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ContentslistsavailableatScienceDirect

Structural Change and Economic Dynamics

j o u r n al ho m e p age :w w w . e l s e v i e r . c o m / l o c a t e / s c e d

Service output, innovation and productivity: A time-based conceptual framework

Maria Savona

, W. Edward Steinmueller

aSPRU,ScienceandTechnologyPolicyResearch,UniversityofSussex,UK

bFacultyofEconomicsandSocialSciences,UniversityofLille1,France

a r t i c l e i n f o

Articlehistory:

ReceivedJanuary2013

ReceivedinrevisedformJune2013 AcceptedJune2013

Available online 19 July 2013

JELclassification:

L8 O33

Keywords:

Lancastercharacteristics-basedapproach Innovationinservices

E-services

Time-savingproductivity

a b s t r a c t

Thepaperaddstotheliteratureoninnovationandproductivityinservicesinathree- foldway.First,itextendsrecentliteratureattemptingtoreconceptualiseserviceoutputin termsofLancasteriancharacteristics.Ourfocusistheanalysisofinputsinvolvingtheuseof client(customer)timeinco-productionandinformationalinputs,whichmaybeproduced byeithertheserviceproviderortheclient.Inparticular,wefocusonthosefeaturesthat areassociatedwiththeuseofinformationandcommunicationtechnology(ICT)inser- vicedefinitionanddelivery.Second,itmodelsuserchoicesintermsofthetime-allocation betweenself-production,co-productionandpurchaseasinfluencedbycompetencesand time-savingpreferences,andsupplierchoicesasgovernedbyopportunitiestobenefitfrom informationaleconomies,costsavingarisingfromthestimulationofco-productionand productivityincreasingopportunitiesarisingfromtheuseofICT.Third,itusestheconcep- tualframeworktore-interpretthewell-knowntheoryofinnovationinservices,theBarras reverseproductcyclemodel.Implicationsofthemodelforproductivityarealsoconsid- ered.Finally,themodelisusedtointerpretUKexperiencewithe-governmentservice:

NHSDirectandDirect-Gov.Thepaperconcludeswitharesearchagendaforthescholarsof innovationinservices.

© 2013 The Authors. Published by Elsevier B.V. All rights reserved.

1. Introduction

Inorderforadvancestobemadeinthestudyofservice sectorinnovation,bettertheoreticalconceptionsofservice

‘production’processes, serviceoutputs,and service pro- ductivityareneeded.Theexistingliteraturehasexplored

夽 Thisisanopen-accessarticledistributedunderthetermsofthe CreativeCommonsAttributionLicense,whichpermitsunrestricteduse, distribution,and reproductioninany medium,provided theoriginal authorandsourcearecredited.

夽夽 ForthcomingontheSpecialIssueofStructuralChangeandEconomic Dynamicson,Innovationinpublicservices.Advancesintheoryandempirical analyses.

∗ Corresponding authorat:SPRU– ScienceandTechnologyPolicy Research,JubileeBuilding,UniversityofSussex,BrightonBN19SL,UK.

Tel.:+44(0)1273877139.

E-mailaddress:M.Savona@sussex.ac.uk(M.Savona).

severaldifferentdirectionsdepartingfromAdamSmith’s dismissiveviewoftheseissues.³

Smith’s view is entangled with the classical distinc- tionbetweenproductiveandunproductivelabour,which persisted untiltheneo-classicalperiodduringwhichthe labourtheoryofvaluewaslargelyextinguished–largely, butnotentirely.Theoriesofvalueanddefinitionofoutput areintrinsicallyrelated.Utilitytheoryofvalueisinprin- ciplebetterequipped thanthe labour theoryofvalue to explainvaluecreationwhentheoutputoftheproduction processisimmaterial.Akeyfeatureofthelabourtheory

3 “Unproductivelabourdoesnotfixorrealiseitselfinanyparticular subjectorvendiblecommodity.Hisservicesgenerallyperishinthevery instantoftheirperformance,andseldomleaveanytraceofvaluebehind them,forwhichanequalquantityofservicescouldafterwardsbepro- cured”(Smith,1960[1776]:BookII,firstpara.ofCh.III).

0954-349X/$–seefrontmatter © 2013 The Authors. Published by Elsevier B.V. All rights reserved.

http://dx.doi.org/10.1016/j.strueco.2013.06.006

ofvalue,whichlingersistheconceptualisationofnational incomeandproductaccountsasarecordofphysicaloutput –theexpansionorcontractionoftheproductionofbales ofcottonortonnesofsteelovertime.

Manyofthemis-measurementissuesandbiaseshigh- lightedbytheliteratureontheeconomicsofservicesand innovationinservices⁴ overthepastdecades stemfrom thelack ofaproper definitionofserviceoutputs,whose immaterialitymakes itdifficulttofindaunitof account toaidinseparatingmonetaryvaluefromthe‘quantity’of servicesproduced.⁵Thishasaffectedconceptualisationand measurementofproductivityandhashamperedaproper reflectionontheeconomiceffectsoftechnologicalinnova- tioninservices.

Anewfoundationofthetheoryofvalue,whichisbet- terabletoaccountfortheimmaterialityofoutputandthe mechanismsbehindproductivityimprovements,isdesir- able.Apromisingavenueinthisdirectionwouldbuildon Georgescu-Roegen’stime-basedrepresentationofproduc- tionprocesses. Thisis moreambitious taskthancarried outhere⁶; insteadwetake a substantialstep towards a redefinitionofserviceoutputandproductivityandarecon- ceptualisation of innovation in services – based on an extensionofLancasterianconsumertheory.

Throughoutthispaperwewillbeusingtheterminno- vationtoindicateimplementnovelty,whichincludesthe morecommondefinitionofinnovationascommercialised invention,butalsoextendsthisdefinitiontoorganisational changeandtonoveltiesininputs,processesandoutcomes thatareonlyindirectlyandimplicitlymonetisedduetothe valueoftime.

TherearetwopracticalreasonsforpursuingaLancas- terianapproach.First,itmaybeobservedthat aspecific immaterial feature of many services that is growing in importanceistheirinformationcontent.For example,in retailing,growinginformationonthequalitiesofphysical goodsincludingtheirprovenance,composition,andappli- cation,as wellas otherusers’ experiencehas important effectsonconsumerchoice.⁷Second,itisanobvious,but nonethelessstrikingfeatureofcontemporarylife,thatthe technologiesforinformationdistribution,Internetaccess andsearchservicesaswellasthe devicesusedtoaccess these services are ubiquitous and are being used more intensivelyovertime.Hence,ourpremiseisthatthepro- visionofinformationandthemeanstoaccessitshould,in

4 AliteratureinwhichGriliches(1992)iscentral,seealsoGalloujand Savona(2009)forareviewoftheseissues.

5 Traditionally,theissueofserviceproductioncontinuestoreflectthe generalisationthatservicesareproducedbylabourintensiveprocesses withfewopportunitiesforproductivityimprovementandfeweroppor- tunitiesforachievingeconomiesofscale.

6 Wedonotdealherewiththerecentrevisionsofproductiontheory linkedtotimerepresentation(forarecentandexhaustivereview,see Vittucci-Marzetti,2013).

