Minder Chen, Ph.D. Associate Professor of MIS Chair of Business and Economics CSU Channel Islands...

Minder Chen, Ph.D. Associate Professor of MIS

Chair of Business and EconomicsCSU Channel Islands

[email protected]

Service Innovation and Management

Services - 2 © Minder Chen, 2009

References (I)• James Teboul, Service Is Front Stage: Positioning Services for Value

Advantage, Palgrave McMillan, 2006.

• Christopher H. Lovelock and Jochen Wirtz, Services Marketing, 6/E, Prentice Hall, 2007.

• James A. Fitzsimmons,Mona J. Fitzsimmons, Service Management: Operations, Strategy, and Information Technology, Irwin Professional Publication, 2008.

• Leonard Berry and Kent Seltman, Management Lessons from Mayo Clinic: Inside One of the Worlds Most Admired Service Organizations, McGraw Hill, 2008.

• Bill Hefley and Wendy Murphy (Editors), Service Science, Management and Engineering: Education for the 21st Century (Service Science: Research and Innovations in the Service Economy), Springer, February 1, 2008.

• Michael D. Johnson and Anders Gustafsson, Competing in a Service Economy: How to Create a Competitive Advantage Through Service Development and Innovation, Jossey-Bass, May 23, 2003.

• Robert F. Lusch & Stephen L. Vargo, The Service-Dominant Logic of Marketing: Dialog, Debate, And Directions, M.E. Sharpe, February 28, 2006.


References (II)

• Putting the Service-Profit Chain to Work, Heskett, James L.; Jones, Thomas O.; Loveman, Gary W.; Sasser, Jr., W. Earl; Schlesinger, Leonard A.. Harvard Business Review, Jul-Aug 2008, Vol. 86 Issue 7/8, p118-129.

• How to Sell Services MORE Profitably, Reinartz, Werner; Ulaga, Wolfgang. Harvard Business Review, May 2008, Vol. 86 Issue 5, p90-96.

• The Four Things a Service Business Must Get Right, Frei, Frances X.. Harvard Business Review, April 2008, Vol. 86 Issue 4, p70-80.

• BREAKING THE TRADE-OFF Between Efficiency and Service, Frei, Frances X., Harvard Business Review, Nov. 2006, Vol. 84 Issue 11, p92-101.

• Vargo, Stephen L. and Lusch, Robert F. (2004a) ‘Evolving to a New Dominant Logic for Marketing’, Journal of Marketing 68(1): 1–17.

• Vargo, Stephen L. and Lusch, Robert F. (2004b) ‘The Four Services Marketing Myths: Remnants from a Manufacturing Model’, Journal of Service Research 6(4): 324–35.

• Succeeding through Service Innovation: A Service Perspective for Education, Research, Business and Government, by: IfM and IBM, 2008


Evolution of Works


Classification of Services

• Extractive (agriculture, mining)

• Transformative (construction, food, manufacturing): Second sector

• Producer services (Business services and marketed services)

• Personal services (domestic, hotel, repair, dry-cleaning, entertainment, etc.)

• Distributive services (logistics, communication, wholesale and retail trade)

• Non-marketed services (Health, welfare, government, legal serices, education services, etc.)

Industry sector: Mining, Construction, & Manufacturing

Source: Front Stage


Service classification – Proximity to final customers

• Business-to-business services

• Consumer services

• “self-services”


Four Categories of Services

Information processing

(services directed at intangible assets):

Accounting

Banking

Nature of the Service Act People Possessions

Tangible Actions People processing

(services directed at people’s bodies):

Barbers

Health care

Who or What Is the Direct Recipient of the Service?

Possession processing

(services directed at physical possessions):

Refueling

Disposal/recycling

Mental stimulus processing

(services directed at people’s minds):

Education

Advertising/PR

Intangible Actions

More T-shaped Peopleto work in, study, and innovate

service systems

Social Science (People)

Management (Business)

Engineering (Technology)

Slide by Jean Paul Jacob

http://images.google.com/imgres?imgurl=http://www.effectivevision.co.uk/Crowd1.gif&imgrefurl=http://www.effectivevision.co.uk/&h=550&w=863&sz=61&tbnid=Yo45tQtyCSdabM:&tbnh=91&tbnw=144&hl=en&start=2&prev=/images%3Fq%3Dpeople%2Bcartoon%26svnum%3D10%26hl%3Den%26lr%3D


Service Characteristics

• A service is a deed, a performance, a process, an effort.

