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Minder Chen, Ph.D. Associate Professor of MIS
CSU Channel IslandsMinder.Chen@CSUCI.EDU
Service Innovation & Customer Relationship Management
Services - 2 © Minder Chen, 2009
Distinguishing services from goods
InseparabilityServices are created and consumed at the same timeServices cannot be inventoriedDemand fluctuations cannot be solved by inventory processes
Quality control cannot be achieved before consumption
Consideration: Does the ability to tailor and customize goods to the customers’ demands and preferences mean that these goods also have an inseparability characteristic?
Services - 3 © Minder Chen, 2009
Distinguishing services from goods
• Heterogeneity From the client’s perspective, there is typically a
wide variation in service offerings: Personalization of services increases their
heterogeneous nature Perceived quality-of-service varies from one client to
the next
• Consideration: Can a homogeneous perception of quality due to customer preference idiosyncrasies (or due to customization) also benefit the goods manufacturer?
Standardization vs. Customization/ Personalization
Services - 4 © Minder Chen, 2009
Distinguishing services from goods
• Perishability Any service capacity that goes unused is perished
Services cannot be stored so that when not used to maximum capacity the service provider is losing opportunities. (No inventory)
Service capability estimation and planning as well as pricing via revenue management are key aspects for service management
• Consideration: Do clients who participate in some service process acquire knowledge which represents part of the stored service’s value? What might the impact be? Priceline.com
Services - 5 © Minder Chen, 2009
Distinguishing services from goods
IntangibilityServices are ideas and concepts that are part of a process process Process mapping Process mapping
The client typically relies on the service providers’ reputation and the trust they have with them to help predict quality-of-service and make service choices. WOM Effect
Regulations and governance are means to assuring some acceptable level of quality-of-service (Service-level agreement) Service performance measure
Consideration: Do most services processes involve some goods?
Services - 6 © Minder Chen, 2009
Definition of Innovation
• An innovation is the creation and application of a new or significantly improved technology, product/service, process, or business model that is accepted by markets and society.
– Adapted from OECD 2005 and Wikipedia.
• Innovation applies ideas and new knowledge to the production of goods and services to improve product/service quality and process performance.
– UK Design Council
http://www.designcouncil.org.uk/Documents/Documents/OurWork/Insight/DesignForInnovation/DesignForInnovation_Dec2011.pdf
http://www.youtube.com/watch?v=2NK0WR2GtFs&feature=watch-vrec
Services - 7 © Minder Chen, 2009
Industry vs. Services: A Matter of Degree
Services - 8 © Minder Chen, 2009
Services: The Front-stage Experience
manufacturing
Services - 9 © Minder Chen, 2009
In-N-Out Burger
http://www.in-n-out.com/menu.asp
Services - 10 © Minder Chen, 2009
Services - 11 © Minder Chen, 2009
Japanese teppanyaki cooking: Hibachi-style• Moving the backstage to the frontstage
• Dining + Entertaining (Showmanship)• http://www.benihana.com/about/the-benihana-story
• http://www.youtube.com/watch?v=P9SUw0ARqwc&feature=related
• http://www.youtube.com/watch?v=aX6gUMRqJjA&feature=related
• http://www.youtube.com/watch?v=J1LGJ4rKX0g&feature=related
• http://www.youtube.com/watch?v=3zATulLPfVc&feature=related
• http://en.wikipedia.org/wiki/Teppanyaki
Services - 12 © Minder Chen, 2009
Service Layering
• Pure service: Legal service, barber shop
• IT-enabled Service/Self service: Google for information search, eBay for online auction services, WebMD for online health information, Facebook, Twitter, etc.
• IT Services: IT outsourcing service provider (IBM Global Service), on-demand data center (EDS), on-demand computing (IBM)
• Service-wrapped IT products: iTune and iPod; GM OnStar (Emergency service + remote diagnosis & sensing + GPS & Navigation)
• Manufacturing services: IC design houses, TSMC foundry service
• Pure manufacturing: Manufacturing of commodity products
Source: Minder Chen, 2007
Services - 13 © Minder Chen, 2009
OnStar Service from GM
OnStar By GM | OnStar.com, Car Safety Device and Vehicle Security Systemhttp://www.onstar.com/us_english/jsp/index.jspScreen clipping taken: 2007/3/6, 上午 07:56
Services - 14 © Minder Chen, 2009
iPod and iTune
Apple - iPod + iTunes, http://www.apple.com/itunes/, Screen clipping taken: 2007/3/6, 08:02
Services - 15 © Minder Chen, 2009
Apple Stores
Services - 16 © Minder Chen, 2009
Experience Economic: Build-A-Bear Workshop
http://www.buildabear.com/aboutus/ourcompany/process.aspx
Services - 17 © Minder Chen, 2009
Computing Clouds: Amazon Web Services
Amazon Web Services Developer Connection : AWS Solutions Cataloghttp://solutions.amazonwebservices.com/connect/index.jspaScreen clipping taken: 2007/3/6, 上午 08:08
Services - 18 © Minder Chen, 2009
Products vs. Services
• Products can be seen as the physical embodiment of the service provided.