7 Forexample,itis blurringthe boundariesbetween searchgoods (definedasgoodswhosequalitiesarecommonknowledge)andexpe- riencegoods(thosegoodsrequiringexperiencetoascertainqualities), adevelopmentthatmayfacilitateproductdifferentiation(Klein,1998,

#1332),(Huangetal.,2009,#1331).However,itisnotsimplythecase thatmoreinformationisbetter.Infoodretailing,forexample,(Grunert, 2005,#1333)concludes‘moreinformationmaynotonlybewithouteffect, butmayinsomecasesincreaseconfusionandconsumerconcerns.’

acontemporarycontext,becentralfeaturesinourunder- standingofhowserviceoutputsaredefinedandmeasured.

Inmoretheoreticalterms,theinformationalandinforma- tionaccesscharacteristicsofservices(andgoods)notonly needtobetakenintoaccount,butameansforexamining the substitution, complementarity, and quality implica- tionsofthesecharacteristicsisneeded.

Toaddresstheseissues,weexaminethefoundationsof serviceproductionalongthelinessuggestedbyLancaster (1966a,b)andbyGalloujandWeinstein(1997)andGallouj and Savona (2009) who reprise and extend the Lan- casterian approach to defining output.According to the characteristics-basedapproachinitsoriginalformulation (Lancaster,1966a,b)andinthosewhichfollowedSaviotti andMetcalfe(1984),GalloujandWeinstein(1997),Gadrey (2000); De Vries(2006) and Galloujand Savona (2009), outputisrepresentedbyasetofvectorsofcharacteristics andcompetences,whicharelinkedtoeachother.Vectors ofcharacteristicsincludetechnicalones,serviceones(or, interestingly, ‘finalusers’ value’)and competences,both thoseofsuppliersandusers.

Thepresenceofusers’characteristicsintherepresenta- tionofserviceproductservesthepurposeofovercoming one ofthe major shortcomings ofthe existingtheory of service‘production’andinnovation,thatistheseparation and dichotomisation of production and consumption. In fact,many,ifnotmost,servicesrelyuponco-production betweenproducersandusers(i.e.co-terminalitybetween deliveryandconsumption(forreviews,seeDeVries(2006) andGalloujandSavona(2009,2010).Moreover,theeco- nomic significance of services most arises from their being multi-attribute. The significance of co-production andtheinteractionsbetweenco-productionandthemulti- attributenatureofmost servicessuggeststheneedfora differentapproachtoassessingthe‘supply’and‘demand’of services,thantreatingthemasordinarycommoditieswith aprice-qualityofferingthattriggersapurchasedepending upon consumertastesand incomes.This isof particular significanceforthoseservicesthatentailinformationasan importantattribute,whereco-productioninvolvesinfor- mation exchange and where there are substitution and complementarity relationshipsbetween the information provided by suppliers or users or both in the course of choosinganddeliveringservices.Inotherwords,defining attributesofmany(butnotall)servicesareinformational.

TheLancasterianframeworkthereforeoffersaninter- estingconceptualplatform,whichallowsadvanceinboth the definition of service output and the analysis of the effectsoftechnicalchange.Itallowsincludingtheroleof customersintheinnovationprocess–thislatterhavingbeen claimedtobemoreimportantinservicesthaninothersec- tors,againduetotheco-terminalitybetweendeliveryand consumption.Also,andmostimportantlyforthepurpose ofthispaper,lookingatanoutputintermsofcharacteristics andcompetencesallowsusgoingbeyondthemarketand non-marketcontextsinwhichoutputsmaybedeliveredto consumers,andextensionoftheconceptualframeworkto thedomainofpublicservices.

For this purpose, we examine howsome of the fea- tures of production processes are illustrated in the UK e-governmentcontextusingtwomajoronlinesites–NHS

Directand DirectGov.Bothof theseserviceofferingsare major portals for citizen access to government services whichexhibittheLancasterianelementsdiscussedinthis paperaswellasthefeaturesofincrementalandcombinato- rialinnovationillustratedinGalloujandWeinstein(1997) orDeVries(2006,#1181)andmodularisationasdeveloped by Sundbo(1994).The resultsareanalyticalratherthan quantitativeestimatesofoutputorproductivity.Inpartic- ular,wewillconsiderhowthechoiceofsuppliedservice characteristicsisreflectedinthreefeaturesoftheservice production/consumptionrelationship:(1) co-production, (2)usercapabilities,and(3)theexpansiblenatureofinfor- mation.

Inaddition,weindicatehowtheBarrasreverseprod- uct cycle(Barras, 1986, 1990), a model often employed inassessingtechnologicalchangeinservices,maycreate a misleading guide formanagerial actionin the case of e-governmentservicesandaseriesofmis-alignments in policy.Thislineofargumentisbasedontheobservation that many e-government software applications embody Barras’assumptionsanddeliveraparticular‘solution’that willmeetaparticularsetofuserneeds.Wethenconsider howsolutionsderivedfromtheBarrasmodelmayresultin shortcomingsinthesupplyandutilisationofservices.

Theremainingofthepaperisstructuredasfollows:we reprise(Section 2)and extend (Section 3)the Lancaste- rianmodelofoutputcharacteristics.Ourmodelofservice innovation considers how productivity in services may increaseopportunitiesinservicesprovisionthroughinfor- matisationanddifferentdegreesofco-production.Section 4locatesthecontributionofthepresentpaperintermsof conceptualadvancewithrespecttoBarras’ReverseProd- uctCycle model. Section5brieflydraws implications in terms ofconceptualisationand measurementofproduc- tivityincreaseslinkedtotime-savinginnovation.Section6 appliesourconceptualframeworktothedomainofpub- licservicesand brieflydiscusses examplesof innovative developmentoftwoe-governmentservices,NHSdirectand DirectGov.Section7concludes.

2. TheLancastermodelandaproposedextensions Lancaster’s definition of product, developed from Gorman(1959)andoriginallyconceivedwithintheframe- work of consumer theory (Lancaster,1966a,b) has been reprisedbySaviottiandMetcalfe(1984)formanufactured productsandadaptedbyGalloujandWeinstein(1997)to account forintangibleproducts (seeGalloujand Savona, 2009,2010forareview).

Briefly,asillustratedinFig.1(fromGalloujandSavona, 2010),aproduct/servicemaybe‘decomposed’inaseries ofvectorsofcharacteristics.Bothservicesupplierandcon- sumerarerepresentedhere,eachofthemcontributingto the output representation by embeddingboth technical andcompetencecharacteristics.

Thefinal(utility)characteristicsarederivedfrom the interactionofbothclients’andproviders’technicalchar- acteristics and from theinteractions betweenclient and supplier competences.The aimof this representation is to highlightthe associationbetween combined external characteristics (i.e. the technical ones) and the internal ones (i.e.the competences) in definingthe final output characteristics.However,inthisversion,theLancasterian representationoftheserviceasavectorof‘input’and‘final’

characteristicsisblindwithrespecttothedegreeandthe choicesofco-productionbetweenconsumerandproducer.

