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Key words: Internet of Things, value co-creation; S-D logic, cultural industry. 1. Introduction. In the last ... actuators, mobile phones, etc. – which, through ..... with the adoption of IoT devices such as QR Code, iPhone, iPad and Android apps.

CONFERENCE PROCEEDING

Referred Proceedings of the 13th International Conference of the Society for Global Business and Economic Development Managing the “Intangibles”: Business and Entrepreneurship Perspectives in a Global Context Ancona – Italy, July 16-18, 2014 Università Politecnica delle Marche, Economics Faculty “Giorgio Fuà”

ISBN 978-88-907795-7-2

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Internet of Things and value co-creation in the cultural industry towards Service Dominant logic perspective Aurelio Tommasetti, [email protected], Massimiliano Vesci, [email protected], Carmela Tuccillo, [email protected], Orlando Troisi, [email protected], Department of Management & Information Technology, University of Salerno, Italy

Internet of Things and value co-creation in the cultural industry towards Service Dominant logic perspective

Abstract In the new Era of connectivity for anything, there is a growing interest in the Internet of Things (IoT). New forms of communication are, in fact, realized in the Internet between human and things that interact within social and environment contexts in a continuous process of value co-creation. The paper aims to understand the IoT paradigm, its role and impact in the co-creation of value drawing from the Service-Dominant (S-D) Logic perspective. The study provides a better understanding of how value is collaboratively created (co-created) in the cultural industry through an examination of two projects (QRator and the “O”). As this paper demonstrates, IoT can be conceptualized as an operant resource capable of acting on other resources to create value, and for value co-creation. The study could be considered a first step in a stream of research on different aspects of IoT and value co-creation which are yet unexplored. Key words: Internet of Things, value co-creation; S-D logic, cultural industry

1. Introduction In the last decade, the radical evolution of the current Internet into a network of interconnected objects reveals the growing of an emerging paradigm called the Internet of Things (IoT) that led to the possibility of seamlessly merging the real and the virtual world (Tan and Wang, 2010; Vermesan et al., 2011; Gubbi et al., 2013; Mahalle et al., 2013). This innovative phenomenon is growing in importance and its pervasive presence has an high impact on several aspects of everyday-life, allowing potential users to interact with each other to reach common goals (Atzori et al., 2010). Thus, IoT opens up new opportunities in terms of a potentially dissemination of digital content in order to reach and engage users in a collaborative way that facilitate the value co-creation. This paper aims to understand this phenomenon with an analysis of how value is collaboratively created (co -created) in the cultural sector through the lens of Service-Dominant (S-D) logic perspective.

2. Conceptual background and research questions 2.1. The concept of IoT in literature: principles and definitions

In recent years, a new phenomenon called the Internet of Things (IoT) has emerged as one of the most important paradigm with regards of the future state of Internet, in which any object will be interconnected and based on interoperable communication protocols (Tan and Wang, 2010; Vermesan et al., 2011; Gubbi et al., 2013; Mahalle et al., 2013). Undoubtedly, the term Internet of Things was used for the first time in e arly 1990s in the area of ubiquitous and pervasive computing (Ashton, 2009). Later on, this concept became popular through the market analysts publications at Massachusetts Institute of Technology (MIT). One of the first definition was attributed to the Auto-ID Labs, (a world-wide network of academic research laboratories) according to the “things oriented” perspective that consider things as very simple items (for example Radio-Frequency IDentification tags). In the field of computing and communication, the IoT is considered a technological revolution based on the concept of anytime, anyplace connectivity for anything. According to this vision, the physical and virtual objects have identities, attributes, and virtual personalities being connected in everyday life through the Internet in effective, practical, and inexpensive ways using intelligent interfaces in dynamic global network infrastructure (CERP -IoT, 2009). The spread of this paradigm has grown considerably and opens up new interesting directions for both research and business. As emerged from literature review, Scholars, made different definitions of IoT in the time. Starting from these, we identify the primary components of each definition, as summarized in the table 1.

