a simple end-to-end guide, of how you can apply Service Design in your next project. Naturally, I won’t go into too much detail in this article, but I reference further readings and resources throughout.

Why Service Design Matters

From a managerial perspective, it makes sense to break down functions in an organisation into silos to benefit from specialisation and economies of scale. Yet, this leaves the customer to navigate through different channels and teams. This can lead to a fragmented experience.

Service Design addresses this issue by putting users at the centre. It aims to create a great user experience across the entire service journey, by adjusting processes, teams and systems.

In this way, Service Design differs to UX design as it’s more holistic in nature. It spans the entire Service journey and often many teams and systems. This invites more complexity, and Sevice Design provides useful tools and methods to navigate that.

If you would like to dive deeper into the “Why” of Service Design, I have a dedicated article on that here.

The Service Design Journey in a Nutshell

In this section I summarise the key phases of Service Design. It is the same structure I will elaborate on for the rest of the article.

I created the diagram below as a visual illustration, with examples exercises in each stage:

📌 Research & Synthesis

You start by gathering as much information as possible to understand the customer journey, making notes of any pain points or opportunities identified along the way.

Then, develop a Service Blueprint to synthesise and visualise this information. This invites further feedback, refinement, and developes a common understanding across stakeholders. This provides a foundation for prioritising key areas of the service that you will work on.

📌 Ideation & Prototyping

The ideation stage involves brainstorming possible solutions to the focus areas identified in the Service Blueprint, before deciding on the most promising ones for the prototyping.

The most promising ideas are then prototyped for user feedback, and refined over time.

📌 Implementation

Once you’ve validated the prototypes, you’re ready to deliver this new service to real users and start the implementation. This would include change management, effective communication, and possibly involvement with software development folk.

Now that you have the overview, let’s dive into each phase in more detail.

Research & Synthesis

The goal at this early stage is to gain an understanding of the overall service, the elements that make it happen, and the experience of the users and staff involved.

Following the “double diamond” model, you first diverge as you collectively expand your knowledge of the situation, and then converge as you synthesise this into a Service Blueprint(s).

An illustration of the double diamond model used in Design Thinking circles. There are many parallels here with the Service Design approach.

At this point it can be easy getting too bogged down into various processes, systems and departments, losing sight of the bigger picture. So when encountering new information, it helps to reflect on its impact on the user experience. This will help to you stay focused on gathering the most relevant information.

Here I will focus on 3 commons ways of gathering insights, drawing on the book “From Service Design to Implementation”:

Interviews

As interviews can be time consuming, both for the interviewers and interviewees, you’ll need to adjust the approach based on the needs and constraints of your project.

A minimal amount might involve 1:1 interviews with 4-5 participants lasting around 45mins. The output would be an executive summary with the top 5 observations and quick wins based on the research.

A mid-level analysis would involve around 10 participants, allowing deeper insights. This is especially useful when seeking long term value beyond the specific project, or for sharing across the company.

💡Tips for Interviews:
- Try to involve a diverse set of stakeholders to gain a bigger picture of what’s going on. For example, include interviews with customers, but also those involved in delivering the service.
- Leave space for silence, and avoid interjecting with your own opinions or emotions – this is all about them.
- You should find you’re asking “why” more than any other type of question, as this can help get to root causes. Yet you should still encourage specific details where appropriate. You can achieve this with questions like “describe a time when…”.

Observation

Sometimes it can be difficult for users to explain their experience or pain points. For example, when they have already figured out hacks or workarounds to cumbersome processes. These types of insights can be gleaned better through direct observation.

Example taken from *Polaine, Løvlie, and Reason. 2013. Service Design: From Insight to Implementation. New York: Rosenfeld Media. rosenfeldmedia.com/books/service-design/*
*Sales staff build their own routines to make their process more efficient. Link to image source.*

Another advantage of direct observation, is seeing the user engage with the service in their original context. This can bring out insights otherwise missed in an interview setting.

Experience

Lastly, it can be a great idea to experience the journey for yourself, taking note of your impressions. On top of the advantages mentioned with “direct observations” above, direct experience can be a powerful way of gaining empathy for users.

Naturally, any quantitative or written information you can get your hands on (e.g. Flow Charts) can also be a big help. But keep in mind those will better answer the “what” and “how” questions and not the “why”. The latter of which are much better gleaned using the qualitative methods above.

The Service Blueprint

A service blueprint builds a picture of the user journey and the elements that make it happen. This includes any service personnel, systems, and supporting teams/ processes.

A blueprint helps to construct a common picture of the service across different stakeholder groups. It bridges the traditional siloed mentality by looking at how each element or team contributes to the overall user journey.

By taking note of how users perceive each part of the service, you can identify areas of improvement. This will inform the later ideation and prototyping stages.

In this section, I draw a lot from the online course “Introduction to Practical Service Blueprinting“, made by the team behind “Practical by Design”. I would highly recommend checking out their website for those wanting to dive deeper. They also have plenty of free resources on Service Blueprinting you can use for your planning and workshops.

There is no standard format for a Service Blueprint, but they tend to follow a grid-like layout and include:

Rows:

The user journey overlayed at the top – phase by phase, step by step
The touchpoints – channel by channel, touchpoint by touchpoint (sometimes I like to have them all in one/two row(s) to reduce the size of the diagram)
The backstage processes – stakeholder by stakeholder, action by action

Columns:

The different phases of the service lifecycle e.g. Aware -> Join -> Use -> Leave

Here are some examples:

Taken from: https://commons.wikimedia.org/wiki/File:Service_Design_Blueprint.png

Made by the team behind “Practical By Design”. You can use their free Mural template here.

Steps to (Co)creating the Service Blueprint

Using the insights gained from your research, you can start drafting the Service Blueprint.

Start by identifying the key phases of the Service you’d like to map, such as the onboarding, usage, servicing flows. This might be based on key problem areas you identified in your research.

Then, outline the key steps of the user journey within each of these phases. For example, the user registers on the website, receives a confirmation e-mail, gets a call from sales staff etc. Make sure to keep track of where these touchpoints take place (Channels) as these are big contributors to the user experience.

Once you have the outline in place, map out the back stage processes, people and systems that enable each step of the user journey. This could be admin support, systems involved or even physical resources that are used.

