Solution Manual For Service Operations Management Improving Service Delivery, 5th Edition by Robert by StudyGuide

Contents Introduction to the instructor’s manual for Service Operations Management (Fifth edition)

Answers to case examples, discussion questions and case exercises

Part I

Framing service operations

Introduction to service operations

The world of service

Service strategy

The service concept

Part II

Part III

Part IV

Service people

Customer relationships

Service quality

Designing customer experience

People in the service operation

Service culture

112

Delivering service

123

Service supply networks

124

Designing the service process

137

Managing service performance

153

Service resources and capacity

172

Improving service operations

189

Service innovation

190

Service improvement

203

Learning from problems

213

Learning from other operations

224

Introduction to the instructor’s manual for Service Operations Management (Fifth edition) A tutor support website has been created by the authors at: www.servops.net. This site contains slides, video commentaries, case studies and other resources to support your teaching. Use of site requires you to register. Please be patient during the registration process. For obvious reasons we need to check that tutors are bona fide. If a tutor has an existing login and password to the servops site for fourth edition, then that login will work for the new servops site. This instructor’s manual in pdf form is a more portable, but much simplified version of the resources on the website. The purpose of the manual is to provide you with a basic set of resources to help you make best use of the text. In this document you will find answers to the following, organised by chapter:

Answers to end-of-chapter discussion questions Each chapter contains end-of-chapter discussion questions. These pages will provide answers and teaching notes for the questions, and in some instances, PowerPoint slides to help debrief the questions.

Information on case exercises At the end of every chapter there is a short, focused case study. These pages will provide detailed notes about how to teach and get the most out of each case study. Additional PowerPoint slides have been included in the PowerPoint packs (see below).

PowerPoint slides The figures in the book have been reproduced as PowerPoint slides in a form that you can develop and amend to fit with your style of presentation. We have also included some of the slides that can be used to debrief the end-of-chapter case studies. The slides can be downloaded with this instructor’s manual, or from servops.net.

Comments If you have any comments about this fifth edition, we would be pleased to hear from you. Please email the authors at: servopsreg@gmail.com. Your comments and suggestions will be read with keen interest and noted for future reference.

Answers to case examples, discussion questions and case exercises Discussion questions The questions for the most part relate to real organisations, albeit sometimes disguised. The purpose of the questions in this guide is to stimulate discussion, so there are no definitive answers. However, we have provided some discussion material and the occasional ‘solution’ as guidance. We have provided information on the key issues that we think should be covered in the answers. You will need to adapt the material to meet the needs of your particular students and your own teaching style. Some of the discussion questions require that students apply chapter concepts in their own or other organisations. The latter are therefore left open for you to explore with your students.

End-of-chapter case exercises The text is laid out to conform to the more traditional approach to teaching; text-based supported with cases. If you prefer to take a case-based approach you will find the cases rich enough to base a whole session around each one. We have deliberately kept the cases short to allow them to be read in class. This feature is useful for executive teaching and it also increases the likelihood of students reading the case before class! However, the cases are rich enough to stimulate a great deal of debate and learning. This case exercise section provides for each chapter some ideas on how to teach the cases using support material from the text. Again; the answers we have provided are neither definitive nor exhaustive but should be used as a guide to help your own teaching. Some lecturers prefer brief and broad questions with the case studies (such as ‘analyse the situation and comment’) to encourage their students to develop their own structure to the answer. Others prefer a much more guided approach with detailed and well-structured questions. The choice depends upon personal preference and also the type of students being taught, e.g. undergraduates versus postgraduates. To deal with this issue we have provided brief questions in the textbook and sometimes more detailed questions in this pdf manual.

Servops.net This manual is just a start. Our teaching is dynamic, and as it evolves we will upload additional material to the servops.net website. So, if you think one of the case or discussion question ‘answers’ is lacking, take a look at the relevant pages on the website. If you have your own ideas… if you think we have missed something, please get in touch.

PART I

FRAMING SERVICE OPERATIONS

CHAPTER 1

Introduction to service operations About this chapter This introductory chapter starts by exploring what is meant by service as distinct from the manufacturing of physical goods, and then looks at the general contribution of operations management before exploring what is distinctive about operations management in service organisations, what its responsibilities are and why it is so important.

Learning objectives •

To define the characteristics of services and understand the implications and limitations of these characteristics

•

To be able to explain what service operations management is

•

To understand the importance of service operations management

•

To be able to understand the multiple perspectives on service operations management

•

To gain an appreciation of the challenges faced by service operations managers

Discussion questions and exercises Question 1 Rent the Runway (RTR), is a privately-owned service that rents out clothes, handbags and jewellery. It has a dry-cleaning warehouse that is the biggest in the world, processing 2,000 items per hour. It started renting out formal dresses for weddings and other events. Eventually, it grew to the point where three-quarters of its clients used it to rent work clothes. Subscribers can rent four items at any one time. Turnaround has to be quick: returned clothes are washed, repaired if necessary and any stains removed. Most items are in and out in less than a day. (a) How does this service compare to a conventional garment retailer in terms of its IHIP characteristics? It is not essential, but students can benefit from a little online research in preparing answers to the two parts of question 1. If you allow students to do 10 to 15 minutes of online research then they can quickly get more depth on RTR. After doing so it would be worth sketching the IHIP

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

dimensions on the whiteboard or alternatively use the template slide provided with the instructor pack. Free-form on a whiteboard or visualiser is probably better than slides as you can debate the positioning for each dimension.

In the traditional garment retailer, especially at the high-end, we have a great deal of interaction in a physical shop, comfortable seats, fitting rooms, a cup of coffee is served and so on... so we have many tangible and intangible elements. At RTR, the tangible element of service is the garment and its packaging, and there are several other tangible elements rendered intangible by virtue of physical separation. In garment stores selling the sort clothing offered by RTR there would be an assessment of needs involving several conversations, several visits to the store, possibly modification of the garment to engineer a custom fit. Each service experience is a response to unique set of customer needs. In RTR, garments are ‘off the shelf ’. In a traditional garment retailer there is a degree of separation of production and consumption in that at the very least the base garment will be prepared in advance and the customer selects this. However, the modification of the garment, as well as assistance in choosing garments from retail staff is clearly done ‘in the moment’.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

At RTR ideally the seamstresses and cleaners would be fully utilised. Albeit that the seamstresses are carrying out repairs in RTR, whereas in a traditional retailer they would be doing alterations. In general, there is a steady inventory of used garments to be processed. Rarely are the back-office workers at RTR idle. This is not true of the traditional garment store. Weekends would be such that we have maximum capacity utilisation for front of house staff, but many weekday mornings will be such that service capacity is underutilised and will obviously perish. In the traditional garment retailer, the seamstresses will need to be available for measuring, fitting, tacking, pinning, etc., though they can postpone some of the alternation work to quiet times. (b) What do you think are its main service operations management responsibilities? The main service operations management responsibilities for RTR are: Processing garments – RTR need to rapidly turnaround garments so as to maximise availability, and inventory of garments generally. So there has to be a focus on shipping and its management. Garments have to be delivered and collected rapidly. When they arrive at the RTR processing centre they are cleaned, repaired and repackaged to put back into inventory. RTR have in the past had some challenges with cleaning and sizing. So clearly there is an important quality management role. Nearly all the key areas of responsibility are in the back office. In terms of the common set of responsibilities of the service operations manager (listed on page 18) the specific responsibilities fit into the following general areas: •

Responsibility for the organisation’s customers (sometimes referred to as clients, users, patients or students, etc.) or surrogates, such as their parcels or orders – Rapid processing of garments.

•

Managing service quality – Ensuring that garments are accurately described, are properly cleaned and repaired.

•

Design of the service operation’s resources and how they impact on their customers’ experience – Ensuring that the capacity of central processing area and its logistics are up to the task of rapid turnaround of garments. Ensuring that there is adequate inventory of garments.

•

Developing the relationships with suppliers and customers in their supply network – Most important of these supply network aspects are the logistics companies that collect and deliver the garments.

•

Managing the match (if appropriate) between an organisation’s capacity to serve its customers and the demand for its services – There are two aspects of capacity to consider. The processing capacity of the cleaning and repair centre, and of inbound and outbound logistics.

Question 2 An increasingly popular service models in business is that companies should earn revenues from subscribers rather than sell products or service as single ‘items’. What do you think are the advantages and disadvantages of this type of service?

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Subscription models are attractive because they promise a recurring stream of revenue. However, acquiring subscribers can be costly. ‘Lock-in’ can also be quite ‘light’ in that customers can still depart. Consumers may have more than one relationship at a time. An obvious example of the ‘mercenary’ behaviour of customers would be in relation to Netflix. There is no real loyalty and it is easy for customers to cancel and then restart the subscription. Customers typically swap amongst providers such as Netflix, Disney plus, Apple TV and so on. Acquiring subscribers is costly because of the necessity to use the ‘drug dealer’ approach for the initial purchase. The first taste is free, or very cheap! For example, the online food ingredient delivery companies such as Hello Fresh and Blue Apron heavily discount or often give away the first few orders without any guarantee of follow-up purchases from customers. The world of software development had to get into subscription models out of necessity. Small-scale developers in particular were burdened with the need to make frequent application updates (often to accommodate new operating systems) and the expectation was that these updates would come free. The development of ‘app stores’ did not help. There was no easy way to charge for updates. The move to subscription models for software was not without pain. Often customers would walk away to alternative ‘outright purchase only’ applications in protest. Dropbox has its freemium model with a considerable amount of storage and syncing service offered for free, and it charges for large capacity online storage. Apple has a similar model with its iCloud storage. Another approach is to load adverts into entertainment services and encourage subscribers to pay-up to get rid of the adverts. The downside to this approach is that it sends inappropriate messaging about the quality of adverts to both customers, and companies that purchase advertising inventory. In terms of the ideas we cover in this textbook, one thing we will look at in Chapter 5 is customer relationships. One could argue that a major benefit of subscription model is it allows the service firm to forge deeper and longer lasting relationships with customers. A subscription model has also the advantage of allowing the service to gain ever greater amounts of intelligence on its users. Data mining means that the insights gained from a sustained relationship are more valuable than before, for customers and firms. The Netflix algorithm knows exactly what viewers want to binge-watch! The subscription model also makes investors more comfortable with intangible businesses. A subscriber base can be thought of as an enduring asset in which firms can invest. Subscription service companies use statistical models to try to ensure that the ‘lifetime value’ of a customer exceeds the cost of acquiring them, but the models are notoriously inaccurate. So we have many advantages but also several disadvantages with subscription services. Probably the main disadvantage is that there is no true lock-in to a subscription service. Customer loyalty is generally illusory. Additionally, customers are becoming increasingly wary of revealing too much about themselves via subscription services, and are becoming more aware of the value of their personal information.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

(a) For each of the departments described, what aspects of their job do not involve directly ‘making’ something? (b) How would you categorise the ‘non-making’ activity in each department? The ENO Example introduces several issues but is mainly about: •

What is service? and

•

What is service operations management?

You can run the case quite quickly as a warm-up with post experience students, but undergraduates will need a bit more time. The case presents an unusual service environment with which few students will be familiar. Most people will have some experience of the front of house elements of a theatre but not backstage. It might be worth showing students one or two YouTube videos on the ENO before you begin. The ENO has a large selection of videos on its YouTube channel, but most are previews of productions. However, in 2014 and 2018, the ENO made two series looking at back-office activity. Probably the best video to begin with is: How To Stage An Opera – ENO (2014) YouTube video, added by English National Opera [Online]. Available at: https://youtu.be/eCiD4BBAhkM Other ‘production’ videos are located under the playlist: Opera jobs: What it’s like to work for ENO – English National Opera https://www.youtube.com/playlist?list=PL7ShuxblyYmG_plwCMlxKeExMVBpradur

Running the exercise in class Start off by asking students to consider the list of back-office departments in the case. The service departments described in the case do not constitute an exhaustive list of the micro-services back of house at the ENO. (See the end of this teaching note for a longer list.) The indicative questions at the end of the case example are: (a) For each of the departments described above, what aspects of their job do not involve directly ‘making’ something? (b) How would you categorise the ‘non-making’ activity in each department? Ask students to categorise the micro services first of all on the basis of whether they are ‘making’ focused/or service focused. It might be useful to draw a list of the micro services on the whiteboard and allocate percentages to making or service for each. Astute students will ask you to define the categories, especially service. If so just stall and say you will come to that later... one purpose of the exercise is to understand what service is.

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Then draw a third column, and department by department invite students to deconstruct the nature of service. What exactly is being done at each department that is not ‘making’? Typical responses are: •

Doing work for someone or a group

•

Interpretation of creative intentions

•

Designing

•

Budget control

•

Lighting a space

•

Planning and control, in particular coordinating and scheduling

•

Curation of collections

•

Manual labour

•

Counselling

•

Purchasing

•

Searching, etc.

The first answer in the list probably sums up what is service. The ‘doing of work’. Sometimes that work involves tangible objects and some sort of facilitating good but often it does not. The point to note here is that service is just one thing in the sense of doing work for someone or some group, but otherwise it encompasses huge variety of activities, in this case, in just one organisation. Try to mark up the number and type of customers serviced by each of the micro-services. Then ask the students to think about: What are the key activities and responsibilities of each service operations manager? The managers’ work is mostly about managing the ‘makers’ but they also do a great deal of the relational work with the other departments, and also external bodies. The makers are mostly at the lower levels of the organisational hierarchy within each team, and further up the hierarchy the more service elements there are to jobs. Finally, ask the question: What does The Technical Director do? When we look at the Technical Director’s activities we see that he does... pretty much nothing, but he is responsible for making everything happen! The Technical Director coordinates, facilitates and ensures that his services are available to the producer in the development phase, and to the stage manager during a live show. 12 © 2021 Pearson Education Limited. All Rights Reserved.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

A long list of back-office operations is (students will have to speculate on some of these, or watch the videos): •

Accounting

•

Budget control

•

Catalogue, store and pack show materials

•

Catering – retail – the main restaurant, and snacks in the four bars

•

Catering – the company

•

Cleaning

•

Colourists

•

Conducting health and safety checks

•

Costumes management (curation, storage and cleaning)

•

Directing

•

Drawing

•

Dyers

•

Electrical power management

•

Facilities management

•

Finance

•

Hairdressers

•

Hats

•

Housekeeping

•

Laundry

•

Lighting design

•

Lighting management

•

Logistics and supplies

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

•

Managing risk assessments

•

Masks

•

Multi-media design and management

•

Online shop

•

Online ticket sales

•

Payroll

•

Producing

•

Production scheduling

•

Prop and fabric buyers

•

Prop costumes

•

Prop design

•

Prop production

•

Props management (curation, storage, cleaning)

•

Prosthetics

•

Relating to artists (interpersonal)

•

Set design

•

Set moves – by the backstage team

•

Singing

•

Sound design

•

Sourcing prop materials and new suppliers

•

Staff welfare

•

Stage management (the ‘event’ Service Operations Manager)

•

The orchestra

•

Training

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•

Website management

•

Wigs

•

Work with dancers, puppeteers

Front office (customer-facing) operations at the ENO are: •

Performance operations

•

Programme sales

•

Box office (ticketing)

•

Welcoming the audience

•

Bag checks

•

Cloakroom

•

Disability access support

•

Health and safety

•

Reception/information desk

•

Restaurants – American Bar and restaurant

•

Merchandising

•

Bars: o

Stalls Bar and Lounge

Laidlaw Bar

Sky Bar

Balcony Bar

Other Events: •

London Coliseum Guided tours

•

Afternoon Tea

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

•

Pre-performance talks

•

Eno Supporters Events

House manager responsibility: •

People

•

Front-of-house assistants

•

Retail sales assistants

Questions 4 and 5 Again, thinking about the music industry, where do ‘live performances’ fit on the scales?

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Question 6 Consider three services: first, a business servicing heating, ventilation and air-conditioning facilities; second, an emergency plumbing service; and third, a disaster emergency charity. Again, using Figure 1.3, how does each service fit on the IHIP scales?

Case exercise – European Airlines Group Questions 1. What problems does Peter Greenwood face? 2. If you were Peter Greenwood, what would you say to the Board? 3. In particular, what recommendations would you make about unbundling the complimentary meals service on long-haul economy?

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Case analysis Introduction Whilst we usually see and evaluate service organisations from a customer perspective, this first case gives us the chance to see the problems from the point of view of the operational staff. We can evaluate what service is delivered, how it is delivered and see some of the real challenges that operations managers face.

Teaching approach This case can be used to introduce most of the material from Chapter 1. The best place to start is by considering the customer perspective. About 10 to 15 minutes in groups, or pre-class preparation, should provide good answers to question 4 of the supplementary questions (below). Let students get started without structure, but then after five minutes help them by suggesting they structure their ideas with some sort of ranking system like the table below (available in the slide pack). The conflicts (supplementary question 5 below) are good for class discussion of the operations perspective and are ideal for syndicate work to allow students to think about some of the dilemmas faced by service staff (cabin staff mainly). question 6 gives you the opportunity to draw some conclusions from the suggestions and identify the learning points. For post-experience students you can take the supplementary questions in the reverse order and start with question 6. There will be plenty of debate here. You can then try to show the value of formal analysis and evaluation, i.e. list the options and evaluate each.

Supplementary questions 4. Describe Sky’s service product. How would you rate the importance of each element? 5. Describe the conflicts between managing day-to-day operations, improving the operation and supporting strategic developments? 6. Evaluate the options suggested by Angela Carter-Smith, Christina Towers, Justin Maude and David Goh.

The customer perspective – Sky’s service product The service product incorporates the service experience and the service outcome. You may find it best to create the list of the elements before rating them. Some suggestions are provided in the table below. We find it better to start with the outcome.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Rating 1−10

Elements

10 = very important 1 = not important Being moved from A to B (not C)

Service

On time

outcome

In one piece (safely)

With your luggage

Efficient check-in

Pleasant cabin crew

On time departure

Drinks

Choice of music and films (for long haul)

Appropriate and good meal

Pleasant temperature

On time arrival

Service experience

If students want to rate everything as 1, ask what would they be prepared to do without, out of necessity forced by price or circumstance, i.e. ‘in one piece’ versus ‘pleasant cabin crew’? Some points worth noting: •

There may be some overlaps between experience and outcome.

•

The experience elements tend to include the intangibles.

•

Outcomes tend to be more important than experience.

•

Many of the most important elements are beyond the control of the airline’s operations managers (‘on time’ and ‘re-routed to C’, are air traffic control (ATC) responsibilities).

•

Other elements are beyond the control of the operations staff (the cabin crew) such as luggage, check-in, on time, choice of music, and type of meal.

•

The cabin crew has an important impact on the passenger in flight but has very little control over the outcome or experience. A somewhat frustrating role!

•

Flying is very much a back-office orientated service. Most of the elements are managed out-ofsight of the customer and the customer’s experience is only a small part of the whole process (which includes ATC, meal preparation, plane servicing, scheduling, ticketing, etc.).

•

Flying is a high volume, low variety service. It is back office orientated, little customisation is available, the focus is on the product, (A-B, on time and safe) and volumes are high, though not as high as mass transit processes.

•

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Day-to-day operations versus strategy Now is the time to move the focus to the operation’s perspective. Students need to consider this question from Peter Greenwood’s point of view. There are three main tasks for the service operations manager. 1. Developing an operations strategy 2. Improving the operation 3. Managing day-to-day operations

Strategic issues •

Need to reduce complaints

•

Need to reduce delays

•

Need to look after premium-fare passengers

•

Need to increase RASM

Improvement issues •

Pressure to improve on-board catering

•

Suggestions to provide seat-side preparation ‘culturally sensitive’ meals

•

Day-to-day operation issues

•

The consistency of meals from different locations

•

Loading the ‘right’ number of meals whilst minimising weight and cost

•

Providing a limited choice of meal – first choice not always available

•

Special meals not loaded

•

No knowledge of food contents

•

Wrong meals types loaded

•

Planes delayed

You can imagine that Peter spends most of his time trying to resolve the immediate day-to-day issues, in particular coordinating the supply chain and managing the real time needs of his customers. Indeed

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this is part of the ‘excitement of service operations management’ (Chapters 1 and 2). However the problems are: •

Dealing with these day-to-day issues leaves little time for longer term strategic planning.

•

These day-to-day issues are hard enough to resolve. The ‘improvements’ suggested look like a nightmare.

•

There are clear conflicts between the ‘improvements’ suggested and operational capability. They may also conflict with some of the strategic issues (increase RASM, reduce complaints and reduce delays). The suggestion may however support the airline’s concern to look after its premium passengers.

•

There is a possibility of the functions taking up entrenched positions here; marketing seeing only the marketing opportunity, operations only seeing operational problems and senior managers only seeing the need for the right figures.

•

The lack of operational awareness by the marketer and senior managers could create significant problems for the operation and therefore for the viability of the airline.

Evaluating the options It is helpful to sketch out the options:

All the options could be seen to support Bernie Williamson’s desire for ‘improved onboard catering’. Operations’ suggestions are concerned with making operations simpler and easier and could improve the existing service for passengers. The marketing suggestions are about making the service more interesting and possibly better and thus enhancing the service for passengers but this would likely exacerbate the operational problems.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Recommendation For us the way to the solution lies in the answer to Supplementary question 4. In the table above we rated meals as 4/10, i.e. not very important. (If your class rated meals 10/10 you had better think of another solution!) The marketing suggestions are based on the assumptions that long haul passengers would want, and want to pay a premium for a degree of seat-side preparation (like in Business Class), and that an Indian person would prefer to eat Indian food on a European airline travelling to London or Paris, for example. They might, however, expect decent, pre-prepared European food, be delighted with pre-prepared and good Indian food, but highly dissatisfied with no food, poor food, delays in seat-side delivery or lack of a promised choice. There is a real need to solve the existing problems or at least recognise them as constraints. Unless, of course, the marketing suggestion could alleviate some of the existing problems. In this case it is fair to assume it would exacerbate them. The (operational) problems that need resolving are listed above. It is possible that one of the choices of meals could be a ‘culturally sensitive’ meal to test out the caterers’ capability to provide such meals and the desire of customers for them. In sum, what we would say to the board is the archetypal operations retort ‘Yes we can do that, but…’.

Learning points An airline is not a restaurant; it faces particular problems of space, weight, galley size, cooking capabilities, inability to call up more supplies and different levels of catering (economy versus premium passengers). Marketing’s role is to push the envelope and to challenge operational constraints and thinking. Operations have to consider what is realistic, affordable and doable which will meet the needs of all customers and fulfil strategic objectives. Managers of all functions should have some understanding of operations activities and issues.

What happened next? This airline was a ‘full-service’ airline not a ‘no-frills’ airline and it was felt to be important to provide a full meal service to all passengers. Indeed this was in line with the other airlines which formed the ‘global alliance’ of which Sky and Airandor were members. Because of the complexity and cost implications of trying to provide seat-side preparation and culturally sensitive meals the airline, in line with many others, retreated back to its core competency and provided a service style and catering which related to its home market, and with delivery being via pre-made and re-heated meals. Earlier attempts to provide culturally sensitive meals had met with criticisms from passengers in terms of quality and inauthenticity. The trail runs of seat-side delivery in the relatively cramped economy cabins proved to be an operational disaster. The airline argued that as part of a global alliance the airlines together provided customers with a rich diversity of meals to meet local and global customer needs. 22 © 2021 Pearson Education Limited. All Rights Reserved.

CHAPTER 2

The world of service About this chapter Chapter 2 looks at the many different types of service organisation that exist, the importance of service in most economies and some developments in how we think about service.

Learning objectives •

To be able to identify the main types of service organisation

•

To understand the importance and growing significance of service in most economies

•

To be able to describe some of the more recent developments in how we think about service

Discussion questions and exercises Question 1 Nespresso has been described as ‘Starbucks without the drive’. It supplies coffee machines that brew coffee from capsules, or pods, for home or professional use. The company is an autonomous globally managed business within the Nestlé Group. With corporate headquarters in Lausanne, Switzerland, Nespresso is present in over 60 countries and counts over 12,000 employees worldwide. The company offers its ubiquitous coffee-filled capsules and machines for brewing espresso, latte and cappuccino one cup at a time, boasting on its website that ‘the world’s best café is in your home’. Investigate Nespresso and (a) explore how the company uses the concepts of experience-based service and ‘servitisation’ to promote its offerings, and (b) how it tries to fulfil its social and environmental responsibilities. Nespresso, an arm of the Nestlé Group of Switzerland, wraps an experience around a food product. The company offers its ubiquitous coffee-filled capsules and machines for brewing espresso, latte and cappuccino one cup at a time, boasting on its website that ‘the world’s best café is in your home’. The flavors are color-coded to match consumers’ moods and play to ‘an endless passion to stay at home’. In short, Nespresso is Starbucks without the drive. Nespresso clearly understands its customers’ wants and needs. According to a 2010 report, the company’s sales have grown an average of 30 per cent each of the past 10 years, with more than 20 billion capsules sold since 2000. The company also offers a club for customers to order capsules, receive personalised advice and obtain technical support.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Another great experience is offered by Paris Miki, a Japanese company that collaborates with its customers to mass-customise eyewear to their exact specifications. The company’s Mikissimes Design System offers customers an “exploring experience,” using computer graphics supported by artificial intelligence to analyse distinctive attributes of each customer’s face. These attributes are combined with customer-provided adjectives that describe the type of look they desire, such as sporty or elegant. The system uses this information to design, refine and virtually prototype the custom glasses, which can be produced in as little as an hour.

Question 2 A supplier of branded kitchen appliances that sells to the domestic market is considering offering its equipment and tools not as products but as ‘a culinary lifestyle’. To help customers experience this lifestyle, it is considering establishing a network of cooking schools. Offer a justification of how this idea could provide a competitive advantage for the company. Cooking schools could conceivably offer some kind of reward scheme or specific product discounts to students/participants and so the rewards end up coming right back into the company in the form of a revenue stream. If the cooking schools work, then clearly there is the opportunity to strengthen the brand and generate word-of-mouth awareness. Another example of this concept in practice would be the off-road skills courses offered by BMW motorcycles in which participants receive two days of training riding difficult and muddy terrain but at the same time they are exposed to the current line-up of BMW motorcycles. Land Rover vehicles do similar with their off-road skills experience. The customer becomes intimately connected to the product via the provision of the education service. This is relatively simple but classic servitisation in action.

Question 3 How do you think that the big manufacturers of cars will respond to: (a) the general move from products to services; and (b) changes in vehicle technology? For many years the larger automobile manufacturers have been moving to the provision of the car as a service as opposed to a product. Consider that if a customer turns up at the dealership with a suitcase full of crisp pound notes or dollar bills then it is actually quite difficult for them to buy a car outright. The dealership is incentivised to sell the customer a lease, or some other form of personal contract purchase. The automobile manufacturers do not want a one-off sale, but what a steady revenue stream from customers. The lease and PCP deals do not quite ‘lock in’ the customer, but they make it quite difficult for the customer to switch to an alternate brand at the end of the lease period. If the customer buys a new vehicle from the same brand then the deal is sweetened considerably with discounts and a decent final trade-in value for their car. By contrast if a customer elects to hand back the car, then a rigourous inspection regime with penalties for anything but minor wear and tear provides a major deterrent to switch. The lease deals, with the built-in service packages, also ensure that there is a ready supply of approved used cars which the major brands that can also be used to ensure sustained revenue.

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So the question is kind of already answered, part ‘a’ anyway in that the automobile manufacturers are already going down the servitisation route. Additionally, they support the customer journey down that path with a plethora of credit offerings from the Bank of BMW, Bank of Mercedes et cetera. The technological change that may well accelerate the servitisation is the automation of the vehicle including the ultimate self-driving/autonomous vehicle. Tesla cars are already essentially autonomous and self-driving though some of this functionality is inhibited. There is some evidence that Apple Inc. is skirmishing with self-driving vehicles, though it makes little sense for Apple, even with its very deep pockets to go up against the major automotive OEMs. More likely that Apple could get into the game with a ride-sharing service ‘sans’ drivers. In the early years of self-driving vehicles, companies providing the technology will have to manage it very carefully. In practice, the risks of such technology are way less than they are for cars driven by humans. However, perception is everything, and so the ride service, using a fleet of branded and tightly controlled vehicles makes a lot of sense for the likes of Apple, Tesla, and possibly Uber. The point is then, that newer players are already moving into the ‘car as service’ domain and so the traditional automobile manufacturers can do little but follow with their own offerings. Transportation is worth $5tn if narrowly defined, but may be as big as $15tn broadly defined. Car ownership may well plummet with autonomous driving. Companies like Apple and Google are building expertise in sensor, driving, and mapping technologies. It very much looks like they will get into the transportation game and they are not going to be selling cars. The car as a smart service offering is inevitable.

Question 4 The Earthy Construction Equipment Company sells its products (large earth-moving equipment) to building and mining customers around the world. The company’s CEO has read about the idea of the ‘experience economy’, but feels it only applies to consumer companies, not business equipment companies such as hers. What could such a company do to provide ‘experiences’ for its customers? This question is channelling the philosophy of ‘Case Construction Equipment’. For the last 60 years or so Case entices potential purchasers and users of its earthmoving equipment by providing junkets in which they can play with the company’s range of more than 60 types of construction equipment. The company has a dedicated outside ‘play’ area which it calls ‘the Tomahawk Centre’. Visitors stay in lakeside lodges and has served hearty, homestyle meals. Case entices approximately 2,000 customers per year to spend up to 3 days at the centre. The cost is large but the benefits are considerable as each machine purchased may cost hundreds of thousands of dollars. More often than not equipment is leased, providing multi-thousand dollar revenue streams for many years. Staff from Case dealerships accompany potential purchasers on the visits to reinforce the levels of support they can expect after any purchase. The approach is a success with the company’s close rate being greater than 75 per cent when purchasers visit the tomahawk centre. In the tourism industry similar practices are used to expose tour companies to the benefits of sending their customers to a specific hotel or resort.

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Question 5 Describe the customer experience and outcomes for a fast-food restaurant, a doctor’s surgery and an internet-based fashion-clothing retailer. Compare and contrast the services of these three organisations. Fast-food restaurant In the fast-food restaurant the customer experience is limited. There is little interaction with any server and increasingly there is zero interaction in that food is selected from a touchscreen menu or ordered via an app. If the customer ‘eats in’ then the surroundings will be comfortable but not overly so. In fact, on occasion, fast-food environments had been deliberately designed to encourage customers to move on and not linger after eating. Often upbeat music is playing and this can be irritating for some. It possibly enhances the experience for the young, but only for a limited amount of time. The outcome is tasty, and sometimes healthy meal which is fairly good value for money. The doctor’s surgery As we will see later on when we look at the concept of ‘the zone of tolerance’ in Chapter 6, the experience in operations such as a doctor’s surgery is critically dependent on the mind state of the customer. If the visit was a routine check-up then possibly the customer or patient will not be anxious. But more often not the visit occurs because the patient has a problem. The patient is predisposed to possibly judge harshly certain experience elements. For example, they will be sensitive to the way reception staff relate to them, how their privacy is addressed, etc. If they have to wait, as they inevitably do, what is the waiting room like? Critically, what are the other customers in the waiting room like? ‘Are they ill? Am I going to catch their diseases?’. The experience in such environments is fluid and complex. Similarly with the outcomes. There is a critical dependence on the reason for the visit. If the visit was for example, to get a prescription of standby antibiotics for an adventure travel trip then the outcome may well just be the prescription, and the judgement is straightforward. By contrast, if the visit was because of stomach pain and in the consultation the doctor reveals the possibility of dangerous conditions such as cancer, then ‘finding out’ is a useful outcome, but may not be perceived as good. Certainly, the customer would not be happy about the outcome. For many complex conditions that are not necessarily life-and-death, the patient has no way of making a judgement on the quality of the outcome. Instead, they judge the outcome on peripheral services and aspects of the experience. The internet-based fashion clothing retailer Most of the experience will be the interaction with the retailer’s webpages. The experience will be judged on things like the quality of photographs of garments and accessories, videos, functionality such as 3D viewing of models wearing clothes, the ability to perform custom searches and so on. Another aspect of the experience will be posted availability of inventory in a particular size and colour-way. In some respects, this latter experience element is also related to an important outcome.

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Stock outs would be considered to be negative outcomes especially if was notified to the customer after ordering. One of the most common reasons for disappointment with online retailers is when the retailer advertises stock that they don’t really have. The customer orders and are soon informed of the delay in delivery. The desirable outcome would obviously be prompt delivery of the stock as ordered. Other bonus outcomes would be discount vouchers, early delivery and so on.

Case exercise – Servitisation at Sterksteen Questions 1. What are the broad advantages and disadvantages of each proposal? 2. Although cost and revenue estimates of each proposal are not yet available, which one do you favour? This Sterksteen case study provides several opportunities to explore issues discussed in Chapter 2. The case can be used with undergraduate students to explore types or categories of service. For example, we have a B2B business that is predominantly goods focused moving into B2B services, and also considering B2C service. The B2B service being the Sterksteen Secure service, and the B2B, Sterksteen Install. If either service goes ahead, especially Sterksteen Install, the company will have effectively created a new set of internal service relationships. Similarly, one could envisage that the newly services would in-turn exploit centralised shared services which are also used by the existing manufacturing business. Acknowledging these two conceptual ideas is not complete exploration, but is a way to reinforce the need to frame analysis using conceptual material from the textbook and your course. At the highest level, you can frame the evolution, or potential evolution of Sterksteen using the Clark model on page 48. Certainly, we will likely have the development of services relating to information provision, training quality standards and so on. The manufacturing activities of the company are currently ‘repetitive and relatively low margin’ and there is going to be an almost inevitable shift towards tertiary and possibly quaternary activities in order to take some of the value currently being eaten up by the installers. The core of the case study however is a look at the implications of potential servitisation for a manufacturing organisation. Question one could almost be reframed as what are the general advantages and disadvantages of servitisation. Clearly, there are nuances which will be applicable to the industrial context of the case, but if students struggle, then I would recommend that they look at the material on ‘why this shift to services’? at the bottom of page 50, and certainly the material at the bottom of page 54 and the head of page 55 on servitisation. The factors that explain the emergence of servitisation generally, act as a framework for listing the benefits of the two proposals for Sterksteen. Both are obviously examples of servitisation, but differ in degree. An approach to question one that can work quite well is to try to tease out the general benefits and disbenefits of servitisation and list these on a board or via visualiser. The checklist can then be used to unpick the case study. The analysis should allow you to come to a view on the answer to

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question 2. In the table below general benefits and potential disbenefits of servitisation are listed in the first column. In the second and third column, a tick indicates whether the benefit or disbenefit is applicable in respect of either option. Sterksteen Secure

Sterksteen Install

Advantages of servitisation ✓

Move to higher margin activity. Potential for larger firms to apply systematisation, automation and technology generally in operations (smaller intermediaries not have sufficient resource to do this).

✓

Potential to move into activity domains with, in-turn, the potential to bring greater satisfaction to clients than supply of material goods alone. Potential to create experiences for end customers which can generate positive word-of-mouth marketing.

✓

Potential to use the service experience to cross sell. That is, cross sell both services and products.

✓

The potential to offer and exploit multiple connections with B2B customers. A shift from largely transactional supply to an ongoing relationship which can be exploited in either direction.

✓

The potential to apply expertise and perspectives from multiple elements of the supplying company to the customer company.

✓

Heads-off potential end customer dissatisfaction resulting from product complexity and technical sophistication. Less chance of end user or any other downstream supplier ‘bodging’ delivery.

✓

Opportunities to enhance product functionality.

✓

Opportunities to expose and enhance the core brand.

✓

Opportunities to provide additional revenue from the installed base of products by providing follow-up services such as maintenance, support, repair, etc.

✓

Opportunities to provide complimentary products and services and to entice the customer to purchase with offers/vouchers, etc.

✓

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✓

Support and follow-up services likely to be consistent and stable source of revenue in comparison to the initial sales and installation of products associated with that installation. Revenue streams possibly smaller, but more consistent and less vulnerable to economic cycles or temporary shocks. Potential to engage B2B and B2C customers in long-term agreements, again for maintenance, support, development, etc.

✓

Hedge against commoditisation of product range.

✓

Opportunities to develop new business streams replacing that which end customers or intermediary suppliers have delivered previously.

✓

Opportunities to create innovative and competitive services… ‘nobody knows our product better than ourselves’. So potentially outcompeting both in terms of product quality, and then customer satisfaction, as well as taking margin previously extracted by intermediaries.

✓

The potential to improve relationships with customers by getting to know them. This applies to both intermediaries and end customers.

✓

Allows B2B customers to focus on their core business and outsource peripheral activities.

✓

Potential to exploit the expertise of intermediaries.

✓

Disadvantages of servitisation ✓

Investment is likely to be required for shifts to higher margin activity. New skills and technology development will be required. Service technologies!

✓

With increased customer intimacy and potential for enhanced customer satisfaction comes greater vulnerability to dissatisfaction. You cannot blame failures on intermediaries or the customer! Word-of-mouth marketing resulting from negative experiences can be potentially very damaging to the core brand.

✓

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Cross-selling potential is not always possible. Services and underlying products have to be complementary. The customer will not buy from the same brand just because of a positive previous experience. There has to be a need.

✓

The relationship with end customers and especially B2B customers becomes more complex and this complexity has to be managed. Multiple connections provide considerable opportunity for conflicting messages and confused communication.

✓

Great potential to exploit expertise and perspectives from many aspects of the supplying company, but additional service expertise needs to be in place to deploy this technical knowledge. Can be very difficult to educate staff previously familiar with goods production in the intricacies of service provision.

✓

Both product quality and service quality expectations will likely become higher and so the provider has to deliver.

✓

As a supplier of goods the provider firm is somewhat buffered from product failure in use. As a service provider this buffer disappears.

✓

Long-term revenue potential has a downside in that it creates an expectation of long-term support. Sometimes legacy products and service streams can be expensive to maintain over the very long-term.

✓

Potential to damage relationships with installer base.

✓

There is considerable scope too argue about the detail. For example, if you look at the potential for cross-selling it is clearly different in respect of Sterksteen Secure than it is for Sterksteen Install. The ranges of products available for cross selling will potentially overlap, but they may not be exactly the same. One important conclusion that can be drawn from looking at the table is that – at least in this case – with more benefits being applicable, there is a corresponding increase in disbenefits. Another way of looking at this issue is to consider risk. Many of the disbenefits are not ‘actual’, they are merely risks. Most can be mitigated by appropriate and comprehensive new service development. However, as we will see in Chapter 14 on Service Innovation, common reasons for failure of new service innovation is lack of attention to operational support of new marketing aspects of the service concept. Both options sound like good, and relatively lucrative future pathways for the company, but both require considerable development of new skills, technologies and most likely different ways of organising. This requirement is much greater for Sterksteen Install, but there are also considerably more potential benefits. The two options represent very different views, both of how to improve service to the market, and the degree of risk Sterksteen should take.

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Sterksteen Secure does not threaten existing players in the industry, in fact it helps installers (by helping them to increase sales and margin), it helps Builders merchants (by pulling through more volume to the installers), and it helps Sterksteen (again by pulling through more volume). Sterksteen Install is potentially a bigger deal, certainly in margin terms, and possibly in volume terms. But it is in effect a ‘declaration of war’ on the industry. If it is successful, everybody in the industry, apart from Sterksteen and the Builders/Civil engineers, will suffer. So the key question is, ‘is Sterksteen prepared to take the (very considerable) risk of upsetting their existing customers in order to disrupt the industry?’. The other issue is one of ‘service competence’. If they go for Sterksteen Install, could Sterksteen match the market, technical and customer relationship expertise of the existing installers? Sterksteen Install risks annoying and possibly losing large elements of the current installer base. That is no bad thing provided that the lost business is made up by revenue from new installations managed understood Sterksteen Install. If the basic products are good, then most likely the installers will come back eventually. Sterksteen Secure potentially gives too much away to installers, and critically helps installers attract more margin. In conclusion, provided the disadvantages are mitigated by appropriate service development attention to necessary changes in operations, then Sterksteen Install would seem to be the better long term option for the company. Moreover, Sterksteen Install would not preclude setting up a complimentary service like Sterksteen Secure at some point. Obviously competition would be increased, but dual track implementation would ensure that fewer installers are alienated by full servitisation. The underlying point in all this is that, although servitisation sounds a great idea, there are real practical difficulties of making it work in an existing market. In this case the issues are the dynamics between the players in the market and the nature of the service ‘mindset’. Sterksteen has no experience of giving service in a B2C market. Could it really acquire such skills and culture? So – If you’re feeling radical and want to take big risks (or are desperate), go for Sterksteen Install. If you are wanting to develop partnerships with the other players (especially installers), go for Sterksteen Secure. The other point is that, to understand service relationships, including servitisation, one has to consider the supply network.

CHAPTER 3

Service strategy About this chapter Chapter 3 looks at how to create and implement an organisation’s service strategy by taking four perspectives on its service operations, all of which are necessary if the operation’s resources and processes are to make an effective contribution to the organisation’s strategic objectives. The chapter goes on to show how performance priorities can be derived from the operation’s performance evaluated against both customers’ and competitors’ positions.

Learning objectives •

To be able to define service strategy

•

To understand the importance of having a service strategy

•

To be able to link service strategy to competitive advantage

•

To know how service performance objectives can be converted into operations priorities

•

To gain an understanding of how a service strategy can be sustained

Discussion questions and exercise Question 1 Re-read the case example on IKEA and its ‘big box’ retail strategy. Applying the elements of the service strategy model (see Figure 3.4), explain what prompted IKEA to adapt its strategy? Figure 3.4 summarises the six elements of service strategy and shows how they interrelate. The six elements are: 1. the creation of a set of overall business objectives 2. an understanding of the market environment 3. the statement of the positioning of the service(s) in their environment

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4. the development of an appropriate service concept 5. the identification of appropriate operations performance objectives 6. the development of appropriate service resources and processes Working through each of these in turn we can come to review on the reasons why IKEA did what they did. Overall business objectives Ikea’s overall business objectives remain largely unchanged since its original conception. In fact, IKEA’s objectives are often stated explicitly by the company and appear on their website and in corporate materials. IKEA do not use the exact language that we use in our book, but their objectives are expressed in two components. Ikea’s vision is to, ‘… create a better everyday life for the many people – for customers, but also for our co-workers and the people who work at our suppliers’. However what IKEA refers to as its ‘business idea’ is, ‘to offer a wide range of well-designed, functional home furnishing products at prices so low, that as many people as possible will be able to afford them’ *. The latter are IKEA’s business objectives and can be operationalised. Important words and phrases to pick up from the business objectives are ‘wide range’, ‘well designed’, ‘functional’, ‘prices so low’. Understanding the market environment IKEA understand that their market environment has changed. They recognised that many customers were becoming intolerant of the traditional IKEA service concept. IKEA serves a broad range of customers but if they have a main target market it is arguably young couples starting a home and possibly a family. The target market has evolved to the point where it is given that they will be able to navigate virtual environments to look at furniture, and be able to order that furniture online. The target market also has been exposed to many turnkey solutions being made for them. The target market wants experiences, but not necessarily the experience of assembling furniture and installing it at home. If the target market is going to do work at home, it is more likely to be in cooking a preselected range of delivered food ingredients! In the UK, for example, we had a nation of people, (mainly males), who would revel in DIY for the pleasure of the activity and potential cost savings. The latter were mostly illusory. Similarly UK males would ‘fettle’ their cars. Again, the cost benefits were most definitely illusory. The skills required to carry out DIY activity are no longer embedded in the populations that might need them and there is a lack of teaching of basic DIY skills in schools. Then we have complimentary developments in other markets, for example, the rise of the gig economy. Understandably IKEA does not want to make its offering over-complex but it does recognise that there is a market need for both delivery and assembly services.

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More recently, we have the rise of services that allow young families to ‘rent’ homewares and furniture. Such services appeal in that the cost of having a well-furnished home is spread over a long period. Additionally, rental services appeal to environmentally conscious young people as they can, in theory return their furniture and hope that it might be reused. In practice, the latter is unlikely and most returned furniture is scrapped or recycled. These are not the only changes in IKEA’s market environment but they are some important ones to which the company must respond. Statement of the positioning of the service(s) in their environment IKEA possibly has little choice about which aspects of its market it wants to serve. The company needs to continue to focus on serving the needs of young start-up families. However, as indicated above that market has additional needs and expectations now. IKEA’s target market is no longer tolerant of the ‘pain’ of a day out at IKEA. So the IKEA range of products needs to be far more accessible than previously. Additionally the new market positioning will be to offer range of channels and delivery modes. As of the time of writing, these delivery modes were not absolutely firmed up. As the case example indicates, IKEA is letting ‘a thousand flowers bloom’ and will home in on those which are most successful. Critically the ‘how’ of service positioning is likely to change only to the extent that IKEA is now more willing to collaborate with external suppliers of delivery, assembly and recycling services. Apart from highly technical service provision such as solar panel installation, most delivery and recycling services are delivered by approved partners. IKEA is ‘sticking to the knitting’. Development of an appropriate service concept The treatment of the service concept is in Chapter 4 but for now we can say that the IKEA service concept is changing both in terms of the customer experience and the service outcomes. The distinctive big box, day-out experience will continue but in addition IKEA will rely on more accessible presentation of their product range via the Internet and virtual reality. For customer groups comfortable with viewing furniture in this way, purchases can be either made online, or in smaller and potentially inner-city stores. The experience in the latter is relatively short-term and more transactional that in the big box environments. In terms of the outcomes the range is broadened. Not so much the product range, but the range of benefits now goes beyond purchase of a flat pack and now includes aspects such as assembly, location and decoration, advice and so on. Identification of appropriate operations performance objectives If we look at the sort of performance objectives considered on page 75 and 76 we can come to a view on what might need to change at IKEA. Price and quality are going to be as previously. IKEA most definitely operate in the ‘value for money’ end of the market. Availability needs to improve and indeed should improve with the planned changes made to store operations. Reliability is difficult to pin down. One of the problems that IKEA has had historically is that stockouts were commonplace. It is possible to check stock online, but in the big box environment, by the time one arrived at the store, the stock of interest

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might well have disappeared. In some respects this problem might go away with online ordering as the customer could potentially back order. Speed of service has never been much of an issue for IKEA. It is not as if anyone needs a sofa in a desperate hurry! New service development is clearly a hot issue for IKEA at the moment and the organisation is in some flux. They have made a slightly risky (in the sense of inconsistent service delivery potential) decision to try out several different concept options, but are doing so sensibly and are trying to avoid breaking the basic IKEA service concept. Development of appropriate service resources and processes Again if we refer to the textbook chapter on page 76 we have some indicative questions and these can reveal something about what IKEA will be doing and why: What changes are required to processes, employees, customer management and infrastructure?