This omissionisparticularly ofconcern when the infor- mationattributesofaserviceareco-producedbecauseof the substitution and complementarityrelationshipsthat arepossible. Theserepresentthe innovationpotentialof servicedelivery.Forexample,itmaybepossibletoemploy userinformationalinputstosimplifythedeliveryofaser- viceatconsiderablesavingtotheproducer.Theproducer maythenpassonallorpartofthesesavingstotheclient, perhaps dependingonthecompetitiveconditionsof the market inwhich theservice isoffered. Sincethe princi- palcostoftheco-productionoftheinformationattributes involvesare-allocationofthetimeemployedindefining anddeliveringtheservicebetweenproducerandclient,it

Fig.1. Source:GalloujandSavona(2010)–adaptedfromGalloujandWeinstein(1997)andDeVries(2006).

isnecessarytoextendtheattributesandcapabilitiesframe- worktoincludethistemporalcomponent.

We propose here an adaptation of the Lancaste- rian approach to (service) output representation. This consistsof introducingtwo furthervectors of character- istics, related to both provider and consumer. The new vectors allow us to represent the choice/trade-off that consumer and supplier face among different degrees of co-production;further,itallowsustoexplicitlyintroduce technicalchangeand itseffects onboth sidesof product representation.Thesearethetimeandinformationvectors.

Aswillbedetailedbelow,the timevectorserves asa conceptualbridgebetween the combination ofuser and supplier’scompetencesandtheextentofco-productionto getthefinalproduct’scharacteristics.⁸Dependingon(i)the degreeofhercompetences,(ii)hertastes,(iii)thedegree ofaccesstotechnicalandinformationalsupport,(iv)her time-savingpreferences,theuserwillchoosewhetheror nottocomplementhercompetenceswiththoseofthesup- pliertoco-producetheservice.Thechoiceofco-producing will depend therefore on the amount of time the co- productionwillsaveherwithrespecttothetwo“extremes”

ofthecontinuum,i.e.choosingbetweenanexclusiveself- production–relyingentirelyonherowncompetences–or atotaloutsourcingoftheservice–i.e.relyingentirelyon thesupplier’scompetences.Thevectorsoftimeandinfor- mationcharacteristicsembeddedinaparticularservice– wheretheinformationvectorcoupleswiththe (generic) technicalcharacteristicsofthe service⁹–servetodefine theamountoftimeuniquelyassociatedtooneparticular consumer,whichisembeddedinherowndegreeofcom- petences,andtheuniquedegreeofco-productionchosen bytheconsumer.

Thisprocessismirroredinthechoicesavailabletothe servicesupplier.Theextenttowhichtheserviceprovider allowsforco-productionwilldependon(i)thedegreeofhis competences,(ii)the(sunk)costsoftechnicalandinforma- tionalcharacteristicsand(iii)thetime-savingimpactofthe co-production,whichinturnwilldependonthecustomer’s competences.

Atthisstageweareawarethatthetimecharacteristics oftheservicemightwellbe‘embodied’inthecompetences and production inputsrepresented by the technical and informationalcontentoftheservice.However,ourintentis preciselytounpackthetimecontentassociatedtoeachsin- gleconsumerandsuppliercharacteristicstohighlightthat thechoiceprocess–onbothsides–substantiallydepends onthetime-savingresultsoftheco-production.Thelevel of co-productionis uniqueto eachconsumer and isthe

8 Separatingouttimefromotherattributesisanarbitrarychoiceinthe representationofthemodel,whichservestohighlighttheroleoftime expendedbyproducersandclients.Asinothermodelsofproductivity improvinginnovation,weneglectthepossibleexternalitiesandadjust- mentcostsinfavourofanarrowercomparativestaticsapproach.Itis assumedthattheexternalitiesandadjustmentcostsofinnovationare eitherresolvedthroughtheannealingprocessesofcompetitionorare internalisedtotheactormakingthechange(andhenceaccountedofin thedecisiontomaketheinnovation).

9 Wereprise(GalloujandWeinstein,1997)andfocusontheinforma- tionalcapitalinvolvedinservicedelivery.

resultof a‘convergence’phenomenon between provider andconsumertime-savingpreferences.

Timeisthereforeenteringthecharacteristics-basedser- vicerepresentationasamulti-dimensionalelement:asa flow-productioninput(alaGeorgescu-Rogen,seeVittucci- Marzetti,2013foracriticalreview);asa‘stock’production inputforcompetence-building purposes;asa constraint which shapes bothproducer and consumer time-saving preferences.

ThemodifiedLancasterianrepresentationoftheservice outputproposedhereallowstheexaminationofinnova- tion in services as a time-saving process resulting from the(changingdegreeof)co-productionofserviceprovider and consumer. We argue (and detail in Section 4) that this modelgoes beyondBarras’reverseproduct cyclein explainingthefocusofinnovativeeffort.Werelatethisto empiricalexamplesinthedomainofpublicservices.

3. Atime-basedmodelofinnovationinservices

3.1. Baselinemodelofserviceconsumerchoice

Webeginwithabaselinemodelthatincorporatesthe possibilityofco-productionandalsomakesclearthenature ofthetrade-offbetweendifferentlevelsofself-production andtheroleofservicesuppliers.Wethenextendthebase- linemodeltoamulti-attributeservicewheresomeofthe attributesarebettersuitedtoself-productionandothers toserviceout-sourcingtothesupplier.

Wedefineanarbitraryserviceasunitofconsumption forwhichan individualconsumeriswillingtoallocatea vectoroftimeandmoney.Giventheprosaicbuteconomi- callyaccurateobservationthat‘timeismoney’(aconsumer maygeneratemoneythroughtheuseoftimedevotedto wageincometosubstitutefortimeinserviceproduction,¹⁰ thevectoroftimeandmoneycanbecollapsedtoasingle vectoroftime.¹¹Allocationoftimeovertheplanninghori- zonoftheservice‘consumer’canbeportrayedasavectorof allocationsoftimeoverintervals,eachofwhichisbounded bythelengthoftheintervalchosen.Hence:

D_ij=U∗(T) where:

D_ijistheamountofdemanded¹²servicejbyconsumer iresultingfromautilitymaximisingchoiceoftimealloca- tion,U^*,whichisinfluencedbytheuser’scapabilities.

T=t(k), k=0, ..., H, H being an individual’s planning horizon.

TheelementsofT,t(k)includetheamountoftimeallo- catedfor:

10 Excludedfromthecurrentproblemsettingarepriorendowmentsof monetarywealththatcouldbeappliedtothepurchaseofservices.

11 Theproblemindoingthisisthatthiscollapseerasesthe‘objectivity’of time;differentconsumerswillhavedifferentvaluationoftimeandhence differentutilitiesassociatedwithtimesaving.

12 Asmentionedabove,consumerschoosetoself-produceentirely(in thisrespecttheysupplytheirownservice),topurchaseentirely(they demandservicestothesupplier)ortovariouslyco-produce.Self-andco- production,togetherwiththepurchasingcase,alldependontheamount of(finite)timeallocatedtowork/leisure.

a) the‘consumption’ofaservice b)theco-productionoftheservice,and

c)theearningofwageincometopayforpurchasedservice.

