service management – introduction -...

Service Management –Introduction

Univ.-Prof. Dr.-Ing. Wolfgang Maass

Chair in Economics – Information and Service Systems (ISS)

Saarland University, Saarbrücken, Germany

WS 2011/2012Thursdays, 8 – 10 a.m.Room HS 024, B4 1

Lecture Schedule

1. Introduction2. Service Strategy3. New Service Development 4. Service Quality5. Supporting Facility6. Forecasting Demand for Services (Part A)7. Forecasting Demand for Services (Part B)8. Managing Capacity and Demand

Univ.-Prof. Dr.-Ing. Wolfgang Maass20.10.2011 Slide 2

8. Managing Capacity and Demand9. Managing Waiting Lines10. Capacity Planning and Queuing Models11. Services and Information Systems12. ITIL Service Design13. IT Service Infrastructures14. Guest Lecture15. Summary and Outlook

Organisation

• VorlesungVorlesungVorlesungVorlesung: : : : • Donnerstag, 8 – 10 Uhr; Raum HS 024, Geb. B4 1• Vorlesungsfolien werden vor dem jeweiligen Termin freigeschalten unter

http://iss.uni-saarland.de/de/teaching/modules/dlm/

• Übung (84 Plätze):Übung (84 Plätze):Übung (84 Plätze):Übung (84 Plätze):• Donnerstag, 14 – 16 Uhr; Raum HS 024, Geb. B4 1• 7 Übungen (2 davon Teil einer Fallstudie) in WS 11/12 (Termine siehe


• 7 Übungen (2 davon Teil einer Fallstudie) in WS 11/12 (Termine siehe Kalender unter http://iss.uni-saarland.de/de/teaching/modules/dlm/)

• Fallstudie: Kick Off am 19.01.12, Bearbeitungszeit von 3 Wochen, Begehung am 09.02.12

• Anmeldung bis 21.10.11, 19:00 Uhr per E-Mail (vollständiger Name, Matrikelnummer) an [email protected]

• 1. Übung am 27. Oktober 201127. Oktober 201127. Oktober 201127. Oktober 2011• Betreuung: Sabine Janzen ([email protected])

Organisation

• Prüfungsmodalitäten:Prüfungsmodalitäten:Prüfungsmodalitäten:Prüfungsmodalitäten:• Klausur, 120 min, 120 Punkte (davon 20 Punkte aus Übungen)

• Durch die pünktliche Abgabe und positive Bewertung der Übungen können 20 Punkte erreicht werden

• Übungen 1-5 werden mit jeweils maximal 2 Punkten bewertet; bei der Fallstudie können maximal 10 Punkte erreicht werden


• Basisliteratur:Basisliteratur:Basisliteratur:Basisliteratur:• Fitzsimmons, J. A. & Fitzsimmons, M. J.: Service Management -

Operations, Strategy, Information Technology; McGraw - Hill, 2011.

• Maglio, P. P., Kieliszewski, C. A., Spohrer, J. C. (eds.): Handbook of Service Science (Service Science: Research and Innovations in the Service Economy), Springer, 2010.

• Bryson, J. R.; Daniels, P. W. & Warf, B.: Service Worlds: People, Organizations, Technologies; Routledge, London, 2004.

Services ⁄. What`s that?


Services ⁄ What`s that?


Definitions of Services

„A service is a time-perishable, intangibleexperience performed for a customeracting in the role of co-producer.‰(Fitzsimmons & Fitzsimmons, 2011)

„A service is an activity or series ofactivities of more or less intangiblenature that normally, but notnecessarily, take place in interactionsbetween customer and serviceemployees and/or physical or goodsand/or systems of the serviceprovider, which are provided assolutions to customer problems.‰

Services are frequently described asperformances by a provider thatcreate and capture economic value for


solutions to customer problems.‰(Grönroos, 1990)

create and capture economic value forboth the provider and client.(Chesbrough & Spohrer, 2006)

„A service offering is produced using thefirmÊs resources including both tangible(such as goods) and intangible (such asknowledge, competence, relationship)assets.‰ (Arnould, 2008)

„Service is a process of applying theproviderÊs competence (knowlegde andskills) for the benefit of, and in conjunctionwith, the customer [⁄].‰ (Chew, 2010)

Definitions of Services

„A service is a time-perishable, intangibleexperience performedperformedperformedperformed for a customercustomercustomercustomeracting in the role of co-producer.‰(Fitzsimmons & Fitzsimmons, 2011)