• What is being bought is intangible.

• Services are produced and consumed almost simultaneously.

• Services in principle cannot be inventories.

• Customers are involved in the production of the services.

• Manufacturing firms also have a service component of their own.

• Instant delivery and custom design are both services.


Service Definition

• A service is a means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks.

– ITIL Version 3


Services Definition

• A service is a provider/client interaction that creates and captures value.

• The provider and client coordinate their work (co-production) and in the process, both create and capture value (transformation).

• Services typically require assessment, during which provider and client come to understand one another's capabilities and goals.

• A time-perishable, intangible experience performed for a customer acting in the role of co-producer (Fitzsimmons, 2001)


Current services thinking

• A service is a provider-to-client interaction that creates and captures value while sharing risks

• Services are value that can be rented

• Services are the application of specialized competences (skills and knowledge)

• Services are autonomous, platform independent, business functions


Distinguishing services from goods

Inseparability Services are created and consumed at the same time Services cannot be inventoried Demand fluctuations cannot be solved by inventory processes Quality control cannot be achieved before consumptionConsideration: Does the ability to tailor and customize goods to the customers’

demands and preferences mean that these goods also have an inseparability characteristic?

Heterogeneity From the client’s perspective, there is typically a wide variation in service

offerings Personalization of services increases their heterogeneous nature Perceived quality-of-service varies from one client to the nextConsideration: Can a homogeneous perception of quality due to customer

preference idiosyncrasies (or due to customization) also benefit the goods manufacturer?


Distinguishing services from goods

Intangibility Services are ideas and concepts that are part of a process The client typically relies on the service providers’ reputation and the trust they

have with them to help predict quality-of-service and make service choices Regulations and governance are means to assuring some acceptable level of

quality-of-serviceConsideration: Do most services processes involve some goods?

Perishability (No inventory) Any service capacity that goes unused is perished Services cannot be stored so that when not used to maximum capacity the

service provider is losing opportunities Service capability estimation and planning are key aspects for service

managementConsideration: Do clients who participate in some service process acquire

knowledge which represents part of the stored service’s value? What might the impact be?

Co-produced


Service Layering

• Pure service: Legal service, barber shop

• IT-enabled Service: Google for information search, eBay for online auction services, WebMD for online health information

• IT Services: IT outsourcing service provider (IBM Global Service), on-demand data center (EDS), on-demand computing (IBM)

• Service-wrapped IT products: iTune and iPod; GM OnStar (Emergency service + remote diagnosis & sensing + GPS & Navigation)

• Manufacturing services: IC design houses, TSMC foundry service

• Pure manufacturing: Manufacturing of commodity products

Source: Minder Chen, 2007


Products vs. Services

• Products can be seen as the physical embodiment of the service provided.

– Cars provide comfortable transportation services

– Televisions deliver entertainment

– Cosmetics offer beatification services

– Cameras provides services for wonderful memory


OnStar Service from GM

OnStar By GM | OnStar.com, Car Safety Device and Vehicle Security Systemhttp://www.onstar.com/us_english/jsp/index.jspScreen clipping taken: 2007/3/6, 上午 07:56


iPod and iTune

Apple - iPod + iTunes, http://www.apple.com/itunes/, Screen clipping taken: 2007/3/6, 08:02


• November 4, 2003 - 08:35 EST Apple today announced that its first retail store in Japan will open in Tokyo's Ginza shopping district on Sunday, November 30 at 10:00 a.m. This will be Apple's 73rd retail store, and the first outside the United States. The new store will feature five floors ….


Inside an Apple Store

Applestore, Soho, New York, 20 Sep 2005


Computing Clouds: Amazon Web Services

Amazon Web Services Developer Connection : AWS Solutions Cataloghttp://solutions.amazonwebservices.com/connect/index.jspaScreen clipping taken: 2007/3/6, 上午 08:08


3 New New Things （三創 )

• Creativity（創造力） : Individual and group creativity, creative problem solving process.