Summingtheseindividualdemandsforpurchasedser- viceswillcreateamarketdemandforthem,i.e.D_j=



iD_ij. The price of services, which influences the trade-off betweentheconsumptionoftheserviceandalsotheextent ofco-production, isalatentvariableinthis formulation.

Because each configuration of possible service offerings involvesdifferent possible responses byusers, it willbe extraordinarily difficult either for this market to be in equilibriumorforproducerstooptimisetheirselectionof servicecharacteristics(moreonthislater).Ineffect,each suppliermustchoose aportfolioofserviceofferings and discoverthepricethatthemarketwillbearfortheseser- vices,essentiallydiscovering‘willingnesstopay’bymaking offersandgaugingtheresponsetothem.Inasimplifiedway wecanportrayeachthese‘offerings’asinvolvingaconstant returnstoscaleproductionprocess.

S_ij=Q_ij(K,L)

Thesummationoverjwillbethetotalportfolioofservices offeredbytheservicesupplierfirmi.Holdingjfixed the totalsupplyofservicesofthattypewillbeasummation overi.

Viewed in this way, the primary factor differentiat- ingservicesisdemandresponse.Inthissimplifiedmodel, productionis takentobeunspecialised,reflected bynot indexingcapital(K) andlabour(L).Ingeneralhowevera proportional increase in S_ij will require a proportionate increaseinKandL(theconstantreturnsfeature).Whether aparticularfirmwillbeabletoearnpositiveprofitswill dependuponthetakeupoftheirserviceofferingsatthe price at which they are offered which will depend on individualfirmproductivity (whichwillalsoreflecttheir capabilities)andthatoftheirrivals.Inotherwordstherela- tionbetweenD_jandS_i isnoteasilymediatedbyaprice, primarily because of the multitude of possible changes inconsumerandproducercapabilities(includingchanges inthesecapabilitiesresultingfromexperience),varietyof competitivealternatives,anduserpreferencesforalloca- tionoftime.

Thisbaselinemodelservesthelimitedobjectiveofhigh- lightingthetrade-offconfrontingtheuserwithregardto devotingthetimeneededinwagelabourtopayforaser- viceratherthanself-producingitandthecomplexitiesthis creates for suppliers. Many possible allocations of time canbeimagined,someofwhichinvolvezeroacquisition ofservicesbecauseitistimesavingfortheconsumerto self-produceratherthanpurchaseaservice.Othersinvolve allocatingpositiveamountsoftimetoboththewagelabour neededtopayfortheserviceandtotimeengagedinco- producingtheservice.Eachservicemayinvolvedifferent levelsoftimeinco-productionandtheselevelsmayalso beinfluencedbyconsumercapabilities(i.e.co-production timewillvary accordingtheseconsumercapabilities). In general, it may be expectedthat the purchase of a ser- vice will always involve a positive amount of time in

‘co-production’,ifnothingelse,becausetheconsumption oftheservicewilltaketime.¹³

Thus,forasimpleexample,apersonmayhaveahaircut atabarberorhairstylistwhichwillalwaysinvolveapos- itiveamountofusertimeinput–onepartgeneratingthe moneytopayforitandasmallconsumptionelementfor receivingthehaircut.¹⁴Itisalsopossibleforanindividualto self-producethehaircut,i.e.tosubstitutethetimeneeded inwageworktopayforthehaircutwithatimeneededto self-produceandconsumethehaircut.Itmayalsobepossi- blefortheindividualtoco-producepartoftheservicebya finaltrimmingorshapingofthehaircuttodesireddetail.Of course,thequalityofthesealternativesmaybedifferent– however,thisisalsomostlyamatteroftimeandconsumer capabilities.Givensufficienttime(andingenuity),anindi- vidualcanbeassumedtobeabletoreplicatethequality ofthepurchasedservicewithownproductionor,alterna- tively,theindividualmaybartertheirtimewithsomeone else’stoengageinreciprocal‘self’-production.

Thissimplemodeloffersverylittlescopefordecision makingbythesupplier.Becauseofthecomplexityofthe consumerchoice,itwillbedifficulttoanticipateresponse tothecombinationofserviceattributesandpriceandthe supplier must essentially iteratively experiment to dis- coveraviablemarketposition.

Whilstinternalisingthepriceoftheserviceasachoice of timeallocationisunconventional,it servesthe useful purposeofmakingthetrade-offbetweenserviceconsump- tionchoicesandtimeallocationmoredirectlycomparable.

Italsoestablishesthebasisfortheextensionofferedinthe nextsection,whichintroducesthecompletemodel.

3.2. Thecompletemodel

Whilst the previous section focussed solely on the consumer choice problem regarding alternative service provisions, the primary aimof this paper is toexamine servicesupplyfrom theproducerviewpoint.Howmight producers achieve better(and hence more desired) and moreproductive(andhencelessexpensivetoproduce)ser- viceofferings?Ifwetakeintoaccountco-production,itis possiblethataservicemightachievebothaimsbydesignof thosefeaturesthatelicitthedesiredlevelofco-production.

Inotherwords,co-productioncanbeconsideredasasav- ingfromthecostofanentirelysupplierdeliveredservice andhenceanetbenefit.Co-productionmayallowtheuser to economise on wage labour in the production of the service(ineffect,sharingthereductionin costsofdeliv- eringtheservicewiththeproducer)andmaysupportan

13 Itissomewhatdifficulttoconstructexamplesofservicesthatrequire zerotimetoconsume.However,thepurchaseofsomeservicesinvolves

‘contingent’allocationoftime,i.e.itisonlyundercertainconditionsthat timeisrequiredtoconsumetheservice.Anexampleisinsurance.Once signedup,theinsuredconsumerwillonlyhavetoallocatetimetopaying fortheserviceunlessaclaimismade(andinthespecialcaseoflifeinsur- ance,co-productionbytheinsuredcustomerwillbeneitherpossiblenor necessary).

14 Aco-productionelementforhaircuts(e.g.sweepingup)isnotincon- ceivable,butisnotcommonpractice.Thepossibilityofchangingthe natureoftheservicetoallowagreaterelementofco-productioniscon- sideredfurtherbelow.

improvementinthequalityofthedeliveredservice(e.g.

self-serviceATMsavailable7/24versusbankclerksavail- ableonlyduringbankerhours).

Demand

D_j=U^∗(TCP,TCB,TW)

where D_j is the demand for services expressed as the utilitymaximising allocationof the timedevoted toco- productionT_CP,creatingcapabilitiesT_CB,andwagelabour T_W.

Inotherwords,theacquisitionofservicesistakentobe theresultofautilitymaximisingchoiceoftimeallocation asinthesimplemodel,withtheadditionoftimeusedto constructcapabilities. In thisversion, wehavecollapsed thetimeneededtoconsumetheserviceasacomponent ofT_CP(theco-productiontime).

Supply

Thesupplier faces the sameproblem as in the base- linemodelofnotbeingabletodeterminehowcustomers willrespondtospecificserviceattributes.However,inthis completemodel,wewishtoconsidertwotypesofchoice thatthesuppliermightmake:the‘co-productionpotential’

andthedegreeof‘informatisation’ofeachpossibleservice offering.

