Self-interest and service design

Ethics doesn’t come up often in service design, so after the coverage of recent international financial crises and the Occupy Movement, I thought it might be worth pursuing. Unfortunately, I’m a designer, not an economist. I had to go away and do some research, so here’s what I found.

After initial searches, my research focused on ‘self-interest’, as the DNA, foundation and heart of business. As it turns out, the concept of self-interest is very old, and offers a proven framework for how a company can best work, both ethically and economically. For a service designer, that’s a very exciting and stimulating result. So here’s the brief and strange story of self-interest for your enjoyment.

1. Ruled by the passions

The concept of ‘self-interest’ was developed from the 1500s – 1800s as a way to counter the destructiveness of despotic rule and exploitative business practices. Its success rested in part on the view that business made people more peaceful and productive than strong political and religious beliefs, which invariably resulted in conflicts.

European history up to the 1700s was marked by despotic forms of rule with cycles of corruption, poverty, disease, internal conflicts, and outright war. Here’s a diagram showing how critics and thinkers of the time saw things.

Ruled by Passions

They observed kings and nobility driven by personal ‘passions’ – pride and ambition, greed and pursuit of wealth, and lust for sex and sensual satisfaction. When acting from these passions, a ruler might gain his immediate rewards, but gains for the nation were arguable and the side-effects were severe. Church’s approach had always been to use reasoned arguments, based on famous biblical figures and the virtues and lessons they offered. Their effects were observably weak.

The result was a self-reinforcing loop with destructive side-effects.

2. Self-interest as a solution

Over the 1500s – 1700s philosophers worked on much a stronger case with increasing success. Their initial idea was to play the passions off against each other: to paraphrase, ‘if you want to be famous, restrain your pride and focus on achieving the results others will admire you for’. Unfortunately this gave reason a rather limited role, but it was clearly on the right track.

This is where the concept of ‘interest’ arrives in politics and business thinking. From the early 1600s thinkers introduced ‘interest’ as a metaphor for well-considered behaviour and applied it in politics and business. To paraphrase, ‘if you invest in good behaviour, the interest you earn will be disproportionately good for you, personally and organisationally.’ This metaphor came with benefits, as philosophers could now argue convincingly for careful reasoning and considering the needs of others. The ‘self’ was later added to emphasise individual responsibility, and to help distinguish individual from company or national interests.

Visualising modern self-interest

The radical new concept of ‘self-interest’ worked well in business, and was quickly popularised. It was realistic about people and practical about outcomes. It accepted the often-dark realities of human motivation, while providing practical ways to coordinate passions with reason and the needs of others. It was also easily scaled from individual to business, market and national interests. And it allowed feedback from effects to inputs. It was so familiar by the late 1700s that Adam Smith could use it, without explanation, to characterise the ‘invisible hand’ of the market. Self-interest now defined the quintessential business: collaborating with others to realise its own goals. Here’s a diagram showing the structure of the new self-interest.

No solution is perfect. Self-interest originated in economies driven by sole operators, family businesses, and small enterprises: the origin of Adam Smith’s phrase, ‘a nation of shopkeepers’. The effects of an owner’s passions could be witnessed locally, directly and immediately. Self-interest is less powerful in larger businesses where owners, shareholders, executives or customers lack direct and timely feedback mechanisms. In recent decades the emphasis is very clearly on strengthening the left-hand loop: the process for defining a business’ self-interest.

3. Self-interest is increasingly political

From the early 1600s criticism of business’ exploitative and monopolistic behaviours had been significant, both within and outside business. Criticism grew in the 1800s with the burgeoning side-effects of the Industrial Revolution and criticism itself became a key driver of change. Determined, well-reasoned criticism of business contributed to growth of leftist political movements, trade unions, regulation, social agencies, the welfare state, and more recently, new scientific and corporate disciplines (corporate social responsibility being an example of the latter). Criticism can seem marginal and uncoordinated, but its impacts are cumulative and profound, as in climate change and sustainability.

