ch4&5 key elements of essentials of service...
TRANSCRIPT
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Dr. Scott E. Sampson
Key elements fromEssentials of Service Design and Innovation
Chapters 4 & 5(preparation for completing Analysis Exercises 4&5)
Identifying the Value Proposition 1
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Dr. Scott E. Sampson
Dr. Scott E. SampsonThorsell Professor of Service
Operations ManagementBrigham Young University
Provo, Utah, USAĀ© 2014,2020 SES
Key elements of chapter 4: Identifying the Value Proposition
Identifying the Value Proposition 2
rev 5/14, 2/15 1/19 dev effort to TVV
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Dr. Scott E. Sampson
Key concepts from Chapter 4ā¢ What is value to different entities?
ā¢ Specific beneficiariesā¢ Generic beneficiaries
ā¢ How is value manifest?ā¢ Value potentialā¢ Value realization
Identifying the Value Proposition 3
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Dr. Scott E. Sampson
What is value?
Identifying the Value Proposition 4
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Dr. Scott E. Sampson
Principle of āvalueāā¢ All participants in a process relationship do so because of perceived benefits (value), which is the satisfaction of some need (a condition of happiness).
ā¢ Some entities participate because of benefits inherent in the system. These āspecific beneficiariesā are often called ācustomers.ā
ā¢ Other entities participate in order to attain benefits through other systems. They access the other systems through monetary means. These āprovidersā are āgeneric beneficiariesā because the benefits they seek are not inherent in the given system.
ā¢ The point is, all entities, customers and providers, participate because of perceived benefits.
Identifying the Value Proposition 5
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Dr. Scott E. Sampson
Roles
What is a provider?
An entity with:ā¢ generic needs ($ money)ā¢ specific resources
(competencies).
What is a customer?
An entity with:ā¢ specific needsā¢ generic resources ($)ā¢ and competencies!
Identifying the Value Proposition 6
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Dr. Scott E. Sampson
What is value?
to the provider? to the customer?
SA
Esteem
Love/belonging
Safety
Physiological
7Identifying the Value Proposition
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Dr. Scott E. Sampson
Elemental conceptsWhat is value?Ćsatisfaction of needsWhat are needs?Ćconditions of happiness and well beingWhat is happiness (well being, quality of life, etc.)?Ćāthe object and design of our existenceā
ā¢ Joseph Smithā¢ Ultimately, increasing happiness is the object and design of all organizations and relationships.
Identifying the Value Proposition 8
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Dr. Scott E. Sampson
The two manifestations of value
Identifying the Value Proposition 9
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Dr. Scott E. Sampson
Two valuesvalue potential
ā¢ a state of nature that has the potential to satisfy needs
value realization
ā¢ the actual satisfaction of needs, improving happiness (well being, etc.)
Identifying the Value Proposition 10
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Dr. Scott E. Sampson
Driver
process domain
interaction Independent processing Direct interaction
Toyota
process domain
Independent processing interaction
Automobile PCN Diagram
produce car sell car drive car
not co-productive interactiveco-production
not co-productive
Identifying the Value Proposition 11
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Dr. Scott E. Sampson
Principles of PCN Analysisā¢ Customer value is always realized in the customersā process domain.
ā¢ Therefore, it is important to understand what goes on in customersā process domain.
ā¢ The primary purpose of service interaction is to facilitate value realization.
12Identifying the Value Proposition
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Dr. Scott E. Sampson
Distinguishing between value potential and value realization
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Dr. Scott E. Sampson
L
Value? Psychological benefit?Value Potential Value Realization
14
JShould we
come skiing again?
I love watching Bobby crash J
LIs there Value Realization on the lift? How much?
Would Bobby be willing to pay $130 per day to ride the lift all day and not ski?
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Dr. Scott E. Sampson
Differences between the two conceptsValue Potential
ā¢ Seeded by providerā¢ Speculativeā¢ Contingentā¢ Depends on the futureā¢ May or may not be realizedā¢ Gets power from beliefā¢ Belief is perpetuated or destroyed by value realization!
Value Realization
ā¢ Customer idiosyncraticā¢ Real!ā¢ Independentā¢ Depends on nothingā¢ Transitory ā real but fleetingā¢ Persistent ā change of state
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Time value of value(Four optional slides.)
Identifying the Value Proposition 16
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Dr. Scott E. Sampson
Two valuesvalue potential
ā¢ a state of nature that has the potential to satisfy needs
value realization
ā¢ the actual satisfaction of needs, improving happiness (well being, etc.)