To start off with, it can be only yourself and members of the core team creating this draft. Later, sharing it with the relevant stakeholders for feedback and enrichment. This can done on digital whiteboarding tools, like Mural or Miro, or even simple sticky notes.

In comparison to creating the blueprint from scratch with the entire stakeholder group, this approach takes up less of everybody’s time. It also allows you to ask more targeted questions during these follow up sessions which maximises your time together.

As you create the blueprint, be sure to include critical feedback you gathered about the user experience, such as any paints points or opportunities identified. Make these noticable by marking or colour coding them. This will be useful for the synthesis and prioritisation step later:

As this stage can take some time, one approach is to build it iteratively. Starting with a “Minimum Viable Blueprint” for initial feedback (perhaps with simple sticky notes), before building it in higher fidelity.

Once you have an initial draft, you can present it users and staff involved in the service and gather their feedback. Make sure to include stakeholders across the entire journey, both front and back end (front end meaning staff who customers directly interact with), who are well versed with the actual process.

Generally 6-8 people are viewed as the sweet spot for workshops. Allow 1.5 – 2 hours for the session(s).

When it comes to planning the actual blueprinting workshop(s), as mentioned, “Practical by Design” have some great free resources which go into a lot more detail than I cover here.

💡 Tips for Service Blueprinting:
- Try to stay at the same level of abstration through each step, and avoid diving into rabbit holes that don’t contribute meaningfully to understanding the overall user experience/ journey.
- Try to get enough data to generalise 80-90% of cases, you’re not trying to capture all possible scenarios.
- During workshops, it helps to have a dedicated scribe to support the facilitator in updating the whiteboarding tool or capturing notes.
- For remote sessions, live whiteboarding tools like Miro or Mural can be great for presenting the blueprints and capturing stakeholder feedback in real-time.

Synthesis and Prioritisation

Now you’ve constructed the Service Blueprint, you can begin collating the key problem/ opportunity areas you’ve identified. This will be easier if you’ve already distinguished these e.g. through a colored sticky note. This can involve only the core project team, or with a wider set of stakeholders, depending on the needs of the project.

As you group similar notes, themes will start to emerge. For example, customers needing to re-enter information, or lack of internal training leading to an inconsistent customer experience.

You can then share these findings with the relevant stakeholders for prioritisation, ideally involving end users. Consider highlighting these within the relevant parts of the service blueprint so it’s tied to the overall context.

Make use of prioritisation/ decision matrices such as value vs. effort to identify the best areas to focus on. For larger groups, you can also utilise dot voting exercises or polls to identify the best opportunity areas.

Ideation

I won’t delve much into ideation strategies in this article, as it’s been done better elsewhere. But the general principle is to follow the Double Diamond approach: diverge then converge. This means you’ll focus first on fostering the quantity over quality of ideas. For these exercises, try to involve a broad representation of different stakeholders and encourage lateral thinking. You can find a great free library of methods at This is Service Design Doing.

To ground the ideation in the insights gathered during the research phase, highlight the key pain points in the Blueprint and invite participants to think of how to resolve these and deliver value.

Once you’ve captured these ideas, you can make use of the same decision matrices and voting methods to gain consensus across the group. The free library I mention above has tools and methods to help with this under the “Ideation” section.

Prototyping

Now for the fun part. Drawing on the list of prioritised ideas you want to focus on, you can start prototyping – testing ideas with users and other stakeholders.

Prototyping allows you to get feedback early, with little upfront effort, allowing you to adjust and improve the idea before launching it. Unlike products, service prototypes usually require participants to interact with multiple touchpoints and key stages across the entire service. Doing this ensures the improvements make sense across the service as a whole, and reduces the risk of optimising a “part” within an ultimately fragmented service.

Deciding on Scope & Fidelity

The time and effort required for prototyping can vary a lot based on the goal. So it’s important to gauge the resource and time constraints of your project to guide its scope.

It’s also important to consider what you’re looking to understand, assumptions you’d like to validate, and how this can be achieved with the minimal amount of time and effort. You should focus on prototyping the areas where the research found to be critical, and require significant re-work.

The diagram below illustrates some possible prototyping options, based on the above criteria. For the “Cost” section, keep in mind the book where this was taken from was targeted at Design companies/ Consultancies doing projects for clients:

The four levels of experience prototyping. Polaine, Løvlie, and Reason. 2013. Service Design: From Insight to Implementation. New York: Rosenfeld Media. rosenfeldmedia.com/books/service-design/. *Link to image source.*

The authors of the book elaborate on 4 different prototyping methods, which I’ve summarised below:

1. Discussion Prototype:

This is the cheapest and simplest option. It involves bringing mockups or storyboards of various touchpoints, and sharing it with a set of customers in a 1-hour interview.

These customers are asked to act as themselves, and respond to different parts of the user journey as if they were experiencing them for real. Through this simple exercise you can already get a sense of what works and what might need revising.

2. Participation Prototype:

This is like the discussion prototype, but takes place where the service would be delivered, thus involving more of the local context. You might, for example, invite a few representatives to a store to try out a new purchasing flow. This would involve mockups of the new ideas whether digital or physical.

The benefit of this approach is that you can simulate more aspects of how the service unfolds over time, taking into account things which you would miss in a standard discussion. Usually for this you would involve 2-6 customers, as well as any key service reps.

3. Simulation Prototype:

This involves a combination of the above two prototyping methods, but in more detail. It would also take place where the service would be delivered, and include more realistic prototypes and mockups, better representing how the actual service would be. Given the upfront investment required, you might want to have a longer testing period with users, to gain richer insights across more aspects of the journey.

Aim for 2-6 customers, though 2-3 customers is typically more realistic due to time and budget constraints.

4. Pilot:

Lastly, if the project conditions allow, you can run a pilot which involves delivering a near-finished service to actual users. This goes beyond a prototype as mockups are no longer used at this stage and users might not even know that they are experiencing this beta service. Given it’s a beta, you’ll need to bake in an iterative feedback and improvement cycle to refine the service over time before the actual full scale implementation.

On top of generating the richest insights in real-world situations, this approach can be useful for services where effects on users have a certain lead time or the service itself is prolonged and complex, such as with certain public services.

💡 Tip for Prototyping:
- These prototyping approaches don’t have to be an either/ or decision. For example, it might make sense to start with a simple discussion prototype, leading to a more detailed simulation, before doing a small-scale pilot. It is common practice to start rough and build the prototypes in higher and higher fidelity as you gather more feedback.