The intense criticisms of the last four decades are not new. They have re-emphasised the power of side-effects and their consequences for global stakeholders, including the environment. Business’ self-interest is being opened and politicised by a wide range of stakeholders from world experts to concerned citizens across the globe. The power of stakeholders in defining business self-interest is increasing slowly, and with this, emphasising more democratic decision-making and more collaborative forms of business design. These include models such as collaborative consumption and practices such as co-design, co-creation, open innovation, and in public services, as co-production.

We might argue that the above notion of self-interest is a dated relic, that today self-interest just means ‘selfish greed and stupidity’ and nothing more. Fair enough. Ideas and language change, and we shouldn’t hang on to impotent ones.

However, understanding the brief and strange history of self-interest brings us straight to the heart of a business: how do we gain our rewards and serve stakeholder interests through a business?

4. Summary: asking self-interested questions

What have I learned? Self-interest is the foundation and heart of business. It also happens to have a strongly ethical basis. By understanding self-interest better, we are better at doing business, criticising it, and designing it. Self-interest’s history is full of great ideas, different ways of thinking, and workable solutions.

Self-interest might be an old solution, and perhaps it’s a bit simple for today’s complex businesses. I’d suggest it doesn’t really matter what we call it or how we make it more useful. In designing different and better forms of business, it’s in our self-interest to use any solutions to ask the best questions we can.

Supplejack wins two awards!

OK, so we submitted our co-design work with Waitemata District Health Board (Waitemata DHB) to NZ’s Market Research Society (MRSNZ) Effectiveness Awards.

Co-design means working with management, staff and customers to design a better service. We took this literally and brought these stakeholders together in ongoing workshops. We identified issues and workable solutions, decided which would deliver best value, and then worked on these solutions together too. Here’s a fabulous YouTube video on co-design by UK service design company thinkpublic.

In our submission we compared a conventional project (one we’d done the year before) to our co-design work. For a given dollar in budget, we spent three times as long working directly with stakeholders, and achieved four times the number of improvements/ innovations. There’s no truth in the view that ordinary people can’t be creative: it’s just a matter of having the motivation and the tools to get on with it.

There’s a lot more we could say about co-design here, including its use in more commercial settings, but we’ll leave that for later.

Frankly, the submission was a lot of work. The crux was demonstrating the effectiveness of the approach and its results for staff and patients. Fortunately my colleague Hilary Boyd at Waitemata DHB had more than enough determination and good humour to keep us on track.

Yes, Hilary and I did joke about winning, and even about an acceptance speech ‘in the unlikely event of an emergency’, as they say during flight safety briefings.

Neither of us are strong in the award-winning speech department, but we did resolve to thank all the patients who have been involved.  We could also have thanked Dr Bernie Mullin for starting the whole business all those years ago, the dedicated staff of the Colorectal, Breast, Melanoma and Breastscreen Aotearoa services who worked closely with us, and Unitec senior lecturer Cris de Groot with his amazing product design students. I think we assumed co-design was a bit too far left field? Our mistake.

So we won a Gold in the Social and Community category. Much to our surprise, we also won Platinum for Effective Partnerships. (To clarify, a Gold is a second prize, if you like, and Platinum is a first.)

And yes, our speech was the shortest on the night.

While receiving the two Awards we nearly wandered off the stage before our photos were taken, and managed to get some of them upside down (thankfully spotted and corrected by the photographer). But we managed not to ramble on (no names mentioned) as well as not falling off the stage (the two jolly dignitaries are undamaged).

A special thanks from me to Hilary for being there right to the… well, the Award-winning end!

My new vision for service sustainability

I’ve a new vision for sustainability in services. It arose this way…

I recently had the honour to work with the Sustainable Business Network (SBN), providing service design expertise and tools to help them develop their offering to members.

We’ve since started a sustainable service design interest group, with its own evolving web page and a member-only ning. In time you’ll find brief presentations and cases studies on service design and service sustainability. On the cards is a seminar or workshop in sustainability in services too. Which is the reason what I’ve evolved a new vision.

Traditional views of service sustainability have emphasised three things: energy and resource use, responsibilities to staff and community, and use of information technologies. More recent versions such as Lean Services and Six Sigma approaches are ever more sophisticated and powerful. In parallel, current systems for certifying a service’s ‘greenness’ are oriented to the organisation’s carbon footprint (typically measured by energy and resource use).