TABLE 1: DEFINITIONS AND PRIMARY COMPONENTS OF IOT Primary components - identifiable objects - virtual representations - virtual things

Definitions IoT refers to uniquely identifiable objects (things) and their virtual representations in an Internet-like structure (Ashton, 1999). The basic idea of the IoT is that virtually every physical thing in this world can also become a computer that is connected to the Internet (ITU, 2005). - universality of communication A “metaphor for the universality of communication processes, for the integration of - integration of data and content any kind of digital data and content, for the unique identification of real or virtual - unique identification objects and for architectures that provide the communicative glue among these components” (CASAGRAS, 2008). -

things with identities smart spaces intelligent interfaces active participation of objects smart objects information network

-

interoperable communication virtual things with identities intelligent interfaces information network

-

pervasive presence unique addressing schemes cooperation common goals

- unique identification - accessibility - combination of digital and physical world -

virtual word ICT technologies real world objects

“Things having identities and virtual personalities operating in smart spaces using intelligent interfaces to connect and communicate within social, environmental, and user contexts” (Eposs, 2008). “A world where physical objects are seamlessly integrated into the information network, and where the physical objects can become active participants in business processes. Services are available to interact with these smart objects over the Internet, query their state and any information associated with them, taking into account security and privacy issues” (Haller et al., 2009). “IoT is an integrated part of future Internet and could be defined as a dynamic global network infrastructure with self-configuring capabilities based on standard and interoperable communication protocols where physical and virtual ‘things’ have identities, physical attributes, and virtual personalities and use intelligent interfaces, and are seamlessly integrated into the information network” (CERP-IoT, 2009). The basic idea of this concept is the pervasive presence around us of a variety of things or objects – such as Radio-Frequency IDenti-fication (RFID) tags, sensors, actuators, mobile phones, etc. – which, through unique addressing schemes, are able to interact with each other and cooperate with their neighbors to reach common goals (Giusto et al., 2010). The “Internet of Things” describes a vision where objects become part of the Internet: where every object is uniquely identified, and accessible to the network, its position and status known, where services and intelligence are added to this expanded Internet, fusing the digital and physical world, ultimately impacting on our professional, personal and social environments” (Coetzee and Eksteen, 2011). It is a concept in which the virtual world of information technology integrates seamlessly with the real world of things (Uckelman et al., 2011). The term Internet of Things (IoT) is a concept that encompasses a variety of technologies and research areas that aim to extend the existing Internet to real world objects (Sánchez López et al., 2012).

Source: our elaboration

Initially, starting from the 1999s, the subject of many definitions was the relation between IoT and every physical thing in the world, for example “virtual things”, “identifiable objects”, “cyber-physical systems” (Ashton, 1999; ITU, 2005; Casagras, 2008). Later on, starting from the 2008s, the emergence of the relation between IoT and the interoperable communication process was noted, but only in the recent years has become an important issue (Eposs, 2008; Haller et al., 2009; CERP-IoT, 2009; Giusto et al., 2010; Coetzee and Eksteen, 2011; Sánchez López et al., 2012). Currently, “active participation”, “accessibility”, “virtual word”, “intelligence interfaces” are mainly associated with the concept of IoT. Moving the locus of IoT from technicality (things) to use (process), means transforming our understanding of value from one based on units to one based on processes that integrate resources. Finally, Scholars have identified the main system-level characteristics of the Internet of Things (Miorandi et al., 2012): 1) communication for anything: things have the ability to communicate with each other in an interconnected

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network of objects; 2) identification for anything: things are identified with an unique address in the digital domain; 3) interaction for anything: things can interact with the local environment through sensing and actuation capabilities. Despite the widely recognized importance of the IoT, limited studies have analysed the impact of the IoT in order to help people in the process of value co-creation. To reach this aim, this paper analyse this process in the cultural industry according to the S-D logic perspective. The forthcoming conceptual sections of this article attempt to address this limitation through the following research questions: RQ1. What is the contribution of IoT in the value co-creation process (in the cultural sector)? RQ2. Can be IoT conceptualize as an operant resource in the process of value co-creation? 2.2 Service Dominant Logic and value co-creation