– Cars »provide comfortable transportation services
– Televisions »deliver entertainment
– Cosmetics »offer beatification services
– Cameras »provides services for wonderful memory
Services - 19 © Minder Chen, 2009
Difficult Conceptual Transitions
Goods-Dominant ConceptsGoods
Products
Feature/attribute
Value-added
Profit maximization
Price
Equilibrium systems
Supply Chain
Promotion
To Market
Product orientation
Transitional Concepts
Services
Offerings
Benefit
Co-production
Financial Engineering
Value delivery
Dynamic systems
Value-Chain
Integrated Marketing Communications
Market to
Market Orientation
Service-Dominant ConceptsService
Experiences
Solution
Co-creation of value
Financial feedback/learning
Value proposition
Complex adaptive systems
Value-creation network/constellation
Dialog
Market with
Service-Dominant Logic(Consumer and relational)
More T-shaped Peopleto work in, study, and innovate
service systems
Social Science (People)
Management (Business)
Engineering (Technology)
Slide by Jean Paul Jacob
Services - 21 © Minder Chen, 2009
Which Has More Value?
• Nike provide service to distribute comfortable shoes and an imagination (90% value)
• A factory in Indonesia produces shoes (10% value)
Apple offers iPhones for better communication and entertainment (85% value)
Foxconn manufactures iPhones for Apple (15% value)
Services - 22 © Minder Chen, 2009
Service-Oriented Model & Architecture
The service target may be the service client itself.
Services - 23 © Minder Chen, 2009
Classification of Outsourcing: Service Types
• Manufacturing Outsourcing– FoxConn’s eCMMS stands for e-enabled
Components, Modules, Moves and Services
– TSMC emphasizes collaborative services*
• Information Technology Outsourcing
• Business Process Outsourcing
• Knowledge Processing Outsourcing
• Innovation Outsourcing– Open innovation and crowd-sourcing
*See http://www.tsmc.com/english/c_services/c00_Service_Guide/c0100_Service_Guide.htm
Smart sourcing: Beyond “lift and shift”.
Services - 24 © Minder Chen, 2009
Crowdsourcing
Source: http://usercontribution.intuit.com/w/page/18238302/The%20Contribution%20Revolution%20linked%20version
Services - 25 © Minder Chen, 2009
Providing Free Services: Is There a Free Lunch?
• Facebook/Google and You
If you are NOT paying for it,
you’re not the customer.
You are the product being sold.*
*Andrew Lewishttp://www.metafilter.com/95152/Userdriven-discontent#3256046** See a counter argument at http://powazek.com/posts/3229
Services - 26 © Minder Chen, 2009
Service innovation is inherently multidisciplinary
Science & Engineering
Business Administrationand Management
Social Sciences(Micro-lending/Microcredit)
Global Economy& Markets
BusinessInnovation
TechnologyInnovation
Social-OrganizationalInnovation
DemandInnovation
Knowledge sources driving service innovations…
Gang Run Printing 合板印刷 /Groupon
http://abcnews.go.com/Business/groupon-grows-leaps-bounds/story?id=11681785http://money.cnn.com/video/technology/2010/10/12/t_40u40_groupon.fortune/
Business Model
Innovation
Services - 27 © Minder Chen, 2009
Customer Relationship Management (CRM)
The measures an organization takes to – identify,
– select,
– acquire,
– work with, and
– retain
its customers. Acquiring new customer vs. retaining existing customer
Acquisition costs vs. customer life time value
Services - 28 © Minder Chen, 2009
Objectives of CRM
• The right offer (products or services)
• To the right person (target marketing)
• At the right time (spacing outbound calls)
• Through the right channel (direct vs. channel)
• Via appropriate media (phone, email, Web)
• By the right employees and service partners.
Services - 29 © Minder Chen, 2009
End-to-End Processes
Customer
Manufacturing Inventory Mgmt.