I suggest these are only a quarter of the story: they represent production- and product-focused views. The service business model is essentially to charge for time, so this approach to certification isn’t telling us how sustainable the use of people’s time  is, both staff and customers.

For this reason it bothers me particularly that consumption-focused views aren’t being made a priority of service sustainability. Where are the impacts on consumers and through consuming? Where do we account for a service/s time-wasting as well as real value-adding time? Time, after all, is all of money, energy and goodwill.

A service’s direct impacts are those arising in service consumption – the environmental, economic and social impacts of being a service’s consumer. The indirect ones are those arising with externalities transferred to other services.  Wasting time in one service leads to ostensibly high-value time in another, though that’s not how it should actually work.

To take my favourite example at present, what’s a ‘sustainable mortgage’? What outcomes might it seek: are these purely ‘ethical’ (social) or are there economic and environmental impacts to aim at too? How would a customer experience it in real time and over time? What touchpoints and services would it include? What externalities might it seek to manage (internally or by supporting other services)? And is it really more sustainable to provide the mortgage via the Internet or a mobile phone?

This is probably just a way of saying service sustainability isn’t a well-defined or well-understood topic yet – yet another example of something we all know already. Perhaps the key for now is the lack of meaningful credentialing for services, such as the service equivalent of Life Cycle Analysis – one that can take into account key impacts downstream (such as of a mortgage).

For well-intentioned services, I think the crux is the very limited attention given to the design of the ‘sustainable’ service and its offerings. By ‘design’ I mean a process that starts by defining the desired sustainability outcomes for customers and their communities, then purposefully evolves the service in ways that lead to these outcomes (be they environmental, economic or social).

At present the tools that might be useful focus on measuring outcomes rather than designing from them (though the latter is perhaps implicit). These include tools by the London Benchmarking Group, the New Economic Foundation’s proving and improving tools for measuring social return on investment (SROI) and the SROI Project.

Along these lines, and at the risk of seemingly taking off on a tangent, I recently attended and highly recommend Kath Dewar’s excellent course on How to Market Sustainability. It’s for anyone working on sustainability in business, as much as sustainability in marketing. And it’s very well developed, taking you from the basics through to the latest and most challenging examples.

So to the point. This’s my very simple vision for sustainability in services.

I look forward to the day we can explore and discuss sustainable services in the way we did on Kath’s course (which will mean of course, that we have a well-established discipline to teach)!

Measuring the good stuff in sustainability

Following on from earlier attempts to measure and report the sustainability of my business (see other blogs below), I’ve been preoccupied with a new problem.

I’ve been bothered by sustainability’s tendency to focus on reducing bad stuff. I’m missing the focus on creating good stuff, mostly because that’s what I really want my business to be about.

A basic sustainability accounting problem is this: we can measure and manage lots of bad stuff (such as carbon emissions and wasted time), but how can we do the same for the good stuff?

To answer this we have to get our heads around two basic problems. I’m using cycling and driving for work purposes as my prime example.

• When we ride a bicycle for work purposes, we cut car costs (bad stuff), but we have difficulty accounting for the ‘good stuff’ of cycling.
• We can quantify some costs (such as petrol, hours elapsed or carbon emissions) and benefits (projects won) by either mode, but these are really just measures of internal efficiency. What about the external effects of these activities?

Sustainability makes us look at how effective an activity or business is – how much good stuff we’re creating in the wider community. It’s both efficiency and effectiveness.

So that’s what’s been bothering me recently – and why I’ve been so quiet – I’ve been working on this experiment!

The table below is the outputs of an experiment with these issues. It uses my company’s road travel – by car and by bicycle – to explore measures of their sustainability.

To do this, I’ve constructed basic social, environmental and economic measures. I’ve converted the base units for driving and cycling (kM and hours travelled per year) into energy used (kW-H), carbon emissions, and social costs and benefits (see sources at end of blog).

Units	Car (per year)	Bicycle (per year)
Basic stuff Hrs Internal cost per hour	. 90 $208	. 30 $192
Social stuff Body kW-H	. 25 (body)	. 16 (body)
Environmental stuff kW-H kgCO2-e $-kgCO2-e	. 2,161 (petrol) 811 40	. - 16 (body)* -144* -7*
Economic stuff $ Social Costs $ Social Benefits	. 341 0	. 5 -318*
The Balance $ Balance $ Balance per hr	. 381 4	. -318* -11*
* Benefits are marked as negatives (negative costs) to help avoid confusion.