In the literature, Service-dominant logic (S-D logic) is a growing perspective which differ from the traditional, goodsdominant (G-D) logic paradigm (Vargo and Lusch 2004, 2008; Vargo, 2008). According to the G-D logic, value is created by the firm and distributed in the market in the form of a good through exchange of money. From this perspective, the firm’s production process creates value for customers and the roles of producers and consumers are distinct. On the contrary, in the S-D logic view, value is always co-created through the integration of resources and competences of producers and consumers that are not distinct. The first important difference between servicedominant and goods-dominant logic lies in the basis of exchange, in fact, in a S-D logic, value is stated in use, while in a G-D logic, value is stated in exchange (Vargo et al., 2008). S-D logic focuses on the action of operant resources whereas G-D logic focuses on the exchange of operand resources (Constantin and Lusch 1994; Vargo and Lusch, 2004). In the S-D logic views, all exchange are based on service and “when goods are involved, they are tools for the delivery and application of resources” (Vargo et al., 2006, p. 40). Value is at all times co-created with the client, and comes from the favourable use of operant resources (Vargo and Lusch, 2008; Vargo and Lusch, 2004). Thus, from S-D logic view, value is co-created by the mutual effort of all stakeholders (Vargo et al., 2008). In contrast with this perspective, G-D logic states that value is embedded during the company’s production process and the economic exchange is based on the creation and delivering of objects to be sold. S-D logic perspective stated that value is constantly co-created and must be established in use, from the customers point of view with a transformation of the position of value creation from exchange to use (Vargo et al., 2008). Following S-D logic, the concept of value cocreation differs from the traditional and suggests a value system where producer and customer generate value in an interactive system through the integration of their resources (Lusch, 2011). From this view, co-creation implies that value is recognized and determined by the client in use. As noted, in the S-D logic view all exchange is based on service that is considered “the application of competences (such as knowledge and skills) by one party for the benefit of another” (Vargo et al., 2008, p. 145). Moreover, the basic unit of analysis for service-for-service exchange is the service system, which is a configuration of resources, including people, information, and technology, connected to other systems by value propositions (Vargo et al., 2008). In this context, service science is the study of service systems and of the co-creation of value within complex configurations of resources and competences. “When value creation is seen from a service systems perspective, the producer-consumer distinction disappears and all participants contribute to the creation of value for themselves and for others” (Vargo et al., 2008, p. 149). To sum up, service system is considered as “an open system (1) capable of improving the state of another system through sharing or applying its resources (i.e., the other system determines and agrees that the interaction has value), and (2) capable of improving its own state by acquiring external resources (i.e., the system itself sees value in its interaction with other systems). Service systems are dynamic configurations of resources, both operant resources that perform actions on other resources and operand resources that are operated on. In this context, economic exchange depends on voluntary, reciprocal value creation between service systems (each system must willingly interact, and both systems must be improved)” (Maglio et al., 2009, p. 149). Thus, “a service system is an arrangement of resources (including people, technology, information, etc.) connected to other systems by value propositions. A service system’s function is to make use of its own resources and the resources of others to improve its circumstance and that of others” (Vargo et al., 2008, p. 149). The capability of the service systems to co-create value, effectively depending on the resources of others in terms of interdependence of service-for-service exchange and resource integration. Value co-creation occurs through the integration of existing resources with those available from a variety of service systems that can contribute to system well-being as determined by the system’s environmental context. “Service systems interact through mutual

