Minder Chen, Ph.D. Professor of MIS CSU Channel Islands [email protected]

Minder Chen, Ph.D. Professor of MIS

CSU Channel [email protected]

Service Innovation & Customer Relationship Management: A Process Reengineering Viewpoint

mailto:[email protected]

Services - 2 © Minder Chen, 2009

Distinguishing services from goods

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

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 consumptionConsideration: Does the ability to tailor and customize goods

to the customers’ demands and preferences mean that these goods also have an inseparability characteristic?



• Heterogeneity From the client’s perspective, there is typically a

wide variation in service offerings: Personalization of services increases their

heterogeneous nature Perceived quality-of-service varies from one client to

the 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



• 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



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?


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




Formula for True Innovation

• America’s advantage, if it continues to have one, will be that it can produce people who are also more creative and imaginative, those who know how to stand at the intersection of the humanities and the sciences.

• That is the formula for true innovation, …true innovation, …

– Walter Isaacson is the author of “Steve Jobs.”

– http://www.nytimes.com/2011/10/30/opinion/sunday/steve-jobss-genius.html?pagewanted=all&_r=0

http://www.aspeninstitute.org/about/about-walter-isaacson

http://www.nytimes.com/2011/10/30/opinion/sunday/steve-jobss-genius.html?pagewanted=all&_r=0




Definition of Reengineering

The fundamental rethinking

and radical redesign of

core business processes to

achieve dramatic improvements in critical

performance measures such as quality,

cost, and cycle time.

Source: Adapted from Hammer and Champy, Reengineering the Corporation, 1993


Definition of Process• A process is simply a structured, measured set of

activities designed to produce a specific output for a particular customers or market.

-- Thomas Davenport

• Characteristics: – A specific sequencing of work activities across time

and place– A beginning and an end (e.g., Marketing is a function

not a process.)– Clearly defined inputs and outputs

– Customer-focus/customer facing Service-oriented

– How the work is done– Process ownership – Measurable and meaningful performance


Industry vs. Services: A Matter of Degree


Services: The Front-stage Experience

manufacturing


In-N-Out Burger

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



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

http://www.benihana.com/about/the-benihana-story

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

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



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


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


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

http://www.onstar.com/us_english/jsp/index.jsp


iPod and iTune

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

http://www.apple.com/itunes/


Apple Stores


Experience Economic: Build-A-Bear Workshop

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

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


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

http://solutions.amazonwebservices.com/connect/index.jspa


Characteristics of Cloud Services

NIST identifies several characteristics for a service to be considered “Cloud”:

• On-demand self-service: The ability for an end user to sign up and receive services without the long delays that have characterized traditional IT.

• Broad network access: Ability to access the service via standard platforms (desktop, laptop, mobile etc).

• Resource pooling: Resources are pooled across multiple customers.

• Rapid elasticity: Capability can scale to cope with demand peaks.

• Measured Service: Billing is metered and delivered as a utility service can be acquired quickly and easily.

http://resources.idgenterprise.com/original/AST-0032300_Understanding_the_Cloud_Computing_Stack.pdf


Platform Continuum

• Bring your own machines, connectivity, software, etc.

• Complete control• Complete

responsibility• Static capabilities• Upfront capital costs

for the infrastructure

• Renting machines, connectivity, software

• Less control• Fewer

responsibilities• Lower capital costs • More flexible• Pay for fixed

capacity, even if idle

• Shared, multi-tenant infrastructure

• Virtualized & dynamic• Scalable & available• Abstracted from the

infrastructure• Higher-level services• Pay as you go

On-PremisesServers

Hosted

Servers

Cloud Platform

Own Rent Rent (fixed) (on-demand)


http://aws.amazon.com/

http://www.salesforce.com/

PaaS

Software as a service (SaaS)

Google AppEngine

Amazon's EC2 (Elastic Compute Cloud)

Fulfilled by Amazon


Fulfilled By Amazon

Source:

•http://services.amazon.com/fulfillment-by-amazon/how-it-works.htm

•http://amazongenius.com/fulfillmentbyamazon/

Business to business service

http://services.amazon.com/fulfillment-by-amazon/how-it-works.htm

http://amazongenius.com/fulfillmentbyamazon/


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


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

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


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)


Service-Oriented Model & Architecture

The service target may be the service client itself.