The comments below give you my views on these figures.

The basic stuff

Hours

I travel about 90 hours per year going to meetings and doing fieldwork around the Auckland, Northland and Waikato regions. I also fly but have excluded this here due to lack of data.

This year I cycled about 30 hours going to meetings, mostly within 10km of my office. For the record, my business bought the bicycle and it paid for itself within the first year.

Within my business the cost of driving is about $208 per hour (including petrol, maintenance and driving time) and cycling is about $192 per hour. This tells you my short cycling trips around the congested Auckland City are cost-efficient.

The social stuff

kW-Hr

My clients don’t care (or don’t know) whether I arrive by car or bicycle, so there’s little to say about relative social effectiveness in this context.

So I use kilowatt-hours to help compare the energy-intensity of these very different modes. The figures suggest my body currently uses more energy per year sitting in a car than it does riding a bicycle.

It’s a nice way of putting travel in context: if I’m going to travel, I might as well find a way of making that time and energy useful.

The environmental stuff

kW-Hr

Measuring energy also helps compare use of different resources over time – in this case the energy from petrol versus foods as resources. You’ll notice my body uses a lot less motive energy than petrol per year.

kg-CO2-e and $-kg-CO2-e

The carbon emissions for driving are those from petrol use. As a result, those credited to cycling are those not used driving (expressed as a negative figure). I prefer this approach to carbon crediting (fat burnt and carbon not used) over tree planting. The carbon emission-dollars ($-kgCO2-e) just show the economic impact of this – a small saving from cycling.

The economic stuff

Dollars

The social costs cover the economics of accidents, congestion and other impacts. The social costs of my driving far outweigh those of cycling.

The balance

The balance for the two modes is the sum of the dollar figures in the table – the economics of these modes.

The total figure indicates my car driving is roughly as bad as my cycling is good – even for the relatively limited amount of cycling I do.

My rough calculations show work-related car driving costs NZ roughly $720 million per annum, while work-related cycling benefits us by about $11 million – that’s from the few percent of people who do work-related cycling. Imagine if more people cycled for work…

I’m surprised. These figures show cycling is both more internally efficient for short trips, and much more effective for creating good stuff outside the company.

Along the way I’ve also evolved a choice of measures (hours, energy, carbon emissions and dollars) we can use to profile other aspects of the business.

Sources

I’ve used my own performance figures with the following sources of data:

• Work hours and kilometers traveled by car and cycle from the Ministry of Transport.
• My body’s energy use while cycling from the United Nations Food and Agriculture Organisation.
• My car’s energy use from good old Wikipedia.
• Economic costs and benefits by travel modes from Smith, Veryard and Kilvington (2009). I’m aware NZTA have just increased the benefits of cycling to $1.45 per kM but use Smith et al’s 2009 figures for consistency.

Social sustainability and service design

I’m very interested in social sustainability because it’s so material to service design. But it’s not well-developed in the literature, so this blog is about an experiment.

In New Zealand service organisations have a huge economic footprint – they comprise about 70% of the total by number and by GDP. Work by Andrew and Forgie (2004) shows service organisations have a smaller ecological footprint than those in primary or manufacturing sectors. They actually inherit much of their footprint from upstream. Because they add value through ‘social processing’ (through networks, knowledge, skills and creativity), they also pass very little of this downstream to their clients.

On balance, their sustainability challenge is to optimise their social impacts relative to their footprint (and perhaps more so than just minimising their environmental impact).

Yes, it’s easy to see the environmental problems of an existing system, but it’s much harder to then work out how to optimise its social impacts, even when we can glimpse a way to do it! Can you imagine a transport system that’s actually generates good health?

How do services measure their ‘social’ value?

Services typically capture the economic value of their social processes by ‘charging for time’. It follows that when designing or improving a service, we’re typically working with the value of time – the service’s production time relative to service delivery and consumption time. Ultimately we are also gauging production time relative to societal gains.

