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ROLE OF SERVICE IN AN ECONOMY
WHAT IS OPERATIONS?
• The transformation process that turns inputs
into outputs, that is, the act of combining
people, raw...
BUT I’M GOING INTO MARKETING,
FINANCE, STRATEGY…
• Regardless of your functional area, you will be
involved in “transforma...
SERVICE DEFINITIONS
Services are deeds, processes, and
performances.
Valarie Zeithaml & Mary Jo Bitner
A service is a time...
DEFINITION OF SERVICE FIRMS
Service enterprises are organizations that
facilitate the production and distribution of
goods...
ROLE OF SERVICES IN AN ECONOMY
WHY STUDY SERVICE OPERATIONS?
• Service firms are a large percentage of the
economies of industrialized nations
• 80% of t...
Chapter 1 - Services in the Economy
HISTORICAL US EMPLOYMENT BY
ECONOMIC SECTOR
PERCENT SERVICE EMPLOYMENT FOR
SELECTED NATIONS
Country 1980 1987 1993 2000
United States 67.1 71.0 74.3 74.2
Canada 67.2 ...
TRENDS IN U.S. EMPLOYMENT BY
SECTOR
0
10
20
30
40
50
60
70
80
90
Proportationoftotalemployement
Year
Service
Manufacturing...
STAGES OF ECONOMIC DEVELOPMENT
Society
Game
Pre-
dominant
activity
Use of
human
labor
Unit of
social life
Standard
of livi...
CHARACTERISTICS OF SERVICES …
• Rules:
• Services are intangible
• Simultaneous production
and consumption
• Proximity to ...
INPUTS
Materials
Equipment
Customers
Staff
Technology
Facilities
PROCESS
SERVICE OPERATION
Operation
Goods and
services
OU...
EXPERIENCE
OUTCOMES
Value
Emotions
Judgements
Intentions
SERVICE PRODUCT
Customer
INPUTS
Time
Effort
Cost
Figure: Service ...
INPUTS
Materials
Equipment
Customers
Staff
Technology
Facilities
PROCESS
SERVICE OPERATION
EXPERIENCE
OUTCOMES
Value
Emoti...
BUSINESS DECISIONS & INTEGRATIVE
ELEMENTS
PERCEIVED DIFFERENCES BETWEEN
MANUFACTURING AND SERVICES
Low High
High
Low
Capability
Commodity
Complexity
Simplicity
Process
variety
Volume per unit
Increasing
process
definition...
THE NEW EXPERIENCE ECONOMY
Economy Agrarian Industrial Service Experience
Function Extract Make Deliver Stage
Nature Fungi...
THE FOUR REALMS OF AN EXPERIENCE
Customer Participation
Passive Active
Environmental
Absorption Entertainment
(Movie): lea...
EXPERIENCE DESIGN PRINCIPLES
• Theme the Experience (Forum shops in Las
Vegas that are decorated with Roman
columns and wh...
EXPERIENCE DESIGN PRINCIPLES
• Eliminate Negative Cues
(Cinemark (Austin, Texas) talking trash
containers that says ‘thank...
Service value:
• All-inclusive price
• Car parking is extra
• Expensive ticket but well worth it
• Few additional costs
• ...
SOURCES OF SERVICE SECTOR GROWTH
• Innovation
Push theory (e.g. 3M, Post-it, discovery of a poor
adhesive translated into ...
SOURCES OF SERVICE SECTOR GROWTH
• Innovation (contd.)
• Information driven services (records of sales by
auto parts store...
SOURCES OF SERVICE SECTOR GROWTH
• Social Trends
Aging of the population
(in USA, the Traveller’s Insurance Company has
de...