Torepresentthesepossibilitieswewillsegregatefactor inputsbythesetwofactssothatthefirmiisabletoproduce acollectionofservicesjwithdifferentlevelsofthesetwo factors

S_ij=Q_ij(KI,KCP,KO,LI,LCP,LO)

wherethe subscriptsrepresentthelevelsofinputsasso- ciatedwiththeinformational(I),co-production(CP),and other(O)characteristicsoftheservice.Theideahereisthat:

∂S_ij

∂KI > ∂S_ij

∂KCP > ∂S_ij

∂KO

and ∂S_ij

∂LI > ∂S_ij

∂LCP > ∂S_ij

∂LO ∀i,j Thisis astrong assumption. However,it is the claim thatinformationalcapital(andlabour)hashighermarginal product than capital (and labour) associated with co- production and the marginal product of capital (and labour)associatedwithco-productionishigherthanthat associated with other or conventional service delivery.

Informationalcapitalmayalsoinfluencethemarginalpro- ductivityofco-production.However,thisproblemcanbe addressedthroughdefinition,informationalcapitalbeing partially a ‘pure’ contribution to supplier and another portion of informational capital being allocated to co- productioncapital.

Inotherwords, thedesign ofaservicebearswith an implicitallocationofcapitalandlabourinputs,whichcan berelatedtotheextentofinformatisationprovidedbythe supplierandtheefforttoelicitco-productionbytheuser.

Whethereitherofthesewillbesuccessfulinstimulating demandfortheserviceorwhethertheuserwilltakeup theco-productionopportunitiesofferedis,fromthesup- plier’sviewpoint,uncertain. However,in orderforthese

possibilitiestoexist,allocationsmustbemadetothemand thestrongassumptionregardingmarginalproductsasso- ciatedwitheach ofthefactorsisthat amountofservice offeredismoreresponsivetoinvestmentsrelated toco- productionandinformatisationthanitistoconventional inputsofcapitalandlabour.

Ceterisparibus,thismeansthatsuppliershaveanincen- tivetomovefromconventionalservicedelivery(i.e.where KI=KCP=LI=LCP=0) to service delivery involvingco- productionandinformatisation(i.e.positivevaluesofthese variables)assuming(a)thatthecostsofaunitofeachof thesetypesofcapitalis commensurateand(b)that ser- viceofferingsinvolvingco-productionandinformatisation arenearsubstitutesforthoseinvolvingmoreconventional servicedeliveryinputs.¹⁵

Obviously,thiscannotbedoneforallservices–provid- inginformationabouthaircutsdoesnothelpverymuchin actuallyaccomplishingthatparticularservice.

3.3. Featuresofthetime-basedmodelwithinLancaster’s framework

A feature of this model that is more specific to e- services(especiallythose providedby government)isin themethodofservicedelivery.E-servicesinvolveamixture ofinformationprovision,supportfortransactions(includ- ingqueries)andotherinteractions(bothinterpersonaland automated). Theextent towhich theseelementscanbe providedusingautomatedinformationsystemsasopposed todirecthumaninterventionwillbeanimportantinflu- enceontheproductivityofservicedelivery.Ingeneral,the greaterthelevelofhumanintervention,themoreservice deliverywillbesubjecttoconstantreturnstoscale.Con- versely,thegreatertheautomation,themoreopportunities there will be for increasing returns to scale. The differ- ence arisesfrom the basicfeaturesof informationas an economicgood–theverylowcostsofinformationrepro- duction(informationexpansibility)and the potentialfor lowcostsinautomatedinformationretrieval(information processingeconomies)createapotentialforeconomiesof scale.

Of course, both of theseopportunities – for improv- ingtheattractivenessofservicesandforreapingbenefits ofautomatedsystems–willalsodependuponproducer andcustomercapabilities.Itwouldbesomewhatblaséto assertthattherearealwaysopportunitiestocreatemore desired co-production and more efficient ‘informatised’

(taking advantageofincreasing returnstoscaleininfor- mationdistributionandprocessing)e-services.Capabilities introduceaninvestmentelementforbothconsumersand producers.Fromtheviewpointofconsumers,thiscanbe seenasafurtherallocationoftheirtime.Fromthesupplier viewpoint,this can beviewedas astandard investment probleminintangiblecapital.

15 Thislatterassumptionisalsoastrongassumption.However,ifitis notjustified,thenattemptstooffersuchserviceswillnotbetakenup andhencewillnotbeofferedinsomefutureiterationofthepackageof offerings.

Therearesomeproblematicelementsofthismodel.It isasatisficingratherthananequilibriummodel.Although theproducercanperceiveopportunitiestoimprovepro- ductivity(reducecosts),thereisuncertaintysurrounding thetakeupofserviceofferingsinvolvinghigherlevelsof informatisation and co-production because of the com- plexities of userresponse. We partiallygloss overthese problemsbyusingtheassumptionthatsomeservices,hav- ingthesefeatures(informatisationandco-production),can beproducedthatareclosesubstitutesforservicesdeliv- ered more conventionally and hence, because they can beproducedmorecheaply,the producer’sincentivesare clear andunidirectional (ceterisparibus, demandcurves maystillbeassumedtohavedownwardslopes).Nonethe- less,everyuserislikelytohavedifferentcapabilitiesand preferenceswithregardtobothco-productionandinfor- matisationandthusproducershavetosearchratherblindly for characteristics that elicit greater customer response (from whichcompetitive advantage through growthare possiblebecauseoftheamplifyingfeatureofinformation economies).

Despite this analytical shortcoming, this model has somerealisticfeatures.Servicesuppliersoftenbeginwith amarketinwhichtheyhavesomeexperience,fromwhich they try to enlarge their client base and, in so doing, adjusttheir service offering. This processoften involves considering ways to deliver services more efficiently suchasinvestmentinintangibleresources(databasesfor customer relations management or customised service offerings)orwaystoreducecostsofservicedelivery(by dis-intermediatingsome of the labour they employ and encouragingclientstoco-producetheservice).

This perspective on the nature of service provision isolatestwoimportantfeaturesinwhichitisfairlystraight- forward tosee howsupplied servicecharacteristics and userpreferencesinteract.However,theseelementsarenot the onlyones that mightbe consideredwithin asimilar framework.Forexample,itispossibletofurtherconsider theprocessofco-productionasacollectiveactivityrather thanexclusivelyaccomplishedbyindividualsandthrough this mechanism to createfurther opportunities for ser- viceproviderstofacilitatingandintermediatingservices.¹⁶ Similarly,itispossibletoconceiveofamorearticulatedver- ticalstructureofserviceproductioninwhichelementsof thefinalpackagedserviceareproducedbymorespecialised suppliers.Theseadditionalextensions,notdevelopedfur- therhereasamatteroftheory,suggestfurtherproblems ofco-ordinationandcommonpurpose.