„A service is an activity or series ofactivities of more or less intangiblenature that normally, but notnecessarily, take place in interactionsinteractionsinteractionsinteractionsbetween customercustomercustomercustomer and serviceemployees and/or physical or goodsand/or systems of the serviceproviderproviderproviderprovider, which are provided assolutionsolutionsolutionsolutions to customer problemproblemproblemproblems.‰

Services are frequently described asperformancesperformancesperformancesperformances by a provider thatcreate and capture economic valuevaluevaluevalue for


solutionsolutionsolutionsolutions to customer problemproblemproblemproblems.‰(Grönroos, 1990)

create and capture economic valuevaluevaluevalue forboth the providerproviderproviderprovider and clientclientclientclient.(Chesbrough & Spohrer, 2006)

„A service offering is produced using thefirmÊs resourcesresourcesresourcesresources including both tangible(such as goods) and intangible (such asknowledge, competence, relationship)assets.‰ (Arnould, 2008)

„Service is a process of applying theproviderproviderproviderproviderÊs competencecompetencecompetencecompetence (knowlegde andskills) for the benefit of, and in conjunctionwith, the customercustomercustomercustomer [⁄].‰ (Chew, 2010)

Industrialization of Information Processes

• Trend to information economy (Machlup, 1962; Porat & Rubin, 1977)

• Major economies in the world dominated by services � growth of information intensive services (Karmarkar, 2010)

• Industrialization of information processes (similar to industrialization of manufacturing in 18th and 19th centuries)


• Driving factors for both industrializations:• Application of sources of power (e.g., information technology)

• Mechanization and automation of processes to leverage human ability (e.g., computers)

• Increases in efficiency of logistics (e.g., telecommunications)

• Process of standardization concerning products (e.g., data bases, websites), processes (e.g., programmable machines, software)

Consequences of Industrialization of Information Processes

• Increase of productivity• Growth in employment, often followed by shrinking

• Lower levels of resource usage - Reduction of employment

• Creation of new, well-defined jobs

• More capital and equipment inputs

• DeDeDeDe----integrationintegrationintegrationintegration of information „chains‰• Modularization of processes enables automation, process engineering, outsourcing, relocation

• ConvergenceConvergenceConvergenceConvergence on service design; dominant designs begin to


• ConvergenceConvergenceConvergenceConvergence on service design; dominant designs begin to emerge

• E.g., retail web sites tend to look similar and to have similar functionality

• Slide into commoditization: differentiation across services is reduced, many suppliers are able to provide the same service

• Helps to develop mass markets, but intensifies competition with emphasis on competing with low costs

• Loss of localization and local monopolies• Intensification of competition (Karmarkar, 2010)

Restructuring of Industry Sectors –Digital Convergence

• Digitization of all types of information, i.e. blurring of boundaries of distinct activities and sectors

• Convergence ⁄• ⁄ in form and presentation („digital‰)

• ⁄ in logistics and process methods, i.e. software


• ⁄ in logistics and process methods, i.e. software and hardware assets used in different sectors

• ⁄ in equipment and appliances extends to the user and the consumption of information

• ⁄ on supply side, i.e. same companies play same role across sectors

• ⁄ in user behavior, i.e. formerly distinct use patterns start to overlap, e.g., consumption of different streams of information at home

(Karmarkar, 2010)

Restructuring of Industry Sectors –Vertical De-Integration

• Chain for delivery of information in form of products and services

• At each stage one or more companies / entities involved - no single big player covering all stages

Creation and captureCreation and captureCreation and captureCreation and capture

ProcessingProcessingProcessingProcessing

Assembly (incl. aggregation)Assembly (incl. aggregation)Assembly (incl. aggregation)Assembly (incl. aggregation)

StorageStorageStorageStorage


covering all stages

• Exceptions: examples of new forms of vertical integration• Apple: iPod and iTunes (appliance and server

based service)

DistributionDistributionDistributionDistribution

Server based B2B servicesServer based B2B servicesServer based B2B servicesServer based B2B services

Server based B2C servicesServer based B2C servicesServer based B2C servicesServer based B2C services

Local distribution and accessLocal distribution and accessLocal distribution and accessLocal distribution and access

Consumption enablers Consumption enablers Consumption enablers Consumption enablers (appliances and software)(appliances and software)(appliances and software)(appliances and software)

(Karmarkar, 2010)

Restructuring of Industry Sectors –Economics change⁄

Industrialization of manufacturing• Large economies of scale

• High employment

• Expensive equipment

• High fixed costs

• Entry difficult


(Karmarkar, 2010)