Identifying the Value Proposition 17
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Dr. Scott E. Sampson
Net Present Valueā¢ NPV = ā R'(C'
(+,-)'/012
ā¢ Rt =expectedrevenueattimetā¢ Ct =expectedcostattimetā¢ i =discountrate(biastowardnearcashflows)
Net Present Happiness
ā¢ NPJ = ā J'(L'(+,-)'
/012
ā¢ J0 = šš š”šššš”ššāššššššš š šš”š”šššš”ā¢ L0 = šš š”šššš”ššš¢šāššššššš š šš”š”šššš”ā¢ i =discountrate(biastowardpresentJ andL,i=1-F)
Identifying the Value Proposition 18
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Dr. Scott E. Sampson
Happiness flows JL
Identifying the Value Proposition 19
JJ J LL LLLJJJ J LJ LL
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Dr. Scott E. Sampson
Happiness flows JL
Identifying the Value Proposition 20
LJ J LJ LJJJLL L LJ JJ
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Dr. Scott E. Sampson
PCN AnalysisRepresenting the value proposition
Identifying the Value Proposition 21
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Dr. Scott E. Sampson
Representing value on a PCN DiagramCosts and benefits to specific beneficiary (customer) are usually psychologicalā¦ā¢ put L for cost steps (waiting, inconvenience, etc.)ā¢ put J by psychological benefit steps (happiness inducing)
Costs and benefits to generic beneficiaries (providers) are usually monetaryā¦ā¢ put -$ by cost stepsā¢ put +$ by revenue steps
Identifying the Value Proposition 22
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Dr. Scott E. Sampson
āSupplierā āCustomerā
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
Representing a value proposition
developappetite
cookpizza
eatpizza
return home
maintainsupplies
servepizza
wait to beseatedseat customer
preheatovens review menu
presentcheck
preparecheck
paycheck
eatleftovers
wait forpizza
create order
developrecipes
-$ costs?+$ value?
J
L
J
L
-$
-$
+$
-$
-$
-$
Identifying the Value Proposition 23
L
J
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Dr. Scott E. Sampson
see Analysis Exercise 4
Identifying the Value Proposition 24
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Dr. Scott E. Sampson
Dr. Scott E. SampsonThorsell Professor of Service
Operations ManagementBrigham Young University
Provo, Utah, USAĀ© 2014 SES
Key elements of chapter 5: Strategic Process Positioning
Strategic Process Positioning 25
rev 1/14,5/14, 2/19
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Dr. Scott E. Sampson
Strategic Process PositioningSandwiches and Investment analysis
26Strategic Process Positioning
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Dr. Scott E. Sampson
Sandwich Consumer
Consumerās Process Domain
Direct interaction
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Sandwich Supplier
Supplierās Process Domain
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Sandwich example from the chapter
assemble prepackaged sandwich in a factory for
sale at grocery storeassemble sandwich to order in restaurant
kitchen
assemble sandwich at a
Subway sandwich as customer
selects orders
assemble sandwich at
a buffet restaurant
assemble sandwich at home using ingredients
from the refrigerator
assemble sandwich
Strategic Process Positioning 27
simple quiz
assemble sandwich assemble sandwich assemble sandwichassemble sandwichassemble sandwich
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Dr. Scott E. Sampson
Thinking about Process Positioning
Your assignmentā¦1. Describe what it would mean for the āanalyze investmentsā step to be in regions 1 through 5.
2. Which of the alternatives is superior in terms of Ć Ć Ć
ā¢ economies of scale?ā¢ customization potential?ā¢ efficiency?
Strategic Process Positioning 28
Investment firm Client
Provider's Process Domain Investor's Process Domain
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
analyzeinvestments
1 2 3 4 5
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Dr. Scott E. Sampson
1 2 3 4 5Your assignmentā¦1. Describe what it would mean for the āanalyze investmentsā step to be in regions 1 through 5.
2. Which of the alternatives is superior in terms of Ć Ć Ć
Thinking about Process Positioning
Strategic Process Positioning 29
Investment firm Client
Provider's Process Domain Investor's Process Domain
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
Option 1:analyze
investments for printing in a newsletter
Option 2:centrally analyze client investorās
investment portfolio
Option 3:discuss client investor's financial needs and help client analyze investment
alternatives
Option 4:analyze own
investments using provider's online
tools
Option 5:analyze own investments
using a spreadsheet
analyzeinvestments
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Dr. Scott E. Sampson
Thinking about Process Positioning
Strategic Process Positioning 30
Invest firm Client
Provider's Process Domain Investor's Process Domain
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
analyzeinvestments
Option 1:analyze
investments for printing in a newsletter
Option 2:centrally analyze client investorās
investment portfolio
Option 3:discuss client investor's financial needs and help client analyze investment
alternatives
Option 4:analyze own
investments using provider's online
tools
Option 5:analyze own investments
using a spreadsheet
2. Which alternative is superior in terms ofā¦economies of scale
customizationpotentialefficiencyefficiency
the most common economy of scale is the acquisition of expertise
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Dr. Scott E. Sampson
Principles of process positioningInvest firm Client
Provider's Process Domain Investor's Process Domain
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
Option 1:analyze
investments for printing in a newsletter
Option 2:centrally analyze client investorās
investment portfolio
Option 3:discuss client investor's financial needs and help client analyze investment
alternatives
Option 4:analyze own
investments using provider's online
tools
Option 5:analyze own investments
using a spreadsheet
greater scale and expertise greater customization potentiallowest
operatingefficiency
31Strategic Process Positioning
analyzeinvestments
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Dr. Scott E. Sampson
Principles of process positioningInvest firm Client
Provider's Process Domain Investor's Process Domain
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
Option 1:analyze
investments for printing in a newsletter
Option 2:centrally analyze client investorās
investment portfolio
Option 3:discuss client investor's financial needs and help client analyze investment
alternatives
Option 4:analyze own
investments using provider's online
tools
Option 5:analyze own investments
using a spreadsheet
greater scale and expertise greater customization potentiallowest
operatingefficiency
32Strategic Process Positioning
process requiresspecialized skills/assets
process requirescustomized attention
process requires both
Process positioning decisionā¦
analyzeinvestments
āskillfulcustomizationā
or low-cost labor andprovider wants control
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Dr. Scott E. Sampson
back to assembling sandwiches
Strategic Process Positioning 33
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Dr. Scott E. Sampson
Sandwich Consumer
Consumerās Process Domain
Direct interaction
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Sandwich Supplier
Supplierās Process Domain
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Principles of process positioning
Which option provides the bestā¦?