Online processes will need to become more sophisticated and while new skills are required to develop these, they affect relatively small number of people. Employees in the newer type of store will need to be more of the ‘visible’ employee (as opposed to the ‘grey’ back office employee) who can provide advice and counsel on furniture choice, layout, tactical installation and so on. How will the changes be brought about?

IKEA is big enough and has deep enough pockets to experiment. And this is what they are doing. When they have for get out for example the detail of the new smaller store service concept they will be able to by capacity fairly easily even in metropolitan areas. What resources are required?

In the previous discussion we talked about range of resources, for example, website functionality and capacity, including virtual reality environments. As mentioned in the last section IKEA will need new sites. Apart from training, in much the same way as the company does at the moment, new staff are potentially readily available. Can the new concept be delivered?

Although there is no one concept at the moment all the ideas discussed in the case example are sensible and deliverable. Will it meet the perceived needs of the target market?

For now, yes. But if markets and their behaviour over the last two decades are anything to go by, there’ll be more changes and IKEA will have to respond to these. Can the performance objectives be achieved?

Clearly, the new aspects of service will increase the cost to the customer but IKEA has quite cleverly separated the cost of the furniture items from associated service costs such as delivery and assembly. In terms of quality performance for the products IKEA simply needs to continue as

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previously and maintain its good reputation for relatively high specification and high conformance products. Service quality could be a challenge however. The independent gig economy workers will need to be managed so as to avoid instances of ‘bodged’ assembly and so on. As it happens, the ‘Sterksteen Secure’ example from the last chapter provides a model for managing this subcontracted delivery and assembly.

Question 2 This story is often related by strategy experts. During manoeuvres in the Alps, a detachment of soldiers got lost. The weather was severe and the snow was deep. In these freezing conditions, after two days of wandering, the soldiers gave up hope and became reconciled to a frozen death on the mountains. Then, to their delight, one of the soldiers discovered a map in his pocket. Much cheered by this discovery, the soldiers were able to escape from the mountains. When they were safe back at their headquarters, they discovered that the map was not of the Alps at all, but of the Pyrenees. What is the relevance of this story to strategy? The relevance of the story is that a plan (or a map) may not be perfect but it gives a sense of purpose and a sense of direction! If the soldiers had waited for the right map they would have died. In fact they were probably going to die anyway. Sometimes any plan… or strategy, is better than none at all. The solder’s renewed confidence motivated them to get up and create opportunities. This does not mean that an organisation can go on forever with a deeply flawed plan. All strategic plans need to be revised in the light of events.

Question 3 Maytech Financial (MF), a large accountancy corporation, is looking to assess the operations functions in three of its locations around the world. The MF Malaysia operations are marginally better than the operations of many of its competitors in the region, but still behind the very best players. The function is also viewed positively by other functions in the organisation and their ‘voice is heard’ when it comes to strategy conversations. Arguably, MF Japan operations continue to provide the basis on which MF Japan competes – it recently developed advanced AI software to enable the company to access new larger corporate clients who, in addition to basic accountancy services, value the customer intelligence that working with MF Japan can offer them. MF Hong Kong operations are now clearly better than most of its competitors’ and it has an active voice in the strategic direction of the firm. Recently, the operations team worked closely with marketing to respond to a key client’s request to develop more automated processing of high-volume, low-variety work on their behalf. The initiative has proved successful, so marketing are becoming increasingly keen to build on this internal ‘win–win’ relationship. Where would you position the three MF operations functions on the Chase and Hayes four-stage model of service operations?

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The relative positions of the three operations are shown in the figure below:

•

Maytech Financial Malaysia operations sit in stage 2, and can be described as ‘externally neutral’ with competitor operations in its market. The key now is for MF Malaysia to push towards stage 3, to not simply match external competitors but becomes one of, and then ultimately, the best in this ‘first division’.

•

Maytech Financial Hong Kong operations sit in stage 3, and can be described as ‘internally supportive’. Clearly, they play a more active role in developing new services by working alongside the marketing function. As such, there is an element of implementing strategy (i.e. responding to the market requirements) but also supporting strategy in proactively developing operational capabilities that appear to be shaping (at least partly) the strategy of MF Hong Kong.

•

Maytech Financial Japan operations sit in stage 4 of the model. The operational capabilities that they are developing and taking to the market are clearly giving an operations advantage and the function can therefore be described an ‘externally supportive’.

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Question 4 Carry out an importance–performance analysis for an amusement park. In doing this, think about the competitive factors (i.e. the key ingredients) for this offering, their level of importance and their performance using the scale shown in Figure 3.10. Then map these onto an importance– performance matrix, as shown in Figure 3.11. Naturally, there is no ‘right’ answer here. It will depend on the particular theme park (or zoo, animal park, etc.) that was selected, and the interpretation of ‘data’ both for importance and performance dimensions. Still, here is an example of an importance–performance matrix for a large theme park based in France (no prizes for guessing which one it is!)

Here, we’re seeing the average rating for importance and performance based on a large amount of quantitative data (largely survey-based) but also some qualitative information from customer and employee focus groups. Of course, it is possible to create multiple importance-performance matrices for different customer groups (e.g. parents and children in this case, or different nationalities), different times of the year (e.g. high-season versus low-season), and so on. Here are some key notes on different competitive factors (or ‘ingredients’ of the customer offering).

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Quality Food quality – seen as important by some customers (French and Italian) and less so by others (English and German). Relatively poor performance, especially not allowed to drink alcohol which many Europeans dislike. Ride quality – very important and customers think they do really well on this. Customer service – very important, especially as the theme park has created a very high service level in other locations. However, the levels of service as perceived by customers are poor at this theme park, so this is clearly an urgent priority for improvement. Speed Ride queues – Average performance of 3, but falls as low as 6/7 in busy periods. Parking delays – not so important because you only have to queue once, but this is rarely a problem as there are lots of spaces available. Dependability Ride availability (i.e. they do operate) – very important and they are very reliable. Location accessibility – important generally perceived as well-located by its customers. Flexibility Service customisation – not seen as too important (though perhaps increasing expectations in this area, e.g. multi-language ride options), but also not very high performance beyond selecting your own rides/meals. Cost Cost – important but seen a relatively expensive compared to other attractions.

Question 5 The managing partner of The Brandfair Partnership (TBP) was describing her business: It is about four years now since we specialized in the small to medium firms’ market. Before that we also used to provide brand consultancy services for anyone who walked in the door. However, within the firm, I think we could focus our activities even more. There seem to be two types of assignment that we are given. About forty per cent is relatively routine. Typically, these assignments are conventional market research and focus group exercises. These activities involve a relatively standard set of steps that can be carried out by relatively junior staff. Of course, an experienced consultant is needed to make some decisions. Customers expect us 39 © 2021 Pearson Education Limited. All Rights Reserved.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

to be relatively inexpensive and fast in delivering the service. Nor do they expect us to make simple errors, if we did this too often we would lose business. Fortunately, our customers know that they are buying a ‘standard package’. However, specialist agencies have been emerging over the last few years and they are undercutting us on price. Yet I still feel that we can operate profitably in this market. The other sixty per cent of our work is for clients who require more specialist services, such as assignments involving major brand reshaping. These assignments are complex, large, take longer, and require significant branding skill and judgment. It is vital that clients respect and trust the advice we give them in all ‘brand associated’ areas such as product development, promotion, pricing and so on. Of course, they assume that we will not be slow or unreliable, but mainly it’s trust in our judgment backed up by hard statistics that is important to the client. This is popular work with our staff. It is both interesting and very profitable. (a) How different are the two types of business described? (b) It has been proposed that she split the firm into two separate business: one to deal with routine services and the other to deal with more complex services. What would be the advantages and disadvantages of doing this? Again, this is the common service operations strategy issue of whether different market requirements warrant different internal operations. In other words, should market segmentation be matched by internal operations segmentation? First, it is always useful to try and understand the differences between the operation’s various offerings (2 in this case) and the implications. The table below illustrates. Conventional market research and focus group exercises (40%)

Complex branding exercises (60%)

Volume

(Implied high)

Lower

Variety

Some commonality between the needs of clients

Every assignment is different

Margin

(Implied low)

(Implied high)

Order-winners

Cost

Quality (of advice)

Speed

Flexibility (of skills)

Quality (no/very few errors)

Speed

Qualifiers

Dependability

So, at least as far as one can tell, the two types of offerings, although both concerned with the same knowledge base, compete in very different ways. But does this mean that the business should be split in two? Advantages and disadvantages could include the following.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Advantages of splitting the business into two separate operations •

Each operation can focus on what the different offerings need to compete effectively (see the discussion of trade-offs in the chapter)

•

Can get a better idea of the true profitability of each type of service

Disadvantages of splitting the business into two separate operations •

Reduces overall volume of business in each part of the business, so more difficult to cover the fixed costs of the business

•

Created two classes of staff. Those trusted with only simple/routine stuff, and those who can tackle more difficult assignments. So less chance of staff development and promotion possibilities.

•

Precludes learning from one service and transferring that knowledge to the other.

Case exercise – Corks Nightclub: an overnight success? Question How did the four perspectives of service operations strategy (top-down, bottom-up, outside-in, and inside-out) influence the eventual service strategy of Corks Nightclub?

Case analysis Two ways to address this case example are to structure a debrief by going through either each of the four perspectives or writing out a timeline for the development of the club. In going through the four perspectives invite students to look for examples of each of the four perspectives in play. However, given that the case is written as a chronological narrative it is probably easier to create the timeline and then go back and consider how we would categorise each of the developments and that which informs those developments. The timeline approach is adopted here. A timeline is included in the slide pack for this chapter.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Corks nightclub timeline Timeline/strategy Pre-purchase perspective (while Barry was at university) Top-down (Service strategy should reflect the overall strategic aims of the business)

Outside-in (Satisfy the requirements of its market(s))

Early days, post purchase

The makeover The end of month one

After six months of trading

At the end of the first year

Post reconfiguration

Barry’s intention was to attract an ethnically diverse, professional crowd. However…

The personal aspirations of the executive are a key aspect of the top-down perspective. Barry clearly had a desire to run a bar and club. Barry believes that the latenight licence will be attractive to club goers and music fans in central London. However the off-track location meant that a lot of work would be required to make the potential market come to the club.

… he promotes the offering to department retailers. Selfridge’s is arguably upmarket and patronised by professionals, but only a small number of professionals work there! The majority of employees in retail, even at the high end

With trade being insufficient, Barry attempts to market the club to a broader range of musical interests, specifically R&B fans. Barry also wants to encourage highspending professionals.

The changes to The re-opening night was a the club are a hit, especially on huge success. Fridays when Customers demand is way returned in droves. The in excess of club was capacity. The Thursday and nominated for Saturday R&B ‘club of the year’ nights are also at the MOBO awards. popular.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

are on minimum wage. This said, Friday nights seem to be attracting staff from local stores and offices. Bottom-up (Account for the practicalities of how a service can be delivered)

Barry wants Barry is familiar Barry has premises, maximum with the some staff and capacity operation of a a manager. He utilisation but bar in a jazz club. Barry has has a chef but one of the is sceptical methods of previous achieving this experience is in about his abilities. Barry (moving tables managing operations and also has a late- at 10pm) was probably accounting. On night licence the face of it he for the bar and unwise. Customers would seem to club. would be be in quite a potentially very good position to comfortable at set up this business. this point, and may resent having their chairs and tables taken away.

One positive aspect of early performance is Friday nights. The R&B DJ seems to be bringing in the trade. Barry gets excited about the potential for running an R&B club.

The kitchen isn’t making any money and Barry fires the chef. Corks is now offering simple snacks rather than a full menu. Barry can’t get rid of the food completely because of licence constraints.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Inside-out (Develop the capabilities of the organisation’s service resources and processes)

Barry seems to have general entrepreneurial skills and wants to develop these.

Barry decided to close for three weeks for a makeover.

The business is haemorrhaging money. The additional costs of late-night opening, including security staff do not seem to be being amortised by volume.

Barry’s general manager suggests appointing the KISS FM radio DJ to run the late slot on Fridays. The manager is familiar with the locale and Still, it’s ‘in for a thinks there is penny, in for a little R&B pound’, and competition Barry asks his from other general manager local venues. to hire new promoters with the brief to attract a broader client base. Barry also instructs his manager to look for new DJs for other nights of the week, specialising in house music, and other genre.

More partnerships with DJs from specialist R&B radio stations proved successful. However, with success comes evidence of a constraint in the form of the layout and general resources in the club. More dance floor room is required as are expanded facilities. Barry decides to temporarily close the club to reconfigure it. The dance floor, bar, toilet and cloakroom were all now expanded with new seating around the edges of the dance floor.

Barry expanded staffing, in particular professional security staff to cope with the new volumes.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Encourage students to either build a timeline on a whiteboard as a group, or possibly distribute flipchart paper. Two sheets of flipchart paper turned landscape would work quite well. Get students to list the key events or dates across the top of the whiteboard or flip paper, and then think about what each phase of development means in terms of the four perspectives. If you look at the table below you can see a gradual shift, perhaps an almost inevitable shift from top-down, through outside in, then bottom-up and then inside out. ‘Inevitably’ in the sense that entrepreneurs generally start with a personal intention or vision and that is articulated as a set of business aims. Then they have to think about what the market wants and whether that market is worth serving. Then there needs to be an assessment of operational constraints and the practicalities of delivery. Finally, with familiarity and learning from early operations comes the recognition of the need to develop capability. In most environments this progression becomes a cycle. In summary then: Top-down

Barry has ‘motive, means and opportunity’ as the police would say. The problem is, he has made several assumptions about his markets that are possibly invalid. Outside-in

This said, Barry quickly wises up and sees the potential for R&B rather than jazz. Barry however remains confused about his so-called high spending professionals and where they might work. Bottom-up

Barry is gradually learning about his operational constraints and potential. The potential goes beyond his core business and extends into a loose supply base. Gradually Barry learns how to exploit this, and so emerges a slightly modified strategy. Inside-out

Barry recognises the need to develop structural an infrastructural assets. The fabric of the club and its layout needs changing and despite requiring considerable investment in a shutdown, Barry has the confidence to go ahead and do this. In terms of softer resources and processes, Barry successfully taps into an informal network in the form of local radio DJs, and formally engages a professional security firm.

CHAPTER 4

The service concept About this chapter Chapter 4 is about how to develop and use ‘the service concept’. The service concept communicates the essence of a service in terms of its ‘organising idea’. It can be used to create organisational alignment, design the service and drive innovation and strategic advantage. In Chapter 4, we will also explain how the service concept can be articulated and show how it can be used to drive the understanding that can lead to innovation in new and existing services.

Learning objectives •

To be able to define a ‘service concept’

•

To be able to identify the elements that make up the structure of the service concept

•

To gain an appreciation of how managers can use the service concept

Discussion questions and exercises Question 1 Referring back to the case example on the Lapworth Museum of Geology, construct the service concept for the current (redesigned) museum. Despite being very successful, it is a fact that tourism and leisure attractions have a finite life. Visitor numbers tend to peak in the first holiday season after introduction of new service, and then steadily decline. This decline in revenue is a problem for museums that are not state funded. It might be difficult to sustain the Lapworth Museum in its current form let alone develop new exhibits and attractions. What changes could be made to the service concept of the Lapworth Museum that would possibly improve revenue potential but at the same time not conflict with the core mission of the museum. The service concept

The service concept for the current (re-designed) museum is below. Note that the service concept has to straddle the demands of two customer groups.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

However, the needs of both groups are not mutually exclusive. The base service provision has to address the needs primarily that of the professional or academic geologist who requires a reference collection for the locale, the UK West Midlands. Fortunately, a more entertaining museum of geology also needs this base service provision. So layered on top of the reference collection which is provided for scholarship, we have multiple additional levels to support the other component of the museum’s service concept, which is to say an environment in which to enthuse young people in particular but families generally about the world of geology. Note that the ‘service received’ area of the service concept below includes very little on the experience of the professional geologist because they need little apart from access to the collection. The customer experience elements listed are for the target intellect which is around 12- to 14-year-old person who visits in a social group. Many of the experience elements are about creating excitement and fun. In order to deliver on this experience young people need a staged narrative and the ability to interact with exhibits. In turn, the fact of visiting in a social group means the usual support facilities need to be available. The ‘service provided’ delivers on the experience and the outcome is hopefully – for the newer customers – enthusiasm for geology but more broadly enthusiasm for the natural world. Other outcomes will be a day of leisure or simply ‘somewhere to take the kids’! Second part of the question

It is almost an axiom of the world of museums and heritage tourist attractions that they have a life. There will always be a steady trickle, but visitors tend to peak in the first three years of opening.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

There needs to be away to keep visitor numbers high in the long term and this invariably involves getting repeat visits. In teaching this case question you can ask the class to simply brainstorm ideas, but the important point of the question is to get students to frame any changes or additions in the language of the service concept, and even more importantly to ask them to consider the impact of any changes on the core service concept. Students will come up with many different ideas and you can test the extent to which they clash with the service concept. One of the commonly adopted solutions is to have the occasional star exhibit. Often smaller museums will in fact collaborate and rotate star exhibits. Perhaps the best example would be in the UK Natural History Museum in London where the brontosaurus skeleton in the main entry foyer was changed to a dramatically posed blue whale skeleton. Fossil dinosaurs, and especially complete dinosaur skeletons are powerful narrative hooks for young people. So one of the easiest ways to attract repeat visitors is to change the star exhibit. The Lapworth has a small tyrannosaur fossil in the main hallway but that could easily be changed for, for example, a stegosaurus, or some other animal skeleton. The beauty of star exhibits is that they don’t harm the existing service concept at all. A large and valuable gem collection, especially diamonds, can also draw in the visitors but not ‘break’ the core concept. Another complimentary change would be to have a visiting art exhibition. Clearly, temporary exhibition space is needed for such. Many museums offer up temporary exhibition space to exhibitions that are not related to the service concept. This can be a problem as there is cognitive dissonance distance on the part of visitors. So, for example, if temporary exhibition space was occupied by the work of the local artist who painted industrial heritage, then that would be a problem as it would be sending conflicting messages that were not consistent with the narrative of the museum. The experience would be diminished and in turn the outcomes would be diminished. By contrast, an exhibition of watercolours of fossils, or perhaps an exhibition of polished gemstones would be generally speaking a ‘fit’ with the service concept.

Question 2 From the 1960s through to the late 1990s, ‘no loitering’ had been an important principle underlying McDonald’s operations. Founder Ray Kroc had ordered that pay telephones, jukeboxes, and vending machines were forbidden at McDonald’s restaurants. The goal of the restaurant was to quickly serve customers and not force them to stay any longer than it took to eat a hamburger. Dining areas were designed with minimalist – and often uncomfortable – hard plastic tables and chairs which were usually bolted into place. Customers consumed their purchases in spartan surroundings which acted as a forcing device to hurry them along and create space for the next customers. With the new ‘Forever Young’ store design (adopted in 2006) remodelled restaurants featured dining zones with ‘distinct personalities’. Most of the new store designs offered three sections or zones. A linger zone was designed to accommodate people who were inclined to dawdle and socialise while sitting comfortably on armchairs or sofas using free wifi access. Another zone offered counters and stools for patrons in a hurry who might just grab and go. The third, and perhaps most important zone is the one for families or groups where seating arrangements can be reconfigured to meet a variety of needs. Harsh colours and hard plastics were replaced with custom earth tones and flexible, padded, fabric-covered booth-seating. All changes had the aim of encouraging diners to loiter and perhaps spend more money. Similarly, in 2003, the McCafé store design was developed in Australia and as it was rolled out worldwide addressed many of the aims of the ‘Forever Young’ store design. In 2012, McDonald’s announced that it would be bringing the

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

McCafé brand and line of products to all of the McDonald’s restaurants in the United Kingdom. As outlets went through their five-yearly upgrade and redecoration cycles they incorporated both ‘Forever Young’ and McCafé facilities designs. Map the service concept for the original, and post ‘Forever Young’ McDonnell’s store designs. What impact do the changes have on those elements the service concept which were not directly the subject of formal redesign? In other words, what were the consequences for the service concept overall on the changes to the physical design of the restaurants? First part of the question

Map the service concept for the original, and post ‘Forever Young’ McDonnell’s store designs. The service concept profiles for both types of store are below and are included in the instructor slide pack.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

In teaching this question you can distribute the blank service concept template as PowerPoint slide and encourage students to complete it or better still, ask students in groups to draw to service concepts on a flipchart. Use one flipchart page for each of the two service concepts then you can invite groups to respond the second part of the question using the two service concepts as a support for their arguments. Drawing the two service concept is relatively easy and most of the information is available in the question. Some interpretation is required however. The usual problem is in deciding which items constitute an aspect of service provision, which are elements of the experience, which are an outcome and so on. Inevitably there are overlaps and I encourage students not to agonise over this positioning but instead to run with the complexity and uncertainty, have a conversation. For example, the obvious issue for contention is under experience… ‘tasty and quick meals’. Some students might say that this should be the service provided. We would argue that the service provided is fast, wholesome and inexpensive food, whereas ‘tasty or not’ is subjective and ultimately is a part of the customers experience, as in fact is any judgement on whether the meal was delivered quickly. If in doubt refer to our definition of the customer experience in the context of the service concept: ‘the customer’s direct and personal interpretation of, and response to, their interaction with and participation in the service process, and its outputs, involving their journey through a series of touch points/steps’.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Second part of the question

What impact do the changes have on those elements the service concept which were not directly the subject of formal redesign? In other words, what were the consequences for the service concept overall on the changes to the physical design of the restaurants? The second part of the question is more tricky. Service providers have to consider what will be the impact of any changes on the service concept overall. Often we see ‘unintended consequences’ of service design changes. The unintended consequences occur because it is often difficult to anticipate the behaviour of customers in response to the changes in physical design of a service environment. Of course, this is why McDonalds wisely piloted their new restaurant designs within a limited region, and even after they were successful, rolled out the stores quite slowly. One could argue however that there is a problem with several of the design changes. Again, you can ask students to brainstorm here, but as always try to get them to frame their ideas using the language of the service concept. One of the challenges that comes up with the new store design is a classic operations challenge, reduced effective capacity. It varies from culture to culture, but in most parts of the world visitors customers will ‘snag’ a table for their family while one member goes to order the food and bring it to the table. So that table and several seats are occupied and effectively closed to other customers whilst the food ‘collector’ is in the queue. On a busy weekend there is double hit in that the wait for food can be long, and there is increased demand for the tables. So we have an aspect of the service provided (the comfortable linger zone and the family/group zone) providing good service but for a reduced number of customers, effectively denying aspects of the service provided to other customers. In turn, there is an impact on the customer experience for waiting customers who wish to have a seat and linger. There is a kind of domino effect also, in that at busy times customers in social groups or families start to snag the ‘grab and go’ stools and this in turn frustrates customers who want to get and eat a quick meal. On weekdays/working days we have a related problem in that customers with laptops will park themselves in one of the comfortable areas and spread out their work on a table. A table that could previously serve for customers now serves only one. More to the point, that one customer may only buy a cup of coffee and will make it last several hours possibly. Another problem with the new store design is that it encourages lingering and socialisation by groups that might put off some customers. For example, a family group entering and seeing a large number of youths might not want to patronise the restaurant, especially if the youths are talking loudly, possibly swearing, etc.

Question 3 An IT Infrastructure Support Group services the IT infrastructure of several clients. In shaping a suitable service concept it is aware that, in effect, the group serves two distinct customer groups within its client base – the ‘end users’ who use the IT systems, and the ‘business leaders’ who invest in the technology. How might these two customer groups’ distinct needs be shown in the service concept?

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

This question is relatively simple to answer for post-experience students who can usually quickly distil their experience of using support units. Undergraduate students might need a bit of handholding through the question. You can use the completed service concept diagram below to guide you in talking through the issues. One thing to note is that the service concept, if it is to be useful needs to be succinct and accessible. It can be challenging to represent two, and definitely three or more related but different services in the same diagram. In this instance, it is very useful to have both service concepts on the same diagram because essentially the same core support team will be delivering service.

Question 4 Earlier in the chapter, we explored the case example of the Japanese hairdressers, QBNET. The service concept for QBNET is essentially simple and no-frills barbering service. The QBNET service has been phenomenally successful in Southeast Asia, and latterly has begun expansion into other regions. Ironically, the UK has seen the opposite in growth of the full-service barber where previously most men’s hairdressing was simple, minimalistic and very much like the QB net offering. Turkish Barber’s Club opened the doors of their first traditional barber shop in Birmingham, bringing the traditional style, heritage and full-service of Turkish Barbering to the UK’s second largest city. The chain proved a huge success and 10 years later had 10 branches throughout the local region. Turkish Barber’s club was not the first of its kind in the UK but was certainly one of the earliest full-service barbers to be successful. After its success, the city

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

experienced phenomenal growth in the Turkish barber concept and both city centre and suburbs saw the rise of many emulators of Turkish Barber’s Club. If one choose any high street in the suburbs of greater Birmingham, within a 10-minute walk one could pass three or four Turkish Barbers. But some local people claimed that the Turkish barber market had become oversaturated. Try to identify which aspects of the service concept for a typical Turkish barber could be seen as the most important. In other words, on what should managers focus so as to make their particular take on the Turkish Barbershop sustainable in the long term. To answer this last question in the chapter requires students to carry out research. Most students in Northern Europe would be aware of the Turkish barbershop concept as well as students from Turkey obviously. However, many will have never patronised a Turkish Barber. So students will need to carry out some brief web research. Also, as the question indicates, the ‘New Hairdressing Concept in Japan’ case example on page 110 will also be of use. The case example relates information on the traditional Japanese barber, and the list of services there provided is very similar to that of a typical Turkish barbershop. So in some respects the de-brief of the Japanese barbershop case example is the opposite of the de-brief/answer to question 4. A service concept for Turkish barbershops is below. This one happens to be based on Turkish Barber’s Club but is typical of the service that is generally offered.

At the centre of the Turkish barbershop is the haircut and shave. Both have to be competent and affordable. The majority of trade will be haircuts and shaves. Of all the services provided it is hair

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

cutting and shaving skill which has to be above a qualifying threshold of performance. The other services listed our relatively easy to learn and carry out. They can be done by less experienced staff. The cost of a haircut in a Turkish barbershop is typically slightly cheaper than in a mainstream barbershop. However the barbering is slightly better, and so for the basic service the Turkish barbershop wins out. Most mainstream barbershops don’t shave. Where the Turkish barbershop makes most money is on supplementary services such as threading, skin buffing, singeing, etc. These are both easier to carry out, especially by lower skilled staff, and they earn higher margins. However, it is difficult to offer these supplementary services stand-alone. The basic service of barbering and shaving has to be in place. Provided there is the capacity (and there’s plenty of capacity in the Turkish barbering industry) then one of the most important aspects of the customer experience, the relaxation of an extended haircut, costs nothing apart from a portion of the rent for the premises. In some respects there is an opportunity cost in that the barber’s chair could be used for another customer, but one of the most appealing aspects of the whole service concept is the potential to sit still, relax and to not have to talk to anyone or get up immediately after having treatment. So to answer the question specifically, the focus must be on core service delivery of haircutting and shaving, but get these basics right and it almost doesn’t matter what other services are provided. These can be traditional (like beard trimming or oiling) or novel (like laser treatments). The latter are high margin and relatively easy to add on.

Case exercise – Capes and Latimer Questions 1. Using the service concept template shown in Figure 4.3, map out the service concepts for the micro pub, the brewpub and the craft beer bar. 2. On the basis of the current service concepts for each pub, as well as the financial data provided in Table 4.1, what recommendations should Marie make to the C&L executive board?

Case analysis Debriefing this case study requires considerable patience and a systematic approach. Answering question one is essential to ensure focused reading of the case study. If you let them, students will jump ahead to look at the financials without appreciating the operations of each pub. If you gave, for example, a syndicate group all three pubs to analyse then they would become tired after creating a service concept profile for the first pub. So the best way to manage the de-brief is to split the work. Distribute different briefs to syndicates and have each analyse one of the three pub types. You could then invite groups to make a case for selecting their public type for promotion within Capes and Latimer. Ask groups to complete the service concept profile first and then distribute the spreadsheet version of Table 4.1 (available from servops.net) as soon as they have done so. Make sure that they actually show you the completed service concept profile before you give them the spreadsheet.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

A little manipulation of the spreadsheet can reveal some interesting surprises. The first calculation that can be quite revealing is to work out the ‘wet/liquor and beer’ and total profit per square metre trading area. The Paperclip

The Temeraire

The Station

Wet sales Profit/m

£7432

£5205

£3662

Total Profit/m

£7432

£5343

£4578

Marie has an idea that the Paperclip is leaving money on the table. She thinks that the same concept, in a larger premises, while risking breaking the ‘atmosphere’ would be far more profitable. We don’t have exact data on is the cost per square metre of trading floor. However, the case informs us that pubs like the paperclip are installed relatively quickly into vacant ‘off High Street’ retail space. They are in fact quite easy to move around. Hence the generic name ‘pop-up’. The opportunity exists to exploit several venues in a region. Clearly, it would be in the interests of the landlord to minimise the number of moves, but the exact location is not critical. More to the point however, the space occupied by pubs like the paperclip are relatively low rent. Certainly they are low rent in comparison to traditional pub sites. Another factor is that many high streets in cities across northern

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Europe are suffering as businesses close. This is because of the general move to online retailing. In the UK certainly, but in many cities across Northern Europe ‘charity shops’ move to fill the vacant premises. Landlords would much rather have customers who can pay higher rents, and local authorities want to charge full, or near full business rates. The upshot is though, that there is plenty of relatively cheap capacity for the pop-up pub. Calculating profit, and ‘wet’ profit per square metre reveals that the paperclip is by far the best user of retail space. The Temeraire is in the middle and not surprisingly the Station, being located in metropolitan areas is poorest performing with nearly half the profit per square metre of the paperclip. Factor in the cost of city centre retail space and the situation is worse. The next calculation worth doing is to look at, or rather estimate the reduced contribution to C&L, the parent, from the Temeraire. Remember that the case indicates the landlord can retain all profits from their home-brewed beers. While this agreement would obviously be subject to negotiation if the concept was rolled out throughout the C&L group, currently it is worth the attempt to factor in the reduced profitability for C&L. The case indicates that the Temeraire sells all production of its own beers. We can infer that if the landlord brews weekly and stocks do not increase then the brewer is selling 200 L or approximately 350 pints per week of his own beer. That is approximately 5.5 per cent of total beer sales in the pub (look at ‘beer volumes’ info in the spreadsheet). That info is sales by volume. Because the home-brewed beer commands premium pricing, the percentage of total profit would be somewhat higher. So the total annual profit of the Temeraire that goes to the parent brewery is reduced by approximately £40,000 at minimum (5.5 per cent of £728,728). From the perspective of the commercial and financial senior management of the parent this hit would be problematic, and most likely would not be condoned going forward. However, from Marie’s perspective the deal is a key motivator to the Brewer/Landlord and is essential for making a success of the concept. Lastly, we have the Station. Marie, at the end of the case study says that ‘it’s quite sad that probably the most successful of all the pilots was the station’. If you look at the figures alone then on the face of it seem that Marie is incorrect. The Temeraire looks to be the better performer, but remember that you have to factor in (from the parent brewery’s perspective) that hit on wet sales profit and possibly food profit from the landlords ‘sideline’. So, it is just about the money then the Station would be a concept worth exploiting. The Paperclip is the really interesting concept. It is perhaps unfair to compare it with the other two pub concepts because the comparison is certainly not like for like. The useful comparator is profit per square metre. We don’t have exact figures for business rates and the cost of the sites but traditional pub real estate is not cheap. By contrast, the Paperclip can be inserted into many vacant retail sites and the wet sales profit per square metre is double that of the Station. Context is also worth considering too. Many local UK Local authorities (local government) are trying to regenerate high streets and there are incentives available. Another piece of context is that post Covid 19, people are going to be commuting less. Both these factors would seem to favour the Paperclip. The Paperclip also provides an opportunity for the brewery to get rid of its ‘bin ends’ which currently are mopped up by the likes of Wetherspoon’s in the UK. Perhaps the most compelling argument in favour of the Paperclip is the extremely low comparative capital costs and investment required to get the pub off the ground. The pub concept requires some branding and signage but everything else can be purchased second-hand if necessary. The charm of the paperclip (and here you need to reference the service concept) is in its simplicity and convivial community vibe. The latter are not expensive. They don’t happen overnight and they require work to create, but physical resources required to set them up cost, relatively speaking ‘pennies’.

PART II

SERVICE PEOPLE

CHAPTER 5

Customer relationships About this chapter Chapter 5 is about the relationship between customers of various types and the operations with which they have a relationship. It looks at how customers can be categorised and the importance of developing ‘customer’ relationships in both B2C and B2B contexts.

Learning objectives •

To be able to define the three approaches to classifying customers

•

To understand the benefits of retaining good customers

•

To explain how managers can develop good customer relationships in B2C markets

•

To explain how managers can develop good business relationships in B2B markets

Discussion questions and exercises Question 1 If you search online under the single word ‘relationships’, you will be bombarded with advice on personal relationships. Also, the language used by authors to describe customer relationships often echoes the language of personal relationships. Are customer relationships like personal relationships? Not surprisingly, the answer to this question is not clear-cut. We pose it at the start of a session on customer relations to get students thinking about the key issues, and critically how much they can ‘borrow’ from their understanding and experience of personal relationships. Clearly, the responses to posing this question will be different depending on the experience of the group of students. It is worth looking at some general principles that might apply in personal relationships and which in fact describe the nature of personal relationships, and then to consider how these principles apply in customer relationships. Attraction Attraction between two people obviously plays a big part in relationships and clearly this idea is applicable in the context of customer relationships. Services need to make themselves attractive 59 © 2021 Pearson Education Limited. All Rights Reserved.

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with advertising, packaging, service positioning and obviously basic competence in service delivery. If a service organisation is not attractive to a customer that they won’t get any customers! Compatibility and basic values Couples do not have to be exactly alike. In fact, there are many who argue that differences can maintain interest and attraction over a long period of time. However, couples need basic values in common. Beyond general principles such as integrity it may be that a couple for example have to talk about whether they want children, whether they are vegetarian, meat-eating or vegan, etc. Differences on these fundamental preferences and values may put a relationship under strain. Similarly, with customer relationships it is important that both parties have a complimentary value set. For example, the outdoor retailer REI closes its stores on Black Friday and several other public holidays. The loss of business is considerable, but the company wants to encourage its typical client, someone cares about the outdoors, to get out and be ‘in nature’. Disagreements All couples argue now and then. The successful and long-term couple learns to work through arguments and resolve them. So it is with customer relationships. Service organisations need to work out what their customers dislike about their service. They may elect not to do anything about that which the customer dislikes, but that decision not to change needs to be a conscious one. Do not provide opportunities for disagreement by accident! Compromise Successful personal relationships are full of compromise. Couples need to give and take. In customer relationships, if policies are too rigid then customers can feel angry and frustrated. One way to address this issue is to give employees the discretion to bend rules when it makes sense to do so. Such considered and responsive rule-breaking can give customers an immense sense of satisfaction. Clearly, there are dangers in the sense that word could get out, and other customers may expect the same service. This said, if that happens then there is a possibility of redesigning the service. Understanding Couples need to be sensitive and listen to each other. They also need to be alert to non-verbal cues that suggest things are out of kilter. This is true of customer relationships also. Customers often make decisions based upon less than rational emotional and unconscious factors. Without listening to and having any sort of customer empathy, the service firm will not understand why customers make the decisions they do. Honesty Lastly and most importantly customer relationships need to be honest. Just like personal relationships, without honesty, openness and trust the relationship is built upon sand, as it were. 60 © 2021 Pearson Education Limited. All Rights Reserved.

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So working through a non-exhaustive but fairly comprehensive list of principles for good personal relationships we see relevance for these principles in the context of customer relationships. The answer then is that in many ways customer relationships and personal relationships are similar, and similar principles for the effective management of these relationships apply in both contexts. One pushback that you might get from students is that customer relationships have often some sort of contractual element. There will be a legal mechanism in play at some point even in the non-profit world. In turn, the response to that pushback is that this formality is often the case for personal relationships too, in the form of marriage or civil partnership. So, the parallels are striking and the simple answer is yes; personal relationships and customer relationships are similar for the most part but there are obvious differences in nuance. The above answer was helped greatly by the work of Colin Shaw (2017), beyond.philosophy.com

Question 2 Re-read the case example on The Prison Service. Why is it valuable to consider all the stakeholders in this particular example? We can identify all the stakeholders of a service and understand their different perspectives. The case example describes the stakeholders for a prison service, and recognises that not all stakeholders will be willing participants. The value of this type of analysis is that it then allows the operations manager to identify the varying (and sometimes conflicting) requirements of each stakeholder group. For example, regular visits by the families helps prisoners to remain grounded in a community, and retain some incentive to not reoffend in future. So the family of a prisoner will need access. They will also need facilities to support the ‘half day out’ for the family. Visits to an inmate in prison are not like a trip to IKEA, but there are many parallels. If the prison service is to avoid recidivism, then it needs to support visits. So the families of prisoner are an important stakeholder group. However, this support has to be balanced against the need to conform to budget, and the need to punish offenders. It could also be argued that a prisoner who was very easily accessible to his family might impose strain on the family to take time out for too many visits. Such is the complex nature of stakeholder management. This said, it has to be done, as without attention to the groups who have an interest, the service is likely to perform below optimum.

Question 3 Calculate your lifetime value for three service organisations that you use – for example, supermarket, clothing retailer, music download website, bar or bank. What are the problems in assessing lifetime values? I will start this answer by going through the calculation logic for easyJet. I use the low-cost airline fairly often. I use it for business travel from the UK Midlands to Northern Europe, mainly France, Germany and Switzerland. I also use the airline for annual ski trips. So my situation introduces the first bit of complexity. It is almost meaningless to calculate CLV for all passengers as they have very different needs and usage patterns. Some segmentation is in order. Clearly, there is segmentation between business and leisure travellers which is applicable in this context. Another possible segmentation would be along the lines of the frequency of flying. That could be frequency 61 © 2021 Pearson Education Limited. All Rights Reserved.

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of flying with easyJet or frequency of flying generally. There are many ways to cut the data. If in doubt cross-reference with other data that you might have available on customers. For this example, I will focus on my activity as a business traveller with easyJet. The first part of the calculation proper is to work out the average purchase price. What is the average I spent on flight tickets over the last five years with easyJet? Depending on how early I can book I pay from £50 a ticket up to about £200. Usually I have to book late, so the average is about £130 for a return flight. The next part of the calculation is the number of repeat sales per year. For me that is approximately five flights. Generally in calculating CLV one would work out the average retention time. So there is a presumption here that all my flights with easyJet. This might not be the case in practice so the proportion of flights with easyJet need to be calculated. Then finally and rather ominously I have to work out for how long I will be flying with the airline. I’m 58 currently and realistically. I’ll continue to do consulting and overseas teaching for another decade. So the easyJet business CLV for me is: £130 × 5 × 10 = £6,500 Note that normally one would factor in acquisition costs, but for this commodity service, the costs are negligible as easyJet pass most of the setup work to the customer. As to other problems in assessing CLV beyond the need for meaningful segmentation, another is covered in the calculation above. It is hard to know for how long the customer will continue patronising the business. So the problem here, as it says on page 137 of the text, is what does ‘lifetime’ really mean? This is why in practical usage of the concept, it may be useful to shorten the ‘lifetime’ and consider value over a period of a year or perhaps five years depending on context. Another issue, if not a problem with CLV is what to do with the information? CLV should in theory allow further segmentation of the fairly homogeneous group of customers into at the very least highly profitable, profitable and low-profit groups. This idea is illustrated in Figure 5.4 on page 138. So what to do with the groups? Might it be worth paying attention to the middle ground… the profitable customers, and try to move them into the ‘very active, and highly profitable’ domain? What agency does the service firm have to manipulate customers in this way? What about the no profit or non-profit customers? Might it be worth trying to deselect these customers? On occasion, I get the sense that services send signals to low-profit customers to encourage them to leave! For example, in the non-chain coffee shops the worker who occupies a full table with their laptop and papers while sipping one latte all morning will often find themselves interrupted by a cleaner spraying noxious chemicals, tidying with the picking up of cups… etc. These are indicators that the customer needs to buy another coffee, or leave.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Question 4 Re-read the case example ‘Revenge of the taxi driver’. What do you think are the problems of platform services such as this rating both providers and users of a service? The first problem, or issue anyway, that springs to mind is that if the ratings to be useful then they need to inform intervention. For passengers the intervention would be binary. Presumably the customer score would get so low that they would be banned from using the service. Interestingly, if Uber applies a ban they do so to the whole family of Uber apps. So a banned passenger would not be able to use Uber eats or ‘Jump’ electric bike rentals. Rather ominously, Uber refers to such bands as ‘deactivations’! For the driver the intervention would be most likely be some sort of warning or counselling if the average score below drops below a certain level. With the driver being kicked off the service if ratings continue to fall. A second problem is related to the interpretation of the rating scheme. Some passengers might view a five-star rating as being suggestive of a perfect ride in all respects. In the world of Uber, anything less suggests there is a problem. On the Uber app, a four-star rating is defined as ‘OK, but had an issue’, a three-star rating is ‘Disappointing’, two-stars is ‘bad’ and one star is ‘terrible’. Lastly, this is in the title of the case example, ‘revenge’, there is obviously the potential for retaliatory scoring. Fortunately, it is not one driver or one passenger that is doing the reviewing. Scores are an average. It is unlikely that one problematic store will have a major impact. The approach adopted by most of the ridesharing services pretty much follows the recommendations of Figure 5.7 on page 141. That is ‘communication’ (in this instance of scores), a degree of ‘counselling’ (certainly to riders who’s scores fall close to the 4.6/5 threshold), the app itself also increases involvement, albeit in a relatively simplistic way. Then finally, we have the option of ‘ejection’ for those customers and drivers who will never meet our standards.

Question 5 Re-read the case example on the Harley Owners Group (H.O.G.). Why does Harley-Davidson put so much effort into promoting this club? The Harley-Davidson Owners Group (H.O.G.) is a wonderful example of practical customer relationship management in action. The H.O.G. provides considerable benefits for both members and the company. In fact, ultimately everything is for the company because if members are happy, generally they continue to purchase Harley-Davidson motorcycles and many, many accessories. Boy do they purchase accessories! For members the benefits of the H.O.G. are: •

It turns a product into a ‘dream’ – a passion shared with other enthusiasts

•

Creates a feeling of belonging

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

•

Creates a feeling of being special

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Provides the chance to meet other like-minded people

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Provides a chance to purchase memorabilia

For Harley-Davidson, the benefits are: •

Repeat purchases

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Long-term loyalty

•

Word-of-mouth advertising – even persuading others to buy and join

Harley-Davidson helps develop the relationship between the company and the rider by taking lowkey control over the H.O.G. ‘Chapters’ or local branches and their organisation. Harley-Davidson also support the worldwide H.O.G. through the provision of websites, handbooks, etc. Critically, while there are basic standards that must be met in order for a H.O.G. chapter to be affiliated with the brand, Harley-Davidson does not directly interfere with the management of the H.O.G. themselves. The H.O.G. considerably broadens the relationship between the customer and the company. Although Figure 5.1 it is meant to represent this phenomenon in business to business relationships, the basic idea is applicable here. We go from simple transactional relationships at the level of product purchase, to a much broader product and service customer supplier relationship.

Question 6 As described in the chapter, some customers abuse service providers. How would you: (a) try to reduce the number of customers who return garments that have been worn to an online clothes retailer; and (b) reduce the number of clients who do not turn up for their hair appointments? (a) Online clothing retail Communication and training

•

One of the reasons why customers overbuy is that they are uncertain about fit, so the first and obvious step would be to improve sizing information.

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Appeal to environmental sensitivity – stress the environmental impact of returns and deliveries. This approach is potentially double-edged though, as arguably the whole idea of fashion is environmentally problematic.

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Issue email warnings to problem customers.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Rules

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Prevent over-ordering by pricing, or ‘blocks’ on web catalogue pages.

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Increase the cost of returns, or perhaps allow a maximum number of free returns.

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Shortening the allowable refund period.

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Be being stricter about accepting return items based on their condition.

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Demand that all returns have their exact original packaging.

Provide alternative services

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An enlightened approach to managing serial offenders would be to think of them as potential customers for a different kind of service. They could be encouraged to use garment rental services (please look at the ‘rent the runway’ example discussed in question 1 on page 32).

Ejection

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Ban the worst customers from vendor websites. This said, ‘banning’ is not so easy as it sounds, as identity is so fluid on the web.

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In the most extreme cases, ‘deactivate’ problem customer accounts.

This all said, flexible returns policies have become the norm, with about half of consumers in most contexts saying that a retailer’s returns policy influences where they choose to shop, and one in five reporting that they will only choose retailers that offer free returns. (b) Hairdressing Communication and training

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Reminders

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Text messages

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Appointment cards

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Phone calls (best): o

Call the client two days (48 hours) before their appointment date.

Leave a voice mail reminder if they don’t answer.

Either way, follow-up immediately with a reminder text.

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If you don’t have the staff capacity to make calls to every client then prioritise calls to first visitclients, and always call known ‘regular no show offenders’… to re-schedule and also to find out why they are not showing up. Learning is key! Have a clear cancellation policy: •

A reminder 48 hours prior to the appointment which gives clients a chance to make their changes.

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A fee will be incurred if an appointment is missed or substantially altered within 24 hours of the appointment time.

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Ensure that there is time between the reminder, and the fee being applied - a 24 hour window for clients to call and reschedule or at least let you know.

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Consider ejecting repeat offenders.

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Have a waiting list/standby list.

Case exercise – P-Mecxx Cyber Services (P-Mecxx) Questions 1. What advice would you give to Travis Bickley regarding the way the firm classifies its clients? 2. What should be done to improve its relationships with its clients? 3. Is the adoption of key account management a good idea for P-Mecxx?

