Service Operations

Management
Instructor: Manpreet Hora
Agenda
• Objectives of the Course
• What is service operations management?
• Course Details
• Content
• Organization
• Grading
• Material
Teaching Development: Cases
Research: Failures (Service Failures, Product
Recalls, Oil Spills)

John Cole, 2014

 Resources: Inputs and Outputs

Physical Service Quality

resources

Delivery Customer
Organizational
System Value
Systems

Technology
and
Information
The Three Key Takeaways

Delight

Deliver

Design

6
Course Objectives

• Study "breakthrough" services in order to understand the operations of

successful service firms that can be benchmarks for future management
practice.

• Develop an understanding of the "state of the art" of service management

thinking.

• Develop an awareness of the opportunities that information technology can

have for enhancing competitiveness of service firms.

• Appreciate the organizational significance of managing the service encounter

to achieve internal and external customer satisfaction.

• Understand the dimensions of service growth and expansion both

domestically and internationally.

• Gain an appreciation of the complexities associated with implementing

change.
Target Participants
• Consult for financial services, IT, outsourcing,
healthcare and hospitality
• Work for services firms as operations or marketing
managers
• Analyze and value service firms as research
analysts in investment banks
• Be involved in entrepreneurial activity
• Interest in not-for-profit sector
• Has a general interest in the services sector and/or
operations management
Course Package
Package
• Articles
• Cases used in this course
• Presentations

Recommended (not required) Text Books

 Fitzsimmons, James A., and Mona J. Fitzsimmons, Service Management:
Operations, Strategy, and Information Technology, 8th Ed., Irwin/McGraw-Hill,
2013.

• R. Metters, K King-Metters and M. Pullman, Successful Service Operations

Management, Thomson South-Western, 2003.
Cases
• Real-time situation
• Dynamism and Interactive
• Analyzing and synthesizing conflicting data
• Managerial decision making with uncertain
information
Grading
• Details in the Syllabus
Class Participation
• Preparation – Case/ Articles
• ForClass
• Attendance
• Grading by Instructor/AA
• Criteria:
• Good listener?
• Points relevant to the discussion?
• Evidence of applying the concepts from the readings.
• Test new ideas and examples
• Comments clarify or build upon the important aspects of
earlier comments
What is a “service” ?
Service
Service
“I slept and dreamt that
life was joy. I awoke and
saw that life was service.
I acted and behold,
service was joy.”
Service
How can we convert the “joy” of
service into profits?
17
Service Definitions
Services are deeds, processes, and performances.
Valarie Zeithaml & Mary Jo Bitner

A service is a time-perishable, intangible experience performed for a

customer acting in the role of a co-producer.
James Fitzsimmons
Definition of Service Firms
Service enterprises are organizations that facilitate the production
and distribution of goods, support other firms in meeting their goals,
and add value to our personal lives.
James Fitzsimmons
 Trends in U.S. Employment by Sector
Services:
Value from enhancing the
capabilities and interactions among
people
Goods:
Percent

Value from
making a product

Agriculture:
Value from
harvesting nature

Year 2012
1-20
Distribution of U.S. Employment, 2009

Agriculture and mining

2% Construction
Retail and 5%
wholesale trade
14% Manufacturing
9%

Federal government 2%

Information 2%
Professional and
business services
12% Transportation and utilities 19%

Other services 4%

Health care
and social assistance State and local government
11% 13%

Educational services
2% Self employed and
Financial services unpaid family workers
Leisure and hospitality 6%
6%
9%

1-21
“Services generate about 70% of US GDP
and 85% of US jobs” … WSJ Jan. 6, 2009
 Role of Services in an Economy

FINANCIAL SERVICES INFRASTRUCTURE SERVICE

· Financing · Communications
· Leasing · Transportation
· Insurance · Utilities
· Banking

PERSONAL SERVICES
MANUFACTURING · Healthcare
Services inside company: · Restaurants
· Finance DISTRIBUTION · Hotels
· Accounting SERVICES
· Legal · Wholesaling
· R&D and design · Retailing
· Repairing CONSUMER
(Self-service)

BUSINESS SERVICES
· Consulting GOVERNMENT SERVICES
· Auditing · Military
· Advertising · Education
· Waste disposal · Judicial
· Police and fire protection
Services
And manufacturing employment is falling almost everywhere, including in China. The phenomenon is driven by technology,
and there’s reason to think developing countries are going to follow a different path to wealth than the U.S. did—one that
involves a lot more jobs in the services sector.

In India, manufacturing accounted for 10 percent of employment in 1960,

rising to 13 percent in 2002 before the level began to fall.
Services accounted for about one-half of global output in 1980, now they
make up 70 percent. In Brazil, the share is 67 percent; in India, 55 percent;
and even in China, where manufacturing remains outsize, services, at 43
percent, still account for a larger proportion of GDP.
The most recent Groningen data for India suggests manufacturing accounted for 11 percent of employment and 16 percent of value
added. In the same year, services accounted for 22 percent of employment and 49 percent of value added.