• Innovation(創新 ): Product/service and Process innovation, culture for innovation.

• Entrepreneurship(創業 ): Creating a business /enterprise, cost leadership, differentiation, focused market, etc.


Service Innovation

• Innovation in services, in service products – new or improved service products (commodities or public services). Often this is contrasted with “technological innovation”, though service products can certainly have technological elements.

• Innovation in service processes – new or improved ways of designing and producing services. This may include innovation in service delivery systems, though often this will be regarded instead as a service product innovation.

• Innovation in service firms, organizations, and industries – organizational innovations, as well as service product and process innovations, and the management of innovation processes, within service organizations.

http://en.wikipedia.org/wiki/Service_innovation


Dimensions of service innovation

• The Service Concept: A “new value proposition”.

• The Client Interface: refers to innovation in the interface between the service provider and its customers. e.g., self-service

• The Service Delivery System: A "service factory" approach— is a standardized and industrialized environment for more effective service innovation.

• Technological Options: Customer loyalty cards and “smart” RFID cards for transactions.


Service-Oriented Model & Architecture

The service target may be the service client itself.


Provider-Client relationship• Provider

– An entity (person, business, or institution) that makes preparations to meet a need

– An entity that serves

• Client

– An entity (person, business, or institution) that engages the service of another

– An entity being served

• Some general relationship characteristics are that the client

– Participates in the service process (also known as the service engagement)

– Co-produces the value

– The quality of service delivered depends on customers preferences, requirements, and expectations


Five Key Areas for Service Innovation in High Tech

1. The Capture, Management and Re-use of Knowledge is progressing slowly. Where are the breakthroughs?

– In electronic self help? In professional services/consulting IP capture?

2. The Growing Complexity of the Customer’s Systems is increasing cost-to-serve and negatively effecting customer satisfaction. How can we apply innovative approaches to tracking the customer environment, the cause of problems and to facilitate cooperative service provision among different companies with common customers?

3. What are future approaches to Building Supportability Into Technology Products?

– Predict environments conducive to problems

– Sense developing problems; Take Pre-emptive actions (automated and non)

– Collect information for service providers

4. Service organizations know more about the use of products and changing customers environments than any other part of the company. How can we Turn Mountains of Data Into Usable Management Information for services management, the sales force and product development teams?

5. The Services Supply Chain is becoming increasingly complex. Innovation around the “service system” business model that can help companies partner effectively will help both the quality of customer solutions and the bottom line.


Service innovation is inherently multidisciplinary

Science & Engineering

Business Administrationand Management

Social Sciences

Global Economy& Markets

BusinessInnovation

TechnologyInnovation

Social-OrganizationalInnovation

DemandInnovation

SSME = Service Sciences, Management, and Engineering

Knowledge sources driving service innovations…


Manufacturing vs. Services: A matter of Degree

Manufacturing Sector Service Sector


Three Types of Restaurants

Source: Service Is Front Stage

Teppanyaki-typeRestaurant (i.e., Benihana)


Services: The front-stage experience

manufacturing


In-N-Out Burger

http://www.in-n-out.com/menu.asp


Important Factors to Fast-Food Users

• The cleanliness of the restaurant (77 percent rated this “extremely important”),

• Taste or flavor of the food (73 percent)

• Order accuracy (66 percent).

• Quality of ingredients also is highly important (64 percent)

• Temperature of food ranks next in importance (57 percent).

http://www.sandelman.com/news/pdf/2005AwardsofExcellenceRelease.pdf


懷石料理Kaiseki or kaiseki ryōri

Manchu Han Imperial Feast (Chinese cuisine 108 dishes)


Japanese teppanyaki cooking: Hibachi-style• Moving the backstage to the frontstage

• Dining + Entertaining (Showmanship)• http://www.benihana.com/about/the-benihana-story

• http://www.youtube.com/watch?v=P9SUw0ARqwc&feature=related

• http://www.youtube.com/watch?v=aX6gUMRqJjA&feature=related

• http://www.youtube.com/watch?v=J1LGJ4rKX0g&feature=related

• http://www.youtube.com/watch?v=3zATulLPfVc&feature=related

• http://en.wikipedia.org/wiki/Teppanyaki


Food for Thought?