Case analysis 1. What advice would you give to Travis Bickley regarding the way the firm classifies its clients? Firstly, Travis needs to choose a classification approach that makes sense for the business. The key approaches are: (a) Approaches based on the nature of their purchasing behavior – primarily used by sales people to judge how best to make a sale. (b) Approaches based on the characteristics of customer groups – primarily by marketing people to segment the market. (c) Approaches based on where a customer is positioned in the supply network – used primarily by operations people to determine the best way to serve customers.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Travis appears to be using a composite of segmentation based upon purchasing behaviour, and segmentation based upon the characteristics of the customer groups (a & b). The latter being largely informal (see below). Regarding segmentation based upon CLV, one thing to note is that the financial information relates to revenue. What we are not seeing here is information on profitability of various clients. The high contact clients are those that are highly engaged with the P-Mecxx service and receive good support from it, hence the high satisfaction scores. However, we have no idea what it costs to serve these clients to get such good scores. In some respects, Travis is in danger of using circular logic regarding CLV segmentation. It might make sense for Travis to segment on the basis of operations activity and perhaps understand the costs of serving that activity. In other words, segmentation based upon a combination of the operations characteristics of the customer groups, their revenue potential and critically the cost to serve them. In other words, we need a degree of operational segmentation. As we will see below, this could potentially turn into a more ‘hardwired’ segmentation in the form of separate operations support domains for the different customer categories. Overall it would seem that classification on the basis of CLV would be kind of missing the point. It is useful to know which clients are more valuable in terms of revenue, but Travis kind of knew that already anyway. Travis needs to understand where the revenue and profit potential is in the relationships. 2. What should be done to improve its relationships with its clients? Travis says that ‘different clients have different needs, and we have to understand them better’. This may be true, but that understanding comes with intimacy and deeper client relationships. Figure 5.5 illustrates the basic principle here. There is need to move from light-touch contacts into deeper relationships. The deeper and richer understanding would also result in more informed segmentation and potential redesign of the various service lines. Ironically, the case suggests that the workers ... the technical staff in the company are already working quite deeply and intimately with clients. One way to improve relations therefore may be to almost formalise ... to manage and support the relationships between technical staff and client staff. In other words, to move from traditional highlevel transactions to the diamond relationship as illustrated in Figure 5.10. 3. Is the adoption of key account management a good idea for P-Mecxx? As to question 3, one could argue that in some respects P-Mecxx is already working informally in this way at the level of technical support, and so it would make sense to formalise the arrangements. The case suggests that the core service delivery is about geeky relationships between technical staff

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

in both supplier and customer’s domain. A key account management approach would strengthen and support those relationships. One of the challenges however, would be in getting technical types (I guess we all have a vision of this person in mind) to consider the business implications of their work. A follow-on challenge would be that key account managers would need to have a very good understanding of the technical aspects of the business. This said, ‘technical sales’ staff are fairly commonplace in the world of IT and IT security. Indeed, they could possibly be promoted from lower level technical personnel. At the end of the case Travis says, ‘Obviously, we will have to make sure that all consultants have a portfolio of clients to look after, with the more senior people having a higher proportion of highcontact clients’. This might work, but until more sophisticated client segmentation is carried out, critically, segmentation that incorporates operations considerations it will be really hard to know where to place the more experienced consultants’ best effect. Key account management makes sense but it has to done be done properly. The resources are potentially there in the company, they just have to be organised and supported properly.

CHAPTER 6

Service quality About this chapter Chapter 6 looks at the nature of customer satisfaction, service quality and how service quality can be measured and managed. The chapter develops the idea that service quality is best thought of as the gap between customers’ expectations and perceptions. After which, it looks at how customers’ expectations and perceptions can be managed and operationalised.

Learning objectives •

To be able to explain the basis of customer satisfaction

•

To be able to define service quality in terms of customers’ expectations and perceptions

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To understand some of the issues involved in how expectations and perceptions can be ‘managed’

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To be able to list some of the factors that can be used to operationalise service quality

Discussion questions and exercise Question 1 Re-read the case example on Le Berceau des Sens. (a) What should the restaurant be doing to make sure that its customers’ expectations are managed appropriately? (b) At what point do you think customers’ tolerance of imperfect service would seriously detract from their experience? (a) What should the restaurant be doing to make sure that its customers’ expectations are managed appropriately? Most patrons of Le Berceau des Sens will understand what they are getting. However, many new customers may need to have their expectations clearly managed. In some respects therefore, the notion of customer confidence is perhaps more applicable here. However, considering the material on page 178 of the textbook on influencing expectations, there are some ‘levers’ that Le Berceau des Sens can pull. Price is the obvious lever, and while the restaurant is not cheap, it is not commanding prices of similar establishments in the region. Speaking of ‘Alternative Services’, if one looks for a comparable one-star restaurant in the region, the price would be typically double what the customer will pay at BDS. The customer is therefore already

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

predisposed to view the price favourably. Marketing is clear about the educational role of the establishment. Customers are under no illusion about the fact that waiting staff are in training. Additionally, word-of-mouth marketing is considerable and the restaurant has a reputation for being charming, in some ways because of the particular circumstances of the wait staff. A casual look at Trpadvisor.com or similar will show that the restaurant pretty much markets itself. Following on from managing expectations, confidence is also effectively managed by positive word-of-mouth, but also communication in the sense that while there is an opportunity for a hiccup or failure by service staff (the students), customers are fully aware that instructors are on hand to correct any problems. (b) At what point do you think customers’ tolerance of imperfect service would seriously detract from their experience? Bad food is probably the only issue that would seriously dispute detract from customers’ experience of the BDS service. Obviously errors in food preparation are possible, but are extremely unlikely, and far less so than in a competing one-star restaurant simply because of the incredible scrutiny and control provided by the teaching staff in the kitchens. ‘… the food is excellent, fine cuisine for sure, and somewhat daring. The service is excellent and the fact that the waiters are students brings a light mood, it is not stuck up in any way while staying very classy and aiming for the best’.

Question 2 Re-read the case example on Guestology at Optiker Söderberg. Make the cases for and against drawing on Disney theme park principles as an appropriate model for retail service quality. ‘Shoppertainment’ is an approach that brick and mortar stores can use try to entice consumers. High street retailers are never going to be able to compete against the lower overheads of online retailers so managers know they have to offer something different to survive. Many hope that creating in-store experiences is the answer, and over the years have looked at the entertainment industry for ideas. In the UK, John Lewis experimented with this concept by giving over retail space to ‘experience playgrounds’ at its Southampton store. These areas offer customers such things as cookery classes, gardening talks, beauty makeovers and technology advice. At Nespresso’s Regent Street store in London, shoppers can smell and taste different coffee flavours and take a coffee masterclass. Special events and attractions at shopping centres are also becoming more common. It remains to be seen whether such ‘shoppertainment’ will be enough to compete with low prices online. In the case example Paula applies the key principles of Disney Guestology not merely because they provide a potential differentiator but because the principles make good business sense. The full list of Guestology principles is in the book: Be Our Guest: Perfecting the Art of Customer Service by the Disney Institute and Theodore Kinni. We don’t deal with all of the principles in the case example, or here in this analysis, but those adopted by Paula were:

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

•

Keep it clean, keep it friendly, make it a real fun place to be.

•

Know when you are on stage.

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Seek out interactions.

•

Rethink where the magic begins.

It is hard to argue with ‘Keep it clean, keep it friendly, make it a real fun place to be’. However, the summary statement needs to be interpreted differently in most retail environments than it would be a theme park. For example, ‘friendly’ in a theme park would mean smiling faces, appropriate language in food outlets, helpful support staff operating rides, etc. A friendly retail environment, in particular an ophthalmologist, might need to have ‘friendly and fun’ moderated a little. Friendliness and politeness is clearly appropriate but ophthalmology is also serious business and ultimately is there to improve and maintain eye health. It may be that the ‘fun’ element has to be diminished somewhat. ‘Know when you are on stage’ is incredibly relevant for retail environments. Many of us will have been waiting for service while at the same time we observe service staff socialising, and not attending to us. Clearly, all service staff need a rest now and then, but perhaps these rest periods need to be hidden away from us else we get frustrated as customers. Understanding the principle of ‘the line of visibility’ (see Chapter 11) is extremely important in retail environments but implementing it can be a challenge. Many service providers have no choice but to rest, take lunch breaks, and socialise on the customers’ side of the line. In a theme park, offstage areas are much easier to hide and control. ‘Seeking out interactions’ also needs care. In a theme park or general entertainment environment, customers are predisposed to interact and indeed this may be a strong expectation. In many retail environments, customers want the opposite, especially in the initial phases of engagement with the service. How many of us have been frustrated by repeated statements of ‘can I help you’. ‘Rethink where the magic begins’ is also challenging. The principle is sound, but often the service organisation has limited agency. For example, IKEA need to care about traffic queues on the highway adjacent to their stores, but their ability to manage those cues is extremely limited. As with all business management prescription and theory, context is key. The same is true of principles drawn from the entertainment industry.

Question 3 Re-read the case example on Campwagen Conversions. What else could Ami and Tom do to manage their customers’ expectations and perceptions of their service? Applying the principles from Section 6.3, Ami and Tom need to ensure that there is clear customer communication of the nature and quality of service that their operation can deliver and, perhaps more importantly, what it cannot deliver. In turn, this communication means there would be an increased likelihood those expectations will be met.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Ami and Tom can also take advantage of opportunities to influence and shape customer expectations during the early stages of a service process. This could be via online information such as brochures and YouTube videos, open days, etc. Another approach might be to set up something like the Harley-Davidson Owners Group (H.O.G.) as discussed in the last chapter. Ami and Tom do not have deep enough pockets to replicate the H.O.G. operation but some principles could be employed. The beauty of the H.O.G. is that effectively it is ‘managed’ word-of-mouth marketing. Harley-Davidson effectively gets H.O.G. members to talk about the merits of the motorcycles and their accessories. Is not too much of a stretch to think that Ami and Tom could do similar for their business. A kind of ‘owners club’ for their camper conversions. To some extent they do this already in that on the company website there is a gallery of previous conversions. Allowing happy customers to talk a little more via forums could expand on this gallery. Similarly previous happy customers might be willing to participate in open days. Setting the right expectations with the customer requires careful attention to the design of the initial process stages or steps of the service, as well as the clues and messages sent to the customer by service providers and the service environment (see Chapter 7). For example, Ami and Tom need to ensure that customer entering their workshop sees a workspace that is clean and tidy, with possibly examples of other customers’ vehicles, and perhaps cues that someone is willing to talk to them. The latter could be a seating area with perhaps a coffee machine, or even a dedicated café.

Question 4 This is an account of what was described as a ‘nightmarish’ flight: It was a 13-hour flight that I will never forget. The trouble began when the passenger in the next seat to me boarded. He had just had bad problems trying to check in his luggage at the self-service desk and was very grumpy. I discovered this because he told me all about it. Then he told the man on his other side – at length. Then he summoned a flight attendant and told him all about it. By this time, I was starting to suspect that the man was . . . err, a bit more than obsessed. After a while, I started to work on my laptop. Then I became aware of an unpleasant vibration to my left. My neighbour was jiggling his leg so hard it was rubbing up against mine. He was also taking all the space on the elbow rest between us, which made typing impossible. ‘Please would you mind moving your arm?’ I asked. ‘What’s your problem?’ he snarled, clamping his arm in place. There were 12 hours to go. I gave up typing, jammed on my headphones and prayed for sleep. He also, presumably started listening to music, because he began to jab his hands in the air and sing, loudly. I asked the flight attendant for another seat, but the flight was full. What could be done to improve the service quality of this flight, as perceived by the narrator? Initially, our narrator will have a role to play in improving the service quality of the flight. The first obvious step is to report the matter to a flight attendant. However, as the question says, the flight is full, and there is no opportunity for a seat change. Therefore, the flight attendant has very limited options in mitigating the difficult circumstances. The airline is ultimately responsible for the overall service experience, but there are some things, especially when the aircraft is taken off, that are outside its control. If the passenger was behaving in a dangerous manner then the crew might elect to land the aircraft. However, this is not the case. The material in the chapter that is most relevant

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

here is the Zone of Tolerance material. The situation we have is analogous to that depicted in Figure 6.14. The customer is dissatisfied and their expectations, or the lower bound of the zone of tolerance has shifted significantly. The role of the flight attendant will be to introduce ‘enhancers’ to compensate for the failure. In theory, the cabin attendant could ask the annoying passenger to refrain from their behavior, but that would probably exacerbate the situation. Some enhancing factors would be for example: •

Tangibles such as a steady supply of food, and possibly drinks from business of first class.

•

Frequent visits to the business or first class bar areas if such exist.

•

Empathy. It has to be managed carefully but if the cabin attendant relayed some of his or her own similar experiences then that might create a sense of camaraderie and shared pain with the passenger experiencing the problem. Empathy and communication would not fix the problem at all, but might cheer-up our narrator. Sympathy, warmth, humour and empathy are difficult to find but if they can be introduced as enhancers then they can mitigate the worst impact of a difficult situation.

•

Compensation. A package of vouchers or similar might go a long way to improving our narrator’s satisfaction with the service.

Question 5 Some organisations that provide high-volume services, such as retailers and restaurant chains, use ‘mystery shoppers’ to check on their service quality. Mystery (or secret) shoppers are people whose job is to act as a customer, evaluate their experience and then report on the experience. What do you think are the advantages and disadvantages of using mystery shoppers to evaluate service quality? Finding out what your customers like or dislike about your service should be somewhere near the top of a service manager’s daily ‘to do’ list. But how do managers unearth that vital information without it taking too much time, costing too much money and most importantly, without annoying your customers? Mystery shopping programmes are used by many service businesses around the world to elicit customer feedback. The programmes commonly involve engaging a mystery shopper service who can provide trained mystery shoppers that will review the company website, visit a workplace or retail environment and/or call your workplace/call-centre with a pre-agreed list of items to assess and rate. Managers are provided with the mystery shoppers’ insights via a written report or scorecard. These insights can help managers improve services and processes, reward and recognise staff, generate new service ideas and identify training opportunities. Of course, the intelligence comes with a price tag and how much information you gain and how often you want it will determine the cost. The advantages and disadvantages of mystery shoppers are as follows.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Advantages

•

Professional mystery shopping providers will have experienced and trained mystery shoppers, who can customise assessments to suit the service being evaluated, and will work with managers to prepare staff for the process. The alternative is to resource the mystery shoppers from within the organisation. Training will be essential, and there’s obviously the danger that the mystery shopper will then be familiar to service staff. One solution is to use managers and staff from other branches of the service.

•

When the programme is set up, manager does not have to do anything else. The provider makes the process happen and delivers their reports.

•

Mystery shopper services will provide an objective and rational view of the service business. The mystery shopper has no emotional attachment to the commissioning organisation’s services or staff so they can assess all aspects of service without the need to make a purchasing decision that affects them.

Disadvantages

•

Some staff can feel anxious about being scrutinised in a mystery shopper process which leads to them act differently and possibly less confidently with real customers.

•

The process is not cheap. Even if you use your own staff, there is a cost of training and time to consider. Additionally, members of your won organisation are unlikely to feel comfortable advising you if your business or particular outlet has problems.

•

The process needs to be repeated so as to track improvements. One mystery shopper, once, only gives a single perception of a service business on that day and in that moment. Service operations managers need to have mystery shoppers visiting regularly, and over a long period, so managers receive a balanced view of their customer’s experience, and so that they can see the impact of interventions.

•

As is often the case with subcontracted quality control, there is a danger that the process would make service staff complacent. Using mystery shoppers does not relive managers and staff of the need to talk with their customers and ask for feedback.

Question 6 Following a survey that revealed that the customers in its most popular branches commented on the fact that serving staff were always ‘happy and smiling’, a chain of quick-service (fast-food) restaurants issued a manual of ‘staff behaviours’ that set out how its staff should, and should not, behave towards customers. However, a campaign on social media attacked this as ‘sinister’, with some describing the manual as reflecting ‘a dystopian regime of surveillance and assessment’. What do you see as the benefits (if any) and drawbacks of issuing a manual of this type?

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It should be obvious already, but in case if it is not, take a look at Chapter 12 on performance management. It is almost impossible to improve a service system without feedback on performance. Similarly, it is not possible to get what you want out of service staff without specific guidance. Role scripts and guidance on demeanour and attitude are as old as the hills in the service sector. They are often not necessary in professional services, though even there, standards are generally specified, and service providers will know if they step out of line. However in mass services, especially in environments that have high staff turnover, manuals and rules are essential. Furthermore, in the UK, many employees in food retail are recent immigrants, with first languages other than English. There is huge scope for misunderstanding without explicit guidance on what to do, and how to behave. Writing things down in manuals, and providing training videos just makes good common sense. In other words, services need to create succinct but detailed and accessible service specification (Chapter 6, page 165). Staff cannot deliver what they don’t understand. The results of attention to process, process rules, appropriate behaviours, dress standards and so on are exemplified by organisations like Disney Inc and McDonald’s. Both have their critics, but they are undeniably successful. McDonald’s in particular has small manual for every process used in every outlet. This manual has been translated into every language in which they serve. For every process there is training video. McDonald’s even cover things like the best way to stack boxes of frozen fries. Good service does not happen by accident. Clearly there are potential drawbacks to this kind of systemisation. A degree of discretion needs to be allowed to service staff. You don’t want staff to be ‘reinventing’ service on the fly, but you do need to allow them a little bit of discretion to deal with any ‘odd’ customer requests or difficult circumstances. What we don’t want ‘service robots’. There are also many incorrect assumptions about the negative impact on staff of rules and procedures. In many ways, specific guidance reduces uncertainty for staff. They are less stressed if they know where they are, and they know how their performance will be assessed. Which brings us back neatly to the opening sentence of this analysis. At some point we need to assess whether our intentions are being realised in service delivery. The only way to do this is to observe and scrutinise performance. Observation can be via mystery shoppers (please see the last question) via customer feedback, observations by managers, public domain rating scales and online feedback, etc. There is no shortage of information on service performance but some of it can be overly subjective. There is also the danger that public domain feedback mechanisms can be subverted by competitors. So surveillance need not be a dirty word. In fact, it is a necessary component of any service delivery system.

Case exercise – The Northern Breast Screening Unit Questions 1. Evaluate the quality of service provided by the NBSU. 2. What recommendations would you make for improvement?

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Case analysis This case provides an opportunity to assess customer satisfaction based on their perceptions of a service using the simplified gap model. The quality factors are provided and the case focuses on the reasons for the mismatches, i.e. service delivery in particular the ability of staff to understand patient priorities. This case can be used to introduce much of the material in Chapter 6, or at the end of the teaching session to illustrate the use of the gap model. We find it best to ask students to come prepared to class having read the case only. We would recommend that syndicate groups are given around 20 minutes to prepare their answers to questions 1–4 and then ask one group to present their answers to questions 1 and 2 and a second group to present 3 and 4. The remaining questions can then be covered during class discussion. You may find it helpful to provide the students with the data sheet below (in the PowerPoint pack).

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Access Availability Care

Communication Competence Courtesy Functionality Reliability Privacy Responsiveness Comfort

Nurse

Radiographer

Manager

4.5

4.2

3.8

4.2

4.5

4.2

3.8

4.2

3.45

3.75

Screened p.

4.01

4.12

4.84

4.8

4.71

4.41

4.59

4.74

4.16

4.06

Diagnosed p.

4.12

4.72

4.92

4.88

4.91

4.61

4.98

4.99

4.91

4.86

4.98

Nurse

Radiographer

Manager

4.5

3.2

3.8

4.2

4.6

4.2

4.8

3.8

4.2

2.8

3.75

Screened p.

3.51

4.68

4.85

4.88

4.91

4.19

4.63

4.35

4.63

4.35

Diagnosed p.

3.62

4.67

4.32

4.51

4.53

4.71

4.55

4.75

4.07

4.21

4.37

Priorities

Perceptions

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Detailed questions 1. Analyse the differences in the priorities of the two types of patients. 2. Analyse the differences in the perceptions of the two types of patients. 3. Identify the gaps between the screened patients’ importance rating and their perceived quality level for each factor. 4. Identify the gaps between the diagnosed patients’ importance rating and their perceived quality level for each factor. 5. Which of the three staff members best understood patient priorities? 6. What do your results tell you about improvement priorities for the NCBSU? 7. What recommendations would you make for improvement?

Differences in priorities and perceptions It is important to note that we are using ‘priorities’ in lieu of ‘expectations’. (You may care to discuss the subtle differences between these.) The analysis for this question and the next questions could be undertaken on a factor by factor approach but we find it easiest and most telling to identify the most important factors (4.5 and over) and then the highest and lowest perceptions (4.5 and over, and below 4.0). We provide undergraduates with a blank copy of the framework below to help their analysis (a copy of the completed framework is in the PowerPoint pack).

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Gap Analysis – Patients Screened patients

Diagnosed patients

Most important factors

communication (4.84)

availability (4.72)

(4.5 and over)

competence (4.8)

care (4.92)

courtesy (4.71)

communication (4.88)

reliability (4.59)

competence (4.91)

privacy (4.74)

courtesy (4.61) functionality (4.98) reliability (4.99) privacy (4.91) responsiveness (4.86) comfort (4.98)

Highest perceptions

availability (4.68)

availability (4.67)

(4.5 and over)

care (4.68)

communication (4.51)

communication (4.85)

competence (4.53)

competence (4.88)

courtesy (4.71)

courtesy (4.91)

functionality (4.55)

reliability (4.63)

reliability (4.75)

responsiveness (4.63) Lowest perceptions

access (3.51)

access (3.62)

Gaps

access (–0.5)

(perception-priority)

availability (0.56)

availability (–0.05)

care (0.46)

care (–0.6)

communication (0.01)

communication (–0.37)

competence (0.08)

competence (–0.38)

courtesy (0.20)

courtesy (0.10)

functionality (–0.22)

functionality (–0.43)

reliability (0.04)

reliability (–0.24)

privacy (–0.39)

privacy (–0.84)

responsiveness (0.47)

responsiveness (–0.65)

comfort (0.29)

comfort (–0.61)

(below 4.0)

Priorities – All the factors rate highly for both groups of patients but by looking at the highest priorities (over 4.5) we can see important differences between the two groups of patients. The screened patients have less high priorities and so we might conclude lower expectations than the diagnosed patients. The diagnosed patients are much more sensitised to the service, for them the ‘price’, i.e. value of the service is significant, indeed potentially life-dependent. It is interesting to 79 © 2021 Pearson Education Limited. All Rights Reserved.

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note that the majority of the most important factors for the screened patients are systemic ones (plus courtesy) whereas the most important factors for the diagnosed patients are more balanced (i.e. a combination of systemic and interpersonal) suggesting that for these patients the hygiene factors are a combination of both systemic and interpersonal factors. Perceptions – looking at the highest expectations first and comparing across the two groups of patients it is clear that the diagnosed patients are less impressed with the service than the screened patients. Both patients’ perceptions of access are relatively poor.

Gaps between importance and perceived quality – screened and diagnosed patients For the screened patients, we see that the perceptions of all the most important factors, with the exception of privacy, exceed the priority rating. The only other, less important, negative perceptions gaps are access and functionality. In general, for the screened patients, expectations exceed their priority scores. For the diagnosed patients there is a negative gap for every factor with the exception of courtesy. The diagnosed patients’ perceptions were not only lower than those of the screened patients but they were also lower than their ‘expectations’.

In summary: 1. There appear to be major differences between the two patient types. 2. The diagnosed patients have higher expectations of more quality factors and those expectations, with only one exception, are not met. 3. Staff understanding of patient priorities 4. Using a similar framework to that above, we can identify the patient priorities and perceptions as seen by the three different groups of staff.

Staff’s view of patient priorities and perceptions Nurse

Radiographer

Manager

Most important factors care (5)

care (5)

access (4.5)

(4.5 and over)

communication (5)

competence (4.5)

competence (5)

courtesy (5) reliability (5) privacy (5) Highest perceptions

access (4.5)

(4.5 and over)

competence (4.6) functionality (4.8)

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Lowest perceptions

access (3)

availability (3.2)

(below 4.0)

functionality (3)

availability (2)

care (3.8)

responsiveness (3)

courtesy (3)

reliability (3.8)

functionality (3)

responsive (2.8)

reliability (3)

comfort (3.75)

privacy (3) comfort (3)

Looking at the most important priorities it is clear that the nurses best understand patient priorities and the managers least understand them! The factors identified may well reflect their differing views of the job, with managers focusing on the systemic issues and nurses on a combination of systemic and interpersonal. In terms of perceptions, it appears that the nurses and radiographers believe that the patients are receiving poorer service than the patients themselves claim. This is certainly better than their thinking the service is better! The managers, on the other hand, seem to be deluding themselves in terms of access and functionality. On most of the other factors, in particular responsiveness, the managers rate their service lower than their patients. It is interesting to note that the nurses see most of the problems to be systemic (e.g. access and functionality) and the managers see some of the problems as being interpersonal (e.g. care and comfort)!

In summary: •

It appears that front office staff understand patient priorities better than the back office staff.

•

Staff seem generally unaware as to how highly the patients rate the service.

•

Staff seem unaware of the differences of priorities and perceptions between screened and diagnosed patients.

Improvement priorities for the NCBSU There are a number of areas that require improvement: •

Access appears to be a problem (gap scores of –0.5 for screened patients and –0.5 for diagnosed patients)

•

Privacy is an issue (–0.39 and –0.84)

•

Functionality is seen as an issue by both types of patients (–0.22 and –0.43) and by nurses and radiographers (perception scores of 3).

•

In addition, diagnosed patients are particularly unhappy about care (–0.6), communication (– 0.37), competence (–0.38), responsiveness (–0.65) and comfort (–0.61).

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Recommendations • Manage screened and diagnosed patients differently, during different sessions, and allow for more contact time for diagnosed patients. • Train staff to understand and respond to the higher expectations of diagnosed patients. • Manage expectations better, for example about the accessibility of the service. • Improve responsive (waiting times) for diagnosed patients. • Routinely measure priorities and perceptions of the two groups to assess the impact of changes. • Recognise and reward improvements made to close the gaps.

CHAPTER 7

Designing customer experience About this chapter This chapter is about how customers experience their journey as they consume a service. It takes a customer perspective on service interactions and discusses what is meant by ‘customer experience’, particularly in terms of the emotions experienced by customers. It distinguishes between the backand front-office processes that impact on customers and examines some of the aspects of process design that shape customer experience, such as servicescapes and service technology.

Learning objectives •

To be able to define ‘customer experience’

•

To understand the nature and impact of servicescapes

•

To be able to explain the impact of front- and back-office processes on the customer journey

•

To understand the importance of managing the total chain of processes experienced by customers

•

To appreciate the role of service technology in developing the customer experience

Discussion questions and exercises Question 1 The movie cinema has remained virtually unchanged since it was first introduced over a century ago. And, until recently, cinemas were the only way to watch a film. The basic idea of a movie cinema and how it provided its services have remained largely the same. There is a dark room with an illuminated screen, rowed seating, surround sound, food and drink concessions and a group of people collectively absorbed in a story. However, the growth of online streaming, with its quality and availability, has caused changes in most people’s viewing habits, with many people using technology to consume film content. The implication of this is that films available at the cinema are no longer a key point of differentiation. There are alternatives to view content. For example, videoon-demand (VOD) platforms, such as Netflix or Amazon Prime are real competitors. How could cinema chains design their customer experience to compete against VOD services? The customer experience is fundamentally the most significant point of differentiation that cinemas can – and should – exploit. The level of innovation in cinemas has been painfully slow; despite

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some content-related shifts including 3D films and IMAX, the experience remains largely unchanged since the 1930s. Expensive tickets, long queues for refreshments, sweet or salted popcorn, and watching your favourite film in an uncomfortable room of strangers who might be using their mobile phones! Most movie fans who watch films on multiple platforms will say that although the range, convenience and quality of VOD platforms enhances their ‘filmie’ lives, there’s still something special about visiting the cinema. The romance of the big screen ‘immersion’. Innovation in the customer experience in the most significant opportunity facing cinema. Its future depends on it. Using this question with a class. It would be so easy to get into a brainstorming session and ‘idea fest’. Students will have no shortage of clever ideas. However, it is best to use the question to introduce some concepts and tool from the chapter. Currently cinemas seem to be designed from an inside-out perspective. There is a standard set process and the service is largely ‘one size fits all’. Switching perspectives to that of the customer, the question is begged which customer group might try to respond to in cinema design. Arguably, there has been some operational segmentation already. Niche cinemas such as Electric Cinema in the UK, and Alamo Drafthouse in the USA are designed for mature film enthusiasts who want no distractions. The ‘mature’ segment wants no crunchy and noisy snacks, no walking in front of the screen, and definitely no use of cell phones, even to check texts. (Alamo Drafthouse, a cinema chain based in Austin, Texas, in 2011 posted a YouTube video of a voicemail message left by a seething customer after she was kicked out for using her phone. The video went viral and Alamo Drafthouse went on to use it as a public service announcement before screenings.) On the other hand, we have the ‘kids’ market. Even this is segmented into young kids and teenagers. The former want to see children’s movies, and can tolerate – even like – noise and distractions. Similarly with teenagers and young adults. They will live with cell phones and general noise because they go to the cinema primarily to socialise. So we have three customer segments already and potentially there are many more. An inside-out perspective word work through the journey taken by these segments in experiencing a movie. What can be useful with a class is to carry out customer journey map or customer experience analysis for a typical cinema visit. Additionally one can carry out this analysis from the perspective of a customer who is in the ‘wrong’ cinema. For example, if your class is post-experience and slightly older than carry out a walk-through of the customer experience for a multiplex cinema predominantly patronised by teens and young adults. You will get lots of moans! Additionally there is an opportunity to practice using a couple of techniques. Similarly with a pre-experience audience of undergraduates you can change things around, and ask them to see how they respond to an alamo Draft House or similar. When carrying out your analysis, encourage students to think about the essence of the experience. Is it the movie, and immersion in a story, is it a particular kind of servicescape, a particular technology and so on, or is it a social experience. The needs of the groups will be different and the nature of technologies and servicescapes will be different too.

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Question 2 For years there has been something of a question mark over the future of retail banks. Many banks have reduced the number of their branches. However, banks are keen to make sure that those that do remain have a warm and friendly feeling, which is why they pay so much attention to the décor and design of their branches. How could the principles of servicescape design help banks to promote excellence in perceived customer experience in their branches? When using question 2 with a class again there is the danger that we descend into a free for all of idea generation. This is no bad thing, but try to organise student contributions, or better still, get them to organise their own contributions using the concepts and language from Section 7.2. Encourage students to think about the various clues or cues in the servicescape such as hearing, taste, touch or smell which might be designed into the banking environment to provide particular messages. What might be the possible unintentional messages that could be conveyed by decisions regarding these clues and cues. Everything needs to be consistent with the service concept, so it would be worth developing that service concept before you begin. Think also about where the service experience begins and ends. For example with a retail bank, the location will provide significant cues about—rightly or wrongly—the reliability of the service, its integrity and so on. Customers may also speculate on the likely cost of the service if it is offered from a very prestigious and expensive-looking establishment for example. Consider people also. Should staff be uniformed, or otherwise? What about other customers? Customers will contribute to the servicescape and so possibly banks need to ‘police’ entry in some way. If you thought that banks would not consider the smell of the branches you would be wrong. When customers visit one South London branch of Lloyds Bank they are greeted by an attractive aroma. It is the fragrance of ‘white tea and thyme’, a scent chosen to conjure up the appropriate feeling in the bank’s customers. The building’s designer, Sarah Harrison said, ‘It gives that inviting feel, that welcoming feel. You can smell it on the High Street when the wind’s blowing in the right direction’. Lloyds is not only experimenting with perfume in the servicescape, but also exploits other opportunities for ‘designing’ customers’ sensory experience. In one of its branches (in Manchester, UK) the servicescape had previously been described as of being in a ‘high-tech giant’s headquarters’. In response, the traditional utilitarian furniture found in many traditional bank branches was thrown out in favour cool armchairs and free wifi. The branch also has its own coffee shop (partly because the aroma of coffee seems to lure potential new customers), stylish ‘breakout pods’ and the newest biometric technology. The bank aims to set a new standard for high street banking, combining face-to-face retail banking expertise with new technology where customers will find everything they would expect from a bank and much more.

Question 3 The pedestrian-crossing lights in New York City, like most other cities, required pedestrians to press a button if they wanted the lights to change. Then, over the course of many years, and without giving it any publicity, the city authorities disabled most of the control buttons that once operated the lights. They had decided that computerised timers almost always worked better. However, the 85 © 2021 Pearson Education Limited. All Rights Reserved.

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city government did not take the disabled buttons away. Initially, the buttons survived because of the cost of removing them. But it turned out that even inoperative buttons serve a purpose. Apparently, pedestrians who press a button are less likely to cross before the green man appears. (a) Why do you think this is? (b) Does this mean that so-called placebo buttons should be used everywhere? (a) Why do you think this is? Many organisations use such tricks to influence customer behaviour (see page 205). Professor Tal Oron-Gilad of Ben-Gurion University of the Negev, in Israel. Having studied behaviour at crossings argues that people more readily obey a system which purports to heed their input. Inoperative buttons produce placebo effects of this sort because people like an impression of control over systems they are using. Software is often designed with a clickable ‘save’ button that has no role other than to reassure those users who are unaware that their keystrokes are saved automatically anyway. (b) Does this mean that so-called placebo buttons should be used everywhere? However, at road crossings, placebo buttons may also have negative implications. Ralf Risser, head of factum, a Viennese institute that studies psychological factors in traffic systems, argues that pedestrians’ awareness of the existence of placebo devices, and consequent resentment at the deception, now outweigh the benefits. A series of events in the Lebanon supports Risser’s view. Crossing buttons introduced in Beirut in the late 2000s proved a flop. Pedestrians wanted buttons to summon a ‘cross’ signal immediately, rather than at the next appropriate phase in the traffic-light cycle, as is usual. The authorities therefore disabled the buttons, putting cross signals on a set schedule instead. News spread that button-pressing was now pointless, and consequent frustration increased jaywalking. In response, the city decided to remove the placebo buttons. New York has similarly stripped crossings of nonfunctioning buttons, though it does retain about 100 working ones. These are in places where pedestrians are sufficiently rare that automatically stopping the traffic is unjustified. However, internet memes about placebo buttons has become commonplace, so that doubt, albeit misguided, seems to be growing about even these functioning buttons’ functionality. This suspicion to other cities in the USA such as Los Angeles, where ironically, most crossing buttons have always worked, at least during off-peak hours. This all said, technology may make all buttons redundant at crossings. At an increasing number of junctions, those waiting to cross can be detected, and even counted, using cameras or infrared and microwave detectors. Several crossing systems even recognise apps on the smartphones of the elderly or disabled, and provides those people with 5 to 12 extra seconds to cross!

Question 4 A hospital in a large city (where there are several hospitals) is considering posting current waiting times outside its ‘Accident and Emergency’ (emergency room) department. According to the operations officer at the hospital, ‘if a patient has a problem that is not life threatening, such as a

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

sprained ankle, the patient can trade off the discomfort of a longer drive with a possibly longer wait’. What do you see as the pros and cons of posting emergency room waiting times? Pros: •

Customer choice – can manage my own expectations.

•

Improves resource utilisation – moves patients away from the most congested facility to less used resources.

•

Focus – keeps relatively trivial cases out of the trauma centre that is needed for the most critical cases.

Cons: •

If a patient was the last of a burst of arrivals, their wait could be more than advertised online.

•

There might be possible under-reporting of how bad the wait is.

•

Patients could self-triage in a dangerous way.

•

There could be inappropriate use of the Accident and Emergency (A&E) Department.

•

There also might be a misplaced emphasis on door-to-doctor times versus more meaningful measures, such as how long it takes for an A&E patient to be admitted or discharged once their care is completed.

•

Patients (and caregivers) may opt for dangerously long drives or stay home because they are overly sensitive to waits.

•

Would patients look at a Twitter feed for wait information when faced with a medical emergency? It probably depends whether we are talking about chest pains versus indigestion or sprained versus broken ankles!

•

What if hospitals are incentivised to compete on this and other wait measures? Patient care could be compromised.

•

If you pit a couple of A&E departments against each other and see who has the fastest throughput times, you may incentivise clinicians to bypass the ordering of any tests that take a long time.

•

Might get hospital senior management focussing attention on measures that may compromise patient care.

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Question 5 Apple opened its ‘Apple Stores’ in smart high streets all over the world. Then it was reported that Apple would be opening a store-within-a-store in one of the world’s most famous department stores – Harrods, in London. What are the advantages to both Apple and Harrods of such a ‘storewithin-a-store’? Harrods is a huge ‘up-market’ department store in the heart of London. It covers over 5 acres (2 hectares) of land and the store itself features over one million square feet (93,000 sq. meters) of selling space. The store has 330 departments that cover clothing, furniture, jewellery, homewares technology accessories, and food. The Apple brand fits in well within the Harrods’s surroundings, and the Harrods Apple Store, itself blends in nicely with the store’s noted architecture. In fact, a customer standing within the Harrods Apple Store would be hard-pressed to find any servicescape cues that they were in fact within a large department store. The Harrods Apple Store features most of what makes an Apple Store an Apple Store, like blondwood tables and signage, and a minimal aesthetic. Like most retail ‘cells’, all the products sold in the Apple store in Harrods could be sold in other departments. But they are collected together for another purpose. In this case, the internal Apple store supports the Apple brand yet does not inconvenience customers. In fact, for Apple fans, it is more convenient. The typical well-to-do customers of Harrods, if there are in the market for a computer or tablet then chances are they will go for a premium brand. Apple therefore fulfils that need conveniently. Apple, as a premium brand supports and enhances Harrods brand, and vice versa while apple generally sells its own wares in its exclusive stores, company is not above linking with other brands. This connection occurs at the level of Apple products, for example, the Hermes and Nike co-branded Apple watches, as well as at the level of placement and select ‘made for Apple’ complimentary certified products.

Question 6 LAX airport in Los Angeles is the fourth-busiest airport on earth. It has also been judged the worst airport in the world. What do you think are the factors that determine the customer experience of an airport? Again, the question supplies a great opportunity to carry out either a customer experience analysis or a customer journey map of an airport. Many post-experience students will have experienced LAX and so can comment directly. Fodors, the travel guidebook company publishes annual reviews of airports. Singapore’s New Changi Airport is a consistent first prizewinner, and LAX nearly always is judged the worst airport in the world. To the defence of, LAX, it is also one of the busiest airports on the planet with some 88 million passengers annually. One of the big problems at LAX, but not unique to it – think Frankfurt or Arlanda – is the congestion between terminals. Passengers do not just have to do a mad dash from one terminal to another, but have to do so through an intense crowd of people, often walking, or running in the opposite direction.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

LAX also presents the would-be passenger with an additional challenge and that is it getting into and out of the airport. It is relevant to raise this issue with students as one question to be asked in journey mapping or customer experience analysis is ‘what is the boundary of the service’? Where does the customer experience begin and end? The local highway is outside the control of the airport authorities, but the gridlocked passenger will begin to make judgements upon the airport even so. Customers have no choice but to drive to and from LAX, or ride a bus. Rail and bus links are poor. The complex road layout is not conducive to rapid travel. From the outskirts of the airport to any terminal is approximately 1 mile, but this journey takes typically about 30 minutes. The city of Los Angeles is currently engaged in a building project which will create a link to local rail networks, but this is unlikely to be completed before 2025. The absolute deadline will be the 2028 Olympic games. In teaching on this subject I find it is best to issue students with flip-chart papers in groups and to carry out a customer experience analysis walking through the service experience from beginning to end. Customer journey mapping can be just as effective, in fact sometimes more so, but requires additional equipment such as post-it notes, glue, coloured pens and a broad spread of whiteboard or brown paper stuck to the classroom walls. Start by introducing the first set of factors that impact upon the customer experience of the airport. Refer to LAX if possible, but other airports will do. Most students will say that it is probably the journey to the airport for an early check-in. The airport only has a limited role in informing check-in times, but nevertheless with increased security concerns these will have an impact on the customer experience. Many business travellers will have to get up very early for example, and may be grumpy and predisposed to rate the airport negatively. Then there will be the challenge of finding a place to park, and of managing the trade-off between the expensive car park slots close to the terminal building and those possibly several miles away that are very cheap. If arriving by taxi, then one has to decide between the close drop off with the premium priced drop-off charges, or the slightly cheaper drop off with a walk. We haven’t even reached the terminal building and yet the customer endures considerable pain. Assuming the customer finds a correct terminal, then they have to find their check-in or bag drop area. This can be a challenge. Airline activity is typically seasonal over many time horizons. Within a business day there will be morning and evening peaks, and a slightly smaller lunchtime peak. If the traveller is unlucky enough to arrive at these times then queueing for check-in or bag drop off is inevitable. The savvy traveller has hand luggage only, and is checked in online. Then we have security which varies considerably around the world from the relatively gentle but usually thorough second-city airports, to the aggressive and cynical security procedures to be endured at large metropolitan airports. After security we have to navigate the oppressive perfumes of duty-free. And on it goes. It’s pointless replicating the whole of the customer journey here in this guide to answering the question, but is what you need to do with your class. Better still get the class to do it for you. A systematic approach is critical. Customer experience analysis is the easiest method. If you have more time carry out journey/emotion mapping. Please check servops.net for more examples. 89 © 2021 Pearson Education Limited. All Rights Reserved.

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Case exercise – Elena Questions 1. Working from Elena’s reactions, chart her ‘emotional journey’ during her customer experience. 2. How could the university’s IT services have improved Elena’s customer experience?

Case analysis The table from the case study is developed below. Note that this table appears spread across several slides in the instructor slide pack, and is also provided as a spreadsheet in the support files pack. On servops.net there are also some photographs of real-world application of the technique, in fact this specific example.

Time

9.15

Elena’s actions

IT IT backhelpdesk’s office response activities

Search through university website to Get voicefind recorded helpdesk options. (HD) phone number. Call it.

Elena’s reaction

Primary Emotion (Fig. 7.3)

Stressed! Will I get the assignment done in time? I should know Fear the HD number, but I haven’t used it before.

Specific Emotional Aspects (Fig. 7.3)

How could the university’s IT services have improved Elena’s customer experience?

A help-desk number should be easy to find. It should be at the footer of every university webpage at the very least. Similarly it could be featured prominently on the covers of Concerned and university materials. This Anxious said, reaching a set of voice recorded options when one is panicked is not a good experience either. IT services will have to manage the tradeoff between high staffing levels and service costs.

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9.17

9.30

Choose options that get through to HD agent. Hang up after five minutes.

Call HD once more. This time leave message outlining problem and asking for HD agent to return call.

Recording says position in queue is 9th.

9th in the queue! Is everyone having problems?

Recorded messages prioritised by IT assistant.

This one is relatively easy to fix. ‘9th in the queue’ could mean 2 minutes or 90 minutes depending on HD capacity and the exact nature of demand. A better Helpless, way to manage Fear, and frustrated, expectations perhaps anxiety and would be to state Shame possible embarrassment something like average queue length in minutes, or, as some systems do, repeatedly announced the queue position as it hopefully declines.

So annoying! Discouraged, I want to Anger and frustrated, speak to a Fear helpless, real person. anxious

There is no easy solution here. The ‘help-desk’ model is generally designed to be cheap to deliver. Even when callers have ready access to staff, the expertise is generally tiered in some way. Students will sometimes suggest having a ‘real emergency’ number, but obviously there is scope for such a number to be abused. An option might be to allow students a limited number of emergency calls in a semester for example. This solution might help users understand trade-offs.

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It is difficult to promise a call back time but with hindsight the helpdesk should have done this. Even if the callback is to say ‘we have no HD agent further What a calls Elena System information’, or friendly and takes automatically ‘we are still Joy, and person. details sends Elena working on it’, etc. maybe a Reassuring Involved, Receives of the issue. an email then the benefit little Love, 09.53 and took my assured, cared call from Issues ‘task confirming would be that the but with 9.59 problem for, HD agent. number’. task number customer knows some Fear seriously. apprehensive Says will and when the call is still in the Hope he investigate explaining coming, and can mix. gets back and get procedure. concentrate on soon. back to her. other tasks, initiate mitigating actions, etc. IT staff could be managing expectations by explaining processes where possible.

10.20

Trying to Still heard find out why nothing Elena can’t from HD access this agent. module. No Should I obvious call again? reason.

Getting increasingly worried now. Half an hour to them is a Anger, small part of Fear, their day, but Shame it’s serious for me if I screw up this assignment.

We need more information on the progress of the case to be provided. Even if we have a nil result then at least Frustrated, Elena will know Annoyed, that someone is Exposed, working on her Apprehensive, problem. Many Embarrassed helpdesks encourage callers to file problems online and the case can be monitored directly by the instigator.

10.55

Elena decides to try contacting the HD by emailing them (replying to the automatic email sent an hour ago).

Was that the right thing to do? The email didn’t say ‘no Anger, reply’, but Fear maybe it isn’t monitored. I don’t want to wait any longer.

This one is an easy hit. IT services could say clearly whether the email reply will be monitored or not. Many helpdesk services put ‘no reply’ or similar in their email address.

Replies to automated emails are not monitored.

Frustrated, Exasperated, Panicked, Apprehensive

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11.15

12.00

HD agent gets back to Elena to say the problem isn’t resolved, but they are working on it.

Elena calls her friend and gets her to access the module notes and send her some of the quotes that she needs.

In fact, two HD agents and an IT assistant are all trying to find out why this problem is affecting this one student.

He was Fear and Panicked, sympathetic some Apprehensive, and more love Cared for, friendly, but Empathy how long will this go on?

The help-desk agent could have explained that a whole team is working on the problem. Providing such information might be helpful but is potentially double-edged. Possibly, in her panicked state Elena might worry even more that her problem was not fixable before the deadline.

This isn’t as good as getting direct access myself, but it’s better than missing the deadline.

This aspect of Elena’s journey is where there is possibly most potential for IT services to improve things. I’m willing to bet that Elena’s problem is not unique. Certainly the consequences are fairly commonplace for students at a University. That is, the fear of missing a deadline for an important assignment. How difficult would it be to automatically send callers a list of suggested actions that might at least move things along while IT services are trying to resolve the problem? One could even imagine keywords in

A tiny bit of Joy (from involvement) but mostly still Fear

Involved but Apprehensive

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual callers’ problem statement which would trigger the issuance of a list of mitigating actions. Such lists might do a lot to alleviate panic. 15.50

HD agent calls to say that the problem has been partially resolved. She can log into the system with a temporary username and password until they can permanen tly fix the issue.

It’s too late to be much help. Could they not have suggested this temporary fix earlier?

Anger, Sadness, Fear

Annoyed, Exasperated, Exposed, Panicked, Disappointme nt, Despair

As per the solution in the last episode, it would seem that if the deadline was looming, IT services could automatically set up an alternate ‘burner’ login to be used temporarily so that the student can complete their work and upload their assignment.