Preparing for Service Prototyping

The Service Blueprint can act as a basis for building your prototypes, as you can overlay your proposed changes in a separate version. This is useful for keeping the team aligned, and can act as a direct input to any storyboards or mockups you create.

Example taken from “Practical by Design”. Direct link to Mural board here

Additionally, the format of the Service Blueprint will help you think holistically in your prototyping. For example any physical props, backend processes or systems involved in each proposal.

After Service Prototyping

After completing the prototyping stage, you’ll want to communicate the findings and possibly build an investment case.

The Service Blueprint can once again be a huge asset, as it acts as a platform to illustrate the proposed changes in an end-to-end, front to back way. But, as the Blueprint is more geared towards the technicalities of the service, you will might want to produce a slimmed down version for communication purposes.

Additionally, as outlined in the book “Service Design: From Insight to Implementation” you can even transform the Blueprint itself into a visual business case. Here, instead of describing the design, you outline the expected impacts on costs and revenue of each proposed change in the service:

Implementation

I won’t go into implementation in too much detail, as it depends a lot on the type of service you are designing for. It may not even be within the scope of the design project itself.

However, the principles of change management should be considered here, as this will influence how effective the new proposition is. It is important that employees are aware of the changes, have been involved in the design, and understand how it will value add for customers.

As Service Design projects involve many dimensions of an organisation, it’s important to take a similarly holistic view during implementation. Luckily the Service Blueprint already helps with this, as many of the key stakeholders will have been identified and even involved in the process. On top of this, Frameworks like the POPIT model can also be useful for evaluating the different aspects of a new proposition:

Here are some questions you might ask, based on the 4 dimensions above:

Organisation: Do we need to reorganise, or create any teams to support this new service? Should we tie any metrics to people’s performance targets?

People: What training do we needed? How will we make customers aware of the new/ improved service?

Process: Do we need to document any changes to the process? How might this affect the way teams collaborate in future?

IT: Do we need to develop any new technical capabilities? Have we defined and prioritised these developments to ensure a smooth service delivery?

If the proposal requires any new IT capabilities, you can feed the insights already gained into agile software development approaches, such as creating personas, and writing user stories. Partner closely with the Product Owner/ Manager (or equivalent), as they are responsible for the backlog prioritisation. Make sure they understand how these technical deliveries tie into the overall service proposition.

Conclusion

So there we have it, an end-to-end overview of a typical Service Design journey. Of course this is just a birds-eye view, so I’ve referenced additional sources throughout for further reading (see also the list I compiled at the bottom of the article).

That said, one takeaway from speaking with other Service Designers and my own experience, is the importance of being adaptable. You may well need to skim over or adjust parts of this journey based on the needs of your project. It’s also not a linear process, so you may need to revisit earlier stages to check assumptions or gain further insights.

Despite having its roots in design thinking methodologies, and drawing parallels with the likes of UX Design and Interaction Design, Service Design complements these by taking a more holistic approach and evaluating the entire service journey. This helps to ensure that we don’t end up with a situation where we have beautiful interfaces lying within a fragmented, unsatisfactory overall service.

As Management Guru and Systems Thinker Russell L. Ackoff once said:

“It’s far better to do the right thing wrong than to do the wrong thing right”

Thanks for taking the time to read this. What did you make of it? Was there anything you felt was unclear or missing? Would love to see your comments below!

—————————-

List of sources and suggests for further reading:

Books:
- Service Design: From Insight to Implementation – Polaine, A., Løvlie, L., & Reason, B. (2013)
- This is Service Design Doing – Stickdorn, M., et al. (2018)

Online Courses:

Free online resources & tools:
- Practical Service Design (Great materials on Service Blueprinting, including free resources for planning your workshops)
- “This is Service Design Doing” Method Library (Large collection of different activities you can do throughout the different stages)

Why Services Need Designing

Posted on April 9, 2022 by Bowen Feng service design

Look at the structure of a typical organisation.

Departments arranged neatly by specialism. Marketing, Sales, IT, Product, Support etc. This maps along a “value chain”. Customers go through a funnel, starting with Marketing, Sales, all the way to Customer Service.

This might make sense from an organisational standpoint. But from the perspective of a customer, it can lead to a fragmented experience of a service. As services tend to span different teams, each with their own goals, processes, and systems, the experience can be disorienting.

How often has this happened when you’re phoning customer support with an issue:

The first representative picks up. After explaining your issue, they pass you to a different team saying they “don’t have visibility of your record in their system”, or “another team deals with this”. The next representative then passes you to a “specialist” as they’re not an expert on your case. All the while, you’re requested to repeat the same information over and over. How can this be so hard? You wonder.

What you’re experiencing here first-hand, is the manifestation of that company’s siloed structure.

Ultimately, customers don’t care how the teams are structured, or how responsibility is divided. To them, they are interacting with one company, so expect one unified experience. This highlights a gap. A gap between the way that companies are organised, and the expectations of customers.

It’s this precise gap, which a growing field called “Service Design” aims to bridge.

What is Service Design

Let’s start with a definition. According to the Nielsen Norman Group:

Service design is the activity of planning and organizing a business’s resources (people, props, and processes) in order to (1) directly improve the employee’s experience, and (2) indirectly, the customer’s experience.

Products vs. Services

Products and services are very different beasts. Yet companies often treat them in a similar way.

Products are tangible things that you can touch and have a physical presence, like a chair or a fridge. But services are intangible, and are realised through a series interactions with the end user(s).

Whereas products tend to be static, services take users on a journey. So when a user experiences a service, they care not only for the quality of each interaction, but also how they come together as a whole.

Design as a Practice

The purpose of design is to create products and services that deliver value to users.

Methods such as design thinking encourage feedback loops between key users and stakeholders. This is then taken as input to shape the design of products and services.

By involving a wider set of stakeholders, the design process can take into account these broader needs and help to validate assumptions.

As services are often complex and involve a range of different teams, these design practices can prove particularly useful.

Putting it Together – Service Design

In summary, services take the user on a journey and can be complex. It may involve many people, processes and systems to make it happen – many of which aren’t even visible to the end user.

Additionally, because of the siloed nature of organisations, people delivering the service tend to lack an end-to-end view of it, and how they fit in to the bigger picture.