Service
delivery
Customer
relationships
Performance
management
Supplier
relationships
Strategy
Service concept
THE SERVICE MANAGEMENT SYSTEM
(BASED ON NORMAN, 2000)
THE MANUFACTURING-SERVICE
INTERFACE IN THE OFFER TO THE
CUSTOMER
NORMAN’S ICERBERG PRINCIPLE IN
SERVICE OPERATIONS
role of service in an economy
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role of service in an economy

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role of service in an economy

  1. 1. ROLE OF SERVICE IN AN ECONOMY
  2. 2. WHAT IS OPERATIONS? • The transformation process that turns inputs into outputs, that is, the act of combining people, raw materials, technology, etc. into useable services and products • Who are in the operations function? • The people who actually make a product or perform a service • Typically operations has the largest number of employees of any functional area
  3. 3. BUT I’M GOING INTO MARKETING, FINANCE, STRATEGY… • Regardless of your functional area, you will be involved in “transformational processes”, in other words, “getting things done” • Service operations can help you get things done more effectively and more efficiently.
  4. 4. 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
  5. 5. 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
  6. 6. ROLE OF SERVICES IN AN ECONOMY
  7. 7. WHY STUDY SERVICE OPERATIONS? • Service firms are a large percentage of the economies of industrialized nations • 80% of the US economy (employment and GDP) • Gain a competitive edge. There is little focus on services in the academic world • Not all management tools that are appropriate for manufacturing are transferable into a service environment
  8. 8. Chapter 1 - Services in the Economy HISTORICAL US EMPLOYMENT BY ECONOMIC SECTOR
  9. 9. PERCENT SERVICE EMPLOYMENT FOR SELECTED NATIONS Country 1980 1987 1993 2000 United States 67.1 71.0 74.3 74.2 Canada 67.2 70.8 74.8 74.1 Israel 63.3 66.0 68.0 73.9 Japan 54.5 58.8 59.9 72.7 France 56.9 63.6 66.4 70.8 Italy 48.7 57.7 60.2 62.8 Brazil 46.2 50.0 51.9 56.5 China 13.1 17.8 21.2 40.6
  10. 10. TRENDS IN U.S. EMPLOYMENT BY SECTOR 0 10 20 30 40 50 60 70 80 90 Proportationoftotalemployement Year Service Manufacturing Agriculture
  11. 11. STAGES OF ECONOMIC DEVELOPMENT Society Game Pre- dominant activity Use of human labor Unit of social life Standard of living measure Structure Technology Pre- Industrial Against Nature Agriculture Mining Raw muscle power Extended household Sub- sistence Routine Traditional Authoritative Simple hand tools Industrial Against fabricated nature Goods production Machine tending Individual Quantity of goods Bureaucratic Hierarchical Machines Post- industrial Among Persons Services Artistic Creative Intellectual Community Quality of life in terms of health, education, recreation Inter- dependent Global Information
  12. 12. CHARACTERISTICS OF SERVICES … • Rules: • Services are intangible • Simultaneous production and consumption • Proximity to the customer • Services cannot be inventoried • Exceptions: • Facilitating goods: playbills, groceries • Computer system upgrades; janitorial services • Internet-based services; catalogs • Retailers hold inventory; hotel rooms, airline seats are inventory
  13. 13. INPUTS Materials Equipment Customers Staff Technology Facilities PROCESS SERVICE OPERATION Operation Goods and services OUTPUTS Figure: The service operation
  14. 14. EXPERIENCE OUTCOMES Value Emotions Judgements Intentions SERVICE PRODUCT Customer INPUTS Time Effort Cost Figure: Service = experience + outcome
  15. 15. INPUTS Materials Equipment Customers Staff Technology Facilities PROCESS SERVICE OPERATION EXPERIENCE OUTCOMES Value Emotions Judgements Intentions SERVICE PRODUCT Customer Operation Figure: Managing service and service operations
  16. 16. BUSINESS DECISIONS & INTEGRATIVE ELEMENTS
  17. 17. PERCEIVED DIFFERENCES BETWEEN MANUFACTURING AND SERVICES
  18. 18. Low High High Low Capability Commodity Complexity Simplicity Process variety Volume per unit Increasing process definition Decreasing unit costs Figure: Four main types of service processes
  19. 19. THE NEW EXPERIENCE ECONOMY Economy Agrarian Industrial Service Experience Function Extract Make Deliver Stage Nature Fungible Tangible Intangible Memorable Attribute Natural Standardized Customized Personal Method of supply Stored in bulk Inventoried Delivered on demand Revealed over time Seller Trader Manufacturer Provider Stager Buyer Market User Client Guest