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service exchange relationships, improving the adaptability and survivability of all service systems engaged in exchange, by allowing integration of resources that are mutually beneficial” (Lusch and Vargo, 2006; Vargo et al., 2008, p. 145). It emerges that value co-creation is one of the key components of service systems, which has been conceptualized by Service-Dominant (S-D) logic perspective as a phenomenon that spread from customer’s involvement in production, design, customization or association process (Vargo and Lusch, 2008; Vargo, 2008; Gummesson et al., 2010). This perspective has been used to emphasize the customer’s collaborative role in value creation, in fact, the customer is always a co-producer (Vargo and Lusch, 2004) and an active part of the system. This implies the evolution of value creation from a solely company-centric approach towards one with more interaction with the customer (Hribernik et al., 2011). In this optic, “co-creation is the process by which products, services, and experiences are developed jointly by companies and their stakeholders, opening up a whole new world of value. Firms must stop thinking of individuals as mere passive recipients of value, to whom they have traditionally delivered goods, services, and experiences. Instead, firms must seek to engage people as active co-creators of value everywhere in the system” (Ramaswamy, 2009, p. 11). On the basis of this concept, “all participants in the value-creation process be viewed as dynamic operant resources. Accordingly, they should be viewed as the primary source of firm and national innovation and value creation. “The terms “co-creation”, “co-production”, and “prosumption” refer to situations in which consumers collaborate with companies or with other consumers to produce things of value” (Humphreys and Grayson, 2008, p. 963). In contrast with the traditional models of value creation, which suggest that value is created by firms (Normann, 2001), this new perspective suggests that customers are active participants in the process of creation of value (Prahalad and Ramaswamy, 2004; Vargo and Lusch, 2004, 2008; Vargo et al., 2008). The literature regarding S-D logic emphasizes the primacy of operant resources, who are capable of acting on other resources to contribute to value creation (Constantin and Lusch 1994; Vargo and Lusch 2004). The study attributes importance to the value-creating processes that involve the customer as a co-creator of value (Lusch and Vargo 2006, p. 181), but relatively little is known about how value is collaboratively created (co-created) in the cultural sector. To fill this gap, the next section contribute to a deeper understanding of this topic through the lens of S-D logic perspective. Finally, two initiatives (QRator and The “O”) concerned with the given phenomenon are analyzed according to the S-D logic in order to explore the nature of the value co-creation process. 2.3 Internet of Things and value co-creation in the cultural sector according to the S-D Logic

In the cultural industry, value co-creation is an emerging concept associated with the opportunity to gain competitive advantage aiming at better satisfying customers’ demands for personalized products, services and experiences (Prahalad and Ramaswamy, 2004). Compared to past, when cultural institutions (museums, theatres, libraries etc.), decide the services they will produce, and visitors have little or no role in value creation; today, in the vision of an increasing number of cultural institutions, the customer becomes a co-creator of value. The Internet of Things and its embedded devices are making possible new and more effective ways for producers and consumers to collaborate, in the co-production and co-creation of value (Bogers et al., 2010; Greer and Lei, 2012). In particular, in the cultural organizations that mainly produce symbolic goods whose value arises from their ability to bring forth an emotional response from consumers (O’Connor, 2000), value co-creation arises less from producing tangible benefits for consumers and more from increasing symbolic and emotional value. Consequently, customers’ knowledge and skills can become a valuable resource for firms, allowing them to gain the flexibility needed to adapt to the rapidly-changing business environment (Prahalad and Ramaswamy, 2000). These concepts share the idea that passive consumers/audiences have become active value creators. In fact, “a digital environment promoting interactivity has fostered a greater capacity and a greater interest by audiences to change, alter and manipulate a text or a textual narrative, to seek co-participation in authorship, and to thus redefine the traditional author– text–audience relationship” (Cover, 2006, p.140). According to the S-D Logic perspective, IoT can be conceptualized as an operant resource that can act on other resources (including other operant resources) to create change. The choice to study the value-co creation in the cultural sector is motivated by the fact that the cultural industries, in economic terms, is one of the fastest growing sectors of the world economy. This growth is accounted for by rapid techno-economic change in products, distribution and marketing that allows for easier production, distribution, consumption as well as co-creation of cultural products and services.