Service Design therefore provides tools and techniques to make this service visible, with the involvement of the different stakeholders that comprise it.

It might involve first zooming into a particular part of the service e.g. customer onboarding, as customers had found it problematic. You would then bring all groups involved or affected by the service together to map the end-to-end scenario in workshops.

In doing so, you would look to discover the main pain points or inefficiencies in this journey, as well as how users are feeling at each step. Eventually, you would prototype service options in collaboration with these stakeholders.

The end result could be a service that delivers greater value to end users. One that improves the day-to-day experience for employees. Or one that involves less redundancy and is more seamless – ideally all the above!

As you can tell, the practice of Service Design is a highly collaborative one. It’s a method that promotes empathy towards users (customers and employees included), helps those who make up the service see it in its entirety, and work to continually improve it.

For a visual example of Service Design, here’s a short illustration involving two Coffee Shops:

Conclusion

The aim of this article was to introduce what Service Design is, and some of the problems it addresses. As ~75% of GDP in developed economies are already made up of services, methods like Service Design will likely become increasingly relevant and embraced within organisations moving forwards.

This might just lead to a world where we experience a bit less frustration with the wide range of services we use day to day. Whether this be in healthcare, the financial sector and beyond.

In future articles I will dive deeper into how Service Design might be applied in practice. As well as how it complements, yet sets itself apart from, other customer-centric design methodologies like Design Thinking or UX Design.

A Roadmap Towards a Sustainable Future

If you’re anything like me, you share a sense that we are approaching a crisis point for human civilisation and life as we know it.

Through human-induced climate change, we’re already seeing tipping points breaking, yet it feels all we can do is stare into the abyss.

At the same time, our capitalist system has made the rich richer and the poor poorer, whilst landfill sites overflow around the world. A recent report by Oxfam, found the wealth of the richest 26 people in the world to be equivalent to that of the bottom half of the population – that’s almost 4 billion people.

You feel like we’re reaching this crisis point, yet it’s too complex. A feeling of helplessness sinks in, what can I do? Is there any cause for hope left?

If you were to ask Rifkin, he’d say yes, and that we already have an answer to this crisis. Through his book “The Third Industrial Revolution”, Rifkin has assessed our current socio-environmental condition as well as its historical trends, and proposed a path forward.

For me, Rifkin was a revelation. For once, I’m starting to see a glimmer of light at the end of the tunnel.

I’m grateful for the opportunity to share his message with you, what will you make of it? In this article, I’ll be summarising his main narrative, key takeaways, and what this means for us.

How Revolutions Happen

I’m sure you’re aware of the scale and urgency of the environmental and existential issues we face today.

As Einstein once said: “No problem can be solved from the same level of consciousness that created it.”

So to address the scale of the challenges we face today, we have to do something radical. In essence, it requires a revolution.

Through a thorough assessment of our current condition, from climate change to inequality, what we need, Rifkin claims, is a new economic vision. One that must be deployed fast.

Drawing from history, Rifkin argues economic revolutions happen when three technologies emerge and converge to create a new infrastructure, fundamentally changing how we manage, power, and move economic life:

New communication technologies to better manage our economic activity
New sources of energy to better power our economic activity
New mode of mobility (transportation and logistics) to more efficiently move the economic activity.

The First and Second Industrial Revolutions

Take the first industrial revolution in Britain.

It was propelled by a communications revolution. The invention of the steam-powered printing press, as well as the electrical telegraph, made mass communications far faster and cheaper than ever before, and instantaneous distance communication possible.

The invention of these communications technologies also coincided with the rise of a new source of energy in Britain – coal. This coal needed to be shipped around the country, which lead to the invention of steam engines, as well as steam trains.

These were among the key factors characterising the first industrial revolution and would have a profound impact on the fabric of economic life.

Now take the second industrial revolution in the US.

New communications technologies – telephones, then radio and TV, made quantum leaps in how humans could communicate. This coincided with the rise of cheap Texas oil – a highly centralised form of power generation – whilst Henry Ford started putting everyone on the road with cars, buses and trucks. Giant, vertically integrated organisations reigned.

Oil Addiction

The second industrial revolution had a profound effect on how we manage, power and move our economic activity. However, it’s an infrastructure built on one key bottleneck – fossil fuels.

Take the agriculture industry as an example. Fertilisers and pesticides come from fossil fuels, transporting the water takes fossil fuels, shipping requires fossil fuels, even the packaging comes from fossil fuels. Surprisingly, most of our pharmaceuticals and even cosmetics are derived from fossil fuels.

So the structure of our whole economic system is essentially built on top of mass digging up and burning of the dead plants and carcasses from another age. An odd way to go.

It’s this deep reliance on these fossil fuels, Rifkin argues, that manifested in the global financial crash of 2008. A few weeks prior, oil had hit an all-time high of over $140/ barrel. Rifkin argues this is what caused the economic shutdown. The financial crash was just an aftershock of this.

After searching for data to prove or disprove Rifkin’s point, I came across this piece of research which seems to shed light on his hypothesis.

Whilst costs for producers are highly correlated with oil prices, the consumer inflation side (CPI), is significantly less so. The justification being that much of the consumption in the US is of the services industry, which we’d expect to be less dependent on oil prices.

That said, there’s no denying that our current economic infrastructure is still heavily shaped by the second industrial revolution, and highly dependent on oil for its function.

Rifkin argues this leads to a highly volatile, continuing economic cycle of growth and shutdown which is highly dependant on oil prices, and therefore to a large extent, the supply decisions of the OPEC countries.

He proposes that oil prices went so low during 2015 (around $30 per barrel) because suppliers are now “fighting amongst themselves in the sunset”, working together to push down prices to eradicate the emerging alternative fossil fuel providers, namely Shale Gas and Tar Sands in Canada. If you’d agreed with his hypothesis, it would’ve seemed to be a big success, with mass bankruptcies in these alternative industries and now oil prices back on the rise.

Infrastructure and Productivity

This is one of Rifkin’s key points. However, I’ll keep it brief and simple.

Rifkin argues that though economists have been looking at productivity from the lens of effectiveness of people and machines, which has generally improved significantly, we’ve still seen productivity declining around the world. Why? Because, according to Rifkin, economists have been blind to what’s called aggregate efficiency.