Shipping
Marketing/Sales
Account Receivable
Services - 30 © Minder Chen, 2009
Processes Are Often Cross Functional Areas
M arketing& S ales
P urchase P roduc tion D is tribution A ccounting
C E O
Supplier
Customer/MarketsNeeds
Value-addedProducts/Services toCustomers
"Manage the white space on the organization chart!"
"We cannot improve or measure the performance of a hierarchical structure. But, we can increase output quality and customer satisfaction, as well as reduce the cost and cycle time of a process to improve it."
Services - 31 © Minder Chen, 2009
Empowered Customer-Focus Processes
Values and Quality delivered to
Customers timely
Empowered Font-line worker
Customer-facing Process
Manager as Coach
Teamwork
Services - 32 © Minder Chen, 2009
Customer Life Cycle
Welcom
e
Awareness
GettingTo Know
Win
back
Targeting
Account
Management
Intensive
Care
Pre-Divorce/Divorce
Translate Failure into Success!The Proof!
"Moments of Truth"
Cross-Selling,Profit Opportunities
Delivery, Welcoming service andContinuous Contact Processes
Sales Processes (Including Business Partners)
Market and Customer Research and analysis
Services - 33 © Minder Chen, 2009
MOT Analysis Example: A Credit Card Company
• Pri to MOT – Recognition
– Information gathering
– Comparison
• MOT – Applying for Credit Card
– Receiving Credit Card
– Using Credit Card
– Providing Information
– Changing and Upgrading
– Gifts giving
– Emergency Assisting
• After MOT– No usage follow-up
– Stop membership follow-up
Services - 34 © Minder Chen, 2009
The Business Context of Business Networking
Company CustomerCustomer's Customer
Suppliers/ Partner
N C N C N C N C
N: Needs and Perceived NeedsC: Capabilities
Source: Adapted from Charles M. Savage, "The Dawn of the Knowledge Era," OR/MS Today, pp. 18-23.
Virtual Enterprising Virtual Enterprising
Competitor
Share: • Costs• Skills• Market access• Technology
Services - 35 © Minder Chen, 2009
TI Semiconductor Business Process Map
Manufacturing Capability Development
StrategyDevelopment
ProductDevelopment
CustomerDesign &Support
OrderFulfillment
Concept
Development
Manufacturing
MarketCustomers
Customer CommunicationCustomer Communication
Source: Adapted from Hammer and Champy, 1993, p. 119.
Services - 36 © Minder Chen, 2009
Service Value Chain Framework
Services - 37 © Minder Chen, 2009
Service blueprint components
Physical evidence
Customer actions
OnstageEmployee actions
BackstageEmployee actions
Support processes
Line of interaction
Line of internal interaction
Line of visibility
Desktop PC and applications, ticket, records
IT request, problem call to help desk, etc
Takes call, opens ticket, visit to employee desk side
Refers to manuals, asks for help from team
Time recording, payroll, training, etc
Services - 38 © Minder Chen, 2009
Service Blueprint(Service Blueprint)
Source: http://digiservices.files.wordpress.com/2009/11/blueprinting2.png
Services - 39 © Minder Chen, 2009
Customer Journey MOTs : Netflix vs. Blockbuster
Services - 40 © Minder Chen, 2009
what really countsmajor preoccupations, worries & aspirations
what friends saywhat boss sayswhat influences say
environmentfriendswhat the markets offers
attitude in publicappearancebehavior towards others
http://www.gogamestorm.com/?p=42http://www.slideshare.net/AdilsonJardim/empathy-map-poster-3201288
Empathy Empathy MapMap
GAIN“wants”/needs, measures of success, obstacles
PAINfears, frustrations, obstacles
Customer (user)Empathy Map
Services - 41 © Minder Chen, 2009
Swiffer – P&G and Contiuum• “There has got to be a better way to clean a floor.
Current mops are the cleaning equivalent of the horse drawn carriage – where’s the car?”
Procter & Gamble’s 2nd most popular consumer product.
Services - 42 © Minder Chen, 2009
Field Research Findings of Mopping the Floor
A team of ethnographic researchers set out to watch how people cleaned their kitchen floors, and they discovered:•Most people swept their floors before they mopped.
•People assemble a system of largely unbranded products to get the job done. [ user-generated innovation, wisdom of the crowd ]
•Mops worked mostly by the adhesion of dirt to the mop and people seemed to spend almost as much time rinsing their mop as they did cleaning the floor.
•People wore old clothes when they were cleaning because it was a dirty job.
Source: http://continuuminnovation.com/work/swiffer/
Services - 43 © Minder Chen, 2009
Employees and Customers
“You don’t get happy guests with unhappy employees.”