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3. Research methodology The objective of the paper is to explore issues relating to value co-creation in the IoT era. In particular the work intends to focus that issues in the field of cultural institutions. The methodology used to investigate value co-creation in the cross section field of IoT and cultural institutions is mainly qualitative which is well suited to exploratory investigations where the objective is not to validate a research proposition but to explore and develop a proposition (Miles and Huberman, 1994). The research, essentially exploratory in nature, was developed using a case study methodology (Yin, 1994, 2003). The case study approach, as suggested in the literature has the dual aim of “grasping in detail the main characteristics of phenomena being studied” and of understanding the dynamics of a given process (Ryan et al., 2002). Thus, the paper proposes an analysis of two initiatives. Each initiatives was analyzed according to the S-D logic perspective in order to understand the role of all participants in the co-creation of value. The study has been conducted on the basis of the following items: 1. configuration of resources; 2. at least one operant resources; 3. service as the application of resources; 4. value is improvement in a system (ability to adapt to an environment); 4.1 value in use (value driver); 5. economic exchange on a voluntary basis; 6. value creators; 7. process of (co)creation; 8. purpose of value; 9. role of good (operant resources). All of these elements derived from the S-D Logic theoretical framework explained in the previous sections. One of these is the QRator project at the Grant Museum of Zoology and at the Museum of the Brands in London. The other is the “O” at the Museum of Old and New Art in New Zealand. These projects are interesting because, in both cases, visitors contribute in the creation of value.

4. The QRator project in the Grant Museum of Zoology and the Museum of the Brands in London The QRator is a visitor engagement project, applied in the Grant Museum of Zoology and in the Museum of the Brands in London with the aim to actively engage visitors in the co-creation of their own interpretations of museum collections with the adoption of IoT devices such as QR Code, iPhone, iPad and Android apps. It is a collaborative initiative between the UCL Centre for Digital Humanities (UCLDH), UCL Centre for Advanced Spatial Analysis (CASA), and UCL Museums and Collections, to develop new kinds of content, co-curated by the public, museum curators, and academic researchers, to enhance museum interpretation, community engagement and establish new connections to museum exhibit content. In line with the S-D logic perspective, this initiative is based on the idea to give the visitor the opportunity to become a co‐curator while interpreting and commenting on exhibition content in an individual way. In fact, “through this approach visitors thoughts become part of the museum object’s history and its display, creating digital living labels which subsequent visitors can read and respond to in real time” (Claire Ross, UCL DH). This project is based around the technology behind “Tales of Things” (http://www.talesofthings.com) which “has developed a method for cataloguing physical objects online, which could make museums and galleries a more interactive experience” (Giles, 2010). At various stages, throughout mobile phone application or direct via the iPad’s keyboard, users are invited to interact with the device and contribute to the continuing conversation and co-creation of value. The system interlinks with Tales of Things and distributes the information to an accompanying website (http://www.qrator.org). According to the S-D logic propositions, QRator aims rethink museums as a place not only for a passive experience, but also for conversation – a cultural laboratory for the meeting of minds and a place of experimentation, dialogue and debate.

5. The “O” at the Museum of Old and New Art in New Zealand The Museum of Old and New Art in New Zealand, better known as MONA is the most visited single attraction in Tasmania. When visitors enter MONA they are each equipped with the “O” device: an iPod Touch loaded with an app that draws on ubiquitous wi-fi and active RFID technology to deliver interpretation about nearby artworks. This not only creates a seamless experience for visitors but provides the museum with data on how many people have viewed which works (and how many times), how users remix the provided information to create their own tours, and what

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they choose to “love” or “hate” about the museum. The “O” application, according with the S-D logic perspective, delivers information in a way that enhances the visitor’s experience of the gallery, facilitating access to engaging multimedia via a highly usable interface in a continuous process of value creation. Delivered on an iPod Touch, the “O” uses an internal positioning system to locate visitors when they request information about nearby artworks. Visitors are provided with various types of content (written, audio and video) and are invited to love or hate the works they view on the device. Given the option to save their tour, visitors can log in to the MONA website at a later date and view a 3D model of their tour through the museum and investigate all the information made available on the device (even for the artworks they missed).