CHAPTER 8

People in the service operation About this chapter This chapter is about how to motivate people – staff and customers, but particularly staff – to facilitate the delivery of service. Rather than addressing routine human resource aspects of terms and conditions of employment contracts, the chapter deals primarily with the pressures that frontline service staff come under, and how such issues as leadership, teamwork, discretion and motivation can reduce stress and improve service.

Learning objectives •

To understand why service delivery can be such a pressurised task

•

To be able to explain some of the issues in managing service staff

•

To appreciate the difference in discretion between compliant and adaptive organisations

•

To be able to describe some customer roles and their importance

Discussion questions and exercises Question 1 Bentown Housing Association is a social landlord charity that owns and manages around 6,000 properties in the south of the UK. Employing around 650 people, it is a quasi-government body that provides housing services in areas of social deprivation. A high percentage of its customers are from ethnic minority groups and over 20 per cent have English as a second language. Almost 90 per cent are in receipt of some form of government benefit and local unemployment is twice the national average. Many of its customers have little or no choice over their housing. The alternatives are relatively expensive private rented accommodation, short-term hostel accommodation or living rough on the streets. Although most customers are well behaved, a minority is difficult and can be abusive and threatening. Most of our customers are good. However, some customers are very difficult to manage. This is sometimes due to their expectation of service levels being higher than we are required to, or indeed can, provide for them. Often this is because they don’t understand what we can or can’t do, although there are clear service standards expressed in our tenancy agreements with our customers. This can make our dealings with customers difficult. They can be frustrated, anxious,

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demanding and occasionally aggressive to customer-facing staff, who generally do a fantastic job. The staff are professional and dedicated and often choose to work in the not-for-profit sector through a sense of social purpose. (John Boot, Bentown Housing Association Service Manager) What could Bentown Housing Association do to minimise work-related stress in its front-line staff? There are some challenging tasks faced by the staff in Bentown Housing Association described in question 1, where they face large numbers of desperate customers and do not have enough resources to keep some of them off the streets. Taking a steer from Figure 8.4 on page 238, possible actions by Bentown Housing Association could be: •

Leadership

•

Teamwork

•

Clarifying roles

•

Effective communication and involvement of staff

•

Enabling staff discretion

On the basis of the information in the question, some examples of what could be done are: Communication and Involvement One key task for managers is to assist their customers so that they understand these standards. In other words, they need to pay attention to managing customer expectations. Clarifying Roles Additionally, managers can help service staff to acquire specific skills to manage these customer interactions. Service staff will require high degrees of competence in ‘soft’ skills. Besides training, it may be that staff with soft skills from other areas could be recruited. For example, from the retail sector. In turn, these staff will need to be provided with intensive training for ‘technical’ housing-related skills. The question scenario indicates that lack of facility with English was preventing certain groups understanding and accessing services, so the provision of community languages might be a requirement. To require that existing staff learn new languages is perhaps a ‘big ask’ so again, modified recruiting procedures are possibly in order. With the inclusion in recruitment requirements of a relevant second language for customer-facing staff.

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Leadership It may be however, that the housing association work will always be stressful, it is therefore important to provide customer-facing staff with support and counselling, good physical conditions of work, and good employment conditions, including rewards and pay with possibly a bonus scheme linked to the individual’s performance reviews and appraisals. People will tolerate and even enjoy difficult work provided that there is appropriate reward. Any reward system needs to be tightly connected to Operations Objectives and in turn the overall Organisational Business Plan. This will give staff sense of perspective of where they fit within the business and how their performance impacts on the business as a whole.

Question 2 Re-read the case example, ‘It’s not part of the job – Co-op’s “Safer Colleagues, Safer Communities” campaign’. In addition to technological solutions such as SmartWater, what else could such retailers do to protect their front-line staff from abuse? Retailers: •

Assess risk – identify what could cause harm to employees on a task by task basis, from this policies can be created to manage these risks and minimise the potential for accident or injury.

•

Preparation – know what to do if there is a robbery. Employers need to have procedures in place to deal with robbery, including armed robbery: do what the robber tells you, do not resist, avoid sudden movements, and do not raise the alarm until it is safe to do so.

•

Increase physical security – depending on the level of risk security measures could include employing security staff, physical barriers, shutters, cameras, motion lights, burglar alarms, panic buttons, access control, safe havens for staff to retreat to and improved lines of sight so there are no hidden areas where incidents can go unnoticed.

•

Staff awareness and training – employees themselves need to be well versed on incident response, how to get help, personal safety, de-escalation and conflict resolution techniques, lockdown protocols and evacuation. Employees gain confidence through practicing these procedures, so regular drills are recommended.

•

Cash handling – cash must be kept out of sight and not allowed to build up in the till.

•

Banking – where possible, banking of cash has to be carried out by specialist security staff. If employees go to banks to deposit cash, the journey would ideally not be on foot or by public transport, and the employee would be accompanied. Employees will need proper training on threat/hazard recognition, how to get help, etc. Cash should be moved regularly to avoid large amounts building up.

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•

Locking-up – Staff are also at greater risk when locking up or opening premises, and receiving deliveries. With the trend toward extensions in opening hours, these tasks are regularly carried out at times when there is no-one else around, sometimes by lone workers who may struggle to get help if something goes wrong.

•

Shoplifters – more than half of physical assaults on shop staff are connected with shoplifting. Employers ought to have a procedure in place to deal with shoplifters. The procedure has to make it clear to staff that they are not to risk their safety to protect property.

•

Working alone – employers where possible should avoid having a situation where staff work alone at high risk times, such as late at night. If not possible, employers must take extra precautions to protect staff working alone, for example, in petrol kiosks.

•

Reporting – incidents and accidents need to be logged, reported to a supervisor or manager and in-turn, the police.

•

Personal alarms – issuing staff with monitored personal safety devices provides a discreet means for employees to get help, giving them peace of mind. Some of these also enable recording which can be used as evidence in court.

•

Review – procedures, in consultation with staff, have to be reviewed to check whether they are working properly.

•

Compensation – if employees are injured or suffer an illness because of work, they will need support, and possibly compensation.

Society/government: •

Review of the Anti-Social Behaviour, Crime and Policing Law.

•

Possible legislation which would carry higher penalties for attacks where the shop worker is enforcing the law on age-restricted sales, such as cigarettes or alcohol.

•

Change to expectations of shop workers regarding age-restricted sales to move the onus onto customers to voluntarily prove their age as opposed to shop workers having to enforce the legislation.

•

Measurement of hate-motivated offences in shops and provide adequate support for those targeted.

•

Dealing with the root causes with better mental health provision and drug treatment programs.

•

Address cost pressures on retailers which result in larger stores giving way to smaller ones, with longer opening hours. Although this change offers customers more convenience, staying open later with less staff on the shop floor has inevitably lead to increased risk for employees.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

•

Policing needs to catch up with the growth of home delivery services means that many drivers are often working alone which can make them vulnerable.

•

Stiffer penalties for ‘low’ value (sub £200) crime – retailers are spending record amounts on crime prevention, which is a drag on the economic viability of shops and not infinitely sustainable.

Question 3 When services talk about ‘customer training’, what do you think that they see as the main advantages? The following advantages of customer training do not constitute an exhaustive list, but do cover the main benefits. The list categories are informed by the material on pages 261 and 262 at the end of Chapter 8, but also by ideas from Chapter 5, on page 148. Enhancing the customer experience Training can help customers to reach the point where they extract maximum value from the service as soon as possible. Training helps a customer engage more with a service, with less frustration, and so they are more likely to become long-term users. Better customer ‘onboarding’ Training can improve the ability of customers to use a service properly. If customers are falling away because of a steep learning curve then an onboarding course may help to bring a greater percentage through the process. Training can also reduce problems with services and products inuse. For example, several IKEA stores now offer workshops on how to assemble their flat-pack furniture. Reduction of support costs Training helps to alleviate the burden of support requests, tickets, etc. Training has the potential to remove many common queries and so save time and cost in service delivery. Training programmes can learn from common troubleshooting episodes by assigning targeted training to service users who often need a hand getting to grips with certain features. Customer training serves as a differentiator Customer training creates more engaged, capable users who derive greater value from service. In turn, this enhances the customer experience, and increases the likelihood of customer satisfaction… even delight, and so encourages customers’ continued use of the service.

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Improved retention Customer training helps to retain more customers by addressing the points of friction in their experience. With training, and knowledge, the service becomes more and more valuable to customers. Training can increase the number of customers who upgrade and cross-grade. Customers that are more experienced at using a service are more likely to upgrade to premium offerings, and use complimentary services from the same provider. The training can provide confidence in service delivery. Creates service champions and allies When a customer is engaged with and competent in invoking a service and that they will generally market that service for the service provider. Trained and competent customers are vocal and motivated, and they will help the service find new users through referrals and recommendations. Reinforces corporate messaging – for example, about green issues. IKEA will also teach people how to take furniture apart! This message is pressed home to the world that IKEAs furniture is not disposable, throwaway tat.

Question 4 Re-read the case example ‘Caring for your players’. What do you think are the main pressures on professional sportspeople that someone in a sports-related service, such as Sara at Scarlets, has to deal with? Using Figure 8.32 to frame the analysis of pressures on professional sports people we have the following categories: Organisational pressures Pressures related to the nature of the task

Professional sports are highly demanding both physically and mentally. There is constant pressure to win, and this in turn means there is a pressure to exclude aspects of life that might intrude on that necessary focus. Achieving balance as a professional sportsperson can be difficult to do alone. Many professional sports organisations employ people to help sportspeople achieve this balance. In the case example, helping players manage the conflicting demands of the task – the need to succeed on the sports field – with the demands of family life, and also the demands of the players’ future, post retirement, are key area of attention for Sara.

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Pressures derived from service design, design of processes and resources

As much as possible Sara helps by developing and maintaining resources to support the players. For example, one of the key tasks is managing players’ seamless transition from the training ground to an away game, and in the Pro 14 series this could be overseas in South Africa, or in Ireland. Clearly, the detail will differ each time, but the basic set of processes is well honed, and so the pressure rarely reaches the individual player. The budget is not infinite, but resources are generally sufficient to avoid and mitigate distraction for players. Pressures relating to performance objectives and targets

The world of professional sports abounds with performance objectives and targets. These apply at the level of the club, and its ongoing mission to win championships and be at the top of its league, all the way down to the players and the weight, strength, and speed targets that they have to meet to satisfy the demands of the strength and conditioning teams. Similarly there will be targets in terms of tries and points scored in general for players in the attack squad. There may be targets for the forwards in respect of scrummages won and penalties gained. The pressure is on constantly. The pressure has to be there because it is a fundamental part of the professional sports environment, but Sara’s role is in alleviating some of the negative consequences of the pressure. In particular, if for whatever reason the player under-achieves then Sarah can help directly or indirectly with support, counselling and help in the form of medical treatment, special diets, additional conditioning support, training and so on. Pressures related to reward and appraisal systems

Linked to the above performance objectives at the level of the team are individual performance objectives relating to, ultimately, an assessment of the value of a player to a team. Professional sports are a business. A squad is recruited and developed to do a job. The performance objectives for the squad are mirrored in particular sets of targets for players and these result in rewards such as continued employment, bonuses, etc. Customer pressures Customer expectations

Both case examples on Sara’s role address the issue of the fans’ sometimes unrealistic expectations of players. For example, fans may see a player every week either live or on TV. They think they know that player. They may shout ‘hello Ken’ from several metres away and the players vague response fails to satisfy them. Many players do have good memories for fans’ faces, but inevitably, sometimes there are misunderstandings. Fans can get upset and players get to know about it either directly or via social media. Intensity of contact

Sara is required to support players not just in the core role of contributing to the squad’s performance on the field, but also in terms of player appearances and other PR duties. The players’ work is sometimes inexorable and overwhelming. Even if a player is injured they have to contribute to support activities relating to corporate sponsors, fans who pay for their child to be a mascot, promotional appearances at local businesses and so on. 101 © 2021 Pearson Education Limited. All Rights Reserved.

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Mood and anxiety

Professional sports people are generally confident individuals but temporary dips in performance can make them anxious and diminish their mood. Part of the support teams’ work is to help players in such situations and bring them out of a funk. A major injury might take a player out of action for a whole season, and there is a big danger that depression sets in. Sara has a key role here in engaging the player with other activities to elevate their mood. Customer competence

Managing the expectations of customers is a key role for Sara. She has to ensure that fans as much as possible understand the limitations of, for example, contact with players. There’s a role for Sarah and the support squad in educating customers and ensuring that they respect players’ time and privacy. The fans are notoriously passionate about their team and if a particular player fails to perform according to expectations then the result can be expressions of dissatisfaction sometimes to the point of insult. The support team has a clear role in mitigating and diminishing this weight of emotion that impacts upon players. Pressures relating to transition from full-time playing

Going beyond the listed pressures in Figure 8.3 we have pressures relating to the transition from active professional playing, to other roles off the field in, for example, punditry or coaching. Many former professional sports people who retire perhaps in their 30s, experience considerable depression, a sense of loss and a lack of identity after their main playing work ends. A big part of the support team’s role and in particular Sara’s role is helping players improve their chances of a fulfilling life after injury or retirement. This might involve training and education, exposure to potential employees and so on.

Question 5 ‘Happy employees mean happy customers’ is at the core of the service–profit chain. How do you think that idea applies to (a) a performance of an opera at a grand opera house, and (b) heart surgery? The service profit chain argues that profitability directly results from customer satisfaction and loyalty, which, in turn, are a direct result of customers’ view of service quality and their sense of the value they receive, and which in turn is derived from employees’ capability, satisfaction and loyalty. The implication for management practice was not particularly new, but was nevertheless clear and intuitive… that the contribution and performance of service staff are critical to the provision of customer service and business performance. While the model makes intuitive sense and is generally applicable, there are contexts in which it may not exactly pan out as argued by the originators. The Superstore PLC case at the end of this chapter serves to illustrate the contextspecificity of the model.

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There may also be conceptual problems with the service profit chain model. Hence question 5, and its answers were heavily inspired by examples related in: Walker, R. H., Johnson, L.W., Leonard, S. (2006) Re-thinking the conceptualization of customer value and service quality within the service-profit chain, Managing Service Quality, Vol. 16 No. 1, pp. 23–36 The following text attempts to provide a precis of part of the original work, but we strongly recommend reading the whole paper: (a) Grand opera

Wagner’s complete Ring cycle was staged in Adelaide to universal critical acclaim. The production was characterised by highly innovative stage design, setting and mechanics, as well as high quality musicianship and vocal talent, and impeccable overall artistic vision and direction. The results produced, and the process by which they were produced, were deemed by attendees to be of inestimable value, despite the high ticket price and personal costs of attending. All of this customer value and service quality serves to support the proposition of the service-profit chain. However, in addition we have the widely recognized intrinsic value of the operatic work and of those responsible for its realization, a value antecedent to the results produced, experienced and perceived. This intrinsic value alone, however, does not necessarily guarantee the overall result. Many poor quality productions around the world attest to this fact, but they do not detract from the inherent value of the original work and the value it offers one prepared and willing to discover and appreciate this value. For example, there were many who did not attend the Adelaide performances, and for whom the value of what was anticipated or expected was severely mitigated by the costs of attending, yet for whom the intrinsic artistic value of the work and its performers was undiminished. So the intrinsic artistic value of the work stands apart from the perceived value offered by attending the production. Further, the intrinsic artistic value of the work may not have been appreciated by some members of the audience otherwise delighted with their experience of the results produced and their assessment of value received. Their satisfaction with the quality of the production, balanced against the costs of attending, represented value for them, but this perceived value may have included no reference to the intrinsic artistic value of the work. This, however, doesn’t necessarily mean that that intrinsic artistic value does not exist or is inestimable, or that it may play a part in a customer’s assessment of value received despite the possibility that a customer lacks the ability to fully appreciate this. (b) Open heart surgery

A recipient of open heart surgery is likely to value highly a successful and beneficial outcome, as a result of the process and expertise invested in delivering this outcome. Costs directly related to the procedure will have a small bearing on the patient’s sense of value received as the alternative would

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

be the risk of a heart attack! However, unless the patient has had relevant medical training or experience, or has gained some understanding of what is involved in becoming trained and qualified to perform open heart surgery, it is unlikely that they will either understand or be in a position to appreciate the intrinsic quality and value of that ability and how it was developed. (The situation is analogous to modern garage services, in which customers have no clue what goes on under the hood /bonnet of their vehicle.) Their value assessment will be made with reference to the results produced, the associated surgical and hospital processes and the associated costs. The value assessment may also take into account personal interaction with medical and other staff, but may exclude appreciation of the intrinsic quality, expertise and value of the surgeons and the medical procedure itself. The extrinsic value assessment doesn’t mean that the intrinsic quality and value do not exist, but that the patient may not be capable of appreciating these. Both examples illustrate the idea that, in addition to an extrinsic value assessed by the recipient of a service, a service may also possess a variable but estimable degree of assessable and acknowledged intrinsic value or worth. This may or may not be observable or known to, fully understood or appreciated by, a customer. This idea however, is not accommodated within the service-profit chain conceptualization, and in fact in most widely accepted definitions of service quality. By omitting consideration intrinsic value, the models may be deficient in terms of fully accounting for the value of, and afforded by, one service as opposed to another.

Question 6 Many services require their front-line staff to adopt very prescriptive dress standards. What factors should be taken into account when deciding on what is considered appropriate clothing and appearance for the following services: (a) airline cabin crew; (b) consultants; (c) receptionists at the headquarters of a large manufacturing company? Dress and appearance codes for staff can be important if a service is trying to attract certain customer types. At one level, the staff, and their dress part of the servicescape. Dress standards, and appearance standards generally will send cues to potential and actual customers. These cues should not be sent by accident! Factors that need to be taken into account when deciding on issues such as uniform and make-up rules are as follows: (a) Airline cabin crew

Virgin Atlantic recently removed its long-standing requirement that female cabin crew wear makeup while on duty. Female cabin crew, whose uniform features a tight, red skirt, are now be offered trousers automatically, rather than only when requested. Newer airlines, such as EasyJet and Ryanair, typically have relatively relaxed rules on uniform, but many longer-established airlines still provide rules on what make-up must be worn. Virgin said that cabin crew could now work without make-up, but were welcome to follow the palette of lipstick and foundation set out in its guidelines. The airline industry has been among the most conservative when it comes to appearance standards, although it is gradually changing. British Airways dropped its no-trouser rule for women in 2016, although it still requires female crew to wear make-up.

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In the airline business, clothing needs to be comfortable and durable. Airline cabins can be warm and humid, and cabin staff are often engaged in physically demanding activities. Thick materials that cause cabin crew to sweat are not going to be very nice for passengers or the crew themselves. Clothing also needs to be robust to travel. It should not crease easily and should be such that it can be washed and pressed remotely with limited laundry facilities. Materials also need to be such that they are resistant to permanent staining, for example, when a passenger, or turbulence results in a coffee or wine spill. Clothing also needs to be compact so that a spare set can be taken in carry-on luggage. Airline clothing also needs to clearly employ the branding of the airline and to some extent the role of a particular staff member in the airline. It is useful for the customer to know who is a member of cabin staff and who is a pilot for example. (b) Consultants

The author of this analysis to question 6 was a former consultant. In the early days of his consulting training he was taught the basic rule of consulting dress. That is, when meeting clients when always airs on the side of caution with slightly more conservative dress than is worn by the client. So if the client routinely wears jeans and t-shirts, show up for meetings with smart jeans and perhaps a casual shirt. If in doubt, a suit is often a safe bet though there are some environments where a suit or the female equivalent might be seen as reducing the perceived intellect of the consultant. Academia for example is such that judgements on competence are more likely to be made on publications, social media presence and perceived attitude than dress. Otherwise consultants generally need to have “uniform” that addresses similar requirements to the airline cabin staff. Consultants often need to travel and to use only carry-on luggage. Clothing therefore needs to be travel friendly, durable and easy to maintain and clean whilst away from home. (c) Receptionists at the headquarters of a large manufacturing company

Finally, we look at the receptionists in a large manufacturing company. If the company has a uniform then it’s a bit of a no-brainer. Receptionists wear the same uniform too. If not, then smart business attire will generally do the job. It may be that the manufacturing company imposes constraints on the flamboyance or colour palette of dress. So they could ask for sober colourways rather than anything too loud.

Case exercise – Superstore PLC Questions 1. What conclusions could Julie draw from the data? 2. What are the issues and implications for the chain?

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Case analysis Introduction It is important that operations managers understand the impact of any changes they make to their delivery system on the organisation’s wider business performance, such as customer satisfaction, retention, revenues, market share and profit. In the Annual Report the company’s chief executive stated that ‘customer satisfaction and loyalty were the real drivers of the company’s profit and growth, and that these were influenced by how its people felt about their work, their rewards and their manager’. This case provides an opportunity to apply the Service Profit Chain/Service Performance Network to test out this assertion with some interesting and unexpected results!

Teaching approach This is quite a difficult case. Undergraduates may need help, such as explanation about the meaning of correlation coefficients and the effect of sample size. They will also require some help with linking the items on the table (such as operating ratio, average basket size and service delivery value) to the Network. We would let postgraduates try to sort it out for themselves! There should be some interesting debate about how to apply ‘real’ data (as indeed it is) to a theoretical framework. This case teaches well after a session on the Service Profit Chain/Service Performance Network. Syndicate groups will need around 20 minutes to reach some form of conclusion (or not) about the links. The reasons for the more unexpected links can then be discussed.

Detailed questions 1. Apply the data to the Service Profit Chain/Service Performance Network. 2. Which links are confirmed and which are not? 3. What are the issues and implications for the store?

Applying the service performance network Not all of the items in the table need be used in the network. The figure below shows how we have interpreted the items. Some of them are obvious such as staff and customer satisfaction. Service value is important because this is the measure of service delivery in the eyes of the customers. The operating ratio, as explained in the case, is used as an indicator of the quality of working life. Customer referral is a proxy for Attraction. Retention and loyalty can be assessed by share of grocery budget spent at the store and/or average basket size. The two measures of financial performance are sales and profit.

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Putting the items into the network

It is now a simple matter of adding in the correlation coefficients. Again, not all of them need be used. It is a matter of identifying the main ones. Others can be added later.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

The links between the variables A number of points can be made. (Please note the following points discuss causalities based on the correlations which are, of course, only measures of the strength of a relationship between variables.) Where there were two measures, retention and financials, the two measures were highly correlated so either one or indeed both of these measures can be used. Also they have similar high correlations along the arrows, between them and other items. Employee satisfaction is inversely correlated with customer satisfaction. This challenges the notion of the ‘virtuous cause-effect relationship between customer and staff satisfaction… the satisfaction mirror’ (page 256 of Chapter 8). Furthermore, the least profitable stores have the happiest employees and the most dissatisfied customers! The operating ratio is lowest when service delivery (service value), customer satisfaction and profits are high. A low operating ratio means that actual hours were the same as planned, whilst a high ratio means planned hours were exceeded. It makes intuitive sense that the more profitable stores adhered to budgeted hours. However, employees are most satisfied when the operating ratio is high! Superstore senior managers believe that staff satisfaction is the lever that drives all the other variables in a positive way. This does not appear to be the case!

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

A couple of these points deserve further investigation. 1. Employee satisfaction, customer satisfaction and profit The unexpected relationships among profit, customer and staff satisfaction can be explained. There is an important intervening variable that the data does not identify that of store size. Why not get your students to consider profit, staff satisfaction and customer satisfaction from the point of view of a large store and a small store? A large store would typically be at an out of town shopping centre with good parking. A small store would usually be in a high street location. Create a blank table as below and see if you can come up with some of the points that explain these relationships. LARGE STORE

SMALL STORE

Staff satisfaction is low because:

Staff satisfaction is high because:

tight supervision demarcations between jobs further to travel to work high turnover of staff not know everyone limited team spirit

everyone knows each other good team spirit small number of staff less distance to travel to work shorter opening hours customers are less impatient

Customer satisfaction is high because: easy parking full range of goods everything under one roof child friendly long opening hours Sunday opening Profit is high because:

Customer satisfaction is low because: small range of items requires frequent trips use primarily for top-up shopping prices perceived to be higher limited opening times cramped and crowded Profit is low because:

large volumes large basket size low rates efficient operation

smaller basket size low volumes higher rates shorter opening hours

The operating ratio Managers believe that the operating ratio is an indicator of the quality of working life yet it correlates negatively with service value and indeed customer satisfaction. It is however correlated positively, though not significantly, with staff satisfaction directly (0.76), though negatively indirectly through service value.

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The managers of Superstore Plc had assumed that when the operating ratio is high, i.e. the actual hours worked are greater than the planned hours, then the workplace is likely to be more stressful. They therefore expected employee satisfaction to be lower when the operating ratio was high. In fact however, the correlations demonstrate that employees are more satisfied when the operating ratio is high. Further interviews with managers led to the following explanation. When store managers find that their sales forecasts are incorrect, and the sales for the following week are likely to be higher than planned, they can adjust the sales forecast and increase the working hours accordingly, bringing employees in at short notice and thus making it easier for staff to meet the high demand level (chase capacity strategy see Chapter 8). Thus, when hours exceed planned hours, working conditions are easier for employees because appropriate staff levels are in place to meet demand. In some stores demand may be more difficult to predict, or store managers may be less competent in predicting demand and so the actual hours adhere to planned hours, even though demand is higher than anticipated. In these circumstances, the store environment is busier and more pressurised and staff have to cope with higher demand without any adjustment to the staff numbers (level capacity strategy). Thus, where actual hours adhere closely to planned hours, employee satisfaction may be lower than in those stores where actual hours exceed planned hours. This also meshes with the explanation in terms of store size: it would appear that smaller stores have higher operating ratios and high levels of employee satisfaction, whilst the larger stores adhere more closely to planned hours, but the stores are more stressful working environments. A further explanation for the high operating ratio in the smaller stores could be that staffing levels are supply 110 © 2021 Pearson Education Limited. All Rights Reserved.

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rather than demand driven. In the smaller stores, employee satisfaction and loyalty is high and therefore it may be easier for store managers to call in staff at short notice when there are unexpected demand peaks; whilst in the larger store, even if the store manager was sensitive to demand increases, s/he may not be in a position to increase manning levels at short notice and therefore planned hours would be adhered to. This study therefore facilitated a new perspective on the interpretation of operating ratio results and highlights the need for managers to properly understand the relationship between different performance ratios.

Issues and implications A number of issues and implications arise from this case: •

Organisational performance is contingent on many environmental and operational variables that cannot always be captured in a model. One therefore needs to exercise caution when interpreting results.

•

The key variable that affects profit is store size and following such a policy the organisation needs to recognise the negative impact on staff and devise ways of dealing with this.

•

Customer–staff interaction is not highly valued by customers and furthermore staff satisfaction and loyalty do not appear to drive profit. This would support the trend towards greater automation of supermarkets, greater self-service, self-scanning and internet shopping, for example.

What happened next? The response of managers to the findings was surprising – they were not surprised! Many of them had a hunch that staff satisfaction did not in fact drive customer loyalty and profit despite the company’s evangelism on this point. These beliefs were starting to create disenchantment with the company philosophy and mantra that ‘customer satisfaction and loyalty were the real drivers of the company’s profit and growth, and that these were influenced by how its people felt about their work, their rewards and their manager’. This was undermining managers’ belief in the competence of senior managers and soundness of the company.

CHAPTER 9

Service culture About this chapter This chapter is about the way in which factors such as rules, procedures, ways of behaving and relating, unwritten standards and assumptions, and attitudes (to name just a few) influence the behaviours of service operations managers, service staff and customers. The chapter will first explore what culture and service culture is, and then will look at ways in which service culture can be managed.

Learning objectives •

To be able to define what is meant by ‘organisational culture’ and specifically ‘service culture’, and why both are important

•

To be familiar with some of the better-known frameworks that attempt to identify different types of culture

•

To identify the steps in attempting to manage service culture

•

To understand some of the elements of national cultures

Discussion questions and exercises Question 1 Re-read the case example on Yahoo in this chapter. What was/were Mayer’s mistake(s)? Part of Mayer’s response to the problems at Yahoo was to take some of the more tangible aspects of Google culture and to import these into Yahoo in the hope that they would help change the legacy culture. The changes did not work. The Yahoo example highlights several challenges that illustrate the importance of understanding culture and climate, but also the necessary sensitivity needed to successfully change culture. Historically, Yahoo’s top management culture was outward-looking and ignored the engine of the company’s innovation that was steadily declining. There was a failure to recognise the damaging and demoralising impact of many changes of management direction. Successive chief executives, instead of creating a climate of stability, instead sought to import management tiers to smooth over the impact of their decisions. Finally, when Marissa Mayer arrived, her intentions and her change solutions were probably workable in the long term, but in the short-term, and with poor communication about their necessity, they were rejected. Rather than

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responding positively to the imperatives for culture change, employees voted with their feet, and sent their CVs to Facebook, and ironically Google! If we think about conceptual ideas from the chapter and try to apply them to this example then as good a place as any to start is Schein’s iceberg metaphor of culture depicted in Figure 9.3. Marisa Mayer’s attempts that change addressed the superficial surface aspects of culture, leaving the intangible activities and processes, and underlying values of the company largely untouched.

Question 2 EPC is a network of social policy researchers, consultants and lobbyists. The company provides consulting services to government and the voluntary sector that are, of necessity, low cost. EPC forgoes a percentage of typical consulting fees in exchange for research access, as well as access to decision makers in local and national government and the European Union. The company has just 16 full-time employees, but a network of 170 part-time consultants drawn from academia and existing consultancies, as well as senior practitioners in social care, housing, local government and the voluntary sector. EPC was formed by a small group of academics from universities in France, Belgium, Germany and the UK. Today, the company draws on consulting and research talent from every country in the European Union. In an industry that is often characterised by ‘cookie-cutter’ approaches, EPC takes the bespoke nature of its services seriously. We don’t do ‘template’ consulting projects. We build on our independence and experience to ensure that all research, surveys, analysis, modelling, consultations, lobbying and consultancy is designed specifically to meet individual client requirements, says Marco Nasir, EPC’s MD. We bring a vast range of experience held by individuals and existing consultancies together under one cooperative roof. By combining our access, professional expertise and experience in different combinations for different projects, we can deliver value, without the overhead demanded by traditional consultancies. Everything we do is a direct response to the individual client’s specification. We deliver high-quality services efficiently, flexibly and at low cost. Our collective approach lets us do this. (Sophie Maddox, Chief Executive) Using the Competing Values Framework, what type of culture does EPC have? Referring to the material on pages 284 through 287 and especially Figure 9.6, we can see that EPC fits fairly neatly into the adhocracy (creative culture) quadrant. First of all, the company is structured on a flexible basis using mostly part-time consultants. These are recruited from organisations that are not renowned for command and control/hierarchic cultures anyway. The company prides itself on the bespoke nature of its projects and service delivery. EPC claim that their consultancy is highly responsive to individual client needs. In many consultancies one might be tempted to be dismissive of such an assertion, but the resource base of EPC suggested it would be hard for them to do anything else. They have a vast range of experience from different walks of life that they bring to bear on consulting jobs if there is any controlling influence will be on the part of the permanent managing partner who steers that project.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

The defining characteristics of the adhocracy culture are innovation, risk taking, entrepreneurship and creativity. And it would seem that EPC is almost predisposed to deliver on all four of these characteristics. If we think about much mainstream consulting which is very much ‘cookie-cutter’ then one can imagine that the typical part-time employee of EPC would be extremely bored with such work. Many small strategy and social policy consulting ‘boutiques’ qualify as Adhocracy cultures.

Question 3 Construct a cultural web for your university/college course. Which elements of the web help or hinder service delivery? The cultural web for a university course in business and management is below. All examples are real, but are a composite and relate to three different business skills in the UK and Belgium. Clearly, the point of the question is to get students to carry out this exercise for themselves. The exercise/question is best run live on a whiteboard as opposed to giving it over to students in breakout groups. This is because the tutor will probably need to explain some of the administrative and cultural background of the school. Build up the culture web on the whiteboard and try to draw out the implications as you go. It might be best to turn off any lecture recording equipment when you run this exercise! A cultural web for a university course within a business school Paradigm – organisational values and culture

A part of, but also semi-independent of the university. Main ‘customers’ are a research community, and after that, paying students. We provide a premium business and management education experience. Focus is on creating more effective leaders (and a better career) as opposed to just better understanding of management theories. Risk averse in teaching, but highly responsive and innovative in terms of the student experience. Great branding, but sometimes weak delivery.

Delivery impact – We have two conflicting elements of the paradigm that are not necessarily unusual Paradigm in higher education but will have an impact on service delivery. Research active faculty will be drawn to spending most of their attention and effort on research. The other problematic aspect of the paradigm is the emphasis on student experience as opposed to the student learning experience. Possibly this will result in resource allocation that develops the overall experience to the detriment of learning and teaching. Organisational structures

From the student perspective both the university and school were highly bureaucratic, especially in respect of assessments. On the other hand, students observed a constant challenge to this bureaucracy from the student welfare team who they saw as their advocates. Students can see little of the research hierarchy from within their course, though it is highly visible externally, and is in fact the ‘public face’ of the institution. The teaching structure was slightly hierarchical, but with functional elements too. It is almost as if there were three organisational structures working contiguously with each other

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Delivery impact – The development of the bureaucracy for administration, and especially quality Organisational assurance in respect of things like assessments, is probably a good thing. The structures history of this development was that faculty, being mostly focused on research took their eye off the ball in terms of teaching and assessment, and were subject to many challenges from students as well as the occasional litigation. In response, the University administration co-opted most decision-making in this area and built a rigid and extensive set of rules and procedures which were almost impossible to deviate from. In some ways, the standardisation and rules were good for students as they hopefully supported fairness. However, the complexity of the administrative system was difficult for students to understand. In response, ‘armies’ of student welfare officers were hired to act as an interface between students and both administration and faculty. The functional aspect of the teaching organisational structure was problematic in respect of business and management degrees because most present problems need to be analysed using multiple analytical lenses. The functional approach resulted in teaching being almost exclusively from single analytical perspectives. Power structures Different bodies and individuals have different kinds of power over student progression, e.g. welfare officers versus faculty (Mum v. Dad/Good cop v. Bad cop.) The power of the student body and its ability to influence decisions by the school/ faculty, e.g. on timing of assessment deadlines, poor teaching, cafeteria opening. Delivery impact – In respect of the course as opposed to the business school overall there was a kind Power structures of ‘passive’ power structure evident in the rules and procedures set up by administration. However, over time students and their advocates learned to push against this power structure by developing their own. Additionally, the paradigm elements relating to the student experience at the level of the university acted as an enabler of the student body in pushing back against rules and procedures and the faculty who tried to implement them. Whether this helped or hindered service delivery or not depends on one's perspective. From the perspective of a student in the short term, having the ability to push back against poor assessment gradings was useful. However in the long term, with grade inflation and reduction of standards, the quality of the degree and the reputation of school and university would be diminished. Control systems

Schedules, e.g. for assessment completion Payment deadlines The timetable of lessons and workshops Accreditation review Teaching review and general quality systems Academic rules and regulations

Delivery impact – As is the case for most control systems, they work for the overwhelming majority of Control systems – in this case – students. However, outliers, for example, students who could not make payment deadlines, or who struggled with managing their time and attention (and so would miss lessons or assessment deadlines) obviously suffered. Some of the control systems were imposed on the school and by extension the course. For example, reviews such as the National Student Survey were not optional for the school, and lack of participation would mean that the school would not be a player in the market. In participation, there was an inevitable de-emphasis of learning and teaching with resources being pushed more towards the general student experience.

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Routines and rituals

The end of semester dean’s awards and cocktail party, a social event for staff and students. The student mentoring programme, and more intimate teaching-related activities such as weekly tutorials. The weekly in-semester cycle of teaching and assessment. The annual cycles such as induction week, placement month, dissertation deadlines, the graduation/end of course ball Degree congregations

Delivery impact – Most of the routines in rituals evident in the course were positive in respect of Routines and service delivery. Many routine and repeat events serve to mark key milestones in rituals student progression and signal the ends and beginnings of phases of instruction. Symbols and role Role-modelling to influence students’ professionalism. models Prize winning students come back to tell their stories. Celebration of alumni success. No swearing by faculty in class. Course branding slogans peppering brochures, slide-ware, the course website and so on. Delivery impact – In one year, the school senior management attempted to introduce a dress code for Symbols and role teaching faculty. The idea was that role-modelling appropriate business attire would models be a good influence on students in their development of a professional approach. The response from faculty was unfortunately mixed, in fact polarised. About 40% of staff went along with the rule and were happy to wear suits or the equivalent in teaching. The remaining 60% completely rejected the ‘imposition’ as they perceived it. Students therefore received inconsistent messaging. Not that they cared. In the same year, senior management, after being appraised of student complaints about one or two flamboyant lectures occasionally swearing in class, issued an edict that this practice was to cease. The response was similar to the response to the clothing edict. Branding and marketing symbols were of limited value. As much as anything they were developed to motivate school marketing staff. They mostly ‘disappeared’ and became part of the wallpaper. On a positive note the celebration of an alumni success was a great help in both promoting the course to potential candidates, and in enthusing and motivating students on the course. Stories and myths Stories of success, for example, students who are invited to publish with faculty members, or whose work features in textbooks. ‘War stories’ for example, about plagiarism investigations and their impact upon degree and employment after (if there is!) graduation. Delivery impact – The school had a very good programme which would invite alumni back to speak in Stories and myths lessons or to be professionally video recorded. The stories of success were a great motivator for the student cohorts. Calling back to the ‘swearing lecturers’ discussed above, from the student perspectives the swearing lecturers became the stuff of legend! After many years of a laissez-faire approach to plagiarism and its policing, the school decided to change tack and use ‘war stories’ to ‘frighten the living daylights’ out of potential offenders. These were a massive success.

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Advise students not to worry too much as to whether the comments are in the right element, but rather to listen to the emotions behind statements which are made. The statements which are reinforced with some strong emotions are frequently the most influential in determining behaviour.

Question 4 Which elements of the cultural web can operations managers influence easily, and which might be more challenging? Interview a service operations manager and ask how they can influence their organisation’s culture in order to provide better service. It is relatively easy to reorganise – to create a different organisational structure, but this rarely achieves any significant change. Concentration on control systems – particularly those which are perceived to be linked to rewards (money, promotion, recognition) is usually the route to fastest impact. Managers might also consider using the grapevine (stories) to influence positive behaviour. As the earlier example illustrates, Marissa Mayer attempted to influence routines and rituals (no more home-working), and symbols and role models (the symbolic switch from iPhones to Blackberries for example, and the ‘town hall’ meetings. Neither was successful in changing culture overall. These anecdotes aside, Cameron and Quinn’s approach (page 291) is quite well grounded in empirical research. This said little of their ‘recipe for culture change’ is easy, and the first two stages can be particularly challenging unless there is a clear desire for change amongst the majority of managers and the executive. As to the second part of question four, obviously the answer depends on the interview carried out by you or your students. One recommendation however, would be to use a framework for the interview. The culture web would be as good as any, and so a blank template is below and this is also included in the slide pack for this chapter. It might also be worth looking for stories of attempts to influence culture online. A web search will turn up some interesting examples. One fascinating story from the World Bank is related by Steve Denning at Forbes. www.forbes.com and search for ‘World Bank Steve Forbes’. Managers’ potential to influence Paradigm – organisational values and culture

Organisational structures

Power structures

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Control systems

Routines and rituals Symbols and role models Stories and myths

Question 5 Evaluate an organisation’s website or annual report and assess the ‘language set’ in use. Also try to identify words and phrases that you would expect to see, but which are absent. After researching the language set, what can you say about the organisation’s paradigm and values? Here we can take a lead from some of the material on page 282: ‘… an airline that refers to economy class passengers as ‘self-loading cargo’ will struggle to provide excellent service. But language does not have to be deliberately derogatory to be revealing. For example, patients in some parts of the UK National Health Service, when discharged from hospital are not referred to as ‘patients’ (still less, ‘customers’), but rather as ‘finished consultant episodes’ (FCEs). Similarly, some claim that the abbreviation FTE to refer to a full-time employee, which is almost ubiquitous, can result in de-personalisation’. In guiding through students through this exercise think of, or rather get them to think of the emotional impact of words used. ‘Triggering’ is topical and most pre-experience students will be familiar with the concept. However, it might be useful to bring some structure to the discussion and so a handy framework for categorising the impact of a language would be Figure 7.3 from Chapter 7. This figure is also included in the slide pack for this chapter. One interesting twist on the exercise is to look at the website or annual report of an organisation that has a reputation for distortion using language. Again, a topical example would be ‘greenwashing’. Here the research needs to be deeper but the exercise can prove to be a good learning experience for students.

Question 6 Do you understand what are the principal underlying assumptions and values of your organisation? To what extent do these assumptions and values support your service concept? Where there are mismatches, how might you engineer a reparative change to these aspects of culture? Question 6 requires some research and the answer will be different depending on the group or individual carrying out that research. This question works best with executive groups who are from the same company/organisation. Some structure is advised for the research work, and any discussion. The material from page 279 is probably a good guide as any, and the key questions are repeated in the template below which is also in the slide pack for this chapter.

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•

What sector is our organisation part of? For example, are you in retail, financial services or perhaps the charitable sector? A reconceptualisation here can provide new ways of looking at business problems and thus, potentially, significant competitive advantage.

•

Who are our main customers or clients? Multinational corporates, small businesses or individual customers? How is this customer base changing?

•

What do we provide for our customers? There is a key link here to the idea of ‘outcomes’ as we discussed in the service concept chapter (Chapter 4). What is the customer buying, as opposed to what is the customer paying for? For example, the home improvement store provides opportunities for a better lifestyle rather than simply paint and power tools. The university management degree is about creating more effective leaders (and a better career) as opposed to just better understanding of management theories.

•

What do we say about ourselves when we compare ourselves to our competitors? Are we more innovative, risk averse (safe) or customer responsive?

•

What are some of the less positive aspects of our organisation? What negative things might people outside of our organisation say about us? Are we inflexible, are we only interested in large, profitable customers, are we arrogant?

Case exercise – Dexan Consulting Question How would you characterise the challenges associated with change at Dexan, and how might these be overcome?

Case analysis The Dexan case study can be used to consolidate the teaching of several related subject areas from the text. In this case, there is the potential to look at changes to the service concept at Dexan. In fact, this might be a useful place to start by looking at the current and potential future service concept if the company started to employ more modularity and technology for service delivery. The case study also touches upon customer relationships in the sense that currently, client contracts are critically dependent on deep relationships at many levels (Figure 5.10). Some of the ideas about modularity and application of AI would of necessity disrupt those relationships and potentially reduce richness and complexity. No doubt these changes could be made to work at a mechanistic level, but there will of necessity be changes to the way the company works with clients. Many operations staff currently have a rich working environment in which they exercise considerable discretion to build client solutions. The move to managed co-creation using off-the-shelf modules would imply a move from the ‘adaptive’

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to the ‘compliant’ zone (Figure 8.6) to a large extent with corresponding anxieties (bottom of page 255) that might result. All this said however, this chapter is about service culture and so it would make sense to employ some of the models we relate the chapter to understanding potential change issues. If we start with the concept of organisational climate (page 271) then what we have at Dexan is a climate that is extremely supportive of long-term relationship-building at multiple levels with client organisations. Furthermore, such relationships and the technical content of implementations was largely at the discretion of the client teams. Ever since the founding of the company, implementations teams were encouraged to exercise creative discretion (page 251). The implied changes in the case study are to these processes and customer contact procedures. If we think about the Schein iceberg metaphor then the changes will be taking place at the level of the middle of the iceberg. That is, to ‘intangible activities and processes or structural resources’. The trouble is, the implementation teams in the company have been historically recruited with a set of values, assumptions and beliefs that may be odds with any limitations to customer contact procedures, and formalisation of process. In other words, we can expect to see considerable cultural inertia from the base of the iceberg. Moving on and using the lens of a different model from the chapter, we can possibly fit the current culture at Dexan into the bottom right quadrant of the Deal and Kennedy framework (Figure 9.4). While the name of that quadrant ‘Betting the Company Culture’ is probably inappropriate, the list of characteristics are ticked in almost every respect. Implementation teams and the company think long-term and strategically. Decisions most definitely have high cost implications. The outcome of decisions about client implementations generally has very long-term benefits. The technical expertise of the implementation teams is extremely highly valued by clients. Both Dexan and clients have also been tolerant of a high degree of risk. Dexan’s management are considering moving to the bottom left of the Deal and Kennedy framework. Whilst the fit is not perfect, we can expect to see more rules and regulations and most certainly an increased emphasis on following procedures. The latter will come from the limitation on implementation design implied by implementations being configured from preset modules. Of necessity, the previous ‘free for all’ in client communication at multiple levels will probably have to go away, and be far more formalised in future. The Deal and Kennedy framework is not particularly good in providing any recipes or ideas for managing cultural change. However, as the above narrative hopefully explains, it does highlight the potential for clashes and so mitigation interventions can be designed. Moving onto the Competing Values Framework (Figure 9.6) it becomes slightly more difficult to figure out where Dexan on this typology. Currently the best fit is most likely with the Adhocracy or create culture on the top right of the framework, but there are some elements of the clan culture in evident also. Either way, we will likely see potential problems as the company is required to shift to towards the bottom left and become more hierarchic and centrally controlled. The case question is specific about characterising the challenges associated with change. The material on page 290 of the textbook introduces a simple set of questions for assessing possible resistance. 120 © 2021 Pearson Education Limited. All Rights Reserved.

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Ability: To what degree do people have the necessary skills required in the change initiative, and if they do not currently possess these skills, what is needed in order to equip them with these skills that would impact on time and resources?

•

Willingness: To what degree are people willing to change and to put in the necessary time, effort and commitment that is necessary? This is where resistance comes in – if and when there is resistance, how might leaders and managers address it? In this latter situation, there would be four different possibilities that leaders and managers would need to consider and handle differently, which would require planning, monitoring and adjustment.