Sustainability approaches the social through societal gains such as intellectual capital (social capability and intellectual assets) and human capital (social equity and social cohesiveness). These are both means and ends within a service business, which means service design can be confusing. We’re saying ‘a sustainable service business achieves socially sustainable ends by socially sustainable means’. Seems kind of circular!

Mind that gap!

The gap between these and the mundane concerns of hours-based service business models is significant. To bridge the gap, we’ve got to consider at least three places where social sustainability is of high value: within the organisation (service production), within the client (service consumption) and at the moment of interface between them (service delivery). Some initial questions to bring social sustainability down to earth might therefore be:

1. Production: How are we spending our time within the organisation? Are we efficient?
2. Interface: How are we spending time with clients? Are we effective?
3. Consumption: How are we helping people spend time beyond our service? Are we good for society?
4. Outcome: Are we helping people experience improved social equity, cohesiveness and capability all the time?

You’ll note there’s no explicit reference to sustainability criteria in these questions. The issue, of course, is the need to define social sustainability in the specific service context. For example, to be more socially sustainable in some contexts, we will want to increase the amount of time spent, while in others, we will want to decrease it.

The Experiment (with a confession)

I’ve already stuck my neck out in this blog so I might as well go the whole way.  I don’t have any major examples of this social sustainability in practice – other than from observing others and through Supplejack’s work with a particularly brave and open-minded client. I’ve used the thinking and questions above to help make it a more socially sustainable service. But more importantly, to achieve this I first had to ask these same questions about Supplejack itself.

So… the table below is based on asking questions 1 – 2 above about two of Supplejack’s own projects:  a project that uses older, more conventional qualitative research methods with one using a newer, design research methods. It measures numbers of people and hours to compare them. It’s an experiment in the social sustainability of an innovation.

	Conventional	Innovative
	Formative evaluation with qualitative research	Co-design with design research
Project	Client-defined	Stakeholder-defined
Participants	12 = 10 clients, 1 staff, 1 researcher	71 = 33 clients, 9 staff, 28 partners, 1 researcher
People-hours in participating	78	336
Product	1 report, 2 innovations, 1 improvement	1 project template, 4 micro-reports, 9 innovations, 5 improvements

You can see design research methods (right-hand column) use a lot more people-hours to gain the most learning for the project, with the benefit that stakeholders can also connect with others and learn for themselves in unprecedented ways. As a result design research is significantly more creative, and its output is the actual launch of new services. Its success depends on good communication, collaboration, creativity and transparency – all socially sustainable processes.

And the downsides?

Are there downsides to design research and co-design? Of course there are. Three points pro-occupy me at the present time.

1. You might suspect the environmental footprint for the design research project is larger. Yes it is. However, per person-hour it is much smaller, mostly because of economies in travel (both carbon emissions and time). Turning this around, for a given unit of carbon emitted the social gains are far higher. The same applies for the economic footprint – the budget for the client is higher (not that much higher, though) but per dollar spent the social gains are much greater. The unanswered question for me here is this: does this open up a different and better business model?
2. Measuring questions 3 and 4 above. It’s all very well developing more ‘socially sustainable means’ but what about demonstrating the ‘socially sustainable ends’? How do I know changes in the service means clients are spending their time ‘more sustainably’? What does this actually mean? And so how do I know social sustainability in the community is actually being improved? For the meantime, I have some indicative data that’s positive, but we need real data! So officially, I’m ‘waiting for the data to come in’.
3. There’s very little in the sustainability or service literature on any of this. I’m very interested in hearing about any other work that’s being done.

So… please email me with any examples of work, or ideas and suggestions, about social sustainability and service design!

What’s a sustainable service business?

I’ve been asking myself this for two reasons: to manage Supplejack as a small service business, and to help my clients, most of whom are services.

So much of sustainability knowledge in business applies first to manufacturing, products and materials. Which leaves me asking,  what’s a sustainable service business?

How I started answering this: reducing, recycling, re-using

I started with sustainability by ‘reducing, recycling and reusing’. As a result, my office footprint (materials, energy and waste) fell by an average of 10% per year to 2009. My travel footprint (fuels) fell by about 30% in 2008 through cycling rather than driving, but this will always vary by the amount of travel I have to do.