6. Discussion In this section we discuss the QRator and the “O” projects according to the S-D logic in order to better understand how value is collaboratively co-created in the cultural industry. In particular, we individualize the presence or not of nine S-D logic items concerning value (see table 4). Starting from the first item, “configurations of resources”, each project include people, information, and technology. For this reason, the first assumption is validated for both. In particular, the QRator project is based around the technology behind “Tales of Things”. Continuing with the second assumption, the role of operant resources if fundamental to enables access to benefits of firm competences. In the QRator project, information technology is considered as an operant resource whereas in the “O”, the IoT should be understood as an operant resources and “as a set of practices and processes, as well as symbols, that contribute to value creation or fulfill a human need” (Akaka and Vargo, 2013). According with the definition of service as “the application of resources, including competences, skills, and knowledge, to make changes that have value for another (system)”, it is clear that, these two project describe the process of value co-creation through interaction and integration of resources within and among service systems. Thus, these systems interact through mutual service exchange relationships, improving the adaptability and survivability of all service systems engaged in exchange, by allowing integration of resources that are mutually beneficial. In this context, value is improvement in a system, as determined by the system or by the system’s ability to adapt to an environment. Value is fundamentally derived and determined in use. Certainly, customers are value creators. In fact, in the QRator project visitors are engaged in the co-creation of their own interpretations of museum collections with the adoption of IoT devices with a little contribution cause of a predefined way of interaction. In the “O”, they deliver interpretation about nearby artworks with a great possibilities of content combination. In each project museum propose value through market offerings, customers continue valuecreation process through use. Customers co-create value through the integration of firm-provided resources with other private and public resources. The purpose of value increase adaptability, survivability, and system wellbeing through service (applied knowledge and skills) of others. TABLE 4: COMPARISON BETWEEN QRATOR AND THE “O”

1. 2. 3. 4.

S-D logic Configuration of resources At least one operant resources Service as the application of resources

QRator Yes Information Technology Yes

The O Yes Internet of Things Yes

Value is improvement in a system (ability to adapt to an environment)

Yes

Yes with increasing possibilities of choice

4.1. Value in use (value driver)

Yes

Yes

5.

Economic exchange on a voluntary basis

Yes

Yes

6.

Value creators

Yes: human and IT (little)

Yes: human and IoT (more)

7.

Process of (co-)creation

Yes with a little contribution cause of a predefined way of interaction

Yes with a great possibilities of content combination

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Source: our elaboration.

7. Implications and Conclusions According to the S-D logic perspective, customers are active players and co-creators of knowledge contributing in the development of value creation processes according to the S-D logic perspective. As this paper shows, IoT can be conceptualized as an operant resource - one that is capable of acting on other resources to create value - and, thus, becomes a critical resource for value co-creation, service innovation and systems (re)formation. To sum up, Internet of Things, is a new revolution of the Internet because objects can get an active role in the communication process. They, in fact, can communicate information about themselves and can access to the information created by other things (see fig. 1).

The Internet revolution Virtual

Real world

Communication & Knowledge

Information Technology

Intelligent and pervasive

The Internet of Things evolution

FIG. 1: THE INTERNET REVOLUTION VS THE INTERNET OF THINGS EVOLUTION Source: our elaboration

The Internet revolution had transformed the real word into a cybernetic word in which, all the computers connected can talk to each other and every knowledge is virtual. Then, with the Internet of Things there is an evolution of this Internet to all the things in the world. This change refers to a world where humans and things communicate and interact with each other in the same space and time (see fig. 2). In fact, people with the IoT, are able to access, adapt, select, and integrate resources in a continuous value co-creation process.

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FIG. 2: FROM INTERNET OF PEOPLE TO INTERNET OF THINGS Source: our elaboration

This study could be considered a first step in a stream of research on some unexplored aspects of IoT. This may involve in future, quantitative surveys, new practices and research challenges concerning Internet of Things and value co-creation in a service dominant logic perspective.

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