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”.


Crowdsourcing

Source: http://usercontribution.intuit.com/w/page/18238302/The%20Contribution%20Revolution%20linked%20version


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


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


CLIENTSCLIENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

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CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

CLIENTSEGMENTS

Describe a Business Model: 9 Building Blocks

OfferOffer

Cost Structure

Cost Structure

CustomerRelationships

CustomerRelationships

CustomerSegmentsCustomerSegments

Competencies, Activities, Resources

Competencies, Activities, Resources

Partner NetworkPartner Network

RevenueStreamsRevenueStreams

Distribution Channels

Distribution Channels

Key Issues To Solve

Key Issues To Solve

Source: Describe and Improve Your Business Model

WhoWhatHow

How Much?


Reverse Engineering Facebook’s Business Model with Ballpark Figures

http://www.businessmodelalchemist.com/


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


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.


End-to-End Processes

Customer

Manufacturing Inventory Mgmt.

Shipping

Marketing/Sales

Account Receivable


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."


Empowered Customer-Focus Processes

Values and Quality delivered to

Customers timely

Empowered Font-line worker

Customer-facing Process

Manager as Coach

Teamwork


Customer Life Cycle

Welcom

e

Awareness

GettingTo Know

Win

back

Targeting

Account

Management

Intensive

Care

Pre-Divorce/Divorce

Translate Failure into Success!The Proof!

"Moments of Truth"

Cross-Selling,Profit Opportunities

Delivery, Welcoming service andContinuous Contact Processes

Sales Processes (Including Business Partners)

Market and Customer Research and analysis


MOT Analysis Example: A Credit Card Company

• Pri to MOT – Recognition

– Information gathering

– Comparison

• MOT – Applying for Credit Card

– Receiving Credit Card

– Using Credit Card

– Providing Information

– Changing and Upgrading

– Gifts giving

– Emergency Assisting

• After MOT– No usage follow-up

– Stop membership follow-up


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


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.


Service Value Chain Framework


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


Service Blueprint(Service Blueprint)

Source: http://digiservices.files.wordpress.com/2009/11/blueprinting2.png


Customer Journey MOTs : Netflix vs. Blockbuster


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


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.


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/


Employees and Customers

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

J. W. Marriot


The Inverted Organizational Pyramid


Service Profit Chain

Source: Putting the Service-Profit Chain to Work (HBR Classic)


The Service Triangle

WOM: Words of Mouth


Southwest Airline

Flight Attendant doing raps!! at http://www.youtube.com/watch?v=ivjybzdXVmI


Lifetime Value of a Customer

CLTV: Customer Life Time Value = $8,000


Customer Loyalty

From why satisfied customers defect. By Jones, T. D. & Sasser Jr., W. E. Harvard business Review, (November–December), 1995 p. 91.


Think from the Customer Back

The CustomerThe Customer

Management

Organization

Functions/Processes

Activities/Tasks

DefineOutcomes

RedesignOutputs

DetermineActivities

DefineJob Responsibilities

DevelopOrganization Structure

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


The Change/Reengineering Diamond

Business Processes & Functions

Business Processes & Functions

Management & Measurement

Systems

Management & Measurement

Systems

Jobs , Skills, & Organizational

Structures

Jobs , Skills, & Organizational

Structures

Values &Beliefs

Values &Beliefs

Enlighten

Entail Demand

Foster

Culture

Customers&

Info. Tech.

Competitors

Markets

Customers &Suppliers


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


HaiDiLao Hot Pot

• Founded in 1994 by Zhang Yong in Sichuan Province

• 73 stores in China


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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