We don’t know enough detail to determine exactly how the implementation teams will respond to the planned changes but we can speculate. If you first consider ability, then the technical aspects of the work will be somewhat simplified. There may be a more difficult technical/design challenge in formalising the modules, and in making an easily accessible structure for these along with some sort of decision-making algorithm for module selection. However, for the most part, technically things will be easier for implementation teams. This simplification of work is likely to result in boredom for many team members. However context is critical. The fact is that in the industry overall, there is a race to the bottom and this is being supported by AI implementation in HR. If an employee did not like the changes, then their employment choices are somewhat limited in the industry overall. There are other small HR companies who operate in the same way as Dexan, but they are becoming fewer in number and are facing similar pressures to change. This leads onto the question of whether implementation teams and their members would be willing to make the change. Because of the changes in the industry it is likely that they will not have any choice. So ‘willing’ is perhaps the wrong word but there will be internal and external compulsions for teams to go along with the changes. Finally, we get onto the second part of the question which is how the company can overcome some of these potential areas of resistance. There are many ‘recipe’ models for cultural change, but we have chosen the Cameron and Quinn OCAI model because of its empirical grounding, popularity and practicality. The biggest challenges in working through the stages of the model will be in reaching consensus. However if management present the arguments related above then change will hopefully be seen as inevitable by the majority of staff in the implementation teams. If not, then obviously there is scope for people to leave, but it could also be pointed out that the proposed menu-based solutions to designing implementations at least allow some discretion for staff in implementation teams whereas elsewhere (in other companies) there will be limited opportunity for them to exercise professional judgement. The stage of the Cameron and Quinn model that the authors are most sceptical about is stage 4, ‘identifying stories illustrating the desired future culture’. It is hard to imagine any ‘stories’ about the desired future state that would be appealing to the current staff. In some ways their working lives will be made easier, but this is generally not what they want! They signed up for, in fact for the most part sought out Dexan specifically for challenge, interest and the ability to exercise discretion. Therefore, stories will need to be emphasising general business success and survival alongside possible negative stories of what might happen without the changes. Stage 6, ‘identifying immediate small wins’ has potential. It could be that a number of pilot implementations are carried out using the new approach. If the company makes every effort to ensure that these are successful then they can supply stories that can be spread (stage 4).

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Stage 7 raises the question of whether the company will need a different kind of leader in the operations side of the business. Stage 8, ‘identification of metrics measures and milestones’ is relatively straightforward part of the process. There are plenty of tips in Chapter 12 that can be employed here.

PART III

DELIVERING SERVICE

CHAPTER 10

Service supply networks About this chapter This chapter is about how to harness the potential and manage supplier relationships in the context of service supply networks. In particular, the chapter looks at the ideas and models used to describe service supply networks and how they are configured by decisions such as outsourcing supply, reducing the number of suppliers, disintermediation and network complexity. It also examines some of the activities of the ongoing management of service supply networks, including partnership relationships, coping with supply network dynamics, service-level agreements and the purchasing or procurement function.

Learning objectives •

To understand the difference between dyadic and triadic relationships

•

To be able to explain the concept of internal and external supply chains and networks

•

To be able to identify the decisions that describe how supply networks are structured

•

To gain an appreciation of the main issues involved in the ongoing management of service supply networks

Discussion questions and exercises Question 1 Re-read the ‘Lunch delivery service of Mumbai’ case example. (a) What makes the Dabbawala service so successful? (b) What do you see as the threats to the business as Indian society changes? (a) What makes the Dabbawala service so successful? Effective supply chains, like the one described in this case example are those that work in close collaboration. Having the right information (timely and accurate information on customer orders for example) and in the appropriate format to be used and understood by all the nodes in the supply chain allows each organisation to better manage their operations and minimise costs. Unlike Deliveroo and Uber Eats – or India’s home-grown equivalents, such as Swiggy and Runnr – the dabbawalas do not deliver restaurant food. Instead, they pick up home-cooked meals – mostly from the customers’ own houses – and deliver them to their workplace in time for lunch.

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The Tiffin Box Supplier’s Organisation (TBSA) runs its low-cost service at a very high level of performance. A 2010 study by Harvard Business School judged compliance to be at ‘Six Sigma’ levels, which means the dabbawalas make fewer than 3.4 mistakes per million transactions. With deliveries to and from roughly 200,000 customers each day that translates to little more than 400 delayed or missing dabbas in a year. The service is not only reliable, it is also cheap. Timeliness is crucial. The whole of Mumbai can be affected by late deliveries. The delivery schedule also has built-in buffers. If a delivery is due at 13:00, the dabbawala will aim for delivery at around 12:00 – even if the destination is only a quarter of an hour away. This buffer allows dabbawalas to improvise if there are delays or obstacles. For every 15 to 20 dabbawalas there is also always someone on stand-by in case one of them gets delayed. The network is ‘redundant’. Strict timekeeping even extends to customers – if the full lunchbox is late for collection in the morning more than two or three times, customers are dropped. The dabbawalas’ commitment to the job is partly because it pays well – roughly 12,000 rupees (£140) a month, a good salary in India for what is essentially unskilled labour. The fame of the dabbawalas also gives the job a certain prestige. One of the key skills possessed by dabbawalas is how to navigate Mumbai. The way systems such as Google or Apple Maps divides the city into neighbourhoods does not take traffic into account, but years of experience had taught the dabbawalas where the bottlenecks are. The information is often tacit or informal, but no other route management system has the dabbawala’s richness of data for each locality in Mumbai. This knowledge helps keep delivery times short. The dabbawala’s low-tech approach is a strength. The dabbawalas offer a different service to the digital start-ups in the city. Potential customers cannot order ‘home cooked’ food online and on the crowded streets, trains and bicycles are quicker than cars and motorbikes. Drivers for Swiggy and Runnr using motorbike have to follow all the rules and parking is a problem. (b) What do you see as the threats to the business as Indian society changes? As the convenience of app-based delivery services catches on, the dabbawalas may encounter threats to their business, but these are probably a long way off. The app-based food delivery sector has yet to establish momentum and some of the business models do not easily transfer from Silicon Valley to India. It may that the app-based operations become more like the dabbawalas, and vice versa. Both Swiggy and Runnr have worked with for their expertise. As well as its on-demand service, Runnr is now experimenting with regular lunchtime deliveries to big offices in Bangalore – putting it in more direct competition with the dabbawalas. The dabbawalas have flexibility to use different transportation routes because they are primarily bicycle and cart-based. However, all are forced ultimately to use one of the main commuter train lines from the suburbs into downtown Mumbai as well as one of the bigger bus routes. The railway infrastructure is old, dating back to Victorian colonial times, and breakdowns are commonplace. If a breakdown occurs then everyone in the city knows about it, but it doesn’t get away from the fact that it is not easy to work around such constraints. By contrast it is somewhat easier, though not much easier, for a newer organisation using motorcycles, for example, to work around such problems.

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Another problem is that because of the insanely high cost of real estate in Mumbai, even affluent commuters are moving to new suburbs which are much further out from the city. This makes it challenging to bring in lunches from these remote locations by traditional means. Another related problem is that modern apartment complexes in the new suburbs have tighter controls on entry for non-residents and this makes things difficult for the dabbawalas. Perhaps the biggest threat to the die boilers is gentrification of the area where most of them live. Sadly, it looks like they are going to be pushed out of their homes over the next few years.

Question 2 Re-read the case example on dark kitchens. (a) Why did this change to the home delivery network happen? (b) What points would you make if you had to make a case against the changes in the delivery network? About 150 years ago, most people made their own clothes. Nearly 20 years from now, most of us will probably not make our own food. Dark kitchens, are seen by some as the logical extension of a system that views food as a manufactured item and replaces hospitality with a supply chain. Dark kitchens and their associated supply networks have emerged because they offer many benefits, though also there are many disbenefits to restauranteurs and customers. (a) Why did this change to the home delivery network happen? Benefits to the restauranteur Improved market knowledge – Delivery companies can use customers’ order histories to identify their preferences, which in turn allows them to identify gaps in a particular neighbourhood’s range of dining options. For example, if Asian food is in particularly high demand in one neighbourhood, while the supply is comparatively low, the company can set up a ghost kitchen nearby and rent it out to restaurants whose menus fit that market need. As a result, the customer enjoys greater variety and shorter waiting times. In turn, the restaurants also benefit. There is a lot of value in owning and focussing on the consumer interface, be that a dining space or an online space, and getting to know customers better. Better resource utilisation – Local authorities seem to be anti-business and provide many financial disincentives to operating on ‘The High Street’. High Street retail space is often prohibitively expensive and so every square metre has to work very hard. Every high street food venue needs to maximise the space allocated to the customers’ domain. So why not move kitchens out to lower rent areas? Some restauranteurs can use dark kitchens to take the concept further, with no space wasted on seating, no superfluous waiting staff – just remotely located professional cooks to help restaurateurs reach customers outside of their existing delivery radius. The online service’s knowledge and experience ... their customer data can be used to optimise their kitchens based on which dishes are the most popular. 126 © 2021 Pearson Education Limited. All Rights Reserved.

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Utilise the ‘troughs’ in demand for car parking. One obvious opportunity is to host mobile kitchens that will enable food-delivery companies to scale-up local delivery capabilities, utilising off-peak parking. Improved network planning and design – Delivery companies can use big data rather than instinct when it comes to choosing new locations. In turn they can adapt to their delivery infrastructure to customer behaviour as effectively as possible. The Deliveroo ‘Edition’ concept for example, was developed on the basis of a comprehensive analysis of online order data. The online delivery service uses its customer data to determine where the most logical locations for their satellite kitchens would be, and which partner restaurants would help them expand their reach. Not all dark kitchens are registered as a restaurant or takeaway, avoiding complex planning permissions. All kitchens are subject to Food Standards Agency checks however. Provide opportunities to test markets without having to invest in a kitchen. Benefits to the customer In metropolitan areas at least, hot food on the table in 30 minutes or less. Younger customers, in particular, are driving the market. Mobile end-user devices make the ordering process easy, and apps offer a way of tracking deliveries. The systems also provide a degree of planning security. Again, in metro areas choice is considerable, and the right food is generally available at the right place at the right time to be delivered. There is a demographic shift towards consumption of prepared meals at home. Faster deliveries imply hotter and ‘fresher’ meals. A dark kitchen can turn around an order in three minutes, compared with 15 minutes at a traditional restaurant. (b) What points would you make if you had to make a case against the changes in the delivery network? Disbenefits for the customer Dark kitchens will play a huge role in the deskilling of a nation of cooks! Reduced engagement with raw ingredients – ‘choice’ for many demographic groups is now between eating out, a delivered ‘take-out’ or a supermarket ‘meal solution’. Dark kitchens aren’t always the most beloved neighbours. Several Londoners living near them have already filed complaints against the kitchens, citing the increased noise and courier traffic. If food goes on a moped for 15 minutes, it might be cold, it might be soggy, it might have spilled. 127 © 2021 Pearson Education Limited. All Rights Reserved.

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Disbenefits for the restauranteur By renting their new production sites from an ordering service, restaurants increase their dependency on suppliers. What if the supplier suddenly changes its terms and raises prices? What if the supplier changes the delivery concept? What the supplier it closes down certain locations? When customers place their orders through the delivery service, the restaurant misses out on valuable customer data. On the other hand, investing in one’s own satellite kitchen, rather than relying on delivery services, involves a significant level of financial risk.

Question 3 Re-read the case example ‘Vodafone brings back call-centre jobs’. What are the advantages and disadvantages of locating call centres in low-labour-cost areas? The offshore call telephony industry has come in for a lot of criticism over the last decade. In the UK, for example, repeated surveys and reports have shown that the public remains highly critical of how offshore call centres perform and people skeptical about their ability to safeguard customer privacy. A series of revelations about data theft from offshore centres have made matters worse and, given the choice between using a UK call centre and an offshore one, the vast majority of people will choose a centre based in the UK. This has led several companies to move their operations back to the mainland to avoid negative publicity. The overwhelming advantage of overseas call centres is their relative low cost. Other secondary advantages are labour availability and in particular availability of labour during the times when people in the UK are most likely to call, that is, evenings and weekends. The disadvantages of overseas call centres are considerable however: Service organisations who can promise customers UK-only call centres may benefit in terms of PR. However, additional costs involved – as well as problems of staff availability, recruitment and retainment – makes it difficult for many firms to give up offshoring entirely. An important question is whether customers are willing to pay the extra costs involved? Will they pay more, wait longer or accept more automated services? The company call-centres.com set out to answer these questions in a recent survey. Perhaps unsurprisingly, their results revealed that UK-based call centres were far more popular among the British public than foreign-based ones, with most respondents saying locally based services were either good or average. Call centres based overseas, on the other hand, were regularly described as poor or very poor. In a follow-up question, the survey asked respondents if they would be willing to use a foreignbased call centre if it meant paying 10 per cent less for the service. Interestingly, three times as

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

many people said they would still prefer to use an onshore service in such a case. This shows that people are willing to pay more if it results in better service for the customer. In fact, respondents were more likely to be influenced by other factors than cash incentives. For example, while automated services are an increasingly common feature of UK-based call centres to help offset the higher costs, marginally more people said they would prefer dealing with a live overseas agent than going through an automated service back home. While there will be some people who prefer to use automated services, call centres must recognise that a large number of customers will always prefer the option of talking to a real person. The opportunity to talk to a live agent makes more difference to most customers than waiting times. Another question posed by the call-centres.com survey was whether customers would prefer to have their call answered immediately by an offshore centre or wait an additional 3 minutes to talk to a UK-based agent. About 71 per cent of respondents said they would prefer to wait if it meant they could speak to a local agent at the end. This is an important point for firms to consider, despite the problem of high labour costs and limited staff availability that has affected the ability of UK-based call centres to deliver services promptly for customers. Even with extra costs and additional waiting times factored in, most customers want to deal with UK-based live agents when they contact a call centre. According to call-centres.com’s survey, the main reason for this is not about protecting British jobs or even data security concerns but, instead, the lower quality service that is delivered by offshore call centres. The upshot of this negative perception of offshore call centres is that less-expensive offshore services may cost companies far more in terms of negative PR and customer dissatisfaction. Recognising the long-term value of forging good customer relations is an important reason why so many companies are moving call centre operations back to the UK.

Question 4 Read the following statement by the chief service officer of an elevator maintenance company: We found ourselves unable to compete against the really big elevator manufacturers, yet we were great at providing maintenance services. Also the margin on new elevator systems had gotten smaller, but servicing profits were holding up well. So I guess it was obvious; we sold our manufacturing business and focused on offering a subscription-based maintenance service. We aim to provide a real partnership-based service. We provide a single point of contact, who is an industry-leading expert, for every customer. One of his or her jobs will be to teach our customers what is in their best interests in terms of how best to use the elevators so as to minimise our emergency call-outs. Of course, some customers will be better at this than others. I guess in the longer term we will have to decide what to do with the less compliant customers, especially if they seem to be taking advantage of our service guarantee. I hope to grow this service to double the number of clients we have at the moment. That should let us gather plenty of information on the performance of different elevator systems. And information is valuable.

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Use the criteria listed in the chapter to decide if the chief service officer is describing a partnership relationship. Partnerships are explored on pages 318 and 319 of the textbook. Figure 10.10 illustrates the attitudes and actions that contribute to the closeness of a partnership arrangement. These attitudes and actions can be used as a framework for analysing the elevator company described in the question. Attitudes •

Multiple points of contact – The chief service officer (CSO) states explicitly that clients will be provided by a single point of contact.

•

Trust – The CSO appears to be suspicious about clients ‘taking advantage’ of the service guarantee.

•

Long-term expectations – The CSO raises the concern about what to do with ‘less compliant’ customers – implies short-termism.

•

Joint learning – There is the suggestion of client education, but one way only.

Actions •

Few relationships – It looks like the CSO will take as many relationships as they can get!

•

Information transparency – The company wants to gather information on elevator systems, but are they willing to share it with clients?

Sharing success, joint problem-solving and dedicated assets don’t get a look in! The conclusion therefore is that the CSO is not really describing a partnership arrangement or anything like one.

Question 5 Being a supplier in the airline catering business is tough. Meals must be of a quality that is appropriate for the class and type of flight, yet the airlines who are their customers are always looking to keep costs as low as possible, menus must change frequently and respond promptly to customer feedback. Forecasting passenger numbers is difficult. Suppliers are advised of likely numbers for each flight several days in advance, but the actual minimum number of passengers is only fixed six hours before take-off. Also, flight arrivals can be delayed, upsetting work schedules – even when on time, no more than 40 minutes are allowed before the flight takes off again. Airline caterers usually produce food on, or near, airports, using their own staff. Catering companies’ suppliers are also usually airline specialists who are located near the caterers. So it caused surprise in the industry when a consortium of Southern Foods, a leading food producer that normally supplies retailers with ‘ready-meals’, and DXX, a logistics company, won a large contract at Heathrow airport against the traditional suppliers. DXX was already a large supplier to ‘airside’ caterers there, with its own premises at the airport.

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Southern Foods made the food at its existing factories and delivered it to DXX, which assembled it onto airline catering trays and transferred them to the aircraft. (a) Why would an airline use a catering services company rather than organise its own on-board services? (b) What are the main operations objectives that a catering services company must achieve in order to satisfy its customers? (c) Why is it important for airlines to reduce turn-around time when an aircraft lands? (d) Why was the Southern Foods–DXX consortium a threat to more traditional catering companies? (a) Why would an airline use a catering services company rather than organise its own on-board services? Because it may not be a specialist. Certainly smaller airlines could not get the economies of scale which catering services companies can achieve. Secondly, as catering service companies attract most customers, they will develop a level of expertise in on-board catering which would be difficult to match. In fact, the longer a catering services company is in the business the more it will learn and the bigger its operation will get (presumably), and therefore the greater its advantages will be. (b) What are the main operations objectives that a catering services company must achieve in order to satisfy its customers? Quality, dependability and cost. Quality – because any customer dissatisfaction will reflect directly on the airline rather than on the catering services company. A customer who is upset because of the poor quality of a 10-Euro meal could next time spend his or her 4000-Euro fare with another airline. Dependability – because if a meal is not ready for loading onto the aircraft in time it will either be delayed (hugely expensive), or will have to take off without the meals on-board (hugely embarrassing). Cost – because unless catering services companies can offer the service cheaper than the airlines could do it themselves, they are unlikely to outsource the business. (c) Why is it important for airlines to reduce turn-around time when an aircraft lands? Because it allows for better utilisation of the aircraft and aircraft are very expensive assets. For local flights this is especially important. A turn-around time of an hour is as long as many flight durations within Europe. This means that the aircraft is not in the air for over half its daily working time. (d) Why was the Southern Foods–DXX consortium a threat to more traditional catering companies? Because the economies of scale are even greater. Southern Foods produces foods for the general retail markets (supermarkets). The volumes involved are likely to be many times greater than catering services companies. Also, although the traditional catering services companies are generally located close to airports and can therefore achieve dependable delivery, DXX also have considerable experience at reliable delivery.

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Question 6 Many retailers devise a policy on ethical sourcing, trying to stock items that conform to such things as workplace standards and business practices, health and safety conditions, human rights, legal systems, child labour, disciplinary practices, wages and benefits, etc. Some suppliers have focused specifically on guaranteeing their sourcing integrity. One such is The North Face, part of the VF Corporation – a $9 billion giant that dominates the leisurewear garment market. Named for the coldest, most unforgiving side of northern hemisphere mountains, its range of high-performance outdoor apparel, equipment and footwear has developed a reputation for durability, fashionable styling and, increasingly, sustainable sourcing of its materials. VF Corporation’s claim is that it responsibly manages the industry’s most efficient and complex supply chain, which spans multiple geographies, product categories and distribution channels. The North Face is keen to promote sustainable purchasing in its supply chain management. Its commitment to sustainability, it says, comes from a desire to protect the natural places associated with how and where its products are used and from its concern about the effects of climate change. As a sign of its determination to pursue sustainable purchasing, The North Face has partnered with the independent bluesign standard – a Swiss-based organisation that promotes maximum resource productivity with a view to environmental protection, health and safety – thus representing an assurance for manufacturers and retailers that today’s quality criteria are fulfilled in the best possible way, and that applicable regulations and limits are complied with. (a) What do you think motivates a company to draw up a policy of this type? (b) What other issues would you include in such a supplier selection policy? (a) What do you think motivates a company to draw up a policy of this type? There are almost always two motives for companies from developed countries to draw up this type of document. The first is straightforward ethics. Many organizations do take their responsibility seriously to improve working conditions in developing countries, even though there may be a price to pay in the sense that enforcing such working conditions may increase the cost of supplied products in the shortterm. Nevertheless, it is the second motive that is often regarded as the more powerful. This is that companies risk seriously damaging their reputation if it is discovered that they are using a developing country’s suppliers whose practices are not acceptable to consumers in developed countries. This ‘reputational risk’ issue has become particularly important as consumers have become more sensitized to these issues and the news media have realized the news value of such exposés. (b) What other issues would you include in such a supplier selection policy? The obvious omission in the issues mentions in the question concerns suppliers’ suppliers. The emphasis in such documents is on direct suppliers. Yet there may be many contractors and subcontractors to these suppliers whose practices are not up to standard. Admittedly this is a particularly difficult area in which to enforce the principles set out in a policy, but some would argue that it is worth making some attempt. The other issue is that many practices that are frowned upon in developed countries are seen very differently in developing countries. The issue of child labour, for example, may be appalling in many consumers’ eyes, but could provide vital economic benefits in some part of the world. This is not to say that companies are wrong to insist on no child labour being used, it is simply to point out that many of these issues look different from different perspectives.

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Question 7 Everyone wants children to be safe, for society to identify those who are ‘at risk’ and for those ‘in authority’ to put processes in place to ensure that no child ‘slips through the net’. The key challenge is that a large number of individuals and agencies are involved in this activity, each with a significant contribution to make. In most countries, heads of local governments’ children’s services are responsible for ensuring that safeguarding processes and procedures are adhered to. But the key to success is the cooperation from all the other agencies involved. Such commitment comes from a clear process, which sets out the stages and target times for the creation of a child protection plan for each case referred to children’s services. These referrals can come from a number of sources, including schools, social services, the police and anonymous reports. Regular strategy meetings determine if a deeper investigation should be carried out by the police and/or by social services. What do you see as important in ensuring that such complex service networks operate effectively? As the question indicates, child protection is a complex issue that requires the involvement of many agencies: •

social services

•

education

•

housing

•

police

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probation

•

youth offending

•

local health board

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named nurse and doctor

In order to make this network operate effectively in protecting children, the network is critically dependent on: •

coordination

•

‘buy-in’

•

clear process specifications

•

stages and target times for creation of a child protection plan

•

all relationships, service level agreements – specified ... nothing left to chance!

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The operational implications are: •

we need a process: meetings, conferences, a multi-agency core group

•

pre-booking strategy meetings

•

key attendees: police, health professionals, teachers, social services

There is a need for clear procedures, appropriate and achievable supply chain measures, and the need for the development of a shared vision for the supply chain as a whole. It is critical to see the supply chain as more than simply a set of processes or organisational relationships. No matter how well processes are designed and managed, the importance of the commitment of key individuals and their relationships across organisational boundaries should not be ignored.

Case exercise – Holmart and Wersa Questions 1. Why was the partnership between Wersa and Homart seen as successful by both parties? 2. Is the partnership really ‘unbalanced’ as David Crawley says? 3. What should Wersa do to ensure the future viability of the partnership?

Case analysis 1. Why was the partnership between Wersa and Holmart seen as successful by both parties? On the face of it the partnership seems to achieve all the generic benefits of partnerships. The relationship between the two companies is so close that it almost is the same as direct ownership or vertical integration. At the same time both companies have incentives to improve. Holmart is under constant pressure to reduce food waste per se, and Wersa is incentivised to increase the volume of digestible material to its processes. The partnership is also successful because of the almost synergistic development by both parties. Holmart had a clear strategic imperative to do something about food waste, be it reduction or reuse, and to also derive its energy from sustainable sources. At the same time Wersa had already been making moves to minimise its landfill operations and was seeking to do something better and more sustainable with waste inputs. Thinking about the attitudes and actions listed in Figure 10.10 in the chapter we can see other reasons for success.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Attitudes •

Multiple points of contact. Both companies, albeit mainly at the instigation of Wersa had multiple points of contact. These had developed to the point of ‘embedding’ of Wersa staff within Holmart for training, education and possibly monitoring purposes.

•

Shared success. Success is clearly shared as the partnership is nationally and to some extent regionally an exemplar of how supermarket chains and waste management companies can work together to produce more sustainable operations.

•

Long-term expectations. We have long-term expectations and these are exemplified by Holmart commissioning the electricity cable from the Wersa processing centre to their superstore. Similarly, Wersa has committed to setting up nationwide collection network by converting eight of its distribution centres for food waste collection. There are other examples too.

•

Joint Learning. There is evidence of joint learning though the emphasis is for the most part on learning by Wersa. Wersa seem to be the more proactive partner because their risk exposure is somewhat higher. We will continue to explore this idea in the answer to question 2.

Actions •

Joint coordination of activities. In some ways, we strayed into the consideration of joint coordination under attitudes but there are more examples. For example, Holmart is committed to providing Wersa with a regular supply of food waste each year that will amount to 55 per cent of the total that can be processed at Wersa’s main facility. Similarly, on the Wersa side of things they supported Holmart nationwide in setting up the conduits for food waste from Holmart’s wider supermarket network.

•

Few relationships. To some extent, the dyadic relationship is breaking down in that Wersa have little choice but to branch out into collecting food waste from other sources. This said, the primary relationship is with the one partner, Holmart.

•

Information transparency. On the Holmart side, they have allowed Wersa complete access to supermarkets and their associated kitchens in order for Wersa to manage quality of waste inputs and share information.

2. Is the partnership really ‘unbalanced’ as David Crawley says? Clearly, Holmart has spent a considerable amount of money on building the electrical cable and it will take several years to pay off this investment. Apart from that however, the supermarket chain risks little in the partnership. By contrast, Wersa are exposed to several categories of risk. For example, one positive result of Holmart’s sustainability efforts will be the reduction of waste per se. This will mean reducing the inputs to Wersa. At the same time Wersa’s processes are becoming more efficient and so there is a risk that their capacity will be underutilised. In order to mitigate this risk Wersa have broadened their source of supply. However, the chances of this action damaging the partnership is small as both companies have been transparent. As the case says, Wersa 135 © 2021 Pearson Education Limited. All Rights Reserved.

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also risk reputational damage because of the unfavourable perception of anaerobic digestion in the public at large. They manage this risk by building their AD plants at remote sites. This makes inbound logistics less efficient. Lastly, and again because of the success of the partnership the AD industry is growing and this means that supply of labour will be more limited/more expensive for Wersa. David Crawley neatly sums up the risks the Wersa faces in his final quotation. To paraphrase: for Holmart, waste management it is an important but secondary issue to the company. It is not their core business. For Wersa AD has become its main business. 3. What should Wersa do to ensure the future viability of the partnership? Arguably in a partnership is not just one side who should be doing the work to ensure future viability of the relationship. Both parties must contribute. This said, given the risk exposure discussed in the answer to question two, the incentives to ensure future viability are all with Wersa. If Holmart is under pressure to reduce food waste generally, then clearly other food retail businesses will be so to. So there is probably plenty of growth opportunity in the AD business generally. Longer term though, if most organisations’ sustainability objectives are fulfilled then the supply of suitable organic material will reduce. Wersa could do a lot worse therefore than to consider broadening its supply base into perhaps agriculture and possibly organic waste from domestic sewage systems. There may also be potential for Wersa in the kind of support service that they have effectively developed to manage inputs from Holmart. The embedded ‘educator and trainer’, for example, could be a concept they could roll out with other suppliers. Doing so would increase the points of contact with new suppliers and would be a great way to market Wersa’s services. The direct impact of both suggestions would be in some ways to weaken the partnership or rather they would ensure that the Holmart and Wersa partnership becomes just one amongst many relationships that Wersa develop with the supply base. One could see the partnership evolving in the long term so that it becomes in some ways more ‘transactional’. This is an important idea to share with students. All too often we consider case studies and real business challenges as a snapshot in time. Businesses are dynamic however, and things like partnerships and in fact all kinds of business relationships evolve over time. If the partnership ‘degrades’ into a more traditional business relationship then it will still be potentially a win-win for each partner. Holmart will have improveed the sustainability of its own operations and achieved its own targets whereas Wesa will have developed a business line which can help other firms achieve the same or similar objectives.

C H A P T E R 11

Designing the service process About this chapter In Chapter 7 we looked at service processes from the perspective of customer experience. Here we look at service process design primarily from the operations perspective. This includes examining the main types of service process, looking at how the details of service processes can be ‘engineered’, how processes can be repositioned in terms of their volume and variety, and how service process technology can impact on processes.

Learning objectives •

To be able to explain why service process design is important

•

To define the main types of service process

•

To be able to explain how managers can ‘engineer’ service processes

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To understand how service processes can be repositioned

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To understand the impact of technology on service process design

Discussion questions and exercises Question 1 When the management thinker and writer Charles Handy suffered a stroke, he had to spend time in hospital as he learned to walk, talk and even swallow again. He said that the experience taught him a valuable lesson about process objectives. As far as Mr Handy was concerned, the point of his hospital stay was to allow him to recover as fully as possible. That meant he needed to be up and about. In the view of the nurses, that was a potential problem; he might fall and hurt himself. Their priority was to keep him safe. In practice, that required him to stay in bed and keep out of trouble. He called this the ‘curse of efficiency’ – organisations focus so much on efficiency that they fail to be effective. Instead of concentrating on their core goal, they pay attention to narrower measures such as cutting costs, or reducing the inconvenience suffered by their staff. (a) What other examples of this phenomenon can you identify? (b) How might it be avoided?

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

(a) What other examples of this phenomenon can you identify? Examples of the problem can be found in many places. The purpose of school education is to prepare children for later life, but all too often the focus is on getting the children to pass exams. The purpose of customer support centres is to help people, but often the focus is on getting through as many ‘cases’ as possible in a shift. (b) How might it be avoided? •

Be careful about the language set used in work. Mr Handy argues that managers tend to like things more than they like people. If all the staff were replaced by robots, he says, running a business would be a lot easier. As it is, there is a temptation to try to turn people into things by calling them ‘human resources’. Call someone a resource, and it is a small step to assuming that they can be treated like a thing, subject to being controlled and, ultimately, dispensed with when surplus to requirements.

•

Pay attention to the customer perspective at all stages of process design, and review frequently. Tools such as CEA and emotion mapping can be of great help here.

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Recognise IHIP implications for process design: ‘Production and consumption often simultaneous’.

•

The presence of customers (or their surrogates) in the process can mean that it is not just what is done in the process that is important, but also how the customer perceives it is done.

Question 2 Re-read the case example on the Shouldice hospital. (a) Illustrate how hernia surgery has moved on from the time it was seen as difficult. (b) List some of the advantages of the move. (a) Illustrate how hernia surgery has moved on from the time it was seen as difficult. By reducing the variability in its operations (‘operations’ in both senses of the word) Shouldice hospital gas designed a set of processes that can both be highly utilised and reduce customer waiting time. The questionnaire helps manage inputs to the process.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

(b) List some of the advantages of the move. There are many advantages to being in this commodity area, as the Shouldice Hernia Hospital demonstrates. Hernia operations here are carried out most cost effectively, with the lowest amounts of ‘rework’ and with high levels of patient satisfaction. A very high degree of repetition helps the hospital to refine its process knowledge and in turn this refinement ensures that procedures are efficient and reliable.

Question 3 In the case example ‘Robot receptionists? Robot carers?’, technology was used as a substitute for service people. What other advantages might such technologies bring? •

A non-exhaustive list of advantages.

•

Ability to analyse large data sets in diagnosing patient / customer needs.

•

Perceived privacy (in comparison to talking with a human)

•

Sensing ability, in particular sight and hearing much more acute than human ‘equivalents’

•

Robots have additional sensing ability too – e.g. ultrasound, infrared, infrasound

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

•

Objectivity

•

Ability to communicate with customer/patient in all languages

•

More consistent than humans

•

Robots are not squeamish

•

At scale – robots are much cheaper than humans

•

Superior strength and endurance

For a wonderful treatment of this subject, see ‘Humans need not apply’: Go to youtube.com and search for CPG Grey, and in the channel, search for ‘Humans need not apply’.

Question 4 There have been a number of changes in medical process technology that have had a huge impact on the way healthcare operations manage themselves. In particular, telemedicine has challenged one of the most fundamental assumptions of medical treatment – that medical staff need to be physically present to examine and diagnose a patient. No longer. Web-connected devices are now able to monitor an individual’s health-related data and communicate the information to healthcare professionals located anywhere in the world. By doing this, medical staff can be alerted to changing conditions as they occur, providing a status report of a person’s health so that the appropriate care can be administered. Telemedicine generally refers to the use of communications and information technologies for the delivery of clinical care. Formally, telemedicine is the ability to provide interactive healthcare utilising modern technology and telecommunications. It allows patients to virtually ‘visit’ with physicians, sometimes live, maybe using video links, sometimes automatically in the case of an emergency, sometimes where patient data is stored and sent to physicians for diagnosis and follow-up treatment at a later time. What do you think are the implications of telemedicine on how healthcare operations can be managed? Telemedicine may be as simple as two health professionals discussing a case over the telephone, or as complex as using diagnostic algorithms and video-conferencing equipment to conduct a real-time consultation between medical specialists in different countries. Broadly, there are three types of telemedicine; store-and-forward, remote monitoring and interactive services. •

Store-and-forward telemedicine – involves acquiring medical data such as medical images, blood test results, dermatological data, biosignals, etc. and then transmitting this data to a (remote) medical specialist at a convenient time for assessment offline. Because this does not require the presence of both parties at the same time, there is no actual physical examination and sometimes no opportunity to collect a medical history. The store-and-forward process

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

requires the clinician to rely on a Medical Record report and maybe an audio/video information as a substitute for a physical examination. •

Remote monitoring – allows medical professionals to monitor a patient remotely using various technological devices. This method is primarily used for managing chronic (long lasting) diseases or specific conditions, such as heart disease. Because monitoring can be almost continuous, remote monitoring services can provide better, or at least comparable health outcomes to traditional physician–patient interactions. In addition, they could be more convenient for both patient and doctor.

•

Interactive telemedicine – involves real-time interactions between patient and provider. These could include online communication, telephone conversations, and facilitated home visits by a non-specialist. This type of telemedicine is similar to traditional face-to-face visits by a physician, and normal activities such as history review, physical examination, psychiatric evaluations, etc. can be performed, at least partially.

For communities in remote or isolated areas telemedicine can be particularly beneficial. Where previously no, or only a partial (or delayed), service was possible, was available, it allows medical services to be delivered. This is particularly important in developing countries. Known as ‘Primary Remote Diagnostic Visits’, a doctor uses devices to remotely examine and treat a patient. Telemedicine can also be useful in facilitating communication between a general practitioner and a specialist. All doctors need to seek advice. The easier, faster and cheaper it is to get this advice, the more likely they are to do it. The approach can also make use of decision support diagnostic systems, which give accurate and consistent diagnoses. The quality of medical care in terms of accuracy of diagnosis and appropriateness of treatment, is therefore enhanced by ‘virtually’ bringing specialist expertise to patients. New knowledge, improved medical practice, novel pharmaceuticals, the latest guidelines, and so on can all be communicated more effectively. Monitoring patients at home using standard equipment like blood pressure monitors and transmitting the information to a carer provides the basis for a faster emergency service. This is certainly true for situations where a physician is needed, but no physician is present, such as on a passenger aircraft. For example, telemedicine kits are regularly used by pilots, cabin crew and other attending staff; non-medical experts who may have to deal with possible medical emergencies. They can use the kits to collect and transmit the data that would normally be collected in a hospital emergency room. This enables doctors, at a remote advice service to help manage the medical emergency, make sure the right decisions are made and determine what treatment can be carried out and whether a diversion or medical evacuation is necessary. Just as important in a world where some healthcare costs are likely to increase substantially, telemedicine has the potential to bring substantial cost savings. Requiring patients to visit physicians at their surgeries or hospitals is costly for the patient. Requiring doctors to visit patients at home can be even more expensive. Connecting through telemedicine reduces these costs dramatically. Patients, having convenient access to medical advice may make fewer visits to the hospital. It is also family-cantered in the sense that patient’s family life and work is less disrupted. More significantly, nurses can see up to 15 patients in four hours, whereas, visiting them in their home, they can see only five or six patients a day. Even when the costs of the technology are taken into account, telemedicine can represent a significant cost saving. Similarly, telemedicine can make the outsourcing of medical services easier. Primary care physicians routinely outsource some services. For example, they take blood samples, but send them to a specialist laboratory for 141 © 2021 Pearson Education Limited. All Rights Reserved.

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analysis. With the more extensive use of telemedicine the data required for diagnostic decisions (e.g. X-ray images) can be processed by a large scale (therefore less expensive) specialist facility, possibly in a less expensive part of the world. But there are issues with the adoption of telemedicine technology. One study found that there were three major barriers to the adoption of telemedicine in emergency and critical care units. The first of these is the regulatory environment in some regions. Medicine must be (of course) a regulated activity, but the difficulty and cost of obtaining permission and or licenses, especially when multiple states and multiple facilities are involved, can be prohibitive. Second, there can be a lack of acceptance by whoever pays for medical care whether this is government or commercial insurance companies. This creates a major financial barrier because puts the payment responsibility upon the hospital or healthcare system. Third, there may be cultural barriers, with some physicians or unwilling to adapt clinical procedures for telemedicine applications.

Question 5 The headquarters of a major creative agency offered a service to all its global subsidiaries, which included the preparation of a budget estimate that was submitted to potential clients when making a ‘pitch’ for new work. This service had been offered previously only to a few of the group’s subsidiary companies. Now that it was to be offered world-wide, it was deemed appropriate to organise the process of compiling budget estimates on a more systematic basis. It was estimated that the worldwide demand for this service would be around 20 budget estimates per week, and that, on average, the staff who would put together these estimates would be working a 35-hour week. The elements within the total task of compiling a budget estimate are shown in Table 11.4. (a) What is the required cycle time for this process? (b) How many people will the process require to meet the anticipated demand of 20 estimates per week? Element

Time (mins) What element(s) must be completed prior to this one?

A – obtain time estimate from creatives

None

B – obtain account handler’s deadlines

None

C – obtain production artwork estimate

None

D – preliminary budget calculations

A, B, and C

E – check on client budget

F – check on resource availability and adjust estimate

G – complete final budget estimate

E and F

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This question is essentially a question about task precedence, attempting to allocate work equally (balancing) and, again, calculating cycle time and the number of people required. (a) What is the required cycle time for this process? Time available each week = 35 (hours) × 60 = 2,100 minutes Demand = 20 per week So, cycle time = 2,100/20 = 105 minutes (b) How many people will the process require to meet the anticipated demand of 20 estimates per week? Add all the individual element times to calculate the total work content = 360 minutes So, the number of people required = 360/105 = 3.43 (say 4) people There are at least two feasible ways of allocating the various elements of the task to achieve a cycle time of 105 minutes or less. The figure below shows one of these ways, together with the resulting ‘lost’ minutes at each stage and the resulting balancing loss for the whole process. Note – we have assumed that the cycle time for the process will be 105 minutes as calculated previously. One could make an argument that the ‘effective cycle time’ is really 100 minutes which is the time taken by the (2) bottleneck stages.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Alternatively the process could be designed with two parallel processes, each with half the number of stations of the long-thin design. In this scenario the assumptions made about what the effective cycle time should be starts to matter. If one assumes the cycle time as derived from the conventional calculation, it will be twice that above (see the final figure). If however, one assumes that the cycle time will, in effect, be the time taken by the longest stage (180 minutes), then there will be no balancing loss. This is a common effect of ‘shorter fatter’ processes. The longer cycle time of each parallel process allows the elements to be allocated more evenly, with the ultimate ‘short fat’; process of using one stage to do the whole task resulting always in zero balancing loss.

Question 6 The Edinburgh Fringe, more accurately known as the Edinburgh Festival Fringe, is the world’s largest arts festival, lasting 25 days and featuring more than 55,000 performances of over 3,000 different shows across 317 venues. The scale of the festival poses a problem for the serious news outlets (websites, apps and newspapers) that aim to review the shows. Around 3,000 shows have to be reviewed during the preview week and the first ‘proper’ week of the festival. In the preview week, reviewers can only get to see about one event per day, but in the first week of the festival proper, they could see three shows per day on average. Most reviews must be done by the end of the first week of the festival, so, with the preview week, two weeks are available. The festival operates on a one-hour cycle for each event (like tracks at a conference), but there are gaps, so this usually allows 15 minutes for walking between venues. There are also plenty of professional ‘queue managers’ and guides around the venues to guide visitors to events. If it takes roughly one hour for a reviewer to write and post a review, and reviewers work 12-hour days, how many reviewers will be needed if all shows are to be seen?

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Demand = 3,000 shows Previews and 1st week of festival = roughly 2 weeks Productive time = 14 days × 12 hours × 60 mins = 10,080 mins Required cycle time = 10,080/3,000 = 3.36 mins Work content = 1 hour for review, plus one hour to write up = 120 mins Number of reviewers needed = 120/3.36 = 36 (rounded up)

Case exercise – The GDP Central Estimation Service Questions 1. What are the objectives of the CES process? 2. Where is the bottleneck (if any) in the process? 3. Do you think that the current process can achieve a service that provides a one-week turnaround to its customers? 4. How would you change the process to improve it?

Case analysis This case study provides students with an opportunity to employ both process mapping and some simple calculations of cycle time. There are also opportunities to apply Little’s Law. The questions are set so as to encourage students to begin with a contextual overview of the CES scenario before getting into the detail. Hence question 1. Invite students to consider the commercial background to the CES scenario. The regional and country offices are bidding for engineering jobs and time is of the essence. Additionally, for GDP overall, accuracy of the RFA process is essential to ensure that jobs are only carried out on a profitable basis. These are some of the reasons for the centralisation of the estimating service. 1. What are the objectives of the CES process? The opening lines of the case study suggest that there were some problems with quality and consistency of estimating before the formation of the central estimation service. We can assume that the rationale for centralisation was to gather expertise in one place so as to improve quality and consistency. If we assume that this related set of objectives will be achieved by the centralisation, then the other objective that needs focus would seem to be speed performance – in other words, the turnaround time for processing RFAs. The final quotations in the case clearly point to problems

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

with getting decisions on RFAs back to the country offices. So the overall objectives of the CES process are speed and quality. 2. Where is the bottleneck (if any) in the process? In order to find out if there are any bottlenecks in the process it is best to start with a process map and then carry out cycle time calculations. Encourage students to resist simply eyeballing the data in Table 11.5 and guessing, but instead to work things out. For example, a student might look at the average time per RSA and jump to the conclusion that engineering is probably the bottleneck. This may well be the case, but given that there are 12 engineers working here, the actual cycle time of the stage could be quite short. So it is best to work things out properly. Some students will like to do the calculations on a spreadsheet but in our experienced they are best done on a whiteboard or flipchart. Given that the ‘middle’ stages of the process are essentially carried out in parallel, the space required for the process map needs to be ‘landscape’ format. So flipchart turned on its side or a whiteboard is fine. Encourage students to keep the process map simple. A simple relationship chart will do. Also encourage them to leave room for calculations and some data about the various stages. The figure below captures most of the relevant data about each stage in the process, process flows, rework and so on. In teaching the case for the first couple of times it is recommended that you practice drawing this diagram in advance. Even after a few practice sessions have the basic diagram available to refer to if necessary. (All figures are in the PowerPoint deck for this chapter, and it might be worth referring to that file as you read because the figures are quite detailed.) The GDP Central Estimation Service - baseline setup

Load: 100 RFAs / week Submissions team - checking Staff: 4 RFAs completed: 1140 Average time per RFA & range: 1.5 (1.0 - 2.0) Re-work: 0.04 (at 12 weeks) WIP: 56

8 over $10m ‘High value’ (code number attached)

4 rework

92 under $10m ‘Normal’

12 rework Engineering team Staff: 12 RFAs completed: 1127 Average time per RFA & range: 5.1 (0.5 - 18.0) (4 to 5 hrs for normal jobs, 10 hrs. for high value jobs) Re-work: 0.05 WIP: 76

Financial team Staff: 9 RFAs completed: 1075 Average time per RFA & range: 3.0 (2.0 - 4.0) However, Typical delay of one week pending external reports. Re-work: 0.04 WIP: 102

Legal team Staff: 6 RFAs completed: 1108 Average time per RFA & range: 1.6 (1.0 - 2.2) Re-work: 0.11 WIP: 25

9 rejects

2% rework Review committee Staff: - Jayne and the three team leaders RFAs completed: 1037 Average time per RFA & range: NA Meets Wednesday and Friday mornings Re-work: 0.02 WIP: 38 Sequencing: FIFO (submission date)

91% approved Completions team Staff: 3 RFAs completed: 1035 Average time per RFA & range: 1.2 (1.0 - 2.0) Re-work: 0 WIP: 0

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Usually when we teach this case we break students into syndicate groups and give them approximately 40 minutes to an hour to come up with the basic diagram and associated calculations. Or rather, give students 40 minutes and then visit them after about 35 when they will ask for an hour! Alternatively you can run the exercise with the class live on a whiteboard drawing up the process map yourself. Make sure that you interact with students and get them to contribute. Another way to get the material up on the walls or whiteboard is to use the very large size Post-it notes. These can be valuable in teaching but are quite expensive. If you use this method you will need some large sharpie markers or similar. First of all draw up the main elements of the service as per the diagram above. That is: submissions, engineering, legal, financial, the review committee and finally completions. In the diagram you will see that we have emphasised the three parallel stages by wrapping around them with a dotted line. Then you can insert the administrative data from the case into each of the boxes. That is number of staff at each stage as well as information on completions of RFA, average times and ranges and so on. Not all the data will be needed but it is useful to get it up on the process map. Also note that some data is conflicting. If students point this out answer that we are talking about a ‘human’ process here and at best Jayne’s assistant has got ‘partial’ information on how the process works. When you’ve got the basic information on the map try to draw in some of the workflows with arrows. The important thing to note here is that there are two key flows in the diagram. Normal jobs (under $10 million) and high-value jobs (over $10 million). In the baseline setup both kinds of job are processed in pretty much the same way. Some students may point out that the high-value jobs have a code number attached. However little is done with this information in practice. The question asks about bottlenecks. So we need to do some calculations. It is useful to bring in context, or the customer requirement before we get into calculating the capabilities of the operation. The required cycle time (TAKT time) for the CES is the available productive time divided by the load on the operation. Given that the CES is in London, a standard working week is 36.5 hours so we have 2,190 minutes divided by a load of a 100 RFAs per week. That gives us a required cycle time of 21.9 minutes. The CES must be able to meet this required cycle time or work will be late. For each stage of the process apart from the review committee we have information on the work content of the task and ‘the number of processing units’. Processing units being people! So we can work out the capability, or the actual cycle time for each stage by dividing the task content in minutes by the number of people working at each stage. These are marked up in the diagram below in the amber boxes.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

The GDP Central Estimation Service - baseline setup with cycle time calculations Required Cycle Time TAKT time) for the CES = available productive time / load = 36.5x60/100 = 21.9 mins

Load: 100 RFAs / week Submissions team - checking Staff: 4 RFAs completed: 1140 Average time per RFA & range: 1.5 (1.0 - 2.0) Re-work: 0.04 (at 12 weeks) WIP: 56

4 rework Average Cycle Time for Submissions = work content of task / no. of processing units = 1.5x60/4 = 22.5 mins

92 under $10m ‘Normal’

8 over $10m ‘High value’ (code number attached) Average Cycle Time for Engineering = 5.1x60/12 = 25.5 mins

Average Cycle Time for Legal = 1.5x60/6 = 15 mins

Engineering team Staff: 12 RFAs completed: 1127 Average time per RFA & range: 5.1 (0.5 - 18.0) (4 to 5 hrs for normal jobs, 10 hrs. for high value jobs) Re-work: 0.05 WIP: 76

Average Cycle Time for Financial = 3.0x60/9 = 20 mins

12 rework

Financial team Staff: 9 RFAs completed: 1075 Average time per RFA & range: 3.0 (2.0 - 4.0) However, Typical delay of one week pending external reports. Re-work: 0.04 WIP: 102

Legal team Staff: 6 RFAs completed: 1108 Average time per RFA & range: 1.6 (1.0 - 2.2) Re-work: 0.11 WIP: 25

9 rejects

Average Cycle Time for Review stage = 36.5x60/(1037x5) = 0.42 mins The ‘5’ appears because the team work only for one day in total.