Put simply, this is the relative energy you need to put into the value chain, in order to get the desired output. For example, a traditional light bulb requires much more energy just to get the same amount of light as an energy-saving one, since a lot of the energy is ‘lost’ via heat. This same idea can be applied from individual organisations, to entire supply chains.

Take this example of a circular economy below:

In each stage of the process – from extracting the raw materials, to manufacturing, consumption and maintenance, and recycling – energy is required to transform the raw material in some way, adding ‘value’ at each stage. The proportion of energy that collectively goes into the system at each stage providing the value to the consumer, versus the energy lost and waste generated in the process, is the system’s aggregate efficiency.

Currently, despite advancements in technology, aggregate efficiency even in the most developed economies have peaked at 20%. On average, this figure tends to be significantly lower. This means at best, only 20% of the energy we put in contributes to the resulting product or service, with 80% of the energy being ‘lost’. Rifkin argues that this visible aggregate efficiency ceiling across all nations is the byproduct of our flawed second industrial revolution infrastructure. Given this basis, which much of the developed world is built on, Rifkin argues that no amount of government spending, monetary incentives, market or labour reforms, can lead to significant economic improvements. The flawed nature of the infrastructure simply won’t allow for it.

Towards a Third Industrial Revolution

Following on from Rifkin’s analysis of the factors that lead to economic revolutions, Rifkin proposes that we need to move towards establishing the ‘smart’ infrastructure that will enable the third industrial revolution. A move that addresses the inequalities perpetuated from our current capitalist system, whilst moving us towards carbon neutrality and decelerating our destruction of the planet.

This coming Industrial Revolution is characterised by the emergence and convergence of three core technologies or internets:

1) Communications internet

2) Renewable energy internet

3) GPS, driverless transportation internet

The convergence of these internets and devices within the network, enabled by the emerging internet of things (IoT) infrastructure, along with the increasingly autonomous and connected nature of many of our devices, will lead to a fundamentally new economic paradigm. The emergence of a distributed nervous system, as the successor to the dominance of large, fragmented, vertically integrated organisations of the second industrial revolution.

Enabled by the platform that this new infrastructure provides, we will experience a society that is increasingly:

Distributed
Open access
Laterally scaled
Characterised by network effects

Networks and Data

With the rise of the IoT and proliferation of sensors on all of our devices, this enables a surge of data encompassing every area of our life.

At the same time, digital communications have allowed us to connect with each other, and create digital communities on a global scale. These forces create the emergence of a distributed ‘web’ of connections that are continuing to eliminate the middlemen that once acted as the intermediaries enabling these connections, or access to information.

By increasingly organising social and economic life in terms of these networks, and democratising its access (think Facebook, Airbnb, or the potential of blockchain technology), Rifkin says we can move away from a hierarchical world where access and ownership lies in the hands of a few – the 1% – and towards a more open and equal society for all.

However, this brings with it some key issues that are already coming to the forefront of public debate. Such as, how do ensure network neutrality? How do we ensure equal access to these networks? And how do we ensure organisations and institutions don’t use this data for manipulative purposes?

In this new paradigm, it doesn’t seem far-fetched to say that “access to opportunity” will become almost synonymous with “access to networks”. Just think of what opportunities access to the internet opens up for the first time user. In an instant, they transcended their geographic constraints, and instantly find themselves enmeshed into a global, distributed network.

Power to the People

In a network-neutral world, where the data flowing in from the IoT infrastructure is open and accessible to all, individuals will be empowered to shape their value chains. This is built on the premises that you will be able to track and differentiate your own value chain away from the others. For example, through blockchain and the IoT, we should be able to see with complete transparency where our food has come from and its relevant emissions.

Linking this back to the idea of aggregate efficiency, Rifkin says that by accessing this open data network spanning all economic activity, we will be able to optimise our own value chains at each stage of the cycle, collectively increasing aggregate efficiency, as well as each of our environmental impacts. The first step is gaining awareness, then control. Access to big data can be a great method of achieving this.

By doing this, we can reduce each of our marginal costs, and in some cases, Rifkin argues, it will go down to effectively zero. When this happens on a collective level, Rifkin says it takes us to an entirely new economic system.

Zero Marginal Cost and The Access Economy

With the proliferation of zero marginal cost exchange of value, this changes the very foundations on which our current economic system is based on, and goes a long way in explaining why many of our most profitable companies today are internet companies.

In economic terms, marginal cost is the additional total cost incurred when you sell an additional unit of your product or service. For example, if you’re selling toys, the marginal cost will include the materials, labour and other expenses associated with making one extra toy – therefore does not include expenses like rent or heating. Our current economic theory states that in an efficient market, all companies sell at their marginal cost. Consumers receive goods at close to cost price, businesses are making just enough to get by, everyone’s happy.

But what are the implications of this economic model if people are producing at close to, or at, zero marginal cost?

Let’s say you’ve just created a new app and price it at 99p on the app store. What is the marginal cost for you, if one additional person downloads it from the app store? Zero. You make a Youtube video. What’s the marginal cost of having an additional viewer, an additional million viewers? Zero.

So an efficient market, in this case, is one in which producers price at zero and supply an infinite amount? Now how can an economy still function with that at its premises?

The technology revolution’s effect on productivity has given rise to the access economy (aka. the sharing economy). In Rifkin’s words, the access economy is:

“the first new economic system to enter on to the world stage since Capitalism and Socialism in the 19th century.”

This ground-shift has lead to the crumbling of many traditional industries and seems to be a continuing trend.

The initial rise of Napster, Wikipedia and now Airbnb, Youtube, and car-sharing apps are pre-cursors to the direction we’re headed – where access to networks are valued over ownership. And with the rise of IoT, this trend is increasingly permeating from the digital world into the physical world.

Renewable Energy at Zero Marginal Cost

According to Rifkin, the age of fossil fuels are over. The data also backs this up. We are fast approaching a tipping point where renewable energy is consistently cheaper to produce than non-renewables.

Source: https://www.windpowermonthly.com/article/1523677/energy-costs-analysis-why-wind-broke-mainstream-2018

The world’s largest renewable energy consortium comprising of 160 states, the IRENA, predicts this major milestone will be reached in 2020. And with solar and wind energy costs continuing to go down, we’re very much on track, and the trend set to continue.