J. W. Marriot
Services - 44 © Minder Chen, 2009
The Inverted Organizational Pyramid
Services - 45 © Minder Chen, 2009
Service Profit Chain
Source: Putting the Service-Profit Chain to Work (HBR Classic)
Services - 46 © Minder Chen, 2009
The Service Triangle
WOM: Words of Mouth
Services - 47 © Minder Chen, 2009
Southwest Airline
Flight Attendant doing raps!! at http://www.youtube.com/watch?v=ivjybzdXVmI
Services - 48 © Minder Chen, 2009
Lifetime Value of a Customer
CLTV: Customer Life Time Value = $8,000
Services - 49 © Minder Chen, 2009
Customer Loyalty
From why satisfied customers defect. By Jones, T. D. & Sasser Jr., W. E. Harvard business Review, (November–December), 1995 p. 91.
Services - 50 © Minder Chen, 2009
Zappos Culture via Its Core Values
• Deliver WOW Through Service
• Embrace and Drive Change
• Create Fun and A Little Weirdness
• Be Adventurous, Creative, and Open-Minded
• Pursue Growth and Learning
• Build Open and Honest Relationships with Communication
• Build a Positive Team and Family Spirit
• Do More with Less
• Be Passionate and Determined
• Be Humble
Services - 51 © Minder Chen, 2009
HaiDiLao Hot Pot
• Founded in 1994 by Zhang Yong in Sichuan Province
• 73 stores in China
Services - 52 © Minder Chen, 2009
Lead by Example• An open letter to Delta CEO Richard Anderson:
Thursday was one of my more harrowing flying days. Due to weather, there were multiple delays, cancellations, re-routings and even a mechanical failure. A 2 hour flight turned into an entire day. By 9:30pm, I was just halfway home, waiting standby in DC hoping to make it out before the 10pm curfew.
During it all, I had contact with at least a dozen Delta employees – by phone, at the counter, at the gate, in the SkyClub… Without exception, they were all calm, kind, diligent, funny… and really went out of their way to try to help me. All this, while at the same time facing a firestorm of angry passengers because there had been so many disrupted flights.
I was 8th on the standby list, showing 0 seats left. I was about to give up, but the counter agent stopped me from leaving. He called 7 names… and then, finally, I was the last to be called. As we rushed down the jetway, the flight attendant at the plane shook her head – not a good sign – but then paused, talked to someone, and waved us down anyway. A vaguely familiar face met me at the doorway, not in uniform so probably an off-duty pilot I had seen before. He quickly grabbed my roll-aboard, helped clear a space in the overhead, and showed me to my seat.
It was important for me to get home – not important enough to tell anyone – but Friday I was to pick up my Type 1 Diabetic 12 year old from her diabetes summer camp. I’m sure she would have been fine if someone else had shown up in my place, but it’s a special moment for me. Camp Kudzu gives my daughter 5 days a year when she feels “normal.” Pick-up day gives me a glimpse into that special world where she’s just like everyone else, and she’s a little bit of a different person for the rest of the day. By the next day, it’s back to the harsh realities of managing a difficult, deadly, incurable disease that kills 1 in 20 before the age of 18. Most people just don’t understand how different it is from regular diabetes.
As the plane descended into Atlanta, the flight attendant announced that there was a special guest on board. He was riding in a jump seat, because he had given up his place to allow one more person on that flight. That special guest was you: Richard Anderson, CEO of Delta.
Suddenly I realized that “familiar face” was not an off-duty pilot. It was you, the CEO of Delta, vaguely familiar from the safety video. It was you, Richard Anderson, who gave up your seat for me. It was you, the Delta CEO, who helped me with my bag. It was you, acting just like an ordinary Mr. Anderson, who showed me to my seat.
You, Richard Anderson, the CEO of Delta, did all that for me, just an average, middle-aged, woman with, as far as anyone at Delta knew, no special reason to get home. But more importantly, it was all of your employees that day that did so much helping me to get home – and now I know why. Because Delta is led by you, Richard Anderson, a dedicated and inspiring leader who so clearly demonstrates, at his very core, that he leads by example, and does not set himself above all those who allow this airline to exist.
Thank you, Richard Anderson. As a result of your leadership and the actions of yourself and your employees, I had my special day with my special child. You and your employees gave us both one more day of happiness, and for that, we are both very grateful. I have always been a loyal Delta customer, but Thursday solidified that loyalty for life! To all Delta employees who helped me on Thursday: thank you again.
Jessica Frank
https://www.facebook.com/delta/posts/617363794949473
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