Industrialization of information services• Low scale economics

• High scope economies caused by high convergence

• Information processing not scale dependent

• Reduced fixed costs

• Equipment can be used convergent

• Entry simpler

Classification of Services

• Services are described in terms of four major characteristics• CCCCo-Production: both provider and client

participate in the act

• HHHHeterogeneity: Clients tend to have


• HHHHeterogeneity: Clients tend to have heterogeneous requirements

• IIIIntangibility: Many services = experiences

• PPPPerishability: Many services cannot be inventoried

(Lovelock et al., 2006; Banavar et al., 2010)


• Service Process Matrix (Schmenner, 1986)

LowLowLowLow HighHighHighHigh

LowLowLowLow Service factory:Airlines, trucking, hotels,

Service shop: Hospitals,auto repair, other repair

Degree of Interaction and CustomizationDegree of Interaction and CustomizationDegree of Interaction and CustomizationDegree of Interaction and Customization

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Airlines, trucking, hotels, resorts and recreation

auto repair, other repair services

HighHighHighHigh Mass service: Retailing,

wholesaling, schools,

retail aspects of

commercial banking

Professional service: Doctors, lawyers,accountants, architects

De

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(Schmenner, 1986; Fitzsimmons & Fitzsimmons, 2011)


• Classification of services by Lovelock (1983)

• Nature of service act

People Property

Tangible

actions

Services aimed at

people’s

Services aimed at

material items,

Direct recipient of serviceDirect recipient of serviceDirect recipient of serviceDirect recipient of service

Na

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of

serv

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act

Na

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of

serv

ice

act

Na

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Na

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actions people’s

physical body, e.g.,

healthcare

and transportation

material items,

e.g., shipping and

cleaning

Intangible

actions

Services aimed at

people’s

minds, e.g.,

education and

entertainment

Services aimed at

information,

e.g., banking and legal

(Lovelock, 1983; Fitzsimmons & Fitzsimmons, 2011)

Na

ture

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serv

ice

act

Na

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Na

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Na

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• Relationship with customers

„Membership‰ „Membership‰ „Membership‰ „Membership‰ relationshiprelationshiprelationshiprelationship

NoNoNoNo formal relationshipformal relationshipformal relationshipformal relationship

ContinuousContinuousContinuousContinuous Insurance Radio station

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Na

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Type of relationship between service organization and its customers Type of relationship between service organization and its customers Type of relationship between service organization and its customers Type of relationship between service organization and its customers


ContinuousContinuousContinuousContinuousdeliverydeliverydeliverydelivery

InsuranceTelephone subscriptionBankingSocial Networks

Radio stationPolice protectionSearch EnginePublic highway

Discrete Discrete Discrete Discrete transactionstransactionstransactionstransactions

Transit pass

Theater series tickets

Airline frequent flyer

Toll highwayCar rentalCinemaRestaurant

Na

ture

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Na

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Classification of Services (Example)

• Examples: relationship with customers

„Membership‰ „Membership‰ „Membership‰ „Membership‰ relationshiprelationshiprelationshiprelationship

NoNoNoNo formal relationshipformal relationshipformal relationshipformal relationship

ContinuousContinuousContinuousContinuous

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atu

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Na

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Type of relationship between service organization and its customers Type of relationship between service organization and its customers Type of relationship between service organization and its customers Type of relationship between service organization and its customers


deliverydeliverydeliverydelivery

Discrete Discrete Discrete Discrete transactionstransactionstransactionstransactionsN

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• Method of service delivery

Single siteSingle siteSingle siteSingle site Multiple sitesMultiple sitesMultiple sitesMultiple sites

Customer travels to Customer travels to Customer travels to Customer travels to serviceserviceserviceservice firmfirmfirmfirm

Theater Bus serviceFast-food chain

Na

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Availability of service outletsAvailability of service outletsAvailability of service outletsAvailability of service outlets


serviceserviceserviceservice firmfirmfirmfirm Fast-food chain

Service firmService firmService firmService firm deliversdeliversdeliversdelivers Taxi Mail deliveryOnline retail service

TransactionTransactionTransactionTransaction at armÊs at armÊs at armÊs at armÊs lengthlengthlengthlength

- Telephone company (phone box)Credit card companyN

atu

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Na

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Brainteaser

• YouÂve used diverse services within thepast 3 days. Which was the mostimportant one?

• Classify this service according to theclassification of services by Lovelock

10 10 10 10 MinutesMinutesMinutesMinutes


classification of services by Lovelock (1983): (a) nature of service act, (b) relationship with customers and (c) method of service delivery.

• Explain it to your neighbour!