91% approved Completions team Staff: 3 RFAs completed: 1035 Average time per RFA & range: 1.2 (1.0 - 2.0) Re-work: 0 WIP: 0

Average Cycle Time for Completions = 1.2x60/3 = 24 mins

Most stages have a cycle time that is longer than the required cycle time. It is not surprising therefore that the CES is receiving complaints of late turnaround for RFAs. One thing to note at this point and an important point to emphasise to students is that the calculations are based on the average task times. Each stage has a range of possible task times and the ranges vary considerably. Engineering has the largest range going from half an hour, to 18 hours for some of the more complex jobs. Next is financial ranging from two hours to four hours with the other teams being pretty consistent having ranges from one hour to two hours. The point is that calculations using the averages are indicating problems,, but if we carry out the calculations at the extreme ends of the ranges the problems might be even worse. If we look at the next diagram we have added cycle time calculations for the ‘high value’ and ‘normal’ engineering assessments. The high value cycle time calculation is rather alarming in that it is nine times the required cycle time. (Again, refer to the PowerPoint version as the text in the figure below is quite small.)

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

The GDP Central Estimation Service - baseline setup with normal and high-value calculations for engineering Required Cycle Time TAKT time) for the CES = available productive time / load = 36.5x60/100 = 21.9 mins

Load: 100 RFAs / week Submissions team - checking Staff: 4 RFAs completed: 1140 Average time per RFA & range: 1.5 (1.0 - 2.0) Re-work: 0.04 (at 12 weeks) WIP: 56

4 rework Average Cycle Time for Submissions = work content of task / no. of processing units = 1.5x60/4 = 22.5 mins

92 under $10m ‘Normal’

8 over $10m ‘High value’ (code number attached) Average Cycle Time for Engineering = 5.1x60/12 = 25.5 mins

Average Cycle Time for Legal = 1.5x60/6 = 15 mins

Engineering team Staff: 12 RFAs completed: 1127 Average time per RFA & range: 5.1 (0.5 - 18.0) (4 to 5 hrs for normal jobs, 10 hrs. for high value jobs) Re-work: 0.05 WIP: 76 Cycle Time for Engineering (High value) = 18x60/6 = 180 mins assume 1/2 engineers are experienced

Average Cycle Time for Financial = 3.0x60/9 = 20 mins

12 rework

Financial team Staff: 9 RFAs completed: 1075 Average time per RFA & range: 3.0 (2.0 - 4.0) However, Typical delay of one week pending external reports. Re-work: 0.04 WIP: 102

Legal team Staff: 6 RFAs completed: 1108 Average time per RFA & range: 1.6 (1.0 - 2.2) Re-work: 0.11 WIP: 25

Cycle Time for Engineering (normal) = 0.5x60/6 = 5 mins assume 1/2 engineers are experienced

9 rejects

Average Cycle Time for Review stage = 36.5x60/(1037x5) = 0.42 mins The ‘5’ appears because the team work only for one day in total.

91% approved Completions team Staff: 3 RFAs completed: 1035 Average time per RFA & range: 1.2 (1.0 - 2.0) Re-work: 0 WIP: 0

Average Cycle Time for Completions = 1.2x60/3 = 24 mins

Either way engineering would indeed appear to be the bottleneck in the process. But this bottleneck is far worse for high-value jobs than normal jobs. It is also worth pointing out at this time that the financial team are often delaying work for a week pending external reports. The team sends out for external reports and risk assessments and while their average cycle time is 20 minutes, there is this almost ‘artificial’ delay of a week. This said, if the CES task is to process 100 RFA per week then the financial team’s week long delay is not necessarily a problem. 3. Do you think that the current process can achieve a service that provides a one-week turnaround to its customers? The problem is with the average cycle time for engineering being 25.5 minutes. If we use Little’s law, which is that ‘throughput time’ = work in process × cycle time, we have a throughput time of 25.5 minutes × 100 RSA and that gives us throughput time of 42.5 hours. So six days near enough, as opposed to the five-day turnaround required. What will happen at both this stage and in the financial stage is that work will queue, and that indeed seems to be the situation if we look at the work in process figures from the case. So the answer is to question three that a one week turnaround is not possible.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

4. How would you change the process to improve it? Open up the question to students, or if you have time send them back in syndicate groups to work on the problem to redesign the process. Hans-Ulrich Wolf, the chief engineer has already said that he would like more engineers to improve performance of his team. Throwing more people at the problem may help, but there are possibly other things could be done. In teaching this case we would normally ‘channel’ the late great Wickham Skinner. In his seminal work ‘The Focussed Factory’, Skinner argued that operations are at their best when they perform a limited range of tasks. This recommendation to focus could be on several different basis. In the case study, there is perhaps the potential to focus on high value versus normal jobs. The high value jobs by their nature will require the most experienced staff at each stage, especially engineering. Therefore, it might be worth breaking out a small number of staff into a ‘cell’ to address the highvalue jobs. It takes a bit of ‘trial and error’ to get the numbers just right but in the figure below we have come pretty close to a cell that can easily deal with the high-value jobs in a week. The cell takes 2.5 FTE worth of engineers half an FTE of legal and one FTE financial. The GDP Central Estimation Service - High Value ‘Cell’ Required Cycle Time (high value RFA) for the CES = available productive time / load = 36.5x60/8 = 274 mins

Load: 100 RFAs / week Submissions team - checking Staff: 4 RFAs completed: 1140 Average time per RFA & range: 1.5 (1.0 - 2.0) Re-work: 0.04 (at 12 weeks) WIP: 56

8 over $10m ‘High value’ (code number attached)

Engineering team Staff: 2.5 FTE Average time per RFA 10 hrs

Average Cycle Time for Submissions = work content of task / no. of processing units = 1.5x60/4 = 22.5 mins

Process bifurcates here

Legal Staff: 0.5 FTE Average time per RFA 2.2

Cycle Time for Engineering (high value) = 10x60/2.5 = 240 mins

Cycle Time for Legal (high value) = 2.2x60/0.5 = 264 mins

Financial Staff: 1 FTE Average time per RFA 4.0 However, Typical delay of one week pending external reports so prioritise. Cycle Time for Financial (high value) = 4.0x60/1 = 240 mins

Review committee Staff: - Jayne and the three team leaders Meets Wednesday and Friday mornings Sequencing: Customer priority (high value) Average Cycle Time for Review stage = 36.5x60/(1037x5) = 0.42 mins The ‘5’ appears because the team work only for one day in total.

Completions Staff: 0.5 Average time per RFA 2.0 Average Cycle Time for Completions (high value) = 2.0x60/0.5 = 240 mins

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Note that the submissions team is untouched because until submissions look at the inputs, there is no way of knowing whether they are high value or normal. The required cycle time for high-value RFA is 274 minutes. The configuration in the slide has cycle times for all stages except the review committee which are shorter than this time. The process is not perfectly balanced but remember that this is not a factory that we are talking about. Precise balance is neither possible nor desirable. Staff will move around. There is also the need for training, in particular of engineers, and junior engineers will need to be exposed to the more challenging jobs on occasion. The beauty of focusing in this way on the high-value jobs is that they can be prioritised. Think back to the context again… this cell’s work is potentially of great value to the company and though high risk, if RFA can be processed quickly then the CES is making GDP overall more competitive. The review committee meets two mornings a week. It is not inconceivable that they could meet daily for the high-value jobs. Or even twice daily. If the team processes jobs sequentially then they will be coming through at one RFA every four hours. The cell can easily make the week turnaround time target. If we make this high-value cell then what about the remainder? In the final slide we have the same set of calculations using the remaining staff to process ‘normal’ RFA. The GDP Central Estimation Service - Normal RFA ‘Cell’ Required Cycle Time (normal RFA) for the CES = available productive time / load = 36.5x60/92 = 23.8mins

Load: 100 RFAs / week Submissions team - checking Staff: 4 RFAs completed: 1140 Average time per RFA & range: 1.5 (1.0 - 2.0) Re-work: 0.04 (at 12 weeks) WIP: 56

92 under $10m ‘Normal’

Average Cycle Time for Submissions = work content of task / no. of processing units = 1.5x60/4 = 22.5 mins

Process bifurcates here

Engineering team Staff: 9.5 FTE Average time per RFA 4.5 hrs

Legal Staff: 5.5 FTE Average time per RFA 1 hr

Cycle Time for Engineering (normal RFA) = 4.5x60/9.5 = 28.4 mins

Cycle Time for Legal (normal RFA) = 1x60/5.5 = 10.9 mins

Financial Staff: 8 FTE Average time per RFA 2.0 However, Typical delay of one week pending external reports. Cycle Time for Financial (normal RFA) = 2.0x60/8 = 15 mins

Completions Staff: 2.5 Average time per RFA 2.0 Average Cycle Time for Completions (normal RFA) = 1.0x60/2.5 = 24 mins

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We have a required cycle time of just under 24 minutes and all stages can beat or match this excepting engineering which has a cycle time of 28.4 minutes. This sounds like a small difference but unless the capacity shortfall is addressed, then work will begin to queue again at engineering. So Hans Ulrich is right in that he needs possibly one more engineer and then the process will be more or less in balance. At this point open up the discussion to students and ask what else could be done to improve speed performance and potentially quality performance. In the opening diagram we showed several points at which rework was created. One way to improve performance would be to address these. Changes could be made the level of imports and some work has been done there already. In other words, ensure that the country and regional offices input the correct data to the process. Significant delay also comes from financial waiting for external reports. We don’t know the detail nature of these reports but it could be that the CES develops an internal capacity to provide this intelligence on the various parties and counterparties.

CHAPTER 12

Managing service performance About this chapter The chapter begins by looking at the particular challenges of managing performance in the service sector, and in so doing tries to draw out the differences between service performance management and more general operations, and strategic performance management. A large part of the chapter concerns measurement, as measurement and measures are an important underpinning of any management control system. Another issue that receives attention in this chapter is the design of performance management systems.

Learning objectives •

To define what is meant by ‘performance’ in service operations

•

To define service performance management at strategic and operational levels

•

To understand the challenges of performance management and measurement

•

To be able to explain the evolution of performance management systems To explain the design of ‘balanced’ performance management systems

•

To understand the methods of measure selection

•

To appreciate how managers can measure the customer’s perspective

•

To understand the principles of target setting and measure reporting

Discussion questions and exercises Question 1 Re-read the case example of the HappyOrNot company. Although the terminals have proved successful, what do you see as the disadvantages of adopting these terminals to gauge customer satisfaction? Personally, I have never been keen on touching a button just outside the door of a public toilet! I mention this because many HappyOrNot buttons are located outside public facilities. At airports in

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

particular. Throw Covid-19 into the mix and the situation gets worse. The buttons would seem to be a perfect vector for the disease. One wonders whether they will survive after the pandemic. Disease aside, we have the obvious problem of abuse of the buttons. This could be by staff or the public. The company behind HappyOrNot say that they investigate irregularities however. The instrument also seems incredibly crude. If we consider that the subject of performance management from the perspective of the IHIP characteristics (as per page 392 of the text) we can have a structure for our consideration of HappyOrNot. Service characteristic

Challenge posed in performance measurement

Implications for performance measurement

Intangibility

Difficult to measure what is not always evident

Need to explore what is happening ‘below the surface’

Heterogeneity

Different customers judge the same service differently

Need to measure the range of customer responses

Inseparability

Both operations and customer-related performance happen together

Need to look for correlation between operations and customer measures

Perishability

Difficult to capture performance as it happens in ‘real time’

Need to measure (and manage) performance ‘as it happens’

Intangibility If we want to explore what is happening under the surface of the operation and look for cause factors for example, then HappyOrNot is not going to help us very much. Obviously, any spikes in negatives will be a signal to us that we need to intervene in some way, or at least do some research but we gain nothing directly from the data that will inform the detail of intervention. Heterogeneity Similarly, the different ways in which customers will judge the service are not captured at all. That information will have to come out of further research. All we get is the initial information that customers have rated our service on a single dimension. Inseparability There is no way that we can unearth any of the complexity deriving from the core of the service relationship, the mixing of operations and customers domains and so on.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Perishability Finally, the measures are post hoc. They do not allow for direct intervention which the service is happening. Simple to implement it may be, but the HappyOrNot system does not offer very much to the service manager trying to drive improvement.

Question 2 With many new ways of collecting data (most notably from social media), how can services make sure that all the data are useful? A handy structure for answering this question is provided by Table 12.2 from the text. The table is included in the slide pack for this chapter. Purpose test – Is there a clear reason for the measure?

The question mentions social media data. Some of the data collected online has a purpose, but much of it is collected because it can be. Why not? Server capacity is relatively cheap, and who knows, maybe the data will be useful one day? Hence the commonly used phrase ‘data mining’ in which analytics professionals search for possible correlations amongst seemingly disparate sets of data. In an ideal world measures could be chosen on the basis of their utility and we would collect measure data for that specific purpose. However, the ubiquity of cheap processing and storage capacity means that the purpose test is often abandoned. System test – Is there a clear system to ensure the results will be acted upon to achieve the purpose?

As above. Ideally data would inform intervention in some way. In turn, someone needs to establish a causal connection between the intervention in the service, and the data or measure of interest. There has to be a logic in the system somewhere. Truth test – Does it measure what it is meant to measure?

Very rarely does a single piece of data or a measure tell you all you need to know about a particular aspect of business performance. Most measures are partial in the way they signal what is going on. So it may be that multiple data sources or measures are required to get a complete picture. Focus test – Does it measure only what it is meant to measure?

It is useful to weed out those data sources that are impacted by multiple cause factors. If a single measure changes because of a range of cause factors, then the measure data is not particularly useful.

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Consistency test – Is it consistent whenever it is measured or whoever measures it?

The consistency test is particularly relevant with social media data. A great deal of the measures derived from social media, and the web generally are related to fashion. The causal connections that might be of interest one month, may not be relevant or might not even exist in the next because the customer of interest has moved on to something else. Access test – Are the results available and easily understood?

Availability is generally not a problem these days. In fact the opposite. Managers are confronted with a plethora of data sources and measures that can overwhelm. Armies of professional analytics specialists are needed to help managers interpret. We have also seen the rise of programming tools like ‘R’ which analytic specialists used to interrogate datasets. Clarity test – Is ambiguity possible in the interpretation of the results?

One of the problems with using social media data is that the causal connections between objective reality and the measure are often not established from the outset. Even when analytics specialists look for correlations, at best these are associative connections amongst variables and cannot be considered to be proof of cause and effect. Data mining is mostly inductive. Timeliness test – Can and will the data be analysed quickly enough for appropriate action to be taken?

Simple carefully chosen measures can indeed be analysed quickly so that the ‘wheels don’t fall off ’ before we are able to intervene. However, this is obviously not true of retrospective data mining in social media data. Cost test – Is it worth the cost of collecting and analysing the data?

Interestingly, we think the game is changed in respect of the cost test. Collection is often extremely cheap, as at the moment, many users of social media do not understand and value their personal data. That may change, but for now the information is cheap. The challenges are in analysing it, though processor power is getting cheaper all the time. Artificial intelligence is able to carry out cost-effective and quick analysis that humans could never do. Gaming test – Will the measure encourage any undesirable behaviours?

There is ample evidence that social media data is gamed, and often by the social media companies. Twitter, Facebook and Google have all been found guilty of manipulating measures. Similarly on the customer side ‘sock puppets’ and the like abound.

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Question 3 Common measures used by call centres are speed of response and call abandonment rate. Assess these measures as drivers of improvement. Question three is innocuous looking, but has huge potential to drive and certainly start a lesson on performance management. If call centres use ‘speed of response’ then that implies obviously there will be some sort of limit beyond which action is triggered. So there will be a target or several targets for the speed of response. Similarly with abandonment rate. One has to wonder why speed of response measures exist in the first place. We cover some of the issues on pages 381 and 391. By measuring speed of response in answering calls an organisation is saying that the speed of answering is important. It broadcasts a clear message to staff. In turn, hopefully that importance derives from strategic considerations. However, if the speed of response is measured but not the quality of the interaction, employees may find themselves, albeit subconsciously, compromising quality for speed. So using speed of response on its own might be problematic whereas in a group of measures it could work quite well. So possibly use speed of response plus ‘quality of interaction’ or ‘extent to which resolution is achieved’. Some call centres will deal with a huge mix of calls. Or to use the language of page 391, the heterogeneity of services, particularly high-contact services, makes the whole concept of an ‘average’ response largely meaningless. Different customers will have different perceptions of service and that means that a range of responses is needed to assess performance. The question mentions call centres, but if ‘speed of response’ to telephone calls is used more generally then another problem the measure can create is that they disrupt other service interactions. For example, imagine you are discussing your requirements with member of retail staff and the phone rings. The staff member knows that they have two or three rings to pick up the call. If they don’t there may be problems. So they de-prioritise you who in front of them, and allow the caller to jump the queue. Clearly, you would be annoyed if this happened, but it happens frequently. As to abandonment rate, to some extent this one follows from measuring speed of response. In order to fine-tune the target for speed of response you could presumably look at abandonment rates and assess correlations. One could theorise that if the speed of response dropped to say 10 rings then it is more likely that customers will baulk, 20 rings extremely likely they will baulk and so on. A little bit of linear programming could work out an optimal speed of response target.

Question 4 A tour operator specialising in holidays for young people is concerned about the quality of service provided. Each month, the marketing manager reports on the number of complaints received. How could this be better reported to help the firm improve its service? Simply reporting on the number of complaints received is crude and will reveal little about customer service problems. Complaints can be useful sources of information to drive improvement. However, they need to be analysed in a systematic way. Firstly complaints need to be categorised to

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

give a better understanding of trends in particular areas. One obvious categorisation approach would be to look at root causes. Managers can also track how well the complaints are addressed, and whether there were any improvement to process resulting from complaint resolution. Similarly, are there any peripheral benefits from the interventions and improvements? Customers can often be more satisfied after successful complaint resolution than if they ‘merely’ receive satisfactory service. The tour operator may therefore wish to assess the level of satisfaction of customers after their complaint has been resolved satisfactorily. In other words, has the customer been ‘recovered’ by the service. One way in which the number of complaints could be used to good effect is if it is monitored using statistical process control. Few organisations will get zero complaints. So, provided the service is mature and stable then conceivably managers could determine ‘warning’ and ‘action’ limits (see page 411) and then use variations in the number to trigger investigations.

Question 5 It is quite difficult to know exactly how long operators should be spending on each call. Sometimes a client really does need detailed advice or reassurance, at other times the call could be dealt with very quickly indeed. There’s a minimum amount of time just to go through the courtesies. But there’s also an upper limit. No matter how complex the call, our systems should be able to cope with it within a set time limit. Said Duncan Hindes, Mortgage Services Manager, Beadles Bank. Duncan was speaking just after the bank had made a considerable investment in its new call centre information technology project. The new system had been ‘up and running’ for several weeks and was generating considerable amounts of data. The average length of phone calls was of particular concern to him. He had a suspicion that the calls were varying too much and that operators should be able to control even the longer calls. He also felt that it should be possible, at the same level of service quality, to get the average call time down to under two-and-a-half minutes. If operators spend too little time with clients, we can lose valuable opportunities to collect information, make them feel ‘dismissed’, and waste an opportunity to sell them further services. On the other hand, if operators spend too much time we are obviously wasting valuable operator time. Duncan decided that he should chart the average call length, and its variability, over time. He used the system to sample six conversations at random every hour, requested the system to calculate the average length of call for the sample and the range of call lengths for each sample. This is shown in Table 12.4. What does the information indicate?

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Sample

Average call 2.55 1.47 2.49 3.15 2.57 2.58 2.18 2.1 2.34 2.36 2.41 2.16 3.24 2.39 2.06 length 3.49 3.13 5.33 5.47 5.37 6.18 3.37 5.23 3.21 3.14 3.19 5.17 5.48 5.21 2.52 Range of call lengths*

*Range = longest call time in sample – shortest call time in sample. In running this question with a class, be aware that several students may have the ability to eyeball the data in Table 12.4 and come to some immediate and possibly correct conclusions. However, there is more opportunity for learning if the question is analysed systematically. Make the point that some datasets might be more complex than this example. In the tutor support pack the spreadsheet version of Table 12.4 is available. You can distribute this to students and invite them to analyse the data graphically. This has been done in the spreadsheet (make sure you don’t give students the spreadsheet with the chart) and is also in the slide deck for this chapter. Before you get into the numbers, it might also be worth initial discussion of the manager’s ideas in respect of call duration. Speculate on why it might be good to have a limit. So a supplementary question would be: Why do you think Duncan Hindes wants a time limit in the first place? It could be (as per question 3) as mundane as a time-limit per call being standard practice in callcentres. Giving the business more credit, having a time limit means you can work out the maximum number of calls per day per member of staff – and ideally factor in breaks, and the fact that calls don’t necessarily flow directly from one to another (i.e. peaks and troughs with demand). When used against wider measures for average calls received per day (again perhaps profiled against historical trends) you can manage the number of heads needed at any one time to answer calls. This keeps costs down. Having a maximum time limit could also be used to reduce the amount of ‘waste’ in the process of answering a call – by encouraging staff to get to the point and close the query or call. The term waste is used if you assume ‘chatting’ to someone is waste. The limit may also be perceived to be important because management looked at the call content itself and felt that staff were not being efficient enough in answering customer queries. And so rather than go through any management or training they cap the call length. If we plot the average call duration and range then what we see is quite interesting. The average call duration floats around Duncan’s 2.5-minute target, but critically does not go much below it. We will deal with this below. The interesting plot is the dashed line which is the range of call durations. When we compare this range plot to Duncan’s intentions the conclusion is that the process is out of control. As we will see in the following discussion, the large fluctuations in call duration may not necessarily be a problem, and in fact might be appropriate for this business. However, from Duncan’s current perspective we have some issues.

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Another supplementary question could be: What do you think is going on in this plot? i.e., with no time limit? The answer depends on a number of factors. Instinctively, you might assume the average length of calls would be high with no time limit. What we would expect to find is that the length of some calls would exceed the suggested 2.5 minutes maximum but that these calls should require more time. However, the quality of the calls and queries answered might well increase, and thus we have increased customer satisfaction. Other notes In the language of performance management, measures often create ‘unintended consequences’. A focus on dealing with calls in a specified time means that some calls might be rushed. In turn, this generates what we would usually refer to as ‘failure demand’. Specifically, a follow-up call from the customer to resolve ‘open loops’ and queries. Also, there is a possibility that once call handlers have a target then they feel comfortable stretching out a call to just before the target time (looking at the plot, I suspect that this is the case here in that there are very few calls below 2 minutes). In the question we are talking about very expensive decisions (mortgages), and mistakes mean considerable expense for the house buyer. Clearly, there is a need to properly resolve customer queries in that first call, which might mean spending a bit more time with them. Epilogue Duncan tried imposing the 2.5 minute limit, but after a few months abandoned it. The call centre used a number of measures to track quality of service and customer satisfaction. On a sampling basis they generally called customers to gain their impression of the service received on the telephone call. By most measures service quality improved when the time-limit was abandoned.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

The time limit for dealing with calls was a target set to hopefully influence operational efficiency. The idea being that if a call-centre operator was aware of the time limit then it would force them to speedily resolve customer’s issues. Customers often felt rushed as did the call operator. Customers were often unhappy that insufficient time was given for them to discuss their complaints or concerns. However, what is perhaps less obvious is the impact of the change on re-work. Because of the ‘rushing’, customers would often have to ring back two or three times. Each time they rang back they would talk to different operator. So what we have in operations language is rework, and also an increased setup penalty in the sense that on each subsequent call, the call operator had to read through the records of the customer’s previous calls. So a measure that was designed to positively influence operational efficiency in fact had the opposite effect.

Question 6 Construct a strategy map (strategic linkage model) for an organisation with which you are familiar. How well do the objectives link with and support strategy? How well do the measures you use support your objectives? Question 6 is best answered by small groups. With undergraduates you can present them with a short description of an organisation or refer them to public domain information. With postexperience students they can use their previous employing organisations or their current day jobs. There might be a temptation to use PowerPoint to build the model. Feel free to do this if you wish. A template strategic linkage model is provided in the slide pack for this chapter. However, a word of warning. If you have a group and they build the SLM in PowerPoint, then generally the person sitting at the computer gets to make most of the decisions. By contrast, if you encourage groups to work on a flipchart or better still using Post-it notes on a wall, then there’s a much greater chance of gaining consensus on the elements of the model and the causal connections therein. This is important because it is the way in which successful / relevant strategy maps are created in practice. Start with the highest level of the map. What are the overarching strategic objectives of the organisation? These should be expressed succinctly and be the stuff of the top outcome objective, or maybe two or three if you cannot nail it down to one. Then try to construct mid-level outcome objectives that feed into this overarching objective. There can be a temptation to have too many objectives on the map. Resist this and encourage students to prioritise. We would recommend typically a maximum of 10 outcome objectives and 10 activity objectives. It might make sense to try to organise the objectives using the four Balanced Scorecard headings: Financial and market performance, customer and external performance, process and capability performance and finally, learning and growth performance. This is not essential but should encourage good range of activity and outcome objectives across most business functions. Then move onto activity objectives. These might be ongoing operations activities or specific projects designed to deliver on the outcome objectives. Finally, join at the bubbles to map assumptions about causality. The aim in answering the question should not be to become experts in designing strategy maps. Rather to just have a play with some of the concepts.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Case exercise – Chilli Airways Questions 1. Figures 12.19–12.21 show some measures from the Chilli Airways Balanced Scorecard documentation. The measures are associated with the two objectives illustrated in the case. 2. What concerns might you have about the measures and targets developed? 3. What changes, or alternative measures, would you recommend for tracking activity objective 1 and outcome objective 10?

Case analysis The volume of information provided in this case study may intimidate students. The best way to teach it therefore is to walk them through it. With post-experience students you can possibly allocate each of the three measures into separate syndicate groups and get them to report back. We need a method to assess each measure and is recommended that you get students to apply the checklist in Table 12.2. The checklist, and all other slides that you need are in the slide pack for this chapter. Before getting into the detail of each of the three measures it is worth talking more generally about the method to be used. The checklist in Table 12.2 is useful but overarching that list is consideration of the extent to which any measure supports strategy. This is the ‘purpose test’, and it is worth developing it and thinking more broadly about where the measure fits in the grand scheme of things. The teaching method we recommend is to get the measure up on screen and then to work through the checklist on a whiteboard or possibly a second screen. If you distribute the materials to students to work through in groups, then by all means distribute the blank check list template and PDFs of the measures. It might be handy for students to print these out so that they can make notes on them. To begin the discussion it might be worth projecting the Chilli airways strategic linkage model which is in Figure 12.17. There is no expectation that students understand anything about the airline business, however in helping tutors guide the debrief it is worth is mentioning one or two technical aspects here in the teaching note. These can put the tutor at a slight advantage over the students.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Chilli Airways’ strategic linkage model

Looking at the strategic linkage model we have outcome objective 10 ‘passenger satisfaction’ in the middle, just above the dashed line which indicates a separation between activity and outcome objectives. Then just below that to the right is activity objective 1 which is ‘efficient and dependable ground operations’. The arrows indicate that there is agreement by the company’s executive on a causal connection between the activity and outcome objective of interest. This assumed connection is not surprising. The detailed definition information for these two objectives is included in the case in Figure 12.18. Slides of the two parts to Figure 12.18 are included in the slide pack for this chapter. It might be worth putting these on-screen briefly to talk through the detail of what is the airline is trying to achieve with these outcome objectives and the corresponding activities that will support them.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

If we look at outcome objective 10 first of all, we have what is probably quite a ‘standard’ or expected objective for the service sector regardless of context ,and that is customer satisfaction, or passenger satisfaction in this case. On the objective description are some assumptions about what drives passenger satisfaction. These make broad sense. We also have some administrative information in terms of the objective owner and their teams. Below that you will see an area of the objective definition entitled ‘objective issues and dependencies’. This is an important area to draw students’ attention to. For example, the first item ‘TSA cooperation’ is a nod to the limited agency that the airline has in achieving overall passenger satisfaction. If you walked students on a journey from the start to the end of the service experience at an airport they should realise/understand that many actors input or to overall satisfaction. The airlines’ influence only goes so far, and similarly security has its own limited span of control and so on. The notes also recognise that the competition will have an impact on performance here. That is to say other airlines can possibly grab resources (such as fuel tankers, water trucks, baggage belts and so on). There is a whole list of factors that Chilli Airways cannot control at all but there are many aspects of customer satisfaction there are in their domain and so they need to pay attention to this objective. Finally at the bottom of the objective are a list of possible measures and metrics could be used. Some are explored in the remainder of the case study. The case study draws upon our work with real airlines and so the issues are real. However, in order to remove some industry jargon we modified the measure names somewhat. One item might require a little explanation then that is ‘bump rates’. Bump rates refer to the number of times in which cabin staff invite passengers to leave the aircraft because of overbooking.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Activity objective 1 is structured similarly but by definition it is more about that which the airline does rather than what it wants to achieve. The items discussed in the objective description relate to, by and large airport ground services operations. A way to get students to think about this context is to get them to imagine waiting for a flight in the terminal building and to look out at the ramp where they will see aircraft fuel tankers, personnel moving luggage on trucks they might see the luggage belt (or the entry to it), toilet emptying tanks, food delivery services and so on. This is the domain that we are talking about in activity objective 1. If you go to the relevant area of servops.net you will see links to several YouTube videos that show typical airport ‘pan’ environments. For this this specific objective, in the notes you can see that cost-cutting especially in IS/IT is impacting upon performance. Students don’t need to know what an ‘AAM system’ is, but the implication is that software and hardware is lagging behind need. Finally at the bottom we have the measures and metrics: boarding to taxi time, schedule adherence and lost baggage. None of these are particularly surprising.

Dealing with the measures Baggage availability What I suggest you do is get students to read through the measure definition form in Figure 12.19 and to speculate on possible problems. 165 © 2021 Pearson Education Limited. All Rights Reserved.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Give them plenty of time. What is useful is to ask them to visualise the processes involved. For example if we look at the measure formula it talks about time from engine shutdown to bags hitting the baggage belt. So what happens in this process? Again, on servops.net we link to videos that show the typical operations here. If you look the window of the jet just after landing you usually see someone waving lighted batons instructing the pilot to shut down. Then you can hear the engines winding down. If one is lucky, then the next step is to depart the jet. However, in general, there is a wait what you will observe if you look out the window is that the luggage hatches are opened and ground staff will either connect a conveyor belt (on a larger aircraft) or as is the case here, with small commuter aircraft, they will probably just physically open a hatch and start hauling out luggage and putting it onto a cart. Now it is worth working through step-by-step the measure checklist. This is carried out below for the baggage availability measure.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Criterion

Explanation

Verdict? Notes

Purpose

Is there a clear reason for the measure?

✓

Yes. It does not take a rocket scientist to work out that rapid availability of checked baggage is going to be important to customers and if we look at the strategic linkage model we can see that there is an assumption that activity objective 1 is causally connected to passenger satisfaction. So the measure fits, there is a clear reason for it and it is consistent with the assumptions of the Chilli strategic linkage model

System

Is there a clear system to ensure the results will be acted upon to achieve the purpose?

✓

There is no obvious indication that anyone is going to respond but we do have a measure reporter and an objective owner. There are clear targets for improvement and one presumes that if these are not met then questions will be asked. So at the level of systems, yes but we cannot say for definite anything about operational reality.

Truth

Does it measure what it is meant to measure?

Here is where we perhaps run into some difficulties. The measure is entitled ‘baggage availability’. A common sense view of baggage availability is that it will be good if the passenger is at baggage reclaim and their bags are waiting for them. By contrast it will be rated as poor if bags are not available and there is a long wait. So the problem we have run into already is common to many performance measures and that is that they are partial. This measure, and the formula, is used to create the measure looks at one part of the process of getting bags to the customer. Arguably, what we should be measuring is the time from engine shutdown to the bag departing the arrivals belt with a passenger. Another problem with the measure is that it is an average. If I waited an hour for the last bag (mine) to appear on the carousel I would not be impressed just because the average time for bag arrival was 10 minutes! In other words, we have no measure of whether the process is in control. We have a measure of average capability.

Focus

Does it measure only what it is meant to measure?

Possibly the measure will be impacted by other factors. For example, the luggage belt may not be working, luggage carts may not be available, sufficient personnel may not be available.

Consistency Is it consistent whenever it is measured or whoever measures it?

✓

There is no reason why the measure should not be consistent. It captures a time for a relatively small part of the process of moving luggage from the aircraft of the passenger

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Access

Are the results available and easily understood?

✓

The results are readily available but whether they are understood or not is debatable. There are potentially several misconceptions which might result in misunderstandings.

Clarity

Is ambiguity possible in the interpretation of the results?

Yes. We might have an impressive average performance but still a degree of customer dissatisfaction. It is the distribution of times that is important. Also the time needs to be that of the total process not a part of it.

Timeliness

Can and will the data be analysed quickly enough for appropriate action to be taken?

✓

The above aside, the measure is a start and it can be analysed quickly enough before ‘the wheels fall off ’. The reporting frequency indicated in the measure is monthly, but the data would appear to be available pretty much constantly. Arguably the reporting frequency needs to be greater.

Cost

Is it worth the cost of collecting and analysing the data?

✓

It is hard to say for certain that the task of collecting the data and analysing it is not particularly onerous. It seems also that minimal changes need to be made to ground crew logs and so on. At some point presumably the data could be collected automatically.

Gaming

Will the measure encourage any undesirable behaviours?

There is an amusing anecdote about Birmingham airport in the UK which may be appropriate here. Feel free to customise it and relate it to students in your world. Birmingham ground services used a similar measure to this one to manage aspects of customer satisfaction related to luggage and its handling. Ground crew knew exactly how they were being measured, and where possible they would choose the most lithe and athletic of the ground crew team to grab that first bag. The ‘athlete’ would then race across the “pan” so that the first bag hit the belt in the shortest time possible. Clearly, there was a distortion of behaviour to address a particular performance measure. Simply changing the measure so that it recorded perhaps the last bag hitting the belt would help.

Please do not share the full solution with students as this can ‘get out into the world’. Share the template with them but talk them through a solution. The remaining measures can be walked through in a similar manner and more detail can be found on these on servops.net. For now some general points about the two remaining measures:

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Passenger Throughput Time

This one makes broad sense but the above-mentioned considerations about agency need to come into the discussion. So many factors outside the control of Chilli Airways will impact upon total passenger throughput time. The baseline information on the targets is an anecdotal 40 minutes coming possibly down to 30 minutes in the smaller airports. What we don’t want to happen is to have interventions informed by unrealistic targets. So the baseline cannot rely on anecdote but needs to be the subject of some sort of pilot survey. There is no explanation for the long-term target aspiration of a 20 per cent reduction. This might be reasonable but again it is worth considering some sort of pilot research to see what improvements might be possible. Other concerns relate to implementation. For example, it is suggested that the measurement is carried out on a sampling basis. So what should be the nature of the sample?

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Airside asset response time

Airside assets are things such as fuel tankers, de-icing machines used in winter, steps, luggage trailers and so on. Many of these assets are ordered in advance or rather requested in advance by aircrew as soon as they have a landing slot. By the way, ‘GSE’ refers to ground servicing equipment. The problem with this measure is largely that it is vague. The objective owner will need detail in order to intervene and improve matters should the measure indicate problems. So for example, which asset are we talking about? Is it fuel tankers, the de-icer or what? Under ‘implementation tasks’ we see a possible unintended consequence. There’s the safety issue and the note says that Chile don’t want fuel browsers racing to the aircraft. In the bad old days of naïve performance targets for pizza delivery, there were many stories of accidents and sometimes deaths because delivery drivers had penalties imposed for late delivery. Further, if you look at the baseline information there is uncertainty about the 17-minute figure. This uncertainty supports the idea that this measure needs to be deconstructed to look at different kinds of asset. Then of course we run into the problem that the measure becomes more ‘partial’. This is fine however, in that it is impossible to develop completely comprehensive measures. Better to have accurate but focused information on a small amount of operations activity than to have broad measure information on a composite of different kinds of activity. The latter is such that intervention and improvement is almost impossible, because nobody knows where to target that intervention.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Finally, we come to question two the end of the case study. This one is looking for alternative measures for activity objective 1 and outcome objective 10. A reminder that activity objective 1 is ‘efficient and dependable ground operations’. You have to encourage students to immerse themselves in the context and think about measures that might indicate efficient and reliable operation for things like aircraft refuelling, restocking the galley, cleaning the aircraft and so on. The critical thing is that students need to work through the measure definition form, and blank templates are provided in the slide deck. The second outcome objective for which a new measure is required it is passenger satisfaction, from outcome objective 10. Below is worked example of a measure for luggage trolley availability. In this case, the measure is luggage trolley shortage.

The measure is a simple one and working through the checklist one can probably agree that it matters to customers if no trolleys are available, so the more trolleys the more satisfaction. The measure formula is simple count of trolleys at various locations around the airport. Encourage students by showing them this measure and in particular how simple it is. There are some unintended consequences but I leave these for students to work out. If you really get stuck check out the information on serve ops.net. One to start you off is that in reality (again at my local airport) the measure encouraged ground staff to move loads of trolleys out into the car park area. Often the Tories were not returned to the trolley parks, and they got in the way of parking and also effectively reduced capacity in the car park.

CHAPTER 13

Service resources and capacity About this chapter Chapter 13 focuses on all the input resources, materials, equipment, customers, staff, and technology and facilities that a service operation might deploy in delivering service. The chapter is concerned with how these resources are managed to provide the service capacity that enables operations to serve their customers. In particular, it looks at how service operations manage, increase or reduce their operating capacity as they try to meet fluctuating levels of demand from customers.

Learning objectives •

To define the meaning and importance of managing resources and capacity

•

To be able to explain the difference between long-, medium- and short-term resourcing and capacity decisions

•

To understand the importance of forecasting demand and capacity

•

To be able to identify the ways in which service organisations manage bottlenecks and queues

•

To gain an appreciation of what happens when service managers cannot cope with demand

•

To explain why and how service organisations seek to improve their capacity utilisation

Discussion questions and exercises Question 1 Suggest how the following three service operations might measure their capacity, outlining the problems in so doing: (a) a garden centre that sells plants and gardening supplies; (b) a hospital; and (c) an online fashion retailer. The garden centre has to pay attention to several aspects of capacity. Whilst some elements of the product range of a garden centre would be ‘to order’, mostly they need provide ample stock of plants, compost, building materials, garden tools etc. The garden supplies market is competitive and if something is not available then a customer can go to another garden centre or one of the DIY “sheds”.

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Given the physical bulk of many plants and garden supplies, a key measure of capacity will be square metres of trading area. A typical garden centre does not need a separate warehouse, as customers are used to walking around the storage areas. In fact they are mostly outdoors because this is obviously of benefit to the plants. In turn, the need for a large amount of outdoor space determines the location of garden centres which are usually in the countryside, or in large retail parks. This all said, most garden centres have indoor facilities for tools, possibly a cafeteria and obviously checkout facilities. There will be an absolute ceiling on the number of customers that can occupy the space because of fire regulations. However, long before the operation hits that ceiling, there will need to consider how customer satisfaction levels are impacted by queues at the checkouts, queues at the cafeteria, number of available covers in the cafeteria and so on. Post Covid-19, the garden centre will also have to factor in social distancing rules in the queues and in seating areas. So in a relatively simple operation we have static measures of capacity as in space for stock, but also dynamic measures such as customers per hour or per day. Other measures of capacity that the garden centre might need to look at would be for the car park, and loading bays. Given that many garden products are bulky or heavy, customers will need to be able to drive their cars right up to the doors so as to minimise heavy lifting. Finally, gardening being a seasonal activity the garden centre will need to look at demand patterns over the year. In the UK, the first significant peak in demand is the Easter public holidays when people start paying attention to their gardens for the first time. Other peaks might be Mother’s Day for which garden centres are a surprisingly popular venue. There are few problems in estimating capacity for a garden centre though one issue could be the mix of demand. For example, garden centres often have a pets section. These are very entertaining for children but the animals can get stressed if there are large numbers of children being noisy and tapping on tanks and cages. So the garden centre might have two consider constraining access. The challenge is in figuring out what proportion of visitors bring their children. A hospital is a more complex capacity measurement context. Often when healthcare personnel talk about capacity they refer to beds. The bed does not refer to the physical item, the frame, mattresses… but the consequences of having a customer/patient occupy that bed. For every person in a bed there is a consequent demand for other aspects of capacity such as nurses and nurse managers, cleaners, monitoring equipment and so on. The calculation is complicated by the degree of dependency of the patient. The needs of a patient in for minor day surgery are very different than someone occupying an intensive-care bed. Finally an online fashion retailer will be concerned about different measures of capacity depending on whether they are a ‘portal’ or primarily a warehouse. The former will need to measure supplier capacity in some way, and this could be very tricky. The latter will also need to measure, like the garden centre, the square metres of warehouse space and its capacity for storing garments. Other aspects of capacity they might need to consider would be processing capacity for orders. Every garment ordered has implications for the number of picking staff required, packing, delivery and so on.

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This question should bring out the need to identify the resource constraints (or near constraints) – the capacity can then be estimated using the rate at which these constraint resources can work off demand. A particular problem in estimating service capacity is that the service may not be constant, particularly if the service is largely intangible such as in some professional services.

Question 2 Re-read the case example ‘Demand fluctuation on London Underground’. How might Transport for London spread out demand from its peak periods? The answer depends on the extent to which commuters can be flexible about their commute departure time. Also, if they are flexible, how can they be persuaded to change their habits and shift their departure time? TFL might consider: •

Financial reward for commuting off-peak or penalties for commuting during peak times.

•

Providing Passenger information about crowding levels via a mobile phone application, possibly integrated with a journey planner. If passengers were made aware of crowding levels and patterns, they might adapt their behaviour.

Either way, the commuter needs to have the flexibility to modify their commuting patterns. Ultimately this will depend upon their employers’ flexibility re: start and finish times. The encouraging news here is that about 65 per cent of London employers allow some form of flexitime. They said, only about 30 per cent of passengers will take advantage of this flexibility. This is probably because employees are constrained by the timing of the school run. Currently pricing has a negligible impact upon the timing of the commute. This is probably because the discounts for travelling off-peak are minimal and also, as indicated above other constraints apply on the typical commuter’s family life. The other issue is that many commuters have season tickets and so the penalties for travelling on peak do not apply to them. This is why some sort of reward mechanism for travelling off-peak might be more effective, especially for the season-ticket holders. Transport for London could ‘pay’ season-ticket holders use off-peak trains.

Question 3 The idea of ‘pooling’ was described as increasing the efficiency of queuing. Why do you think that supermarkets do not use it? Most people prefer to take their chances with parallel queues – individual queues dedicated to a single check-out – even though most of the time they end up picking a slower queue! Studies show that that with three check-outs, each serving their own queues of customers, the waiting time is three times longer on average than a single queue leading to an array of check-outs. However, nobody wants a huge queue of customers with full grocery trolleys winding around a supermarket. The queue would potentially occupy a great deal more space then separate queues because not everyone would move at the same time. There is also a huge opportunity for cheating in a long 174 © 2021 Pearson Education Limited. All Rights Reserved.

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queue. On busy days, in a large supermarket reaching the end of the queue might mean a trek from one end of a line of checkouts to the other. This is all a recipe for pain and complaint, which is why it does not happen.

Question 4 One place where queues are not always enforced are bars, where people compete for attracting the attention of servers. People who jump the queue at the bar (even without meaning to) cause considerable frustration to customers who have been overlooked. However, one solution that has been proposed is the use of facial recognition techology, which will make getting drinks at busy bars faster and fairer. The system organises customers into a ‘virtual’ queue to manage crowds, and identifies who has been waiting the longest. Not only that, the security-style system will also help people get served more quickly by advising younger-looking patrons who may be underage to get their identification ready, and let staff know if they have already been checked. What might be the advantages and disadvantages of bars using this system? Advantages

An advantage of facial recognition is that it effectively puts the customer into a virtual queue. They are called forward to order their drinks when capacity exists. That means they can occupy their waiting time in a conversation. Thinking about Maister’s principles of waiting (page 441), the second principle about pre-process weights feeling longer than in-process weights comes to mind. The customer who is in the virtual queue has already done something to begin the process of ordering drinks and are therefore ‘in process’ and get some reassurance that something is going to happen. The wait may well feel shorter as a result. Working through the remainder of Maister’s list point number three, about anxiety is clearly addressed by the system. The anxiety associated with people jumping in and attracting servers’ attention will disappear. The system can broadcast information on wait times and this would address Maister’s point number four about uncertain waits seeming longer than when they are known. The main problem addressed by the system however is equity. There’s a fairness to the system. Disadvantages

Obviously there is a cost to the system and at £200 a month (this was the typical price at the time of writing) it might be rather high for a small bar. However the customer satisfaction benefits might outweigh these costs and in fact sales revenue could well increase because customers are less likely to balk. Another disadvantage is that the mêleé at the busy bar is part of life in most of northern Europe and the United States. It is a place to meet new people. How many people have met their partners while queueing at the bar?