With a moment’s thought you’ll realise it doesn’t take long for a small service business to reach the limit for reducing its footprint. Why? Because there’s only so much that can be cut from ‘business-as-usual’.

The deeper question is therefore, how would a sustainable service (business-as-unusual!) actually work?

My next step: measuring my whole business

My next step was to look at my business-as-usual more accurately so I could understand what I actually needed to manage. And ‘you can’t manage unless you measure’. So I measured!

I first listed the major things I do over a year, and looking at my financial accounts helped me identify the major activities. What do I do?

Sell my own time on projects, spend time managing my business, sub-contract others, meet others in cafes, buy goods (such as computer equipment, books and other stuff), and volunteer time/money to good causes (the Cycling Advocates Network, Greenpeace and Barnardos).

Measuring these proved very difficult. To cut an 18-month story short, I decided to measured them in Watts (using the tools at WattzOn). Watts were easier and more accurate to measure and manage than carbon emissions (which depend on the accuracy of multipliers).

The results are below – my business as it is today (after the first phase of recycling, reducing and re-using).

Profiling my small service business (in Watts)

What I do at work all day…	%
Meet, have coffees and foods in cafes	1
Produce hard copies of reports and documents	2
Buy/ use goods and stuff	2
Contract expertise	2
Use energy through office appliances	5
Volunteer time and resources	5
Travel to meetings around town and in other cities	15
Spend time doing work	67
Total	100

So great, I’ve developed an initial, rough overview of the energy footprint of my small service business. A major achievement!

Great! But… what am I learning?

I’m learning it’s not enough to be sustainable. You have to DO sustainability as well, and you have to DO it with and for others in a way that’s hugely disproportionate. To explain…

On the positive side, the table shows I can carry on conducting business in cafes with a clear conscience! And I’m only passing on a very small proportion of my footprint (in hard copy documents).

But on the negative side, you’ll notice a number of problems.

1. Office energy use and travel are actually a small part of all the energy used in my business. In the case of office energy use, there’s only marginal savings to be made at best. Why bother? In the case of travel, I’ve already reduced it about 30% by cycling locally. realistically, what more can I do?

2. How to account for energy used AND energy not used? For example, voluntary work represents about 5% of total energy. Cycling has replaced about 30% of car travel. Should these actually be accounted for as credits (like carbon credits and instead of planitng trees, for example) and subtracted from the total?

3. And how to manage the energy embodied in the biggest sources – staff and contractors? The obvious way is to encourage them to live and work more sustainably. But in reality a 10% drop in a contractor’s energy use translates into a negligible reduction within Supplejack. Why? Because they only spend a small proportion of their year working with me. It’s good to encourage others to be sustainable, but the individual and network energy reductions are relatively small.

That’s my problem. ‘Relatively small’ is too small for me.

Here’s my interim conclusion: to BE sustainable is not enough

There are limits to reducing, recycling and re-using. This doesn’t mean we shouldn’t do them, but they are NOT sustainability.

It’s good to BE sustainable, but it’s not enough. Reducing your footprint is good, but you can’t keep reducing forever. There’s a limit to how sustainable you can BE within business-as-usual.

So here’s my interim answer: you have to DO sustainability with and for others

Here’s my ‘service business’ proposal for sustainability – which incidentally, covers about 70% of businesses and GDP.

A service business is only sustainable when it generates much more sustainability value for others than it uses up in doing so.

We don’t yet have a way of saying how much more, but I’m thinking if my total business energy is 100 units, I should aim at squaring it – 100 x 100 units of value created for others – at least.

This value arises through the combination of:

1. Encouraging others to minimising resource use – social, economic and environmental, with an emphasis on the latter.

2. Creating value created for others (clients, partners, stakeholders and communities of interest) by collaborating on fully sustainable service offerings.

3. Creating value within the organisation itself, expressed in non-material assets (such as revenues, intellectual property, employees and other non-material assets).

A final question… what do you make of all this?

Are these appropriate guiding principles for designing and growing a sustainable service business – its model, strategy, activities and so on? Are there others principles that should be included?

Find me at Supplejack.