• Complimentary flatbed pick-up & delivery of your vehicle.

• New Express Service: Oil change in 30 minutes.

• Loaner Vehicles and complimentary car wash with every service.

• Longo Lexus courtesy pickup and dropoff shuttle (within a 15-mile)

• Guest Lounge with complimentary cappuccinos, coffee, tea, and pastries.

• Kids Play Area with children's movies and games.

• Guest Business Center provides computers, copier, fax and printer, & phone.

• Wireless internet access available throughout our facility.

• Starbucks Coffee and Subway sandwich restaurant located at our facility.

http://www.longolexus.com/AboutServiceAndParts


Empowered Customer-Focus Processes

Values and Quality delivered to

Customers timely

Empowered Font-line worker

Customer-facing Process

Manager as Coach

Teamwork


The Progression of Economic Value

WELCOME TO THE EXPERIENCE ECONOMY. Pine, II, B. Joseph; Gilmore, James H.. Harvard Business Review, Jul/Aug98, Vol. 76 Issue 4, p97-105.


Build a Bear Workshop

• http://www.buildabear.com/aboutus/ourcompany/process.aspx


Servant Leadership

• Customer

• Distributors/Dealers

• Front-line workers

• Supervisor

• Managers

• CIO, CFO, COO

• CEO


Employees and Customers

“You don’t get happy guests with unhappy employees.”

J. W. Marriot


Value Chain of People

Employee

Value

Customer

Satisfaction

Business

Profitability

Shareholder

Value

++

+

++

+


Service Profit Chain


Lifetime Value of a Customer


The Service Triangle

WOM: Words of Mouth


The Service Triangle

Frontline employee

Customer

Firm

Product and process formulation

Low turnoverProductivity Loyalty

High-quality internal services and Good internal management

Revenue growth and profitability

Relationship

Value of service provided

(Teboul, 2005, p. 33).


Customer Loyalty


Zappos.com

• YouTube - Zappos on Nightline www.youtube.com/watch?v=tFyW5s_7ZWc

• Amazon acquires Zappos for $850M Million

• Video from Jeff Bezos about Amazon and Zappos

• Zappos on face book http://www.facebook.com/zappos?v=app_3801015922

• http://twitter.com/zappos

• http://ag.arizona.edu/rtip/Symposium/2008/08_powerpoint/c_adkins_zappos.pdf

• Why Zappos are so successful in selling shoes online?

• How would you use Web 2.0 for your business?

• Anything unique about the Web site design?


Zappos at a Glance• Founded in 1999,1600 employees (half in Las Vegas,

Nevada, half in Louisville, Kentucky)

• Zappos is “Powered by Service”

• Providing the best online shopping experience possible.

– Fast, Free Shipping. Free return shipping. 365‐day return policy.

– Fast fulfillment. Expedited delivery. Fast, friendly & expert customer service.

• Best selection:

– Over 1200 brands, over 200,000 styles, over 900,000 unique UPCs. Over 4 million items in warehouse

– Photography in multiple angles & 100% in‐house.

– 100% of products inventoried (no drop ship).

• Zappos is a service company that happens to sell shoes, clothing, handbags, eyewear, watches (and eventually a bunch of other stuff).


Zappos Core Value

1. Deliver WOW Through Service 2. Embrace and Drive Change 3. Create Fun and A Little Weirdness 4. Be Adventurous, Creative, and Open-Minded 5. Pursue Growth and Learning 6. Build Open and Honest Relationships With

Communication 7. Build a Positive Team and Family Spirit 8. Do More With Less 9. Be Passionate and Determined 10.Be Humble

http://about.zappos.com/our-unique-culture/zappos-core-values/deliver-wow-through-service


Zappos Success• encouraging customers to order as many products as they wanted

in order to “try them on,” then offering free return shipping for a full 365 days

• only listing products on the site when stock was in their own warehouse (which actually lowered sales by 25% at a time when the company was still in the red)

• Run warehouse operation 24/7 to deliver super-fast turnaround on orders, despite it being an inefficient way to manage fulfillment

• encouraging customers to call them about nearly everything. Their call center takes 5,000 calls per day, and employees work independent of scripts, quotas, or call time limits. The longest call to date has been four hours. Zappos views the phone experience as a branding device, and speaks to virtually every customer at least once.