For the solar and wind industry, however, given the supply varies greatly based on climate, energy storage is a key barrier. We are making some good progress on this front though, with Tesla constructing the world’s largest battery in Southern Australia in 2017 to protect the country from blackouts (it was very successful), and an ever-expanding global network of cars – each with their own batteries.

To put things into perspective, the energy capacity of Tesla’s “Megapack” in Southern Australia, is still equal to that of less than 2000 of Tesla’s cars. Given that in 2018 we had 5 million electric cars on the road, and that this number is rapidly rising, it gives us a sense of the collective storage capacity of the electric cars in our homes.

Especially given the seemingly exponential decrease in the cost of solar panels, as well as high-capacity battery storage technology, the future of energy seems to set on households and renewable energy cooperatives generating their own energy, storing during peak times, and selling off any additional excess into the smart grid. This is in stark contrast to the centralised energy production structures we have today, and promises a future distributed energy internet which is more resilient, less prone to blackouts, better for the environment, and cheaper for households.

The exciting part is that this is already happening – with Tesla leading the ‘charge’ in establishing renewable energy homes.

And the beauty of it all, is that once this infrastructure is set, renewable energy keeps producing energy at next to zero marginal cost. The sun will keep beaming down for billions of years to come, no digging, shipping or processing required.

Autonomous Transport at Zero Marginal Cost

Rifkin foresees the coming of the communications internet, along with the distributed renewable energy internet, leading to the rise of the GPS, driverless, logistics and transportation internet (road, rail, water and air).

This is already happening with the shift away from car ownership towards a preference for access to transportation and car-sharing networks. In contrast, the second industrial revolution was itself largely fuelled from our desire for owning cars.

Taking this idea further, Rifkin quotes a study by Larry Burns stating we can eliminate 80% of cars from the roads, whilst still enabling better mobility for consumers, cheaper. This is considering, as Rifkin claims, that for each car share, we are taking 15 cars off the road.

Don’t believe that we’ll make the transition to car sharing? This 3-min video which might convince you otherwise:

Assuming Burn’s study is right, this trend will see us having far fewer cars on the road, despite a growing population. It seems safe to assume that by this point a large share of the remaining cars will be powered entirely by renewable energy, and have full self-driving capability. Given that transport and shipping are one of the largest pollutants out there (homes being another, which we’ve already looked at), this is likely to be a very positive step towards enhabiting a more environmentally sustainable economy.

Making it Happen

So now you’ve gotten a taste of the grand vision. Question is, how are we going to get there?

As is the nature of any of the large-scale, complex issues we face, it can never be resolved by any one initiative or organisation in isolation. But instead, through the collaborative and joined-up effort of many parties.

On the enterprise side, with the help of Tesla, the automobile industry has been pushed to take significant strides in developing more effective electric vehicles. Demand is predicted to follow an exponential curve, whilst at the same time, renewable power stations are being installed all over the world.

Source: IEA, “Electric car deployment in selected countries, 2013-2018”

Renewable energy is continuing to become more competitive against fossil fuels, with solar and wind predicted to become consistently cheaper than non-renewables by 2020. Depending on whether we can crack the energy storage problem, this leaves hope for a shift away from fossil fuels within the next few decades, perhaps even sooner.

Governments have also clocked on to this problem, with initiatives around the world committed to reaching carbon neutrality. In Germany, at good times, renewable energy can now often account for over 50% of overall energy production, and some smaller countries such as Iceland and Denmark have already gone fully renewable. China has also committed to an ambitious 5-year plan to transition towards the ‘Third Industrial Revolution’.

However, this can only come into fruition if we all play a part in making this a reality.

Living in the UK, I’ve recently switched my energy supplier to one that focuses solely on renewable energy* (*affiliate link) – achieving significant cost savings in the process. I’ve found this very encouraging, and it’s proved to me that from a consumer’s point of view, switching to renewables has become not only a smart ecological choice, but also a smart financial one. I’ve also begun cutting out all meat and fish from my diet, and have been surprised at how smoothly you can make the transition.

Light at the End of the Tunnel?

Will all this be enough to correct our course in time? Sadly, it’s impossible to say. Rifkin acknowledges this journey won’t be easy. However, he believes that with the right compass, and determination for change, we may well be able to carve a path towards a more sustainable and prosperous future.

In the middle of these chaotic, divided times, perhaps it’s precisely these tangible, yet undeniably optimistic narratives of the future, that we deeply need. Those that rather than pit us against each other, unite us towards a larger, common goal.

Thank you for sharing this part of the journey with me. If reading this sparked any thoughts, I’d love to hear them.

Also, if you’re interested in delving more into Rifkin’s ideas, he’s written numerous books, and done countless talks, including this one which inspired this post.

The Emerging Network Society

Posted on October 11, 2019 by Bowen Feng network economy network society Web 3.0

Societies are shaped by our means of decision making, coordinating action, and allocating resources. With every major innovation in one of these areas, we witness a profound change in the structure of the society.

Just think of the impact of the invention of language, the invention of the printing press, or more recently, digital networks such as the internet on the very fabric of society.

Food vector created by macrovector – www.freepik.com

With the emergence of Web 3.0 and the Network Society, we find ourselves at the brink of yet another major societal re-structure.

Characteristics that define our world in the Network Society include hyperconnectivity, open access, decentralisation and data as the new raw material. This represents a radical change from the factors driving the industrial age, which saw the growth and dominance of large hierarchical organisations, optimised for the mass production and processing of physical goods.

In this article, we’ll dive into some of the characteristics of this new economy and how it will drastically change how we coordinate and gain access to what we deem most valuable.

Characteristics of the Network Society

1. Hyperconnectivity

2 Boy Sitting on Brown Floor While Using Their Smartphone Near Woman Siiting on Bench Using Smartphone during Daytime

Whilst we’ve been attracted to networks such as markets for a long time, the rise of the internet and digital communications has lead to a profound shift in how these networks can operate. Through ICT, the networks we can be part of and contribute to, are no longer constrained by physical limitations such as geography.

This means today a citizen can be simultaneously part of a network on a physical, local realm such as a local community, as well as multiple online digital networks without boundaries, all at the same time. This liberation of individuals away from networks of geographic constraint simply didn’t exist before.

In this new hyperconnected world, value within society and organisations increasingly comes from growing the number of connections being made within its boundary, and connectivity and communications becoming the defining feature of these organisations.