Insummary,in adapting theLancasterian framework tothenatureofserviceproductionandconsumptionwe recognise,but treatasa backgroundissue,the idea that acommodity isa multi-attributeartefactin whichindi- vidualconsumershavecomplexpreferencesforindividual characteristicsandbundlesofcharacteristics.Weempha- sise,however, the relevance of a Lancasterian theory of productionin whichelementsof commoninfrastructure (information)andco-productionaswellasthepossibilities

16 Thisisonewaytointerpretthegrowingroleofvirtualcommunities andsocialnetworkinfrastructureproviders.

forcollectiveproductionand specialisedserviceproduc- tionhelptoexplaintheevolutionofservicemarketsthat allowthesefeaturesandprovidesnewtoolstoconceptu- aliseinnovationinservices.

Wenowturnfromthisabstractdiscussiontoaseries of more applied observations. First, we consider pro- ducer opportunities for expanding informatisation and co-production.TheninSection4weexaminehowthisthe- orycanberelatedtoBarras’s(1986)theoryofthereverse product cycle of service innovation in order to suggest howthis modelencompasseskey featuresofthe theory wehavedevelopedwhilstalsomissingimportantimpli- cationsand alternatives. Thisfollowedin Section5 bya shortexaminationofthe implicationsofthis framework forexaminingserviceproductivityandinSection6byvery concreteobservationsaboutthenatureoftwoleadingUK e-governmentservices.

3.3.1. Opportunitiestoexpandinformatisation

The uncertainties regarding demand make it diffi- cult todisentanglewhethergreater productivityfollows fromhigherlevelsofinformationorco-production-related capital (and labour), particularly for individual service providers.Ontheonehand,foraparticularsupplier,infor- matisationmayproveveryprofitableifsubstantialdemand arisesforsuchaservicebecausethe intangibleinforma- tionalcapitalallowsaverylowmarginalcostofservingan additionalclient(oratleasttheabsenceofaneedtoexpand labour inputsproportionately withincreasesin service).

Ontheotherhand,ifthelargefixedcostsofcreatingthis intangiblecapitalarenotbornbyasubstantialclientbase, i.e.thereisnotastrongtake-upoftheseservices,itwillnot bepossibletorecoverthemandtheserviceproviderwill earnaloss.Thus,anyparticularsuppliermaychooseinfor- mationalcapitalinvestmentsthatareactuallyinimicalto theirsuccessratherthanasourceofadvantage.

Among the choices that service suppliers have for investmentsinintangible(informational)capital,thereare several different possibilities that may be described in generic terms.Eachof thesepossibilitiesmaybeunder- stood as innovations in relation to conventional service deliverymethods.Weconsiderthreeofthese.First,there isthepossibilityofcreatingacustomisedorone-offsystem designedspecificallytothecharacteristicsandroutinesof theservicesupplierorganisation.Thistypeofinvestment, if successful,willprovide a highly differentiatedservice offering which customers regard as offering substantial improvement inthe quality of the servicewhilst simul- taneously reducing the labour necessary to service the expandingclientbase.Therearetworisksassociatedwith thischoice–oneisthatsuchcustomisedinformationalcap- italislikelytoberelativelyexpensive(riskingnotacquiring alargeclientbase)andtheotheristhatprojectstodevelop and deploysuch capital are,themselves, relatively risky (possiblyproducingnon-recoverableinvestmentcosts).

Asecondalternativeoftenavailabletoserviceproviders istoacquireastandardisedverticalapplication(orsector specialisedsystem).Anexampleofsuchsystemsarethese produced by Enterprise ResourcePlanning(ERP) system companiessuchas SAP,Oracle,Microsoft, orotherlarge softwarecompanies.Theadvantagesofsuchsystemsare

thattheircostofownership(costofacquisition,mainte- nanceanduse)arelikelylowerthanthedevelopmentofa customisedsystemandtheyhavelowerdevelopmentrisks andcosts.Thedisadvantageofemployingastandardised systemisthatitprovidesfeweropportunitiesforservice differentiationandinnovation–whatcanbedoneisoften constrainedbythearchitectureordesignofthesystem.

Whilstthefirsttwopossibilitiesemphasisetheservice deliveryprocess,botharesupportedbythecreationofser- viceandcustomerrelateddatabases,i.e.informationthat canbequeried,re-packaged,and customisedinthe pro- cessofservicedelivery.Thecreationofrichandvarieddata setsthatarerelevanttofulfillingcustomerserviceneedsis potentiallyaformofknowledgecodificationthatsubsti- tutesfor‘knowwhat,’ ‘know who’and‘know how’type knowledgethatmight otherwisebe masteredby human serviceworkers.Thepotentialsforsuchdatabaseinnova- tionstocontributetoperceivedimprovementsinservice quality(and hencegreater take-upofaservice offering) areoftenover-estimated,butsometimesverysuccessful inencouragingtheuseofinformatisedsystems,regardless ofwhethertheyarebuiltonacustomisedorstandardised platform.

These different approaches to creating informational capital aremeant to be illustrativeand to highlightthe complexityofthestrategicchoicesthatserviceproviders face.Someindicationoftherelativesuccessofstandardised platformsisindicatedbythemajorgrowthofthecompa- niesprovidingsuchsolutionssoftwareoverthepastseveral decades. The result of the articulation of this market is thatfewtypesofbusinesslacktheseoptionsforincreasing theinformationalcapitalandlabourassociatedwithser- vicedelivery,afeaturethatwewillconsiderinrelationto theBarrasreverseproductcyclemodelande-government servicesbelowinSections4and5.

3.3.2. Opportunitiestoexpandco-production

The methods and outcomes of allocating capital and labourtoexpandingco-production,whichalsorepresent innovations on conventional techniques for service def- inition and delivery, offer opportunities that are more complexandless generalisable.AsGershuny (1978)and Gershuny and Miles(1983)have observed, this supplier choice may come in many forms and some types of co-productionarearguablymuchmoreefficientthansup- plyingtheservicetotheclient–e.g.aserviceclient’sfilling inaformislikelytosignificantlymoreefficientthanpaying apersontoverballyinterrogatetheclientinordertofillin orenterdataonline.Stillgreaterefficienciesarepossible ifthecliententersthedataonline.¹⁷Inthisprocess,both thenatureofsystemsandusercapabilitiesareofsomesig- nificance.Forexample,informationmayberetainedfora returningcustomer,requiringthattheyonlyupdateinfor- mationas theircircumstanceschange, asystem feature.

17 Incidentally,thislatterpossibilityisaplausibleexplanationforthe delayinproductivitygainsfromthepersonalcomputerrevolutionofthe 1980s.Ineffect,directdataentrydis-intermediatesotherrelativelycostly formsofdatacapturebutdoesnotbecomeavailableuntilindividualsare online(i.e.post1995inmanyoftheOECDcountries).

In addition, and outside of the supplier’s decisions, the client’scomputersystemmayretainthetypeofinforma- tionneededtofillinforms.

Thissimple exampleillustrates a generalpropertyof co-production of e-services. What is involved is often

‘shared information’ – information retained by the ser- vice supplier butcontributedby the user. Opportunities tobuildsuchsharedresourcesareparticularlyprevalent in online media e-commerceapplications such as Ama- zonandiTuneswhereusers’priorpurchasedecisionsand searchesareretainedasguidestotheirpossibleinterests.¹⁸ Inthiscase,thesharingofdatabytheuserislargelyinad- vertent and this has raised concerns aboutuser control andprivacy. Nonetheless,fromthe producer’sviewpoint thisinformationisco-producedandfindingsuchmarket andmarketingrelateddataby othermeanswouldlikely bemuchmoreexpensive.