  20. 20. THE FOUR REALMS OF AN EXPERIENCE Customer Participation Passive Active Environmental Absorption Entertainment (Movie): least involved level of experience Education (Language) Relationship Immersion Esthetic (Tourist) Escapist (Scuba Diving): requires the most commitment from the customer
  21. 21. EXPERIENCE DESIGN PRINCIPLES • Theme the Experience (Forum shops in Las Vegas that are decorated with Roman columns and where the salespeople wear togas) • Harmonize Impressions with Positive Cues (O’Hare airport parking garage, each floor is painted with a distinctive colour and unique music – hard rock on the first floor and classical on the second)
  22. 22. EXPERIENCE DESIGN PRINCIPLES • Eliminate Negative Cues (Cinemark (Austin, Texas) talking trash containers that says ‘thank you’ when an item s discarded ) • Mix in Memorabilia (Hard Rock T-shirts or group pictures of vacationers) • Engage all Five Senses (Jungle sounds and mist in the air at the Rainforest Café in Las Vegas)
  23. 23. Service value: • All-inclusive price • Car parking is extra • Expensive ticket but well worth it • Few additional costs • Food reasonably priced • Overall excellent value for money Service operation: • Good signage to the park • Large car parks • Clear site maps • Different queuing systems • Range of food outlets • Over 100 rides and attractions Organising idea: A great day out at a theme park Organisation: Alton Towers, Staffordshire, UK Service outcome: • Great day out • Fun time • Thrilling rides • Never a dull moment • Great experience with friends/family • Exhausting Service experience: • Quick and easy to buy ticket • Exhilarating and entertaining • Fun and lively, for all ages • Range of attractions • Plenty of food and drinks • Long queues for main rides at peak Service concept (summary): A UK theme park that provides an inclusive package of over 100 rides and attractions to suit all ages and tastes with thrills, fun, fantasy, fast food, historic heritage and magnificent gardens. Figure: Alton Towers’ service concept
  24. 24. SOURCES OF SERVICE SECTOR GROWTH • Innovation Push theory (e.g. 3M, Post-it, discovery of a poor adhesive translated into a glue for notes for temporary attachment; www as a place of commerce is changing the delivery of services) Pull theory (e.g. Cash Management Account introduced by Merrill Lynch(during the period of high interest rates in the 1980s, a need arose to finance short-term corporate cash flows, and individual investors were interested in obtaining an interest rate that was higher than those currently available on passbook bank deposits); after the French Revolution, the chefs employed by the dispossessed nobles opened their own restaurants) Services derived from products (Video Rental creating a renewed demand for old movies)
  25. 25. SOURCES OF SERVICE SECTOR GROWTH • Innovation (contd.) • Information driven services (records of sales by auto parts stores can be used to identify frequent failure areas in particular models of cars – the information having value both for the manufacturer who can accomplish engineering changes, and the retailer who can diagnose customer problems) Difficulty of testing service prototypes, providing a partial explanation for the high failure rate of service innovations, particularly in retailing and restaurants, (Burger King mock restaurant in Miami, beta versions of software)
  26. 26. SOURCES OF SERVICE SECTOR GROWTH • Social Trends Aging of the population (in USA, the Traveller’s Insurance Company has developed a Retirement Job Bank of its retired employees to fill-in during hard times) • Two-income families (day-care, pres-school, home delivery, eating out services) • Growth in number of single people (recreational sports and other group-oriented activities will be in demand) All these social trends support the notion that Home will become a sanctuary for people in future (with IT- enabled connectivity in various forms)
  27. 27. Service delivery Customer relationships Performance management Supplier relationships Strategy Service concept
  28. 28. THE SERVICE MANAGEMENT SYSTEM (BASED ON NORMAN, 2000)
  29. 29. THE MANUFACTURING-SERVICE INTERFACE IN THE OFFER TO THE CUSTOMER
  30. 30. NORMAN’S ICERBERG PRINCIPLE IN SERVICE OPERATIONS

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