Strategic Process Positioning 34
assemble prepackaged sandwich in a factory for
sale at grocery store
assemble sandwich to order in restaurant
kitchen
assemble sandwich at a
Subway sandwich as customer
selects orders
assemble sandwich at
a buffet restaurant
assemble sandwich at home using ingredients
from the refrigerator
assemble sandwich
economies of scalecustomization
potentialefficiencyefficiency
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Dr. Scott E. Sampson
Sandwich Consumer
Consumerās Process Domain
Direct interaction
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Sandwich Supplier
Supplierās Process Domain
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Principles of process positioning
assemble prepackaged sandwich in a factory for
sale at grocery store
assemble sandwich to order in restaurant
kitchen
assemble sandwich at a
Subway sandwich as customer
selects orders
assemble sandwich at
a buffet restaurant
assemble sandwich at home using ingredients
from the refrigerator
assemble sandwich
Strategic Process Positioning 35
process requiresspecialized skills/assets
process requirescustomized attention
process requires both
Process positioning decisionā¦
āskillfulcustomizationā
or low-cost labor andprovider wants control
greater scaleincluding expertise
greater customizationpotential
lowestoperatingefficiency
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Dr. Scott E. Sampson
Principles of PCN Analysisā¢ Process positioning has strategic implications.ā¢ Process positioning defines your value proposition.
ā¢ You can change and improve your value proposition by repositioning process steps.
36Strategic Process Positioning
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Dr. Scott E. Sampson
Enabling Innovations and Relieving Innovations
Take and bake pizza case study
37Strategic Process Positioning
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Dr. Scott E. Sampson
Take-and-bake pizzaāSupplierā āCustomerā
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
call restaurant
cook pizza
eatleftovers
eatpizza
travelhome
maintainsupplies
developrecipes
travel to store
discuss options and
specials
place order
L
customer costs? Lvalue? J
J
J
L L
Lwork
play
Strategic Process Positioning 38
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Dr. Scott E. Sampson
Enabling innovation?āSupplierā āCustomerā
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
call restaurant
preheatovens
cook pizza
eatleftovers
eatpizza
travelhome
maintainsupplies
developrecipes
travel to store
discuss options and
specials
place order
work
play
L
L
L
Strategic Process Positioning 39
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Dr. Scott E. Sampson
Enabling innovation?āSupplierā āCustomerā
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
call restaurant
preheatovens
cook pizza
eatleftovers
eatpizza
travelhome
maintainsupplies
developrecipes
travel to store
discuss options and
specials
place order
āenablingā innovations moveprocess steps towards customers
work
play
Strategic Process Positioning 40
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Dr. Scott E. Sampson
work
play
Enabling innovationāSupplierā āCustomerā
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
preheatovens
cook pizza
eatleftovers
eatpizza
place orderon mobilephone app
travelhome
maintainsupplies
developrecipes
travel to store
call restaurant
discuss options and
specials
place order
The NEW Pizza Hut
iPhone App
āenablingā innovations moveprocess steps towards customers
J
Improved value
proposition
Strategic Process Positioning 41
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Dr. Scott E. Sampson
Relieving innovation?āSupplierā āCustomerā
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
call restaurant
preheatovens
cook pizza
eatleftovers
eatpizza
travelhome
maintainsupplies
developrecipes
travel to store
discuss options and
specials
place order
ārelievingā innovations moveprocess steps away from customers
Strategic Process Positioning 42
L
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Dr. Scott E. Sampson
Relieving innovation?āSupplierā āCustomerā
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
preheatovens
cook pizza
eatleftovers
eatpizza
travelhome
maintainsupplies
developrecipes
deduct from customer account
place pizza in customerās porch box
travel to store
ārelievingā innovations moveprocess steps away from customers
call restaurant
discuss options and
specials
place order
Strategic Process Positioning 43
L
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Dr. Scott E. Sampson
Principles of PCN Analysisā¢ Service innovation comes from process repositioningā¦ā¢ Enabling innovations move process steps toward
customers.ā¢ Relieving innovations move process steps away from
customers.ā¢ Optimal positioning depends on customer segment requirements.
44Strategic Process Positioning
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Dr. Scott E. Sampson
see Analysis Exercise 5
Identifying the Value Proposition 45