Why Factory Jobs Are Shrinking Everywhere, Businessweek, Charles Kenny, April 28, 2014
 Distinctive Characteristics of Services

• Simultaneity: opportunities for personal selling, interaction creates

customer perceptions of quality
• Perishability: cannot inventory, opportunity loss of idle capacity, need to
match supply with demand
• Intangibility: creative advertising, no patent protection, importance of
reputation
• Heterogeneity: customer involvement in delivery process results in
variability
• Customer Participation in the Service Process: attention to facility
design, opportunities for co-production, concern for customer and
employee behavior
 Functional Overlaps

Operations
Business

Marketing Finance
Course Outline Review

• Nature of Services

• Service Delivery
• New Service Development

• Service Quality
• Service Productivity
• Service Failures and Service Recovery

• Managing Capacity and Demand

• Capacity Management and Process Analysis
• Demand Management

• Service Profit Chain

Course Outline Review

• Nature of Services
Context
• Service Delivery Financial Services
• New Service Development Airlines
Health Care
• Service Quality Hospitality
• Service Productivity
• Service Failures and Service Recovery

• Managing Capacity and Demand

• Capacity Management and Process Analysis Approach
• Demand Management Qualitative and
Quantitative
• Service Profit Chain
 Group Assignment

• Case write-ups and associated short presentations

• Presentations
• About 10 to 12 minutes
• Assigned questions to be addressed

• Written Component
• Ability to relate the concepts from the readings to the issues in the
specific situation.
• How well the discussion generated insights and ideas from the
participants.
• How effectively the team led the discussion.
• Was the analysis complete?
 Service Project
• The individual project will cover the tools and
concepts developed in the course. The project will
focus on product companies with a service growth
potential and more details will be provided. Needless
to say, the work performed on the project must be
strictly your own.
Cases
 It's easy to forget that so many of the goods that surround us made long
journeys across vast stretches of ocean to reach their destination--

Much as you might fancy yourself a world traveler, chances are that even the lowliest
objects by your side at this very moment - a pen, a coffee mug, a saltshaker - have
been around the globe, on the high seas, more than you ever will be. Source:
http://www.sfgate.com Monday, August 19, 2013
The Onset of Servicization

“People don’t want to buy a quarter-inch drill. They

want a quarter-inch hole!”
Theodore Levitt, HBS
The Onset of Servicization

“People don’t want to buy a quarter-inch drill. They

want a quarter-inch hole!” Theodore Levitt, HBS
 As-a-Service Model

Vs.
Product as-a- Product
Service
Source of Service Sector Growth

• Information Technology (e.g. Internet)

• Innovation
• Push theory
• Pull theory (e.g. Cash Management)
• Services derived from products (e.g. Netflix)
• Exploiting information

• Changing Demographics
Distribution of GDP in the US Economy

Product Services

A B

Physical 6% 31% 37%

Information
10% 53% 63%

C D

16% 84%
Chase (1996): Service Areas
• Service Encounter
• Interaction between service provider and customer
• Business Process Re-engineering
• Service Quality
• Linking to Performance
• Poka-Yoke
• Customer Loyalty
• Yield Management
• Information Revolution
• Customer Service
 Economic Evolution
Economy Agrarian Industrial Service Experience

Economic Food Packaged Commodity Consumer Business

Offering goods service services services

Function Extract Make Deliver Stage Co-create

Nature Fungible Tangible Intangible Memorable Effectual

Attribute Natural Standardized Customized Personal Growth

Method of Supply Stored in bulk Inventoried Delivered on Revealed over Sustained over
demand time time
Seller Trader Producer Provider Stager Collaborator

Buyer Market Customer Client Guest Collaborator

Expectation Quantity Features Benefits Sensations Capability

The Four Realms of an Experience

Customer Participation

Passive Active

Absorption Entertainment Education

Environmental (Movie) (Language)
Relationship Immersion Esthetic Escapist
(Tourist) (ScubaDiving)
 Typology of Services in the 21st Century

Core Experience Essential Feature Examples

Creative Present ideas

Enabling Act as intermediary

Experiential Presence of customer

Extending Extend and maintain

Entrusted Contractual agreement

Information Access to information

Innovation Facilitate new concepts

Problem solving Access to specialists

Quality of life Improve well-being

Regulation Establish rules and regulations

Sawhney et al. (2004)
Growth Opportunity Matrix
Spatial Expansion by GM

Source: Sawhney et. al, 2004

 Concluding Remarks

• “There are no such things as service industries. There are only

industries whose service components are greater or lesser than those
of other industries. Everybody is in service”. (Theodore Levitt, 1972)
 Next Session
• Topic : Nature of Services
• Pine, B. J and Gilmore, J H (1998) Welcome to the
Experience Economy, Harvard Business Review, July-
August, pp 97-105.
• F. X. Frei. Breaking the trade-off between efficiency and
service. Harvard Business Review, 84(11):92–101, 2006.