Think, for example, of the huge valuations of Airbnb and Uber. What actual value do they provided to their respective industries?

Their value did not come from expanding ownership of physical assets, such as building more hotels or purchasing more taxis, but instead by providing a means of connecting buyers and sellers within their network.

2. Open Access

Brass Ornate Vintage Key on Black Computer Keyboard

With the rapid rise and growth of these digital networks, we also experience a breaking down of organisational and social boundaries. The effect of this is an increasing ease of not only consuming within, but also contributing to such networks.

Prior to Airbnb, for example, the entry barriers to starting up an accommodation business were large. It typically required large amounts of upfront investment in physical assets, certifications etc. These relatively high barriers lead to a fairly centralised industry, with a few established brands taking a large share of the market.

How Airbnb revolutionised this, was by forming a decentralised network (OK, within their centralised network – but it’s still an improvement, more on this later) of accommodation seekers and providers. This lowered barriers to entry, and effectively split up the profits of the hospitality industry so that more people were able to benefit – both providers and consumers.

Similarly, the rise of Web 2.0 liberated the average internet user away from merely a passive consumer of information to also being a contributor. This radical shift is what paved the way for the success of Wikipedia and all the social media platforms we take for granted today.

3. Decentralisation

A consequence of this rapid increase in communications and connections between people, is that change now happens – fast. Large, traditional firms are feeling the pain of this, as their vertical hierarchical structures make them extremely slow to adapt and respond to environmental changes.

This type of volatile environment favours more flat, decentralised, networked organisations, as they tend to be adept at responding rapidly to change.

Let’s say that there’s a huge surge in demand for accommodation in a specific area. Due to the fixed, resource ownership model of hotels, they would have no way of responding to this surge, other than raising prices in their existing rooms. Supply is fixed in the short term. However Airbnb – due to its decentralised, open network of suppliers and buyers – would see a surge in quantity of accomodation up for rent, in response to this lucrative increase in demand. The structure of the Airbnb ‘organism’ is proven to be far more flexible and adaptive than its traditional counterpart.

Another argument for why network organisations will become the norm, lies in a Nobel prize winning idea by the economist Ronald Coase. Coase set out to answer the question, why do firms exist, as opposed to people simply transacting through the market?

Say you were looking to build a house. What would lead you contact a corporation to do the work for you, rather than individually contracting with a builder, plumber, electrician etc.?

The answer, Coase claims, lies in the cost of transacting with the market. This includes cost of searching and communicating with contractors, cost of writing and enforcing the contract, and time required to do all of these. When the cost of transacting with the market is high, this favours the formation of large organisations who create a more efficient ‘internal market’. If costs of transacting with the market go down, firms will tend to become more decentralised.

Taking this view, let’s consider the impact of the internet on these transaction costs.

When Coase first proposed his idea in 1937, it was certainly hard to imagine a world of large online spaces where freelancers and clients could easily find and connect with each other, through platforms such as UpWork or Fiverr. The internet has radically improved our ability to scour the market, communicate with candidates and write and enforce contracts. No wonder we’ve seen such a recent surge in the number of freelancers globally.

4. Networks & Data > Physical Resources

In the information age, data is the new oil.

Just a few decades ago, the list of most valuable corporations were dominated by large oil firms. Now, they’re dominated by technology companies – the likes of Facebook, Amazon, and of course, Google.

What do these new incumbents do? They don’t own or manufacture much in the way of physical resource. Instead, they are are champions of hoarding and processing consumer data.

This represents a realisation of what’s been called the Network Economy. And with this, we see value in the emerging economic system being generated primarily through the production and exchange information, rather than that of physical resources.

This will have a profound effect on the dominant organisational structures in this new economy. In the industrial age, the vertical, hierarchical structures optimised for managing and transforming physical resources reigned supreme. However, in the network economy, decentralised network organisations which are optimised for information processing, tend to be far better suited.

As you can see, this new paradigm largely favours platform models – such as Airbnb, Google or Facebook – over centralised, hierarchical models such as hotel chains.

In this new networked economy, goods and services will be increasingly traded on the basis of access, rather than ownership. So instead of owning your own CDs, you might choose to gain access to a music streaming service, such as Spotify. And rather than owning your own car, you gain access to a car sharing service, such as ZipCar.

People don’t really want products. They want to be connected to the services that allow them the context for living the quality of life they desire.

Looking Ahead & Final Thoughts

Throughout this article I’ve been using platform organisations such as Airbnb and Uber to illustrate the rise of these digital networks. However, as I’ve mentioned, we’ve seen they are far from ideal for society at large. Due to network effects and switching costs, the few platforms that have succeeded do so in a big way, and grow to become gigantic entities welding unsettling levels of wealth and power.

It appears we’re reaching the saturation point of a new stage, where rather than large resource-rich companies being the dominate players, a new type centralised corporation has emerged. An organisation whose primary goal is the curation and mediation of large digital networks. Where data acts as the new oil providing these entities with unprecedented levels of power and influence over society. Clearly, this new order comes with its own dark sides.

Fortunately, this is already being addressed with the emergence of Web 3.0 and the rise of peer-to-peer, institutional technologies such as blockchain. Many visionaries and pioneers of today, see the rise of centralised platforms as just one step towards a more truly decentralised and prosperous society.

I sure hope they’re right. But for now, let’s buckle in, and prepare for the ride.

. . . . .

Credit to the work of Systems Innovation and Manual Castells for inspiring this post.

This article is part one, of a three part series on exploring an emergent paradigm, built on the interactions surrounding 3 key phenomena: the Network Society, New Institutional Technologies, and Networked Organisations.

Why The World Needs Systems Thinking

Posted on September 30, 2019 by Bowen Feng holism problem solving systems thinking

We’ve all heard of the butterfly effect.

How the flapping of a butterfly’s wings can influence the direction of entire hurricanes.

This discovery feels at the same time profound and deeply terrifying. If something so small as a butterfly can have such a tremendous impact, what future effects and tragedies might my actions be manifesting today?

We’ll go about our days, carrying a narrow and short-sighted view of the world, enforced by our everyday demands and goals. However, occasionally we’ll come across encounters that open our eyes to the interconnected nature of the world, as well as just how complex and delicate it can be.

Systems thinking can be thought of as this way of viewing the world. One in which a particular focus is placed on the relationships between things, rather than just the things themselves.