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Question 5 A recent newspaper article13 criticised London arts venues for introducing ‘surge pricing’ by charging higher prices for blockbuster exhibitions at busy times. The piece said that venues such as the Royal Academy of Arts and the National Portrait Gallery were asking visitors to pay up to 22 per cent more at weekends and in other peak periods. Other galleries were operating a premium on exhibitions throughout the whole of August, when tourist numbers were high. It is said that the variable charges were reminiscent of the ‘surge pricing’ policy used by taxi-hailing services such as Uber to maximise revenue when demand for taxis is at its greatest. If you had to, how would you defend this practice? Probably the main defence of the practice of surge pricing is that ultimately, the customer has a choice. Those of limited means are free to choose to attend galleries and other exhibits when they know that the price is going to be low. It is almost a given that the busiest people in life are often the most affluent. The person who has most ability to pay, has the least amount of time to attend in the working week. They have little choice but to attend at weekends. Similarly, surge pricing, and the consequence of it in terms of low pricing during weekdays can be useful for schools, for example, who need to pay for large numbers of children to visit at any one time. It is worthwhile to consider the implications of banning surge pricing. This may well mean that galleries would have under-utilised capacity over the whole year. This is a problem as the way in which they generally attract return visits is with ‘blockbuster’ attractions. (Please see the Lapworth museum case in Chapter 4 for a discussion of this issue.) By its nature, the time-limited blockbuster attraction means an increase in demand possibly in excess of capacity. The blockbuster is essential to generate revenue, but if people cannot attend then money is ‘left on the table’. Surge pricing means that for the duration of the blockbuster attraction, the ‘troughs’ of demand are more likely to be filled. Surge pricing is an excellent way to manage demand efficiently.

Question 6 When a video, taken by a fellow passenger, showed a bloodied and unconscious man being pulled off a United Airlines flight at O’Hare International Airport in Chicago, it caused a sensation on social media and other news outlets. The incident began when United overbooked the flight and decided that it needed to bump four passengers off (common practice, when a flight is overbooked). They offered a financial encouragement for passengers to take a later flight, first offering $400, overnight hotel accommodation and a flight the following day. No one accepted and the offer was increased to $800. Still no one accepted the offer, so a manager announced that passengers would be selected to leave the flight, with frequent fliers and business-class passengers being given priority. The first two people selected agreed to leave the plane. The third person selected also agreed. However, when the fourth man was approached, he refused, saying that he was a doctor and had to see patients in the morning. Eyewitnesses said the man was ‘very upset’ and tried to call his lawyer. So, instead of selecting another passenger, or increasing its offer (it could have offered a maximum of $1,350), security staff were called. The encounter with the security staff concluded with the man being wrenched from his seat onto the floor, after which he was hauled down the aisle, blood covering his face.

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(a) How should the airline have handled the situation? (b) After the incident attracted so much negative publicity, United announced a new upper limit of $10,000 in compensation for passengers who agree to give up a seat on a flight where United needs to free space, and that it would create a ‘customer solutions team to provide agents with creative solutions’ for getting inconvenienced customers to their destination. Do you think that these were sensible moves? It is not uncommon for airlines sell more tickets than they have seats under the assumption that some passengers will either fail to show or cancel at the last minute. It is claimed that, because of fierce competition and to avoid flying with empty seats, so-called denied boarding incidents are becoming more common. As the incident described in the question gained publicity, the CEO of United Airlines, Oscar Munoz, said that employees ‘followed established procedures’, but he was ‘upset to see and hear about what happened’, although the passenger had been ‘disruptive and belligerent’. When the passenger refused to voluntarily leave the plane, he said, the staff were ‘left with no choice but to call Security Officers to assist in removing the customer from the flight’. The travel writer, Simon Calder, said that the airline was technically within their rights. ‘The captain is in charge of the aircraft. And if he or she decides that someone needs to be offloaded, that command has to be obeyed. From the moment that the unfortunate individual in this case said, “I’m staying put”, he became a disruptive passenger. Officials were legally entitled to remove him, and as the videos show, he was dragged from the plane. It appears from the evidence that the law was broken by him, not by the airline. But I would be surprised if United pressed charges’. So the airline acted within the rules, but with hindsight rather foolishly. Increasing the compensation on offer would probably have attracted another passenger to the idea of being bumped from that flight. In the airline’s defence, they have to be careful about setting a precedent. They were within their rights to reject the passenger from the aircraft and had they allowed the passenger to remain, then other passengers in similar situations could point to the incident and site discrimination if they behaved differently towards them. So in answer to question part B, absolutely yes the upper limit of $10,000 in compensation would seem to be cheap in comparison to the cost associated with reputational damage. The more interesting aspect of part b is the development of the ‘customer solutions team’. A dedicated team who are used to working with over-booked flights would do two things. It would supply more options to pressurised cabin staff, and it would automatically create a kind of ‘cooling down’ buffer. Instead of feeling that they have to react instantly cabin staff could kick the problem up to the centralised team.

Case exercise – Treegrove Holiday Village Questions 1. What are the main capacity constraints that Rosemary faces? 2. How does Treegrove currently cope with demand fluctuations, and what more could it do?

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3. What would be the effects on the capacity management of the business of the three proposals for the future that Rosemary mentions (expanding the number of day visitors, promoting wedding packages and school visits)? 4. If Rosemary goes ahead and builds a car park, how many car or bus spaces should it have?

Case analysis Treegrove Holiday Village has developed several new businesses to mostly replace what was traditional country village life, and farming activity. The first is hospitality, specifically holiday accommodation. The second is agri-tourism, opening up the farm to paying visitors who can observe farming and equestrian activities, and a rare breeds centre. The case allows students to explore capacity constraints in a service business, and to compare the capacity with demand forecasts. The tutor will be able to highlight the dangers of ignoring changes in ‘mix’ of demand, and the inappropriate use of averaged data. Students can explore options for flexing capacity, managing demand, and target marketing to achieve better balance between capacity and demand in a very seasonal business. The case should allow students to focus on trade-offs between conflicting organisational priorities, forcing them to examine compromises and make appropriate decisions that may (or may not) please differing stakeholder groups. 1. What are the main capacity constraints that Rosemary faces? Whilst question 1 asks the student to analyse various capacity constraints, these are relevant only in the context of demand. Students will be able to work out the various capacities quite easily, but then you can push back and say ‘so what’? How do we know whether capacity is sufficient. The first task is therefore to look the patterns of the demand for both categories of service. The chart below is developed from Table 13.2 and highlights the seasonality in respect of day visitors.

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There is additional seasonality to consider is that 60 per cent of weekly visitors in quiet months come on Saturday or Sunday. Finally, day visitors will not arrive at a uniform rate through the day. We have no daily arrival data, but can reasonably speculate that numbers will peak at some point in the early afternoon. The UK weather will also have an impact. These considerations should allow us to work out a ‘worst case’ or ‘stress test’ demand scenario for day visitors with which we can assess the capacity constraints at Treegrove. Note that ‘worst case’ refers to the periods when the agritourism operations will be under most pressure. Clearly, such situations have the greatest revenue potential and are not necessarily all bad, so long as operations can cope. Looking at the above figure and Table 13.2, the busiest days of the year appear to be in August. However, the case also says that in quiet months, most visitors come at weekdays. Day visitors in August = 4,300/31 = 139 It might be tempting to go for 139 visitors as our ‘stress test’ figure, but it is probably worth checking the implications of visitors’ preference for weekends at certain times of year. We don’t know exactly what Rosemary considers to be a ‘quiet month’ but if we go for September through March we can develop Table 13.3 as below (the spreadsheet version is available in the tutor support pack or via servops.net):

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Table 13.3 – extended Jan Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov Dec

Weekend days/month 8

Days/month Day Visitors/month

900 1700 2700 3400 2800 3900 4100 4300 2200 1100 600 700

Visitors per day (Apr to Aug)

113

130

132

139

Visitors per weekend day (Sep to Mar)

128

203

165

Visitors per weekday (Sep to Mar)

The balance of weekend/weekdays in each month will obviously vary from year to year, but the table nevertheless indicates an interesting weekend figure for March. We have potentially 203 day visitors on a weekend in March. We can speculate on why this might be, but a quick web search reveals (from Horse & Hound Magazine!) one reason this could be that the nearby Cheltenham Festival runs midMarch. This major equestrian event could be drawing in extra visitors. So the ‘stress test’ figure should be 203 visitors per day but remember that we are forecasting on the basis of historical data, and ought to build in an error margin. The exact percentage error margin could be obtained from looking at historical demand patterns in more detail. We will go with 10 per cent for illustrative purposes. The case does not provide us with much data on demand within a busy day, but we can make reasonable speculation about arrival patterns, and this is what is shown in the table and figure below. The table looks at the implications for a weekend day in March of a typical UK tourism arrival pattern, and assumes that day visitors stay for three hours. Arrival times

10:00 to 11:00

11:00 to 12:00

12:00 to 13:00

Numbers

110

Total on site

Total visitors

200

13:00 to 14:00

140

14:00 to 15:00

160

15:00 to 16:00

16:00 to 17:00 to 17:00 18:00

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Our stress figure is therefore 160 plus 10 per cent error margin, so 176. Let’s now go on to compare this figure with the capacity of the various agri-tourism attractions. The milking parlour

We don’t know that all visitors go to watch the milking, but we are told that the queue forms at 3:00 p.m., so the attraction is popular. With 176 people on site, assuming everyone views the milking, we have: Available productive time = 2.5 hours = 150 mins ‘Stress test’ demand = 176 Required cycle time = 150/176 = 51 sec Actual cycle time = 10 mins/12 people = 50 sec However, the case also says that up to 80 people per hour have been through the milking parlour in busy periods. This would give an actual cycle time in the ‘coping zone’ of 60 mins/80 people = 45 sec. You might want to invite students to consider how Treegrove managed to push people though so quickly in busy periods. It might be that the simple ‘pressure’ of a large queue provided an incentive for visitors to ‘dwell’ for a shorter duration. Also, it may that ‘helpers’ encouraged viewers to move on.

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The upshot is that the capacity of milking parlour is probably sufficient for now, but capacity and demand are quite closely matched, with required and actual cycle times being almost identical. This means that future expansion of Treegrove needs to account for this potential constraint. There is not much quantitative data on the remaining agri-tourism attractions, but we can make some general comment: The rare breeds area

It would seem that supervising staff are not always available for the rare breeds area in its role as a ‘petting zoo’. More to the point, the staff do not like supervising children as there is a suggestion that the animals become stressed. This stress would presumably increase at busy times. With expansion of numbers of day visitors, it may be best to have the rare breeds portion of the Treegrove as a viewing area only. The Equestrian centre

The Equestrian centre seems to also become busy with conflicting demands on this service from guests and day visitors. The farming equipment exhibition, and the local area museum

No data here, but Rosemary needs to calculate capacity ceilings at some point if her expansion plans go ahead. Hospitality

For the accommodation, we see a similar seasonality apart from a ‘spike’ in demand for village houses, and to some extent cabins at Christmas. The chart below shows demand patterns for each type of accommodation and is derived from Table 13.3:

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We have near 100 per cent occupancy in late June through August. There is no scope to increase the number of houses and Rosemary says that she is running out of space for cabins and yurts. She also thinks that any more of such would potentially destroy the atmosphere of Treegrove. So there is an absolute constraint capacity constraint in terms of hospitality resources but there is little that can be done to change the capacity ceiling. The challenge for Rosemary is to address the ‘shoulders’ of demand in the winter months as this underutilised capacity represent significant opportunity cost. We will address the ways in which Treegrove might respond to this demand pattern in the answer to question 2. The other aspect of capacity under ‘hospitality’ is the café. Again we have no quantitative data but Rosemary suggests that on occasion it becomes very busy and temporary staff have to be used. The café is popular with non-residents and a good deal of the demand for the café services comes from this group. 2. How does Treegrove currently cope with demand fluctuations, and what more could it do? General

Treegrove currently copes with demand fluctuations by pricing to some extent (for example, the double rate for large camper vans or motorhomes). And we don’t know, but it is reasonable to assume accommodation rates will be higher at peak periods. Apart from the practical reality of

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capacity constraints listed above effectively acting as a disincentive for visitors and guests, then currently Rosemary and Treegrove do very little to manage demand. On the capacity side of things, clearly Rosemary has access to temporary and part-time staff and is able to flex capacity to some extent. For example, the rushing through of people in the milking parlour, moving staff around…, etc. Accommodation

If she does not do it already, there is potential for Rosemary to manage demand somewhat by discounting accommodation for the quieter months of the year. Rosemary could promote the accommodation in several ways. Advertising in the local press obviously would be useful but also it might be profitable to connect with media relating to equestrian events. And advert in the aforementioned ‘Horse & Hound’ might prove useful in boosting demand for accommodation during quiet months of the year. It might also be worth investigating the profit per square metre from the various types of accommodation. There is little that can be done about the village houses but potentially Rosemary could adjust the relative numbers of cabins, yurts and camping spaces so as to maximise revenue. For the agri-tourism business some ideas for coping with demand fluctuations are as follows: •

booking system for day visits in summer

•

promote weekdays with discounts and special attractions

•

alternative services

•

film/video milking

•

talks on weekdays, in the evenings/off peak periods

•

general prices and discounts, for example, in the café

•

promote ‘early morning’ equestrian and rare breeds viewing

•

open up midweek for coach parties

It would also be beneficial to start recording other information that would help better manage: •

records of car demand for day visitors

•

effect of weather patterns on day visitors and sales

•

customer’s tolerance to queuing (e.g. at the milking parlour)

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•

customer survey needed – what service do day visitors want?

•

demographic data on target customers/groups

More specific fixes to the potential capacity problems in the attractions dressed above are: Milking parlour

•

having information signs on the process outside

•

having a CCTV outside to show what is going on. Visitors can make then decide whether they want to enter before joining the queue

•

in busy periods having signals to pull customers through the process on a reduced cycle time

•

reducing interaction with milking staff (and cows!),for example, through having a guide during peak demand times or a tape-recorded/video commentary with a short-cycle time

•

increasing the viewing area size

Petting Zoo

A number of ideas may improve the operational efficiency of the petting zoo, such as: •

Implementing a cycle-time by running the service for 20 minutes before letting the animals ‘rest’ for 5 minutes

•

Transitioning in lower maintenance animals (e.g. guinea pigs) to reduce staff costs

•

Looking at flow improvements around the exhibit (i.e. look for bottlenecks)

Café

Since the café is potentially a profitable area, it would seem appropriate to maximise the space allocated. The idea of managing demand by allowing customers to pre-order snacks and drinks may work, but could be problematic if, for example, they turn up late or early for their orders (particularly if it is hot food). It might be worth reducing the variety of the café’s food offering at peak times. The case study simply hints that capacity in the café is a problem, but is unspecific about where (in the kitchen, the tills, the sitting area, etc.). It would relatively easy to examine where the bottlenecks were. 3. What would be the effects on the capacity management of the business of the three proposals for the future that Rosemary mentions (expanding the number of day visitors, promoting wedding packages and school visits)?

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Expanding the number of day visitors

Enhancements to the café, and additional attractions related to farming or equestrian sports, a larger milking parlour or similar attractions might all increase the numbers of day visitors. However, we know that current capacity in the summer months it is only just able to meet demand. Increasing the number of day visitors exacerbates the situation. Moreover, there is the potential of new day visitors to annoy the guests. Increasing day visitors effectively increases the seasonality in demand for many of the tree groves resources. Perhaps the idea of expanding the number of day visitors is a distraction. What Rosemary needs is to find sources of revenue at quiet times, and expanding the café so that it is an upmarket, local produce shop might be effective in generating revenue without stressing the tourism attractions at Treegrove. Short-stay car parking would be needed for any shop. Promoting wedding packages

Many couples plan their weddings for high summer but it is not essential that weddings take place then, even with the fickle UK weather. There would seem to be considerable potential to develop the wedding packages business so as to fill up the shoulders of demand for accommodation services. Despite the earlier comment about re-balancing the different types of accommodation, it may be that having a mix of accommodation types would be beneficial for the wedding package business. One can imagine bride, groom and their immediate families being accommodated in the houses, with the younger friends of the bride and groom staying in the cabins and yurts. Whilst Rosemary was thinking of developing the village hall for the wedding ceremony and the evening events, it may be that a larger capacity space (for example, for dancing) would be necessary. School visits

While wedding packages would obviously utilise capacity at the weekends of the quieter months, the school visits would be handy to utilise weekday capacity. Weekday visitors in the winter months are extremely small in number and one has to wonder whether the village is financially viable at these times. School visits might be useful to generate additional revenue especially if the school parties can be persuaded to eat lunch at the café. School visits might be also useful as a marketing tool in that parents may visit because their child has visited and hopefully had a good experience. Some of the benefits of school visits are: •

Utilises assets when demand for Treegrove services is slack

•

Can schedule arrival time to suit Treegrove

•

Uses vacant buildings in the village

•

Membership of School Associations can provide free publicity

•

Already have several staff skilled at interacting with children

•

Demand is manageable since tours would be pre-booked

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Summary

Overall, increasing the number of day visitors would seem like a bad idea. The exception being visitors to the proposed shop only. On the other hand, a joint development of wedding packages and school visits would seem to make complete sense in terms of improving capacity utilisation. 4. If Rosemary goes ahead and builds a car park, how many car or bus spaces should it have? The decision about the size of the car park is going to be dependent on the mix of visitors. In turn this will be dependent upon the type of new business proposal that Rosemary decides to adopt. Currently, it looks as if most visitors come in their cars. So in terms of day visitors we might have the need for 176 visitors worth of capacity in any given hour. We have to make some assumptions about the occupancy of cars. If we assume four people per car (this might vary between weekday and weekend day) we need space for 176/4 = 44 cars. The space needed for guest cars is more difficult to estimate. Assuming almost full occupancy in the summer or at Christmas we have units of accommodation occupied as follows: 20 cabins, 10 yurts, and 15 houses. Let’s say we ignore the cars for people occupying the camping and caravan spaces because they would presumably need to park adjacent to their tents. With the typical occupancy figures given by Rosemary we have, at full occupancy of the cabins, yurts and houses: (20 × 3) + (10 × 3.5) + (15 × 4) = 155 people Again assuming four people per car, then we have the need for parking for 39 cars. Adding coaches into the mix helps the situation somewhat. Coaches are slightly more efficient in their use of car parking space. Coach can accommodate up to 50 passengers but a more realistic occupancy level would be 40. Even with the current setup Rosemary needs car parking for approximately 83 cars. There is probably no reason need to commit to marking out distinct coach parking areas and is probably best to leave the area to be flexible. After all the need for the two types of vehicle to be parked is different at different times of year and will change again depending on which proposal Rosemary adopts. Any discussion you have on car parking should emphasise that the question the answer to the question is very much dependent upon the mix of cars and coaches and the assumptions about occupancy levels. Another issue to factoring is the extent to which each car park space cycles throughout the day. The above calculations are not affected by cycling because they use number of people on site in any hour. Students might ask though, and you can talk about the average visit being probably three hours, so a car park slot will typically cycle 2 to 3 times per day. Given that people are parking (perhaps dangerously) in the village roads, it is clear that Rosemary needs to do something here. It may also be because some of the 80 staff arriving daily may be taking up some of the parking slots.

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Discussion on management of the car park would include ideas such as: •

Making coach drivers drop off passengers before parking elsewhere; this would free up additional parking spaces

•

Making staff park elsewhere

•

Opening up another field for overflow parking in peak season

Managing demand by: •

Charging for stays over 3 hours

•

Offering discounts to people arriving on cycles

•

Selling discounted early bird/late arrival tickets on weekends

•

Increasing weekend prices/discounting mid-week prices

The tradeoffs associated with each of these ideas should be discussed; for example, charging for parking may prove unpopular and might mean people rush their visits and hence buy less in the café and proposed new shop. Higher prices at peak times might reduce demand and hence improve visit quality; however, cheaper off peak tickets might reduce revenues overall.

PART IV

IMPROVING SERVICE OPERATIONS

CHAPTER 14

Service innovation About this chapter This chapter looks at the nature of innovation and the development of new and modified services. It includes a discussion of the importance of innovation and describes the innovation process.

Learning objectives •

To be able to explain what is meant by innovation

•

To understand the nature and importance of service innovation

•

To be able to identify the stages of the service innovation process

•

To gain an appreciation of the resources necessary for the service innovation process

Discussion questions and exercises Question 1 Re-read the case example on Singapore Zoo. The chief executive of Singapore Zoo is keen to continue developing the zoo. Try to develop a new service concept for the zoo. This question can benefit from some creativity on the part of students but that is not the main purpose of the exercise. The idea is that students apply the material from the chapter. Specifically you need to get students to work through the material on pages 483 and 484 and Figure 14.7 in particular. This figure shows how the service concept can be used to surface strategic issues relating to service innovation and to then look for operational implications. An alternative to inviting students to think up something genuinely new for Singapore Zoo, is to look at the more recent attractions developed and to consider how they fit with the overall service concept of the Zoo. So for example, students could look at the River Safari. They can work through Figure 14.7 and assess the impact of changes. The River Safari is functionally very similar to the other attractions at Singapore zoo. The River Safari merely shifts focus to the sea and rivers of the region with their associated fauna and flora. In some ways the riverboat ride is a direct equivalent of the Night Safari tours in that it exposes visitors to animals that live near or in the rivers of the region, in their natural environment. 190 © 2021 Pearson Education Limited. All Rights Reserved.

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The riverboat ride is also operationally similar to the Night Safari in that the flow of visitors is controlled completely by the operation. The service concept summary could be neatly summed up as follows: ‘The first and only river-themed wildlife park in Asia. The part is home to hundreds of plant species and many thousands of aquatic and terrestrial animals representing nearly 250 species. The River Safari inspires visitors to appreciate and care for fragile freshwater ecosystems, and provides a supportive environment for several threatened species such as the giant panda, manatee and Mekong giant catfish. These wonderful animals are housed in themed domains that mirror rivers of the world’. In terms of the service provided, again, changes are minimal. The service processes are largely the same with the only complication being the need to move visitors safely over water. This said, theme parks around the world, most notably the Disney organisation have provided exemplary solutions to this problem. The service outcomes are also similar, albeit relating to different kinds of fauna and flora to that covered in other aspects of the Zoo. The key input resources are largely the tropical rainforest of the region to which Wildlife Reserves Singapore has easy access and in fact owns (owns in that the city-state is a major shareholder in the zoo). The customer is exactly the same as it is for the existing parts of the park. It is a cliché, but the development of River Safari can be seen as a ‘no-brainer’ for Wildlife Reserves Singapore. In fact, it is surprising that this part of the park did not was not developed earlier.

Question 2 In the case example of the Icehotel, where did the inspiration for the service come from? What lessons does this example have for the service innovation processes of other service organisations? The inspiration for the Icehotel was commercial necessity. Jukkasjårvi made very little, and often no money during the long winter months in Swedish Lapland. Arguably, some of the inspiration also came from ice sculptures that appeared every year around the world. Yngve Bergqvist, made the connection and built the first rudimentary Icehotel. Applying some of the chapter content, in particular the material on page 479 we can say that the vison and ideation stages of the innovation process for IceHotel began with the desire to even out revenues over the year for a region of Swedish Lapland, and the potential inherent in their almost unique location. The Icehotel is an example of modular innovation (see page 467). Fundamentally all we have is a hotel, but it is built using techniques imported from other domains, in this case the artistic domain. In some ways, the ice hotel is a rather cheap and cheerful hotel. Don’t get me wrong, is anything but cheap in terms of the price the visitor pays for a room-night, but rather the quality of fixtures and fittings are rudimentary. Lift up the reindeer-skin bed cover, and you will see a rudimentary bed of wooden slats with a simple memory-foam mattress to sleep upon. Visitors tolerate the simple fixtures and fittings because of the novelty of the experience. The romance and charm of a room made from ice distracts visitors from facilities that would only command €30 a night were they in a mainstream metropolitan area. The lesson is therefore that attractive innovation need not be particularly expensive. The most mundane of services can be revolutionised and turned into

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potentially blockbuster attractions by relatively minor additions deriving from component knowledge.

Question 3 Using the diagram shown in Figure 14.4, how would you characterise the development of retail banking services from conventional branch banking, through the use of call centres, to internet banking and mobile banking apps? Please refer to the Monzo bank example for background (page 473).

‘Pioneer’ Process Characteristics

g Increasin difficulty

E. Internet banking

D. Full centralisation and branch culling

Extension to Processes Characteristics

C. Partial centralisation and phone banking

Inc re diff asin i cu g l ty

Degree of Process Innovation

F. Mobile banking

Developments to Process Characteristics

B. Credit scoring and new channels

Modifications to Process Characteristics

Modification to Service Characteristics

Extension to Service Characteristics

Development of Service Characteristics

‘Pioneer’ Service Characteristics

Degree of Product/Service Innovation The relationship between ‘product’ and ‘process’ in retail banking

A. The branch system In the mid 1970s, UK retail banking was such that thousands of branches served personal and small business accounts. In the late 70s however, the banks’ business was under attack. American financial institutions, credit card firms and point of sale finance companies attacked specific lending markets. They enjoyed some success; their relative focus allowed reduced costs and greater efficiency, while the banks struggled trying to be ‘all things to all people’.

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Because branch managers made lending decisions the traditional branch system was also plagued by relative slowness and inconsistency. B. Credit scoring and new channels The industry responded with systemisation via credit scoring. High street banks therefore created an advantage – over newer lenders – in that they were able to supplement credit-scoring information with an account history. The new competition also offered multiple channels into banking services. Customers could buy credit at the point of sale, could establish a line of credit in advance (the credit card) or could make a phone call. The traditional retail banks would therefore need to support such multiple entry routes to their own lending services. C. Partial centralisation and telephone banking In the early 1990s, most UK banks responded to the environmental changes by embarking on a partial centralisation of decision making. The first phase of centralisation and resulted in several hundred functional centres (mainly lending centres) of various sizes. Some of the banks allowed the structure and design of these centres to be determined locally. The result was many process centres doing the same job but in different ways. Alongside these developments the UK saw the emergence of telephone-only banking, for example, with First Direct in 1989. The ‘branchless’ bank First Direct had proved to be a great success, both with customers and operationally. Its service concept was not dependent on an expensive branch network at all. Its emphasis was on high levels of 24/7 customer service, accessed via telephone, and later via internet. D. Full centralisation and culling of the branch network By the mid-1990s, the limited centralisation had delivered cost benefits, but had compromised consistency and quality. The banks then went for further standardisation and centralisation of functions such as lending, cards, cash etc. Alongside the centralisation most banks decided to reduce the number of branches. Anything that didn’t have to be done at the branches would be centralised. The other major change at this time was to automate as many decisions as possible, with only exceptions remaining for human intervention. E. Internet banking In the early 1980s, the industry had also began to experiment with internet banking, and by the mid80s clunky, but workable internet banking systems were a reality. The big change occurred with the rise in accessibility and popularity of the internet in the mid-1990s. Banks began to use the web to advertise services, and soon began to add account services. By 1999, a respectable percentage of households were using online banking. In the UK by around 2011 some 60 per cent of internet users took advantage of online banking services

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F. Mobile banking Around the mid 2010s a group of small ‘challenger’ retail banks in the UK aimed to compete directly with the longer-established banks in the country, often by specialising in areas underserved by larger established banks. For example, Monzo’s aim was to offer a new kind of bank, built for its clients’ smartphones and designed for the way younger clients preferred to do business. Originally, the Monzo service was limited to a mobile app and a prepay debit card. However, within two years its UK banking licence restrictions were removed and Monzo was able to offer a ‘conventional’ current (cheque) account. Monzo also offered many features not provided by traditional banks, such as free card payments overseas, app-based budgeting and saving tools and, critically, the communication method of choice for its young target market – a 24/7 chat facility.

Question 4 A conventional method of judging the effectiveness of any process is to assess the quality of its output, the speed with which it responds, the dependability of its response, its flexibility and its cost/efficiency. How could these aspects of performance be used to judge the effectiveness of a new service innovation process? An important driver of service innovation is to satisfy market needs. It follows; then, that an important way of judging the effectiveness of the service innovation process is to judge how it performs in terms of quality, speed, dependability, flexibility and cost. These performance objectives have just as much relevance for the production of new service ideas as they do for their ongoing creation once they are introduced to the market. There is, however, a difference in judging how innovation processes satisfy market needs. When customers are both familiar and relatively satisfied with existing services they find it difficult to articulate their needs for novel service. Customers often develop an enhanced understanding of their own needs only when they are offered the service and start to use it. Many software companies talk about the ‘I don’t know what I want but I’ll know when I see it’ syndrome, meaning that only when customers use the software are they in a position to articulate what they do or don’t require. Quality of service innovation Service quality, as a general performance attribute is not always easy to define precisely. It is no easier when we are looking at the quality of service innovation. However, it is possible to distinguish high-quality service innovation from low-quality service innovation (although this is easier to do in hindsight). A useful approach if we wish to judge on-going service innovation is to use the distinction between market requirements quality and operations resource quality. By market requirements quality we mean the ability of the output from the service innovation process to meet the requirements of the service organisation’s intended market position. Operations resource quality indicates the extent to which the final design of the service allows the exploitation of the capabilities of the company’s processes.

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Speed of service innovation Fast service innovation has become the norm in many industries. Sometimes this is because the pressures of market competition have forced companies to capture the markets’ imagination with the frequent introduction of new offerings. Sometimes it is the result of fast-changing consumer fashion. Getting to market quickly in order to capture a trend is important in many sectors. Sometimes, fast innovation and development is the result of a rapidly changing technology base. Some software services need to be updated frequently because their underlying technology is constantly improving. Sometimes all of these pressures are evident, as in many internet-based services, for example. But no matter what pressures have motivated organisations to speed up their innovation processes, many have discovered that fast innovation brings a number of specific advantages: •

Early market launch – The most obvious advantage of an ability to develop services speedily is that they can be introduced to the market earlier and thus earn revenue for longer. Not only that, but if the service is the first of its type into the market, initially it has a 100 per cent of the market share, and customers may subsequently be reluctant to move to a competitor. Moreover, new offerings often can command price premiums.

•

Frequent market stimulation – Short development times allow the introduction of new or updated services more frequently. With a given set of development resourcing, if it takes 12 months to develop a new service, a company can only introduce a new or updated offering every 12 months. A six-month development process doubles their potential for making an impact in the market.

•

More opportunities for innovation – In markets where the underlying ‘technology’ base is moving fast, it may be important to have frequent opportunities to introduce these new technologies as often as possible. Short development time with frequent updates produces more windows of opportunity for this type of innovation.

Dependable service innovation A fast service innovation process that cannot be relied on to deliver innovations dependably is, in reality, not fast at all. Schedule slippage can extend the development times of innovations, but worse, a lack of dependability adds to the uncertainty surrounding the innovation process. Conversely, innovation processes that are dependable give stability and minimise uncertainty. Yet this poses a problem. Unexpected technical difficulties, innovations that do not work or have to be modified, suppliers who themselves do not deliver solutions on time, customers or markets that change during the innovation process itself, and so on, all contribute to an uncertain and sometimes ambiguous environment. Certainly professional project management of the development process can help to reduce uncertainty. At least, it should minimise the risk of internal disturbance to the process if effective project management can prevent (or give early warning of) missed deadlines, detect bottlenecks and spot resource shortages. External disturbances to the process, however, will remain. Again, these may be minimised through close liaison with suppliers and effective market or environmental monitoring. Nevertheless, unexpected disruptions will always occur. This is why flexibility within the innovation process is one of the most important ways in which dependable delivery of innovative services can be ensured. 195 © 2021 Pearson Education Limited. All Rights Reserved.

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Flexibility of product and service development Flexibility in new service innovation is usually taken to mean the ability of the innovation process to cope with external or internal change. The most common reason for external change is because the market in general, or specific customers, change their requirements. This may be prompted by their own customers and markets changing, or because developments in competitors’ services dictate a matching or leapfrogging move. Internal changes could include the emergence of superior materials or technical solutions. Two trends in many markets make innovation flexibility particularly important. The first is the pace and magnitude of environmental change. Although flexibility may not be needed in relatively predictable environments, it is clearly valuable in more fast-moving and volatile environments. The second factor, however, which amplifies environmental volatility, is increasing complexity and interconnectedness of services. A bank, for example, may bundle together a number of separate services for one particular segment of its market. Privileged account holders may obtain special deposit rates, premium credit cards, insurance offers, travel facilities and so on together in the same ‘product’. Changing one aspect of this bundle may require changes to be made in other elements. So, extending the credit card benefits to include extra travel insurance may also mean the redesign of the separate insurance element of the package. Cost of service innovation The cost of developing services is conventionally analysed in a similar way to the on-going cost of producing the services. In other words, cost factors are split up into three categories: the cost of buying the inputs to the process, the cost of providing the labour in the process and the other general overhead costs of running the process. In most in-house development processes, the latter two costs outweigh the former. As with day-to-day production of services, however, it is perhaps more revealing to consider how the other performance objectives drive cost: •

Quality – ‘Error-free’ processes reduce reworking concepts and designs.

•

Speed – Fast development can use resources for shorter periods.

•

Dependability – On-time development provides process stability, allows efficient resource planning and prevents expensive launch date slippage.

•

Flexibility – The ability to delay design decisions can ensure the most appropriate options being chosen, preventing the costs of changing direction in the development.

One way of thinking about the effect of the other development performance objectives on cost is that the end result is inevitably that the development is late. Delayed completion of the development results in both more expenditure on the development and delayed (and probably reduced) revenue. The combination of both these effects usually means that the financial breakeven point for a new product or service is delayed far more than the original delay in the product or service launch.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Question 5 Re-read the case example ‘If one customer wants it, maybe more do?’, on the Heywood Hill bookshop and its subscription service. In what way is this service different from the algorithm-driven recommendations that are used by many online retailers, such as Amazon? The difference between Heywood Hill and Amazon recommendations is that the latter will look at all purchases made by the account holder in order to inform recommendations. This means that if a customer buys a book on unicorns for their niece, they may well end up being recommended to purchase more books on pixies, fairies, etc. By contrast, the Heywood Hill algorithm is overseen by human beings who can weed out inappropriate input data. More to the point they can intelligently query subscribers to refine the algorithm. In theory, there is nothing to prevent Amazon from similarly refining their own algorithm. The recommendations may be good, but they do come at a cost however. He would hills books are a little more expensive than Amazon’s. Other aspects of the Heywood Hill service are differentiated from Amazon. For example, people are involved and subscribers know this. They can even visit the shop, and so a more intimate connection is forged between the subscriber and the service.

Case exercise – County Workhouse Questions 1. Who are the main stakeholders in the development of this service, and what is their interest in it? 2. How would you position each stakeholder group on Dale’s power–interest grid? 3. Why is Phase 2 of the development looking more difficult? What could have been done to reduce potential problems? 4. Specifically, how would you include the local population in the development of Phase 2?

Case analysis This case focuses on a restoration and project by the British Historical Restoration Society (BHRS) to transform ‘The County Workhouse’ from a derelict site into a visitor attraction. In particular, this case focuses on the importance of stakeholder management in the context of service innovation. Most students will be able to imagine this type of project and will be able identify a range of stakeholders who may have an interest. This case allows students to develop their thoughts about how to identify and manage stakeholders. Having completed the case it is easy to widen the debate about the role of stakeholder management. As with all the cases in this textbook, it can be used as a stand-alone learning experience or students can be asked to work through the case (individually or in groups) and then debriefed in a relatively conventional manner in class. The class debrief should 197 © 2021 Pearson Education Limited. All Rights Reserved.

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focus not only the ‘content’ of decisions but also on how students went about making a particular decision. 1. Who are the main stakeholders in the development of this service, and what is their interest in it? Responses to this first question should illustrate the diversity of stakeholder groups. The list in the case is not exhaustive and students may well be able to identify other stakeholders. A good way of running this particular question is to ask the students to identify the different stakeholders and then to consider each group’s interest in the project, and their relative importance to the project success. Who are stakeholders for the County Workhouse project?

What is each stakeholder group’s interest in the new service, and what is their relative importance to the project’s success?

The local population

The local population are stakeholders in that they are likely to be affected by the County Workhouse Project. They are also important in the sense that, other things being equal, it is good to keep local people ‘on-side’. In the short term however, they may not be able to affect the project significantly if local planning authorisation has already been given.

Other heritage groups advising the project

Other heritage groups could be considered to be stakeholders, but probably not very important ones. Nevertheless, keeping other heritage groups informed could prevent duplication of effort and could lead to some useful learning for the County Workhouse team if other heritage groups have experience of similar projects.

BHRS members

BHRS Members are certainly a stakeholder group, though probably not amongst the most important. Given that it is (partly) their subscription fees that will have gone towards some of indirect funding for this project, there is arguably an ethical as well as a practical reason to include them in the stakeholder groups.

BHRS volunteers

BHRS volunteers are certainly amongst the stakeholders in the project. However, not all of them will be directly involved in the project. In fact, only a small number will be. Nevertheless, an ‘interesting’ project such as this might help to engender enthusiasm amongst BHRS volunteers throughout the country.

Local media organisations

Local media organisations are stakeholders in the sense that the way in which they ‘cover’ the project could influence more important stakeholders.

Traffic authorities and road builders

Traffic authorities and road builders are stakeholders, but only if the County Workhouse, when running, results in an increased volume of traffic in the area.

Local government

Local government is a stakeholder in so much as they will have to give permission for such things as landscaping, car parking, and so on. Also, they could be affected by secondary effects of the new service such as increased traffic.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

The individual builders

The individual builders involved in the project are a very important stakeholder group indeed. We already know that their skills and enthusiasm could have an important effect on the success of the new service.

Funding bodies

Funding bodies are important stakeholders. It is they who have been persuaded to provide the funding that makes the project possible. Even if they have already agreed to provide the funding and cannot change their mind, they are still worth managing carefully. If they regard the project as being successful, they are more likely to fund other projects in the future.

Suppliers of audio visual equipment that will be used in the attraction

Suppliers of audio visual equipment that will be used in the attraction will only be stakeholders if there is some aspect of the equipment they are supplying (or its delivery) that could have a significant impact on the project. More likely, the equipment will be relatively standard and so regarding them as stakeholders is not very useful.

2. How would you position each stakeholder group on Dale’s power–interest grid? The second question builds upon the first and introduces a way of discriminating amongst different groups of stakeholders. This part of the exercise may generate a lot of discussion and disagreement but that is the point of it. Stakeholder management can be particularly important both to avoid difficulties in service innovation projects and can help maximise the chances of success. But stakeholders are different. The first question demonstrated that almost any group could (just) be regarded as having some connection with a project. So any project team needs to discriminate between different stakeholder groups. In managing stakeholders, it can be useful to distinguish between their power to influence the project and their interest in doing so. In fact this is the method used by Dale in the case. Stakeholders who have the power to exercise a major influence over the project should not ever be ignored. At the very least, the nature of their interest, and their motivation, should be well understood. But not all stakeholders who have the power to exercise influence over a project will be interested in doing so, and not everyone who is interested in the project has the power to influence it. Dale’s power-interest grid classifies stakeholders in this way and is shown below (the diagram is in the slide deck for this chapter). Although there will be graduations between them, the two dimensions are useful in providing an indication of how stakeholders can be managed in terms of four categories.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Dale’s Power / Interest Grid for the County Workhouse The power-interest grid High

Keep satisfied

Manage closely traffic authorities and road builders local government

local media organisations

the funding bodies

Stakeholder power

BHRS volunteers

Monitor

Keep informed

BHRS members

suppliers of audio-visual and other equipment the local population the builders restoring the building and preparing the site Low Other heritage groups

Low

High Stakeholder interest

3. Why is phase 2 of the development looking more difficult? What could have been done to reduce potential problems? The last section of the case study relates several potential challenges in managing phase 2. Innocuously at the start of that section there is the mention that audio-visual equipment has been installed, but Dale has not yet commissioned the actual content. This is of concern because the nature of the equipment purchased might constrain that content. In service innovation, constraints are no bad thing and can stimulate creativity but this omission is something to note. The case acknowledges that the BHRS was on comparatively new ground, as it were, in that they mostly curated buildings… stately homes. This time a large area of natural parkland needed to be looked after, and more to the point needed to be developed in such a way that did not conflict with the service concept for the workhouse itself. Which begs the question, what is that service concept? If you look at Figure 14.7 from the chapter there is a handy framework for considering service concept changes. Starting at the top of the figure we are invited to consider ‘organisation’. If we also look back to the Dale’s power-interest grid we can see that the local government and traffic authorities need to be managed closely. In fact, local government can almost be seen as new partners in the project. In the case study the local authority representative is emphasising the need for education and that the main

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emphasis of the whole site should be on education. This is potentially in conflict with the BHRS whose officers were more keen on having a kind of living museum in the parkland surrounding the site. Conceivably the two preferences could be merged in one service concept. Figure 14.7 then asks us to look at the organising idea for the service. Here is where we have more challenges in that the case has funders wanting entertainment and revenue generating entertainment at that. Whereas the local authority and BHRS are putting more emphasis on heritage. The funders are obviously stakeholders that need to be managed closely and so any phase 2 work needs to respect their concerns. Tea shops, gift shops and plant sales are all fair game for BHRS properties, but fairground rides, unless they were occasional ‘heritage’ fairground rides (e.g. at Christmas) are probably out of the question. Dale will probably have to achieve a degree of consensus on the essence of the service concept as this will inform decisions about the service received in terms of the customer experience and service outcomes. For example, if the attraction is predominantly about an educational experience then there will need to be classrooms and accommodation for school visits. If the emphasis is on, for example, farming heritage in the parkland, then there will need to be safe ways for visitors to view and potentially interact with this activity. Fortunately, both sorts of activity had been offered by BHRS in the past and their requirements are not that difficult to reconcile. As to what could be done to resolve these challenges, the answer is that the key stakeholders (the top right of Dale’s power-interest grid) are probably best brought together to gain, if not agreement consensus on the way forward. The ideal vehicle for this would be the service concept that reconciles the differences in terms of the customer experience elements that need to be built which will in turn deliver on service outcomes. One or two workshops with local government, funding bodies and the local police might be in order. Obviously this consensus should have been reached earlier but, as the saying goes ‘we are where we are’. 4. Specifically, how would you include the local population in the development of phase 2? This final question looks at another stakeholder group, the local population, and begs the question why are they important? The reasons are: •

BHRS were aware of previous local objections to a proposed housing development on the site, and would want to avoid planning objections from local people in regard to phase 2.

•

BHRS wanted potential employees from the locality when the operation was up and running.

•

BHRS wanted help with the historical significance of the site.

The first point suggests that we should perhaps review our assessment of the local population as having low stakeholder power. The reason for the earlier categorisation’s ‘low-power’ was that ultimately the planning objections could be overridden. All they would achieve would be to delay aspects of phase 2. The way to include the local population would be via a similar process of engagement to that which took place in phase 1. Local people can for example be invited to attend meetings. Perhaps not all meetings, in particular they introduce too much complexity into the meetings relating to the service 201 © 2021 Pearson Education Limited. All Rights Reserved.

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concept suggested earlier. However, it would be really useful to talk to local people in a managed way. Such meetings could actually be briefings in practice but with opportunities for local people to contribute. Another useful approach would be to approach some of the people who have a personal connection with the county workhouse and invite them to speak and be part of any presentations. Obviously, site visits before public opening word help assure the locals that they were important to the project.

CHAPTER 15

Service improvement About this chapter This chapter is about the importance of service improvement. It starts by looking at ‘value’ as a basis for improvement, and distinguishes between organisations that want to improve to be better than others, and those that want simply to be different. The specific nature of improvement in service operations is examined, together with some of the more common approaches to improvement.

Learning objectives •

To understand how ‘value’ can be used as a basis for improvement

•

To be able to explain the difference between improvement to be ‘better’ and improvement to be ‘different’

•

To be able to explain the connection between ‘better’ and ‘different’ and continuous and radical improvement

•

To identify some of the main approaches to continuous improvement

•

To describe how improvement can be sustained

Discussion questions and exercises Question 1 Think about the last time you used a high-customer-contact service such as a clinic, a hotel, or a restaurant. Sketch the service process, and try to determine which elements were subject to high levels of control. Were there any elements of the service that were not subject to control, but should have been? Why was this so? This series of questions provide an opportunity to apply some of the ideas on pages 513 and 514 relating to variability.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Setting the context as a high contact environment means that students have to think a little more about where to apply control mechanisms. The ‘sketching’ part of the question is important because it forces students to deconstruct properly, as is the case with application of Customer Experience Analysis in Chapter 7. One of the authors asked his students to assess levels of control at their campus restaurants. The outlets threw up a few surprises: Not surprisingly the cash register was subject to several checks Portion control was exercised in that there was some monitoring of the maximum portion size by the restaurant manager, and the cashier was briefed to report large portions. This was because students were employed as servers, and they tended so serve their friends better deals. However, there were few checks by staff of minimum portion size. Male students complained that female servers would serve tiny portions… that they served the portion size they would like to eat themselves. The chiller cabinet temperature was checked regularly The surprising omissions were plate warming, the water under bain-marie, the temperature of cooked food and the length of queues for the cashier. Problems in all three areas were cumulative. Our students observed that not very warm food, served on cold plates, that would hang around in a queue for five minutes was a guarantee of a poor meal. Once a queue built up, it was really hard to reduce it without additional staff to expedite So a conclusion was there was a requirement to monitor queue lengths to stop them building up, and obviously to check food and plate temperatures. Upon digging a little deeper the students discovered that there was no checklist for setting up the serving area. The first serving staff tended to arrive about 30 minutes before the restaurant opened. This was too late to get plate warmers and bain-marie up to operating temperatures. They recommended that the cooks, who started work much earlier than the servers should take just one minute to set up the serving area when they came on shift – obviating the need for any controls.