• deciding to invest in “surprise” (free) upgrades to overnight shipping for most customers. This means that most orders are delivered within 24 hours, despite the web site indicating it will take 2-5 business days.


Zappos: 10 Things Learned in e‐commerce 1. The e‐commerce business is built on repeat customers

2. Word of mouth really works online

3. Don’t compete on Price

4. Make sure your web site inventory is 100% accurate

5. Centrally locate your distribution

6. Customer service is an investment, not an expense.

7. Start small, stay focused

8. Don’t be secretive. Don’t worry about competitors

9. You need to actively manage your company culture

10. Be wary of so‐called experts…INCLUDING US!!!

Services - 57 © Minder Chen, 2009 57

Service blueprint components

Physical evidence

Customer actions

OnstageEmployee actions

BackstageEmployee actions

Support processes

Line of interaction

Line of internal interaction

Line of visibility

Desktop PC and applications, ticket, records

IT request, problem call to help desk, etc

Takes call, opens ticket, visit to employee desk side

Refers to manuals, asks for help from team

Time recording, payroll, training, etc


Customer Life Cycle

Welcom

e

Awareness

GettingTo Know

Win

back

Targeting

Account

Management

Intensive

Care

Pre-Divorce/Divorce

Translate Failure into Success!The Proof!

"Moments of Truth"

Cross-Selling,Profit Opportunities

Delivery, Welcoming service andContinuous Contact Processes

Sales Processes (Including Business Partners)

Market and Customer Research and analysis


MOT Analysis Example: A Credit Card Company

• Pri to MOT – Recognition

– Information gathering

– Comparison

• MOT – Applying for Credit Card

– Receiving Credit Card

– Using Credit Card

– Providing Information

– Changing and Upgrading

– Gifts giving

– Emergency Assisting

• After MOT– No usage follow-up

– Stop membership follow-up


Customer Experiences of an Airline Passenger: SAS

SAS Scandinavian Airlines


Value Creation Cycle for a Full Service Hotel


Think from the Customer Back

The CustomerThe Customer

Management

Organization

Functions/Processes

Activities/Tasks

DefineOutcomes

RedesignOutputs

DetermineActivities

DefineJob Responsibilities

DevelopOrganization Structure

* Adapted from The Price Waterhouse Change Integration Team, Better Change, Irwin, 1995, p. 163.


EC and Business Processes

Seller Customer

Co

rpo

rate

Dat

abas

es

Provide Info

Get customer

Provide info

Fulfill Services

Support

Identify need

Find source

Evaluate offerings

Purchase

Operate, Maintain, Repair

Phone, fax, e-mail

Web site

Newsgroups

Net communities

Web site

EDI

Web site, phone, fax, e-mail, e-mailing list

Credit cards, e-cashP.O.s

Demos, reviews

Send info

Data sheets, catalogs, demos

Request info

Web surfing

Web searches, web ads

Deliver soft goods electronically


The Service Portfolio


Service Support Model


The Service Delivery Process Model


Service-Oriented Enterprise Architecture

View SERVICE PROCESS People Information Motivation

Strategic View

Service Strategy

Service Value Chain Framework

Customer Segmentation & Employee Attributes

Enterprise-Wide Conceptual Information Model

Visions, Missions, & Business Strategy

Tactic View

Service Portfolio & Catalogue

Customer Management Activity Model

Organizational Structure & Human Workflow

Logical Data Model

Business Goals

Operational View

Service Operations & Web Services

Service Blueprinting

Service Teams Physical Data Model & Dimensional Model for Data Warehouse

Performance Measure

Minder Chen, Ph.D. Associate Professor of MIS Chair of Business and Economics CSU Channel Islands...

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Transcript of Minder Chen, Ph.D. Associate Professor of MIS Chair of Business and Economics CSU Channel Islands...