Inthecaseofe-governmentservices,co-productionis complicatedbytheusercontroland privacyissues.Indi- viduals may be more concerned about the retention of individualinformationbygovernmentthanprivateenter- prise.Nonetheless,theuseofe-governmentresourcesdoes provideopportunitiestobenefitfromco-productionpro- cessessimplybecausepatternsofusebecomepredictive– whataparticularuserseeksinaparticularonlinesession duringwhichtheirindividualityifnottheiridentitycanbe retained providesapredictionas toareasinwhichthey mightbeinterestedand,withsufficientadditionalinvest- mentandexperience,thisonlinebehaviourcanbeusedto improveandcustomisethedeliveryofservices.

3.4. Summary

Insummary,thedemandsideofthemodelemphasises theroleofco-productioninthechoiceofserviceandthe risk reductionas a motive for consumer choice. This is addressedbythe‘branding’ofservices,whichispresumed tocarry someweightinterms of signallingthe feasibil- ityandlowercostsofaservice.Beyondthis,theclientis takentohavesomelatitudeinengaginginco-production forwhichitmightbeexpectedthattheywillsharesome of the resulting cost savings with service supplier. The possibilityofself-productionofservicesisclearlypresent and reflects a potentialclient’s evaluationof alternative choicewithregardtotheallocationoftimetoconsume, co-produce or self-produce services. Many services, but by no means all, services may be self-supplied.In gen- eral,however,potentialclientswillbebetteroffallocating additional time towage services topay for rather than self-producesomeservices.Adaptingthesepreceptstothe caseofbusinessserviceswouldinvolvesubstitutingout- sourcedservicelabourforinternallyemployedlabour,the latterbeingroughlycomparabletoself-producedservice.

Finally,onthedemandside,itisreasonabletoassumethat thereareinteractionsbetweentheinformatisationandco- productioncharacteristicsofspecificservices.

18 Seealso Lehreretal. (2012) foraqualitativeanalysis oftheco- productioninbusinessservices.

Onthesupplyside,wehaveemphasisedthepossibil- ityofchoosingto‘informatise’serviceswherepossibleas thisofferspossibilitiestoreducethemarginalcostsofpro- ductionand,ifathresholdlevelofdemandisforthcoming, economiesof scaleresultingfrom distributingtheinitial costsofproductionofinformationalcapital(K_I)wherethe opportunitiesassociatedwithICTthatallowlowmarginal costsofreproduction,eitherbystandardisingaserviceor byproducingasystemthatisabletodeliverservicescus- tomised on an ‘as needed’ basis. It was also noted that the service provider might choose various levels of co- productionopportunitybutthatthetakeupofthiswould generallybebeyondtheaprioriknowledgeoftheservice provider.Wealsohavestatedthesupplyfunctionwithout restrictiontopossibleinteractionsamongthevariablesand madepriceachoicevariablewithassumptionthatthepro- ducerdoesnothaveperfectinformationaboutthetakeup ofserviceofferings–partlyduetotheuncertaintiessur- roundingclientwillingnessandabilitytoco-producethe service.

This model has a numberof direct implications and can be fruitfully extended to consider expectations or ideas about the process of service innovation, the sub- jectofthe nextsection,productivity (Section5)and the politicaleconomicforcesgoverningtheimplementationof e-governmentservices(Section6).

4. DepartingfromBarras’‘ReverseProductcycle’

model?

Onthebasisofourre-examinationoftheLancasterian characteristics-basedservicerepresentation–proposedin Section2–anditsextensiontothetime-allocationbased modelofinnovationinservices–proposedinthe above Section3–wediscussinwhatfollowshowourconceptu- alisationoftheserviceproductandserviceinnovationboth reproducesanddepartsfromtheBarrasmodel.Suchadis- cussionisausefulwaytograspthemanagerialimplications ofthisapproachtopublicservices.

4.1. Theoriginalframework

Barras(1986,1990)borrowedandadaptedtheproduct lifecycleframeworkfromAbernathyandUtterback(1975, 1978)todevelop adynamic modelof innovationwhich couldfunctionforservices.WiththeReverseProductCycle (RPC)Model,BarrasarguesthatICTsrepresentan“enabling technology” (Barras,1990:215) forservice applications.

Three evolving stages, depending on the degree of ICT adoption,areidentified:incrementalprocessinnovation, radicalprocessinnovationand,finally,productinnovation, whereaserviceinnovationrepresentssomewhata‘radical processinnovation’.Thesestagesrevealtheexistenceofa learningcurvebehindtheadoptionprocess(Barras,1990:

226).

The incremental process stage is a typical ‘supplier dominated’phase,aimedatincreasingefficiency.Thesec- ondstageimplies anupgradingofthelearning-by-doing process,whereacertaindegreeofradicaldeparturechar- acterisesservice innovation, whichare aimedat quality rather than efficiency changes, though still through a

process of selective standardisation. The third stage – according to Barras – is typically ‘user dominated’: the introduction of the radical service innovation is consid- eredasfollows:“themoreradicaltheserviceinnovations become,themorereasonableitistoidentifytheresultant improvementsinservicedeliveryasnewservices”(Barras, 1990:226).

4.2. IsBarrasRPCmodelempiricallygeneralisable?

Thetheoryofserviceinnovationdevelopedby Barras (1986)iswell-knownandisconsistentwiththeideathat there is asystematic bias in favour of moregeneralised models which arethen refined and developed in appli- cation.Theideathatthiscreatesa‘reverseproductcycle’

Barras’s(1986)terminservicesissomewhatlesspersua- siveasatheoreticalgeneralisation;regardlessofwhether a servicefirmstarts from acustomisedor ageneralised design,developmenteffortisrequired.However,theuse

‘reverseproductcycle’asanempiricalgeneralisationwas prescientand hasaccuratelycharacterisedthedominant trendinthelastquartercenturyofsoftwaredevelopment forservices.Thisisremarkableandsomewhatironicgiven theverymodestlevelofdevelopmentofICTatthetimeof (Barras,1986),priortoextensivediffusionofpersonalcom- puters,publicaccesstotheInternet,ortherangeofonline servicesthathavesubsequentlyemerged.Despitetechni- calprogress,themodelremainsaneffectivetoolforservice innovationinpartbecauseitiscloselylinkedwithdevelop- mentsinsoftwaremanagementincludingapreferencefor COTS(commercialoftheshelf)softwareandthecontem- porarydevelopmentof‘cloudbased’informationservices whichcreatecontemporaryversionsofthe‘enablingtech- nology’thatwascentraltoBarras’argument.¹⁹

Thesuccessofthe reverseproductcyclemodelasan empirical generalisation may, however, createa hazard.

Onewouldexpectthat inseveraldecadesthose applica- tions that weremost suitable and feasiblefor this form of the development had been exploited. As application domainsinwhichthereverseproductcyclemodelmaybe lesssuitable,i.e.wherethealternativemodelofproducinga proliferationofcustomisedandidiosyncraticapproachesto defininganddeliveringserviceswouldoffergreateroppor- tunitiesforadvanceinclientuseandinnovation.