Question 2 A transport services company provides a whole range of services to railway operators. Its reputation for quality is a valuable asset in its increasingly competitive market. We are continually looking for innovation in the way we deliver our services because the continuous improvement of our processes is the only way to make our company more efficient, said the company’s CEO.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

We use a defined set of criteria to identify critical processes, each of which is allocated a ‘process owner’ by our quality steering committee. This is helped by the company’s ‘process excellence index’ (PEI), which is an indicator of the way a process performs, particularly how it is designed, controlled and improved. The PEI score, which is expressed on a scale of 1 to 100, is calculated by the process owner and registered with the quality department. With this one figure we can measure the cost, reliability and quality of each process so that we can compare performance. If you don’t measure, you can’t improve. And if you don’t measure in the correct way, how can you know where you are? Employee recognition is also important. Our suggestion scheme is designed to encourage staff to submit ideas that are evaluated and rated. No individual suggestion is finally evaluated until it has been fully implemented. Where a team of employees puts ideas forward, the score is divided between them, either equally or according to the wishes of the team itself. These employee policies are supported by the company’s training schemes, many of which are designed to ensure all employees are customer-focused. (a) What seem to be the key elements in this company’s approach to improvement? (b) Do you think this approach is appropriate for all operations? In answering this question initially it is probably best to have students work through some of the broad approaches to improvement described on pages 515 through 520. The improvement approaches described in the question do not seem to fit perfectly within any of the approaches described in the chapter. It seems that at the highest level int he organisation, quality performance is important to the company. They also assert that they consider process innovation to be important along with process improvement. Efficiency is mentioned too. In the second quote the chief executive talks about identifying critical processes with each being allocated a process owner by, critically, a ‘quality steering committee’. Critically because this suggests that quality and quality improvement are managed centrally in a ‘traditional’ sense. The company also has a quality index which presumably is based upon some sort of formula that integrates several partial measures of performance. Again, this process excellence index implies degree of centralisation of improvement activity. This said, employees are encouraged to submit suggestions for improvement. Again though, the suggestions are highly moderated by a centralised team. So what we have would seem to be kind of hybrid of old-school traditional centralised quality and improvement management, but with some elements of business process re-engineering thrown into the mix. Would this approach be appropriate for all operations? Probably not. Thinking back to the chapter on ‘service people’ one could imagine that more adaptive organisations would struggle with such centralisation of improvement activity. Service managers and staff with high degrees of discretion and service knowledge might resent the centralised control. However, one can imagine many environments where the approach would be completely appropriate. Thinking back to Chapter 8, the more compliant organisations might be a good fit with this approach. Remember that the idea of a compliant organisation does not imply anything negative. There are many organisations services

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where one would be reassured to know that they were characterised as being compliant. For example, healthcare and aviation.

Question 3 Some organisations believe that the well-known approaches to improvement (such as TQM, etc.) are, in fact, pre-packaged ‘solutions’ made up by selecting from a set of common ingredients. So, does this mean that anyone can simply pick out whatever elements appeal to them and construct their own improvement approach? Yes, and no. In some ways this question is ‘channelling’ the counterpoint box from pages 530 and 531. Yes because any improvement activity needs to ultimately be a response to the service organisation’s overall strategic objectives. If you think back to Chapter 12 and the discussion of the Balanced Scorecard, strategic linkage models and strategy maps, one message that was clear was that there was a need to have a clear causal connection between operations activities and, via medium-term objectives, operations strategy. Anything that the organisation does in respect of improvement has to be connected to strategy. This means that adopting generic guidance is one of the more common improvement approaches or banners may result in the service organisation wasting resource on non-relevant improvement activities rather than those that specifically address its strategic goals. Such has been a frequent criticism of the quality improvement award systems such as Malcolm Baldridge in the United States and the European Foundation for Quality Management (EFQM) in Europe. The approaches require all member organisations to adopt a generic suite of improvement activities. By contrast, more enlightened approaches such as that exemplified by the Balanced Scorecard would say that the service organisation has to make choices about specific improvement activity. In other words, to pick and mix from a portfolio of tools and techniques. As long as there is organisation for improvement activity then there is no harm in cherry-picking techniques and tools appropriate to the service. This leads us to the no. No is because it is handy to have some sort of banner to rally managers and staff around improvement activity. Senior management have explained their approach and reference to an existing methodology can make the task much easier. Most organisations also recruit consultants to facilitate improvements, and consultants working in the improvement domain will have packaged solutions organised under portfolio concepts such as lean, six Sigma, BPR, etc.

Question 4 Re-read the case example on Four Seasons and Zara. In terms of being either ‘better’ or ‘different’, how would you classify IKEA, the most successful furniture retailer ever, and Amazon, with whose website (almost) everyone is familiar? Justify your judgement. IKEA did not differentiate itself on the basis of flat-pack furniture. Flatpack furniture was nothing new. However, what was new, and different was the setting up of complete environments for customers to view furniture in context. Many people will criticise the winding and inescapable path 206 © 2021 Pearson Education Limited. All Rights Reserved.

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around a typical IKEA store, but what this does is to show all the company’s wares in typical room environments. In turn this allows the customer to make informed judgements on furniture choice. IKEA is also different in that it is needed to support the target consumer for a long day out with their family. The typical IKEA customer is not an individual but a family group. They need to drive to the IKEA ‘shed’, be able to park easily and need access to restaurants, toilets, children’s play areas, etc. There are pain points in invoking the IKEA service, but these are compensated for in the measures taken by the company to support a day out for the customer. In these respects IKEA is different than previous furniture retail outlets. It is different at the level of service experience and the processes to deliver on that experience. By contrast, Amazon is better. Amazon takes online book retail and makes it bigger and more efficient. Amazon were not the first online book retailer but they very quickly became the largest. We also know the history that they expanded into pretty much every product one can imagine. They are now general-purpose universal store that supplies goods quickly, efficiently and cheaply. Amazon does the same as the earlier online retailers but much, much better.

Question 5 Lucy is the COO of an outsourcing business that provides ‘back-office’ services to a range of companies. She believes that: everything we do can be broken down into a process. It may be more straightforward in a manufacturing business, but the concept of process improvement is just as powerful in service operations. Using this approach our team of black belts has achieved 30 per cent productivity improvements in six months. I think Six Sigma is powerful because it is the process of comparing process outputs against customer requirements. To get processes operating at less than 3.4 defects per million opportunities means that you must strive to get closer to perfection and it is the customer that defines the goal. Measuring defects per opportunity means that you can actually compare the process of, say, a human resources process with a billing and collection process. (a) What are the benefits of being able to compare the amount of defects in a human resources process with those of collection or billing? (b) Why is achieving defects of less than 3.4 per million opportunities seen as important by Lucy? (c) What do you think are the benefits and problems of training black belts and taking them off their present job to run the improvement projects, rather than the project being run by a member of the team that has responsibility for actually operating the process? (a) What are the benefits of being able to compare the amount of defects in a human resources process with those of collection or billing? The main impact of comparing defect levels amongst different functional areas and process types is that it spreads the message that quality is important everywhere in the business. In other words, it helps establish a quality culture. Another important reason for comparison is that most services consist of internal networks of micro-services and each element of the network needs to function

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

effectively and support other elements of the network. This interconnectedness can be reinforced by process comparison on a commonly accepted metric. (b) Why is achieving defects of less than 3.4 per million opportunities seen as important by Lucy? The answer to part (b) is the general one that six Sigma levels of quality control underpin high levels of capability. More to the point it is impossible to enhance capability without being in control. This idea is explained on page 517 of the chapter. In more prosaic terms, the idea of improving capability without attention to control, means that for every step forward the service takes in capability, they may take several steps back because they cannot consistently guarantee this new capability. (c) What do you think are the benefits and problems of training black belts and taking them off their present job to run the improvement projects, rather than the project being run by a member of the team that has responsibility for actually operating the process? The answer to part (c) is that generally the day job fully occupies the attention of any manager. You can give managers an allocation of time to run improvement projects in theory, but practically, that time will be eroded because day-to-day operations get in the way. However, perhaps more importantly there are considerable benefits to be accrued from having a fresh pair eyes on any operations problem. Toyota is renowned for taking diagonal slices across the organisational hierarchy to make up its improvement teams. The company might have a member of the executive board, an operations manager from another department, someone from finance and possibly a member of the cleaning staff to look at an operations problem. Accor, the hospitality group has also successfully implemented this approach and runs frequent improvement workshops using such groups.

Case exercise – Fermat Numérique Questions 1. What should be Alain’s priorities for strategic improvement? 2. The acquisition of EAP and Équipe 25 was intended to provide Fermat Numérique with several advantages in terms of strategic positioning. What were the possible disadvantages to the acquisition? 3. Assess the value stream maps for the simple and complex installations. What improvements would you suggest to Alain?

Case analysis 1. What should be Alain’s priorities for strategic improvement? The chapter material that is most relevant in addressing questions 1 and 2 is on pages 511 and 512. This is the material own managing trade-offs. Alain has inherited a series of strategic operations 208 © 2021 Pearson Education Limited. All Rights Reserved.

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decisions made in the days of Philadelphia Media. These have had implications for current operations and so it is worth walking through them before getting into the detail of the case study. In the case study, the discussion of acquisition of EAP by Philadelphia media is likely to get into sensitive issues. Think carefully about how you will manage the class in looking at the implications of off shoring. The shift from call centres in the south of France to the Philippines and India seems to have resulted in cost reductions, but more customer complaints and reduced customer dissatisfaction. If we frame this idea using the value frontier conceptualisation of Figures 15.4 and 15.5 we can say that there is been potentially a large increase in value to the organisation, but actually a reduction in value for customers. The value reduction is twofold. Firstly there is the problem of calls to the support centres taking far longer than customers would normally have expected, and then, as we will develop in the answer to question 3, potentially the danger of confusion and uncertainty resulting from language misunderstandings feeding into problems in the installation processes. In the language of Figures 15.4 and 15.5, there is a need for repositioning so as to increase/redress value for customers. Fortunately, there is potential to do this as indicated in the case study. FN already has its own telephony centres and while these are not experienced in cable TV installations, channel package selections, etc., none of this is particularly complicated. Thinking about the earlier change under Philadelphia media, it is not as if there was any technical advantage to be gained by moving offshore. The new offshore call centres had no particular technical expertise and staff were largely reading from scripts. In bringing EAP into the ‘FN fold’ as it were, at least one aspect of customer value would be addressed overnight and that was the language issue. With appropriate scripting and guidance, the technical aspects of installations and package selection could be addressed retrospectively. In teaching the case is worth asking students to consider whether the changes need to be radical, or more incremental. It can be pointed out that the previous change was in essence radical in the sense that well-functioning call centres were shut down almost overnight and their work transferred overseas. The repair of the situation, in order to avoid the same kinds of risk should perhaps be more incremental. Younger students may well argue for adopting one of the branded approaches/banners explored from pages 514 through 520. Our recommendation is to push back on this. Rather, look at the detail and adopt specific approaches or even tools and techniques on the basis of need. The second two questions in the case lead the student inevitably onto this detail. 2. The acquisition of EAP and Équipe 25 was intended to provide Fermat Numérique with several advantages in terms of strategic positioning. What were the possible disadvantages to the acquisition? Question 2 can be debriefed with a review of the strategic capabilities acquired when FN bought EAP and Équipe 25. Try to avoid too much discussion of the market potential of owning the sports channels. Focus students on the operational competencies and capabilities acquired instead. The advantage of buying the new channel is that overnight FN has sports videography competencies with a very good reputation. These are probably best left alone, but if changes are to be made it is simply to exploit this expertise and deploy it more broadly within FN. The question is begged

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though, does FN want to continue with sports media production? This question is not really an operations question however. The more relevant advantages come from the acquisition of EAP’s cable network installation and maintenance competencies. This acquisition makes sense for several reasons. Firstly it might well allow FN to break free of the reliance on France Télécom. Conceivably landline phone services could be offered over cable. The other advantage accruing from the acquisition is that FN will now have network operations and installations capability which it did not have previously. Whilst there are many complaints about installations, and in particular installation teams, from customers, it may be that these are relatively easy to address. Moreover as the earlier discussion indicates, fixing the problems would – in part – come from on ensuring correct inputs to the initial stages of the installation process. As to disadvantages accruing from the acquisition these were for the most part reputational. This said the failures inherited by Alain are, for now, clearly ‘EAP-branded’ failures. Obviously customers will become aware of the acquisition in time, but by then conceivably Alain could have fixed the problems that are likely to do most damage to the FN brand. Returning to the acquisition of Équipe 25, this is probably a distraction for FN. One could imagine the idea of having connections with major national sporting events to be attractive to an executive board because of the ability to have access to tickets, hospitality boxes and so on. However, the disadvantage is that the media production is non-core and in fact completely new to the company. Funds will be needed for improvements to network operations and call centre capacity including perhaps restarting the call centres in Perpignan and Bayonne, and this money could conceivably come from the sale of Équipe 25. 3. Assess the value stream maps for the simple and complex installations. What improvements would you suggest to Alain? Students may well be intimidated by the large amount of data in the figures associated with this case study. What you can do to reassure them is to say that most of the hard work has been done already! All the students have to do is infer problems from the data and also to suggest remedial action. As you probably realise, the earlier contextual discussion is critical for understanding the two-value stream maps. For example, evaluation needs to take into account the uncertainty of input data. Looking at simple installations first of all, this map is mostly straightforward. In the second last column we have no stages where there is zero value-add. However, we have several stages where the value-add is partial. Dealing with these one by one, we have: The making up of the installation kits. This would seem to be relatively easy to fix and possibly FN could order the kids preassembled from a supplier. Similarly, the kits could be loaded into the installer’s van on the evening before installation day. In the UK, several spares support companies operate in this way. One example would be Baxi boilers who use a logistics provider to shift their plumbing spares from the central depot in the UK Midlands out to plumbers in the field. The logistics company has keys to the plumbers vans and where requested will drop-off parts directly. Lastly we have partial value-add for the Digital Video Recorder (DVR) set-up stage (OS15). Whilst there is no guarantee, possibly the duration and uncertainty of call length would be reduced with the on shoring of the telephony centres back to France. There is more analysis to be done in respect of 210 © 2021 Pearson Education Limited. All Rights Reserved.

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the simple installation process but will come back to this later after looking at value-adds for the complex installations. Complex installations

Looking down the value-add column we have two pre-installation operations (P13 and P14) that are causing some problems. Both involve the booking of heavy technical equipment for the installation. It seems odd that bookings have to go through the overseas call centres when the depots are invariably local. Onshoring of the telephony centres may alleviate the problem, but an interim solution might be to simply allow the area foreman to contact the depot directly. Stages ID3 and ID3 are identical to that for complex installations so the remedy is identical also. Stages OS4 and OS5 potentially waste a lot of driver and installation engineer time. While one is working, the other one is waiting. It may not be possible to redesign the process so that these aspects of waste are eliminated completely. However, once again decent inputs to the process in the form of full information capture in the initial setup would be helpful. The said some questions have to be asked about the site survey. (Stage P12). Possibly more time spent here carrying out an extensive survey might allow more detailed scheduling for OS 4 and OS 5 with consequent reduction in waiting times. Without more detail it is difficult to figure out how to reduce waste in stages OS6 through OS9. The waste here is primarily the time of the driver who is hanging around just in case they are needed for the final cable installation. Lastly, we have stage OS 16 which is identical to the simple installation equivalent and the fix is potentially the same also. So far in the debrief of question 3 what we have is a simple interpretation of some of the case data on waste. We can reassure students that they have done most of the work already. The examples illustrate the broad perspective on waste that is characteristic of most enlightened approaches to operations improvement. The review of different kinds of waste also begins to illustrate the importance of understanding failure demand. We have waste that is a result of uncertainty and poor information capture in the early part of the process. Moving on to look at the task duration and standard deviation columns we can develop this idea. Encourage students to scan down the standard deviation column and to pick out any process step where there is a large amount of variability in activity duration. The variability is of concern because it erodes capacity/time. However, turning this idea on its head, if you look at preinstallation step PI1, the installation survey you can see that we have an average duration of four minutes with a tiny standard deviation of just 12 seconds (.2 minutes). Invite students to speculate on why this might be. If we cast our minds back to the performance management chapter, in there, and in the questions associated with that chapter we had examples of where telephony centres had targets for the maximum duration of calls. One unintended consequence of these targets was that call handlers would cut off clients calling in, regardless of whether sufficient information was received. Additionally, there was a tendency for call handlers to actually use the time available to them regardless of need. This is possibly why we find surprising low variability in call duration. Given the later problems that we already started exploring it it may be that the call handlers need to be liberated so as to extract the maximum

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information possible. For example, if you scan forward to the step OS4 for complex installations you can see that the digger driver wastes quite a lot of time and capacity hanging around just in case. It could be that with better information extracted from the customer, and a more comprehensive survey by the area foreman then this variability could be reduced. Make the point to students that high degree of variability at the level of initial information capture (in the call centres) is relatively inexpensive as compared to high variability in the installation stage. The latter can be massively expensive when one considers the cost of the assets involved (diggers, tunnel borers) and also the staff/driver time associated with employing these assets. Therein lies the power of value stream mapping. It is not just about unearthing obvious waste, but also it reveals information about how poorly designed operation can create ‘failure demand’. Potential improvements therefore are relatively straightforward. Change the way in which the calls are handled and in part, on shoring would help with this. But also allow flexibility of installation teams to directly communicate with central installation assets. There’s no reason why these need to be managed by the telephony centre. Communication with the depot directly would make a lot more sense.

CHAPTER 16

Learning from problems About this chapter This chapter is about how services can learn from the everyday problems that all types of organisations suffer, in order to improve an operation’s performance and the way its services can be developed.

Learning objectives •

To understand the main causes of service problems

•

To be able to describe the process for handling customer complaints

•

To gain an appreciation of how problems can drive improvement

•

To be able to identify the main ways service operations managers can prevent problems occurring

Discussion questions and exercises Question 1 Banking customers often suffer digital banking failures and shutdowns, either because of security alerts or because the bank’s systems have failed. What is the damage to a bank’s reputation when such problems occur and how can the bank both learn from them and minimise them? The damage to a bank’s reputation resulting from failures and shutdowns, or security alerts is that such failures hit the bank in the area of performance that is non-negotiable. Banks need to be exemplars of integrity and accuracy. Any failures will damage customers’ confidence on these criteria and it is not as if perceptions of performance degrade gradually. Integrity and accuracy tend to be judged as attributes rather than variables. In other words, they are binary. The bank either has these qualities or does not. Incidents can make customers or potential customers mistrust a bank overnight. The bank can learn from such failures by thorough investigation. The investigation needs to find the root cause of the failure and the ways in which it propagated to impact upon customers. Then, ideally the bank could design out the propensity for such failures to occur in future and/or design mitigation routines so that the failure does not reach the end customer.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Any learning and associated process changes need to be fed back to customers so as to reassure them that the bank is aware of the consequences of failure, has listened, is apologetic and has learned how to avoid making the mistake again.

Question 2 Re-read the Counterpoint box that claims that how a business responds publicly to complaints or criticisms can easily descend into cliché. How valid are such views, and what could companies do to prevent their replies becoming meaningless? The question does raise a valid concern about stock responses. The alternative is to spend time customising each response so that it is meaningful and reflective of the customers’ feedback or complaint. In turn, this time costs money. Singapore Airlines is supposedly an exemplar of customised feedback. Legend has it that many problems are resolved not just with process change but with a follow-up letter from a middle to senior executive to explain to the customer what was done about their problem. The other problem with detailed responses to feedback and complaints is potential litigation or worries that the customer supplied service firm with an idea which they later can suggest is theirs. One really useful method of responding to feedback is simply to phone customers. If the email or letter is inevitably going to include boilerplate text than a call ensures that it is never used. A phone call allows for follow-up, questioning and discussion with the customer. Clearly, there is an overhead involved, but simply calling back would probably be a great way to head off customer dissatisfaction and also for the company to learn.

Question 3 How might public service guarantees (service guarantees issued by public, rather than private, organisations) need to differ from normal commercial ones? Many public services are offered in a monopoly situation and customers have no or limited possibility to choose other suppliers. However, customers’ experience of private-sector service, and associated service guarantees will clearly influence their expectations in respect of public sector guarantees. In addition, many services previously provided directly by public sector organisations such as local governments have now been subcontracted to commercial organisations. and so expectations are again raised. One area of caution is that there is probably no ‘standard’ set of recommendations for designing public sector service guarantees. Public sector service is fragmented into many different service types and contextual areas. Following the list of elements for the design of a service guarantee on page 564 we have five criteria that should be addressed regardless of whether the guarantee is in the public or private sector. All elements are applicable to public sector guarantees, but the emphasis will be different for elements three, four and five:

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

1. It should be meaningful – The service guarantee needs to be meaningful. In some way, invoking the guarantee needs to inflict pain on the provider organisation equal to that inflicted on the customer service provider needs to care if the guarantee is invoked. There need to be consequences of failure. 2. It should be easy to understand – The service guarantee should be easy to understand. Language needs to be unambiguous and straightforward. The service provider needs to avoid too much ‘small print’. 3. *It should be explicit – The guarantee needs to be explicit and here is one of the big differences perhaps between service guarantees in the public sector versus the commercial sector. Public sector service delivery is often multiagency and complex as a result. One of the big problems will be deciding where a failure has occurred. It might be therefore difficult to make the guarantee explicit. 4. *It should be unconditional – Following on from this it might be difficult to make public sector guarantee unconditional. The multiagency nature of service delivery in the public sector means that responsibility will be hard to determine. 5. *It should pay out – Another point to note is that ultimately it is the taxpayer who will be paying for any compensation resulting from failure to meet a public sector guarantee.

Question 4 Viz2XHealth was a business-to-business healthcare IT company based in Dubai, serving major hospitals in the Gulf States. Its system allowed health staff to access and interrogate multiple systems from one, user-friendly interface. But it had a problem. Everything we have ever done and worked for is about to go up in smoke, explained the service manager. If we are not able to quickly sort out the problems with the system at one of our main customer hospitals, we could lose a lot of future work. The problem came to a head when it emerged that one patient, who had a serious but treatable heart condition that could have been cured with simple surgery, had died because of failures in the new system. It should have generated an admissions letter, but did not because the ‘bed state’ on the computer incorrectly showed no free beds. The patient died while waiting for admission. The hospital told Viz2XHealth that the system clearly did not work, had taken two years to implement instead of the promised six months and had cost significantly more than the original tender. It wanted it fixed, very quickly, at no additional cost, and would sue the company for the payout made to the family of the dead patient. The Viz2XHealth service manager explained that they had followed all the usual protocols but had hit several problems. The steering group, which was there to oversee and specify the system, was a nightmare to run; people kept being called away and meetings cancelled. Individual members just

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

seemed interested in their own area and nothing else. User groups (whose role was to check the practicality of the proposal) also became resistant, making access to key people and processes difficult. Also, the hospital had requested a change of the system’s specification a month before it went live. Moreover, the hospital’s CEO changed half-way through the project, with the new one wanting to save money. A Viz2XHealth systems developer commented: We spent time and effort mapping out all existing processes and identifying user needs. Then, when we checked back with the staff, they knew what they wanted but couldn’t see the benefits of everything being joined up. Then, when they saw an early version of the system they started wanting lots of changes, not to the interface we were developing but to some of their existing systems. That significantly increased costs and extended the implementation. He concluded, Viz2XHealth has only been going for a few years. At the start it all seemed relatively straightforward. We would put in an interface system and people seemed to be grateful. Now we put in the system and they expect us to solve all their other problems for the same cost. We then get into a vicious spiral of increasing demands, greater complexity, escalating costs, more problems and more complaints. (a) How should Viz2XHealth respond to the problems with the hospital? (b) What should Viz2XHealth do to avoid this type of problem? (a) How should Viz2XHealth respond to the problems with the hospital? First of all it might be useful to ask why did the failure occur (i.e. why did things go wrong)? Open the question up to the class and ask students to brainstorm cause factors. These could be categorised under service technology/facility failures, service failures and customer failures (page 547): •

•

Service failures o

Implementation overran (time and cost) maybe leading to errors or over-complexity?

Staff did not do a good job getting the specification right.

Staff did not work at involving people well enough.

Multiple ‘customers’

Customer failures (in this case, remember that customers are B2B) o

Customer changed their minds.

Customers expected too much/were oversold.

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•

Customers only cared about their bit.

Customers didn’t fulfil their roles/obligations.

Service technology / facility failures o

Systems didn’t work well/correctly

Despite the best efforts of service managers… things go wrong. Healthcare operations are usually complex, human-based systems involving the provision of many services. Healthcare processes involve a wide range of inputs; staff, technology, facilities, with the additional variable, the customer, whose inputs are not always as predictable or consistent as service managers might like. Problems such as errors, mistakes and failures are simply inevitable. Each and every problem, irrespective of responsibility, provides an organisation with an opportunity to recover. Many people use the term ‘service recovery’ to mean dealing with the customer after something has gone wrong, i.e. apologising to them, fixing the problem for them and maybe providing compensation. Clearly, in this case, this apology needs to be made, and at several levels. Ask students to suggest: •

How to make things better for the customer – apologise, fix the problem, pay the money!

•

How to make things better for the staff – explain the issues, not blame the staff, get them to develop new protocols.

•

How to make things better for the organisation – identify the issues, ensure learning and changes take place.

(b) What should Viz2X-Health do to avoid this type of problem? Service recovery is the action of seeking out and dealing with problems and failures in the provision of service in order to improve the service and operational and organisational performance. Lean from the service recovery: •

Expose the root cause(s) of the problem(s)

•

Drive improvements

•

To ensure no repetition

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Minimise/reduce reputational risk

•

Minimise financial risk

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Question 5 Froden is a leading international retailer selling clothing and accessories, with stores around the world. The countries from which it sources its products include Sri Lanka, Bangladesh, India and Vietnam. It was shocked when a British newspaper reported that an unauthorised subcontractor had used child workers to make some of its products at a factory in Delhi. In response, Froden immediately issued a statement: Earlier this week, the company was informed about an allegation of child labour at a facility in India that was working on one product for Froden. An investigation was immediately launched. The company noted that a very small portion of a particular order placed with one of its vendors was apparently subcontracted to an unauthorised subcontractor without the company’s knowledge or approval. This is in direct violation of the company’s agreement with the vendor under its Code of Vendor Conduct. Froden’s CEO said, We strictly prohibit the use of child labour. This is a non-negotiable for us. Froden has a history of addressing challenges like this head-on. Froden ceased business with 20 factories due to code violations. We have 90 people located around the world whose job is to ensure compliance with our Code of Vendor Conduct. As soon as we were alerted, we stopped the work order and prevented the product from being sold in stores. While such violations are extremely rare, we have called an urgent meeting with our suppliers to reinforce our policies. Froden has one of the industry’s most comprehensive programmes in place to fight for workers’ rights. We will continue to work with stakeholder organisations in an effort to end the use of child labour. (a) ‘Being an ethical company isn’t enough anymore. These days, leading brands are judged by the company they keep.’ What does this mean for Froden? (b) When Froden found itself with this problem, was its recovery appropriate? It is expensive to manufacture garments in developed countries where wages, transport and infrastructure costs are high. Fashion is also a competitive market. As customers, most of us look to secure a good deal when we shop. This is why most garments sold in developed countries are actually made in less developed countries. Large retail chains such as Froden select suppliers who can deliver acceptable quality at a cost that allows both them and the chain to make a profit. But what if the supplier achieves this by adopting practices that, while not unusual in the supplier’s country, are unacceptable to consumers? Then, in addition to any harm to the victims of the practice, the danger to the retail chain is one of ‘reputational risk’. (a) ‘Being an ethical company isn’t enough anymore. These days, leading brands are judged by the company they keep.’ What does this mean for Froden? It takes a long time to develop a good corporate reputation, but it can be demolished in a day or even an hour. The implications for Froden are that they need to be active in managing conduct in all aspects of the supply chain. They cannot trust suppliers to actively manage compliance with policy, but will have to do these themselves. Some aspects of supplier compliance can be subcontracted but there is nothing like active checking.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

(b) When Froden found itself with this problem, was its recovery appropriate? As to whether Froden’s actions were appropriate, probably not. Any incident such as this needs more than withdrawing a product from sale. There has to be penance and customers will expect real changes and evidence of such.

Question 6 What would be the impact of offering a guarantee on the service that you personally provide? Be guided by the six ‘acid tests’ of service guarantees (page 562): •

To what extent will the guarantee drive personal learning and improvement?

•

Will the guarantee lead to an increase in customer satisfaction?

•

Will it improve customer retention rates?

•

Will the guarantee drive process improvements?

•

Will the guarantee lead to a better job for you?

•

And, as a result of the above, will the guarantee improve your financial performance?

Case exercise – ‘One-Stop’ Protection Service Questions How would you respond to this letter?

Case analysis Introduction This case provides an opportunity to discuss a service failure and discuss ways in which the organisation might deal with it. Whilst the focus of the discussion is likely to be about satisfying the customer, an important question for the operations managers is will this complaint lead to improvements, i.e. the identification and rectification of the root causes?

Teaching approach We use this case to teach service recovery and intersperse the questions with chapter material on recovery. After supplementary question 2 (below) one can introduce the ‘acid tests’ of recovery.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

After question 3, discuss consumer behaviour and best practice for complaint handling. After question 4 discuss proactive service recovery. And, after questions 5 and 6 (see later) revisit the acid tests. The case could be further extended by asking students to devise a suitable service guarantee and debate the impact that it might have.

Supplementary questions: 1. How would you respond to this letter? 2. What went wrong? (i.e. what were the root causes of the failure?) 3. Whose fault was it? 4. Evaluate James Creek’s intervention. 5. How should the organisation respond to this letter?

The root causes ‘One Stop’ failed to deliver its promises, i.e. provide a “friendly, efficient and thorough service to all its customers” and that it will answer calls, texts or mail triggers within an average of ten seconds, generate loss reports to the card issuers within 20 seconds after the initial trigger and always send prompt confirmation of action taken with an email and text message to the customer. There seem to be several root causes of the problem: •

A flawed procedure used by operators, i.e. Omnium not recognising the Executive Bank Cashline card issue issue, and not offering a claims form for lost cash.

•

And, as we shall see, a defective recovery process.

•

Whose fault was it?

Blame can be spread far and wide: •

The operator – either did not follow the procedure or followed a flawed procedure without thought for the customer.

•

Management – for the design of poor procedures.

•

Executive Bank – for having different procedures than its former subsidiary!

•

James Creek – who passed on the blame to the operator rather than taking responsibility himself.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

•

The thieves – for undertaking the robbery in the first place.

•

The customer – for having his wallet in his back pocket in Warsaw (even though he was warned about this by his Polish hosts) and so ‘encouraging’ the theft of his wallet.

The crucial question is does it help to blame someone? Clearly as we have seen, everyone shares some responsibility for the incident, so finger pointing makes everyone feel bad and does not deal with the problem. Blame is a way of allocating responsibility to anyone else.

James Creek’s intervention Up to the time David Smith rang to check why his Cashline card had not arrived, he was quite satisfied with the service. The non-arrival of the card and subsequent explanation was a nuisance and somewhat dissatisfying. The way James Creek dealt with the situation clearly escalated the problem and deepened the customers feeling of dissatisfaction. Although he effected an adequate, though not ideal recovery, it was not followed through. This has been referred to as ‘double deviation’ or double jeopardy. You may like to create a ‘control chart’ on the whiteboard and plot the customer’s level of dissatisfaction as events unfold. The ‘Zone of Tolerance’ material can be useful here too. What did Creek do and what was its effect on the customer’s level of dis/satisfaction: •

Apologise (+)

•

Blame the operator (−)

•

Said the operator should have sent the claim forms (0)

•

Put material in the post (+)

•

Sorted out a replacement card (+)

•

Offered free spouse membership (+)

However, what still rankles the customer is that he feels that nothing will be done to prevent this situation happening again. The organisation is not taking the issue seriously. Recovery is viewed ‘simply as a means of trying to pacify and mollify a dissatisfied customer’. The customer becomes angrier at the delays in getting the card and incensed that the promised material does not appear. He then writes the letter.

Responding to this letter Students will make many suggestions which can be collected in two columns of a table as below (also in the slide pack for this chapter).

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Responding to the letter Dealing with the customer

Dealing with the problem

Compensation

change procedures

free gift

deal with the Standard Bank

Apology

improve recovery procedures

Explanation admit error personal letter or visit from a senior manager

The first column tends to fill first and the second after some prompting (leave off the headings until later). This allows one to make the point that it is too easy to focus on pacifying the customer and ignoring the real benefit of complaints, i.e. driving improvements through the organisation. Many organisations have systems to mollify; few have systems to drive improvements. This organisation claimed to be a world class company. Can this be true? The students’ suggestions can be then compared to the theory, firstly how do the suggestions stack up against the principles of excellent complaint handling and secondly did they pass the four ‘acid tests’.

What happened next? The company responded to David Smith by email. (You may wish to look at the advantages and disadvantages of using email or letter versus telephone.) A copy of this email (One-Stop B) can be found in the resource pack and at http://www.servops.net You may care to add the question: 5. Evaluate Daniel Payne’s response. It is interesting to go through the email section by section to see the inept way in which this socalled world class organisation dealt with the customer. It will be significantly different to anything proposed in the previous section! David Smith might now just cancel his subscription and walk away feeling thoroughly dissatisfied and defeated by the system. If he did this the organisation might feel that it did all it could and its procedures were fine. David instead wrote another email suggesting the response had been ‘less than helpful’. You may care to ask the question: 6. How should the organisation respond to this (unseen) email? This begs the question can you ‘recover’ the customer from a deeply dissatisfied state. Few really new suggestions that did not appear on the table earlier are possible. The ingredients are essentially 222 © 2021 Pearson Education Limited. All Rights Reserved.

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the same. The issue is that the organisation has just got to get it right, as soon as possible, since dissatisfaction appears to deepen with time. What is worthy of analysis is the letter that was received by David Smith in response to his unseen reply. A copy of this email (One-Stop C) can be found in the resource pack and at http://www.servops.net. Although this letter is humble and helpful, it still fails on the key acid test, one has little faith that the organisation will actually do anything to improve its processes to ensure the problem does not reoccur. David Smith is no longer a member of One Stop.

CHAPTER 17

Learning from other operations About this chapter This chapter is about how service operations can learn from other operations to improve performance. We will start by defining benchmarking, explain why it is important and identify the various types of benchmarking that can be undertaken. We will then focus on the important part – how to do benchmarking. We will also spend a little time explaining the useful role of quality awards in benchmarking.

Learning objectives •

To be able to explain what is benchmarking

•

To be able to identify some ways in which benchmarking can help organisations improve their performance

•

To be able to list the different types of benchmarking

•

To be able to identify the key steps organisations can take to implement benchmarking

•

To be able to discuss how quality awards and academic studies help with benchmarking

Discussion questions and exercises Question 1 Select a process you are involved in, such as ‘being taught’, ‘cooking a meal’, ‘cleaning’, etc. What might be the benefits of benchmarking this process and with whom could you compare your performance? How would this lead to the benefits identified? It may help you realise that some tasks can be done better than you are currently achieving. Benchmarking may identify better ways of doing things. The difficulty may be in the selection of the partner. Students should be encouraged not to look at the detail of the activity but at the nature of the process (or each process), such as low volume, well defined steps, frequent changes, high customer mix, etc., and then look for (very different) processes with similar characteristics.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Question 2 Haven is a charity providing refuge and safe houses for parents and children who have been subject to domestic abuse. The charity is based in the south-west of England. Most of the revenue funding for the charity comes from Haven’s 14 charity shops. One of the problems encountered in the shops is that charitable gifts end up clogging the precious floor space. Donations can be dropped at the shops at any time. Typically, a donator will pull up their car outside the shop and bring in several bags of clothing, bric-a-brac, books, digital media, etc. Haven’s shops do not process the donations directly. Rather, they are consolidated at Haven’s central warehouse just outside Bristol, and then redistributed to Haven’s shops according to intelligence on where best to sell certain items. For example, if a shop is adjacent to a bus stop, then it can easily sell small and lightweight paperback books. Accordingly, the warehouse would put extra books in deliveries to that particular shop. Even though there is some thought going into the stock that gets distributed to the shops, the individual shops rarely have any say in what arrives on their doorstep. As a result, there is considerable clutter. The clutter is problematic because purchasers cannot see all the goods and the shop environment becomes unattractive and unfriendly. Where could Haven look to get ideas on how to organise both the consolidation and distribution process, and also the organisation of stock within its shops? On page 579 we have some ideas on choosing benchmarking targets: •

Be compared against other internal processes within the same organisation (known as internal benchmarking).

•

Be compared against competitors – external organisations in the same or similar markets, or providing similar services (known as competitor benchmarking)

•

Be compared against non-competitors – external organisations that don’t compete in the same market, but have some kind of commonality, so that a comparison reveals something (known as non-competitor benchmarking)

Looking through these in turn: Internal benchmarking – Haven has 14 shops. It is a fair bet that some will be better than others in terms of managing space, stock and general organisation. Each shop will have a slightly different context but structurally they are going to be more or less the same. So Haven the charity, can point Haven shops who need help to the best performers. The downside to this approach is that it occupies quite a lot of time for the benchmarking target. The charity needs to be aware of this and ensure that allowances are made for the disruption caused by having visits, giving advice and so on. Competitor benchmarking – Similarly in the charity shop business overall, organisation and stock management ranges from abysmal to pretty impressive. Nearly, all charity shops manage similar kinds of inputs (donations) and have broadly similar policies for organisation of same. Some shops have a degree of control over stock that they retain in-store but generally there are policies on centralising many items. For example, Oxfam has dedicated media shops that only sell CDs and vinyl. Other Oxfam shops focus on books and so on. These other charity organisations are competitors obviously but often these competitors will be willing to collaborate and share. The 225 © 2021 Pearson Education Limited. All Rights Reserved.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

other way to practice benchmark competitors is to do a little espionage. One could pretend to be a customer and have a look around competitors’ shops, and one could even make a donation and see what happens to it. Non-competitor benchmarking – The interesting area for comparison is non-competing organisations. One possible benchmarking target that springs to mind is waste disposal companies. Increasingly these organisations are under pressure from local authorities to sort, reuse and recycle waste. We have a structurally similar operation from which Haven could potentially learn quite a lot. Another benchmarking target might be the returns desk of a large clothing retailer such as Marks & Spencer. They take in items and have to do press, sometimes clean and then return these to stock or move on to disposal in some other way.

Question 3 Viola Media, run by Violet Lesseps, had developed a specialisation in videography for festivals, arts and outdoor events when it won a contract to provide videography support for the production of online Masters degrees at a UK university. Violet knew that the work would be interesting but potentially challenging. The university had already subcontracted project management of the online programmes to a large US-based publishing house, which had experience in short commercial video production. One surprise was the high degree of hand-holding and support required by professional lecturers. Violet had assumed that lecturers who could talk for several hours in traditional face-toface lecturing would easily warm to the video medium. This was not the case. Delivering short introductory videos for an online course was not the same as delivering a full-blown two-hour lecture to a class of students. To shoot the videos, the production crew would generally come to the lecturer’s institution for a day, with possibly one additional day for location shoots. This time had to be exploited fully. Pre-production was extensive. Nearly a year into the five-year project, Violet’s processes were extremely efficient and Viola Media succeeded in winning more work from other publishers and universities directly, and the US publisher decided to bring Viola in-house. The problem arose when the US publisher decided to conduct an internal benchmarking study. It found that Viola’s costs were far higher than its other divisions. The adherence to time budgets for videography and editing were broadly comparable with the teams in the USA, but Viola Media generally spent far more money and time on pre- production. Moreover, the US parent was frustrated because a good deal of the pre-production time was unquantified. How should the publisher respond to these findings? The problem we have in the example is that the publisher is carrying out performance benchmarking between entities that work in very different contexts. The publisher is not comparing ‘apples and apples’. In terms of practice benchmarking there might be a great deal to learn from the comparisons but the performance comparison is meaningless. Videography for short commercials is going to be in a context where a professional crew is filming professional actors who have a script and a tightly defined brief. Actors can pick up a script ‘blind’ and read through perfectly the first time. At most they will need one or two readthroughs to correct difficult phrases, for example. By contrast the academic videography is with non-experts who need to come across as unscripted, but actually need scripts. Lecturers are used to using the scripts that are their slide decks, and even if they don’t read from slides (as they shouldn’t) they will use slides to provide an overarching narrative and sequence for delivery of teaching. The sequence and the mnemonic cues need to be

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

present for videography in such a way that they do not lead to the academic ‘just reading stuff ’. Clearly, this preparation will require a lot more work than is the case in making short commercial videos.

Question 4 Re-read the ‘Acuity and HouseMark’ case example earlier in the chapter. The example refers to ‘benchmarking clubs’. The benefits of these clubs are mostly obvious, but what might be the ‘disbenefits’? How would you counter these disbenefits? Other ‘clubs’ that could be the subject of student research for answering this question are: The home of the European Foundation for Quality Management – https://www.efqm.org The National Institute of Standards and Technology – http://www.nist.gov (search for ‘baldrige’) Section 17.4 and the counterpoint box on page 593 hint at problems with such schemes… that they provide generic advice. In fact, organisations are pretty much compelled to adopt generic practices if they are to participate in the award schemes. This is not always a good thing: •

Organisations can become overly concerned with, and then bogged down with, metrics. The counter is to mix metric benchmarking with a healthy dose of practice benchmarking as the latter will help pace the scores in context.

•

Naive benchmarking can result in organisations trying import solutions rather than principles. It is hard to isolate an example of good practice from the multiplicity of factors that affect it within and external to the firm (think back to the last question on Viola Media). Good practice is not always transferable. The counter is to think about and if possible control for the contextual factors that result in performance differences. In other words, impose experimental discipline.

•

Practice benchmarking can easily fall into the trap of ‘industrial tourism’. Industrial tourism occurs when managers enjoy the activity of finding, going to and looking at other processes and operations but those experiences do not lead to improvements. The counter is to asses – benchmark – the benchmarking. Build-in review process that formally assess benefits derived from practice benchmarking.

•

Becoming an exemplar can be a problem. High-performance units become practice leaders for given areas of activity and this generates a considerable administrative burden associated with visits from other parts of the service who want to learn from you. The additional scrutiny can be stressful for service staff too. Give benchmarking targets time and other resource ‘allowances’. If the opportunity to learn from high performers is valuable, then be willing to pay for it!

•

Benchmarking can drive inappropriate behaviour – see the case example on page 591 about school performance league tables. One way around this problem is to change the detail of benchmarking measures, which in turn makes the measures more difficult to game.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Question 5 A problem in large service organisations is that knowledge is often ‘siloed’ in regions, or functional departments. Internal practice benchmarking can be difficult because experience is inaccessible to many employees. This situation can be a real headache for managers who need to ‘onboard’ new employees. New employees who want to meet people and acquire information may not know where to go. A company that runs facilities management services has been offered an artificialintelligence-driven ‘Cognitive Assistant’ app that its developers claim can be used to bridge the gap among pools of knowledge and experience. It is claimed that it would provide readily accessible advice on who to approach in a variety of scenarios, such as onboarding new hires and for supporting outsourced employees. The app would provide employees with a ‘one-stop shop’ knowledge base for assignment support, process guidelines, HR policy advice, etc. The app would also allow new employees to readily identify recent assignments similar to their own, and therefore provide an opportunity to tap valuable practice experience. (a) How is this app related to the practice of ‘benchmarking’? (b) How could it aid improvement in the company? Such applications are now relatively commonplace and while not originally designed for benchmarking purposes, they effectively become platforms for performance and to some extent metric benchmarking. The apps are idea for supplying new hires with advice on who to talk to about a particular assignment type. Previously such advice would come from word-of-mouth and possibly the new hire’s line manager. However in large organisations, and especially those that are organised on a project structure there is the problem that teams disperse after project is completed. The knowledge associated with the last project of interest is dissipated. Apps such as the one described in the question help forge connections between those who need the information and those who might have it. Such applications are nothing new in business but previously would have been expensive and complex. Now they tend to reside on standard server-side platforms with smart phone interfaces. The question is begged however, how does one ensure that information is inserted onto the apps? One way of doing this is to require that projects are not complete and ‘signed off ’ until knowledge database entries are completed, and reviewed by someone with a bit of seniority. The apps can help improve operations by sharing good practice, and by avoiding waste. In theory, if the database is kept up-to-date then there will be less propensity for new hires to ‘reinvent the wheel’… as it were.

Case exercise – Mumbai Private Bank Questions 1. What is the purpose of benchmarking? 2. What advice would you give to Arnab Mondal?

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Case analysis This short and simple case requires students to evaluate the meaning, purpose and benefits of benchmarking. It is best used at the start of a discussion on benchmarking (or at the end as a test of what they have learnt – will they fall into the trap?) Key issues: •

Purpose of benchmarking

•

Performance criteria

•

Order winners versus qualifiers

•

Step change improvement

Indicative questions: 1. What is the purpose of benchmarking? 2. What advice would you give to Khalid Ahmed?

Discussion I would allow students to dive into question 2 and even provide suggestions as to which organisations MPB should benchmark itself against. This will provide the ideal backdrop against which to discuss the nature and purpose of benchmarking. 1. Choice of organisations This is a question that will evoke a great deal of discussion as students (undergraduates, postgraduates and executives!) start to tie themselves in knots. You might like to aid the discussion with the following table (ADDING THE LAST COLUMN ONLY WHEN YOU WISH TO DRAW THE DISCUSSION TO A CLOSE). It is not necessary for students to know anything about alternative organisations; they can use any banks known to them or indeed any other organisations they wish.

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

Organisation

Strengths/Reasons

Bombay Mercantile Co-operative Bank

Local bank Focused on personal service

State Bank of India

Large, prestigious, wide reaching

Coutts bank

Focused on high wealth individuals, UK based

HSBC

Global bank

Oberoi Hotels

High quality hotel chain Indian owned

Singapore Airlines

Global brand Renowned for excellent service

After looking at any possible organisations against which MPB could benchmark itself, the question to be written in the final column is ‘Is this an area where MPB would like to improve’? As the debate ranges from yes to no, eventually the students may start to realise that they have no idea if these criteria are appropriate. Indeed, MPB’s reason for benchmarking is ‘help us improve and know how far in front or behind we are’. without any real understanding of which area of performance is critical for their business. (Should it be global networks or nationwide coverage or service or product range?) Until an organisation can define its (future) order winning and qualifying criteria it cannot realistically make a decision about the most appropriate organisation(s) to benchmark itself against. You may like to ask what MPB should do next. The next appropriate steps for MPB might be to: •

identify competitive criteria;

•

undertake an importance/performance analysis (see Slack et al. Chapter 18);

•

identify areas where change is needed (either performance criteria in the urgent action zone or a factor which the organisation would like to make its order winner); and

•

identify an organisation which is particularly strong in this area,

2. Benchmarking The previous discussion should start to demonstrate some of the key purposes of (external) benchmarking (and also what it is not). Although, strictly speaking, benchmarking is simply a process of comparing measures, this activity in itself is futile. The purpose of benchmarking is to learn from others and to improve what you do and how you do it, the goal is improved performance. In particular, benchmarking:

Johnston et al, Service Operations Management, 5th Edition, Instructor’s Manual

•

encourages organisations to look outside their own organisation and ways of doing things

•

forces organisations to look for practice outside their own industry (otherwise performance can only become as good as the competition)

•

identifies areas for improvement

•

may yield step-change improvements

•

can be more motivational than ‘yet another improvement programme’

•

facilitates cross functional working

•

questions the performance measures that the organisation uses

•

allows for comparative measurements across organisations