A famous example from Russel Ackoff:

Imagine you’re building the world’s greatest car. You get all the world’s best cars into one room, and hire the world’s best engineers. For each of the car components, you get the engineers to select which one comes top. They might discover the Rolls-Royce engine is the best, and the Ferrari exhaust is the best, for example. Using this method for each of the other parts, you eventually create a list of all the best car parts in the world. You get the engineers to put all these components together and what do you get?

A useless, frankenstein monster. The parts just don’t fit. The Rolls-Royce engine just doesn’t work well with the Ferrari exhaust.

And suddenly it becomes clear. The properties of the car, lie not only in its individual components, but how they relate to each other and interoperate.

It’s important to realise that this idea relates not only to creating cars, but designing schools, making policy decisions, and even choosing pets…

If you’re looking for a brief overview of what systems thinking is about, I would highly recommend watching this short video:

The best overview of Systems Thinking I’ve come across

Holism vs. Reductionism

A key aspect within systems thinking is holism.

Holism comes from the greek word holos, meaning “whole”, and embodies the philosophical idea that systems (biological, cognitive, social etc.) and their properties should be viewed as wholes, and not just from a collection of parts.

“The whole is more than the sum of its parts” – Aristotle

Its polar opposite is reductionism – where we seek to understand a system by breaking it down into smaller and smaller pieces, then adding these together. In other words – “the whole is equal to the sum of its parts”.

Our western scientific worldview, which greatly influenced the industrial age, tends to be highly biased towards the right side of this spectrum, placing a lot of emphasis on analysis and detail. This bias can become embedded in the design of the systems that surround us, from factories to schools.

Taking schools as an example, this bias has contributed to the creation of rigid, hierarchical education systems, using heavily factory-guided principles like batch production process and standardises tests to determine quality. What has this lead to? A system that favours:

Conformity over diversity
Adherence to rules over autonomy and self directed learning
Memorisation over individual thinking
Individuality over collaboration
Success over the importance of failure and resilience

Part of the reason why this reductionist approach to designing our education system, has lead to so many undesired consequences, is that it’s the wrong approach for the wrong type of system – something I will discuss in the next section.

Finally, it’s important to stress that it’s not simply about universally favouring one approach over another, each has its advantages and disadvantages. Instead, a more useful way of viewing this is a constant balancing of both approaches, with a sensitivity to the specific problems and characteristics inherent in the system that you’re concerned with.

Image result for yin and yang — Holism & Reductionism – the Ying and Yang of Systems Thinking

Understanding the Problem, and it’s Systemic Context

The universe can be viewed as fundamentally comprised of systems within systems.

Your home is on a street consisting of a collection of other homes. Your street makes up a part of a city-system, which itself is part of a nation-system etc…

Whenever we’re trying to address certain kinds of problems, how effective our solutions turn out will depend largely on the approaches and tools that we use, and how compatible that approach is with the characteristics of that system.

For example, a hammer is a tool that can effectively solve the problem of needing sharp objects to remain in walls. However, if we try using it to fix a persistent headache, it might be less effective.

Image result for peter drucker it is more important to do the right thing — Thanks, Drucker.

3 Kinds of Systems

Broadly speaking, we find ourselves dealing with 3 types of systems:

Simple systems = few components, easy to predict cause and effect.
Complicated systems = lots of components, more variables but still possible to predict by analysing using cause and effect.
Complex systems = comprises networks of elements that are interconnected, autonomous and influence each other in unpredictable ways. This type of system is constantly in flux. Full understanding becomes impossible, and prediction too.

Your car key is simple. It has just a few components, and its properties are relatively easy to understand.

Your car is complicated. There are more parts that interact and more difficulty diagnosing problems. But an experienced mechanic would understand the function of each of the parts, be able to take it apart and put back together piece by piece, with the system operating very much like it did before.

Traffic is complex. You could drive up and down the same stretch of road hundreds of times, and the outcome each time would be different. There are different players that exist with their own autonomy, and I wouldn’t be able to predict how my journey might turn out with much precision.

For both simple and complicated systems, adopting a more reductionistic, analytical approach is most appropriate. As these systems are governed by cause and effect, breaking the system apart to understanding and ‘localising’ a problem tends to be highly effective.

However, when we’re dealing with complex systems such as social systems, or any living system in general, using a simple analytical approach towards understanding and designing solutions, tends to lead to lots of frustration and unintended consequences.

A recent example comes from our understanding of personal hygiene. This dimension of health relates to a sense of ‘cleanness’ and tends to involve us habitually zapping away all bacteria, other microorganisms, and dirt from the surface of our skin, using harsh detergents and chemicals. This attitude has fuelled the growth of a gigantic industry. However, supported by recent research surrounding the human microbiome, scientists have begun to discover that many of these microorganisms play an important role in our overall health. Considering more than half of the human body is comprised of non-human cells, suddenly zapping them all away might not seem like such a good idea after all.

By alternating between the reductionistic and holistic way of seeing, we begin to not only understand the functions of each of the human cells and other microorganisms in isolation, but also tie this understanding to appreciating their functions with the bodily ecosystem as a whole.

Our World, Today

When we take a look at some of the most pressing problems we face today – climate change, mass extinction, extreme global inequality – what do we notice? They’re all deeply complex and interconnected problems, involving the interplay of many different systems, and many different parties, each with their own distinct motivations and behaviours.

The magnitude and nature of these challenges call for creative, and holistic solutions that address these problems in systemic ways, not just short-term bandaids that temporarily mask the problem. Or as physicist, systems theorist and deep ecologist Fritjof Capra describes as:

Creating systems that nurture earth’s inherent ability to sustain life.

Some promising examples of such systemic solutions include community energy cooperatives, sustainable agriculture practices, as well as the emergence of ecological design, all of which I’ll delve further into in future blog posts.

As for me, in my own small way, I’ll aim to contribute towards this movement by continuing my involvement in, and support of, communities in the rich Capra Course Community, as well as potentially getting involved in Systems Innovation’s initiation of community collaboration spaces in London. And of course, alongside all of this will be my personal journey of discovery and learning within this emerging field, which I hope to openly share with others so they can hopefully learn and benefit too.

Who knows, maybe each of our little actions towards this can, like the flapping of a butterfly’s wings, leading to a ripple effects that span far wider than our own consciousness can understand…