Asignal thatthis might bethe situationin aspecific sectorwouldbeevaluationsthat suchsystemswerenot meetinguser needsor werefailing tobe takenup.This doesnotmean,however,thatthealternativeofmorecus- tomised systems would necessarily be better. It might be that certain application domains are, with current softwareengineeringtechniques,usercharacteristicsand preferences,andserviceprovidercapabilities,infeasiblefor

‘informatisation’(thedevelopmentoflargescaleintangible

19 Cloud-basedservicesareaparticularlygoodexampleofthepower ofreverseproductcycletypedevelopmentwithgeneralisedapplications potentiallyservingaglobalclientmarket(atleastamongthoseglobal countrieswithadequateInternetinfrastructuretosupportconcurrent communicationandhenceterminalbasedinteractionwiththeonline applications).

(informational)capital(K_I)inthemodelabove).²⁰Insuch domains,serviceprovidersmayhavelittlealternativethan theconstantreturnstechnologyassociatedwithhaircuts andotherformsofdirectservice.

Afurtherbarriertoprogressin‘informatisation’maybe thecharacteristicsofusers.Whilstco-productionmaybe relativelystraightforwardforsomeoftheactivitiesprevi- ouslydiscussedsuchasthefillingofformsorconductof ordinaryonlinee-commercetransactions,requiringmore sophisticatedco-productioncapabilitiesoftheclientmay createan unfavourableassessmentofthe timethatthey wouldrequire in co-production tolearn touse or actu- ally use the system. This, too, describes a situation in whichcertainapplicationdomainsmaynotbeaccessible.

Inshort,onlineservicesrequireconsiderableusersophis- ticationfor optimaluse.For example,successful uses of e-Bayandotheronlineauctionsystemstooptimisebidding has already generated a whole classof ‘sniper’applica- tionswhichexploitonlineauctiondeadlinestogenerate winningbidsintheremainingsecondsbeforetheauction expires.²¹Similarbiddingmanagementsystemsareused forpublicprocurementsystems,creatingapotentialbar- riertotheequityofsuchsystemsacrossspectrumofclient skills,whicharenotnecessarilyperfectlycorrelatedwith theabilitytodeliver‘valueformoney’inpublicprocure- ment.

Finally, progress in developing some application domainsmayreflectthecapabilitiesofsuppliers.Forexam- ple, in a sample of European companies developing or deployingCRM(customerrelationsmanagement)systems atthe turn ofthe century, itwasfoundthat userswere mostlyrejectingconsultantadvicetoimplement‘compre- hensive’ CRM systems in favour of systems with more limitedfunctionality –inotherwords,theywerepriori- tisingtheir service developmentaccording to theirown capabilities anda perceptionof whichelementsof CRM would have the greatest payoff for their business.²² In the domain of e-government services, the problem of servicesuppliercapabilitiesisoftenhighlightedandanum- ber of authors have attempted to create models of the development process needed to advance e-government applications(e.g.LayneandLee,2001;Lee,2010;Scherlis andEisenberg,2003;KlievinkandJanssen,2009).

4.3. ManagerialimplicationsofBarras’reverseproduct cycle

ConfrontedwiththeideathatICT-basedserviceinno- vation proceeds from promulgation of a standardised modeltoaphaseofincrementalimprovementinvolving learningbydoingwouldsuggestthat‘puttinginplace’e- governmentservicesandlearningfromexperienceintheir

20 Theprocessofinformatisationhasbeenstudiedbynumerousauthors.

(Zuscovitch,1983,#1334)had,forexample,conceivedofthetrade-off discussedherebetweenefficiencyandvarietyinthecontextofthethen primitiveinformationtechnology.

21 See http://www.techradar.com/news/internet/the-best-free-and- paid-ebay-sniper-software-667696(LastAccessed18March2012)fora reviewofsuchsoftwareandadiscussionofitsapplication.

22 SeeSteinmueller(2003).

usewasapre-requisitetoreachingthethirdstageinwhich Barrassuggests userswillhave amoreprofound rolein serviceinnovation.However,itisunclearwhatwouldsig- nal readiness to enter this third phase if the degree of interactionwithusersismodestornon-existent.Inshort, onemighttakethefirsttwophasesoftheBarrasmodelas theendsofthestory(atleastfortheforeseeablefuture) andconcludethatthehighestpriorityistolearnfromthe experience ofother implementersof e-government sys- temswhatisthebestwaytostandardisesuchprovision.

A considerable amount of exchange and sharing has occurredinthelastdecadethatislargelyorganisedaround thismodelofdefiningasomewhatstandardisedapproach –whatshouldbeincludedine-governmentapplications, howtheyshould be mademoreaccessible,and the sets ofdebatesaroundtheireffectivenesscomparedtoalterna- tivemeansofservicedelivery.Thisprocessassumesthatan appropriatestartingplaceforsuchdevelopmenthasbeen identifiedandthatitcanbereliablyrefinedthroughsome sortofevaluativeprocess.Insomecases,thiswillbetrue.E- governmentservicesthatinvolveatransactionalelement canbecomparedtoalternativemeansofservicedelivery and theirtakeupand relativeefficiencycanbeassayed.

Whetherthis sameprocesscanbe followedwithregard toothere-government functionssuchaselicitingcitizen involvementandco-operationorevenelicitingcollective actionaremoreuncertain.

Theapproach suggestedin thispaper recognisesthat thereareadvantagestoinformatisingservicesand stim- ulatingco-production,butweareagnosticastowhether theseapproacheswillproveeffectivefor‘customers’orcit- izenusersofsuchsystemsandthereforebetakenforuse bythem.Theincentivesandbiasesareonesthatfavourthe supplier.When the supplieris a marketparticipant, the issueoftake-upisofcentralimportancebecauseitgov- ernswhetheraparticularserviceisviable.Inthecaseof governmentservices,theimperativetooffersuchservices becausedoingsoisseen,inthefirstinstance,asprovid- ingopportunitiesforgovernmenttoentertheInformation orKnowledge Societymayincreasetheriskof discount- ingorignoringthewayinwhichtheseservicesareused.²³ Thisheightenstheimportanceofevaluationbecauseitis only through the evaluation of the use of such services thatitmightbediscoveredthatthe‘generalformula’for theirprovisionmaybeflawedandthatsomeotherstart- ingpointshouldbechoseninattemptingtobuildcitizen engagementanduseofsuchsystems.

Thus, in relation to the managerial issues of e- government service development, the Barras model creates a set of risks. First, the presumption is that the motivationforinitialdiffusionofe-governmentservicesis thattherearemoreefficientmeansofdeliveringservices onlinethancanbeachievedthroughalternativemethods of delivery (Barras first phase). As we have suggested, successinfulfillingthismotivationisbynomeanscertain.

At this phase, at least, there are some clear indicators

23 Itcanbeargued,forexample,thattheproblemisoneofusercapabil- itiesratherthanthequalitiesoftheservicesonofferthatareaffectingthe takeupanduseofsuchservices.