Service Systems

„A service system (Chesbrough & Spohrer, 2006; Spohrer et al., 2008) has been defined as a network of providers and clients co-producing value through service performances.‰ (Banavar et al., 2010)

„Broadly, a service system (Spohrer et al., 2007) or service world (Bryson et al., 2004) is a complex adaptive system of people, and technologies working


2004) is a complex adaptive system of people, and technologies working together to create value for its constituents.‰ (Chew, 2010)

„Service systems, which form a growing proportion of the world economy, are dynamic configurations of people, technologies, organisations and shared information, creating and delivering value to customers, providers and other stakeholders (Spohrer et al., 2007).‰ (Spohrer et al., 2010)

The Logic Behind⁄

• ServiceServiceServiceService----dominant dominant dominant dominant logiclogiclogiclogic (S-D logic) (Vargo & Lusch, 2004) = service-centeredalternative to traditional goods-centered paradigm (Goods-Dominant Logic) fordescribing economic exchange and value creation (Fitzsimmons & Fitzsimmons, 2011; Grönroos, 1990)

PrePrePrePre----1900 1900 1900 1900 Goods-Centered Model of Exchange

(Concepts: tangibles, statics, discrete transactions, and operand

resources) (Smith, 1904)

TwentyTwentyTwentyTwenty----first Centuryfirst Centuryfirst Centuryfirst CenturyService-Centered Model of Exchange(Concepts: intangibles, competences,dynamics, exchange processes and

relationships, and operant resources)


• S-D logic bases on premise that servicesservicesservicesservices – i.e. the application of competences forthe benefit of another – are the fundamental fundamental fundamental fundamental basisbasisbasisbasis ofofofof exchangeexchangeexchangeexchange (Vargo et al., 2010)

• Operand Operand Operand Operand resourcesresourcesresourcesresources are static in nature whereas operant operant operant operant resourcesresourcesresourcesresources can berejuvenated, replenished, and newly created, thus dynamic in nature.

• Operand and operant resources do not have ıvalue„ per se - valuevaluevaluevalue isisisis cocococo----createdcreatedcreatedcreated withwithwithwithcustomerscustomerscustomerscustomers whenwhenwhenwhen resourcesresourcesresourcesresources areareareare usedusedusedused (Edvardsson et al., 2010)

• S-D logic considers serviceserviceserviceservice asasasas a a a a processprocessprocessprocess, rather than a unit of output (good) (Vargo& Lusch, 2008)

resources) (Smith, 1904) relationships, and operant resources)

Service-Dominant Logic

• 10 foundational premises (Vargo & Akaka, 2009; Fitzsimmons & Fitzsimmons, 2011)(1) ServiceServiceServiceService is the fundamental basisbasisbasisbasis ofofofof exchangeexchangeexchangeexchange - application of

operant resources (knowledge and skills) = ıservice„ is basis forall exchange.

(2) IndirectIndirectIndirectIndirect exchangeexchangeexchangeexchange masksmasksmasksmasks the fundamental basisbasisbasisbasis ofofofof exchangeexchangeexchangeexchange, i.e., goods, money etc. mask the service-for-service nature of


i.e., goods, money etc. mask the service-for-service nature ofexchange.

(3) GoodsGoodsGoodsGoods are distributiondistributiondistributiondistribution mechanismsmechanismsmechanismsmechanisms for service provision, i.e., goods derive their value through use - the service they provide.

(4) Operant Operant Operant Operant resourcesresourcesresourcesresources are the fundamental fundamental fundamental fundamental sourcesourcesourcesource of competitiveadvantage.

(5) All All All All economieseconomieseconomieseconomies are serviceserviceserviceservice economieseconomieseconomieseconomies.

Service-Dominant Logic

(6) The customercustomercustomercustomer is always a cocococo----creatorcreatorcreatorcreator ofofofof valuevaluevaluevalue, i.e., value creation isinteractional.

(7) The enterpriseenterpriseenterpriseenterprise cannotcannotcannotcannot deliverdeliverdeliverdeliver valuevaluevaluevalue ((((alonealonealonealone)))), but only offer valuepropositions.

(8) A serviceserviceserviceservice----centeredcenteredcenteredcentered viewviewviewview is inherently customercustomercustomercustomer----orientedorientedorientedoriented andrelationalrelationalrelationalrelational, because service is customer-determined and co-created.


relationalrelationalrelationalrelational, because service is customer-determined and co-created.

(9) All economiceconomiceconomiceconomic andandandand socialsocialsocialsocial actorsactorsactorsactors are resourceresourceresourceresource integratorsintegratorsintegratorsintegrators, i.e. valuecreation based on networks of networks.

(10) ValueValueValueValue is always uniquelyuniquelyuniquelyuniquely and phenomenologicallyphenomenologicallyphenomenologicallyphenomenologically determineddetermineddetermineddetermined bythe beneficiarybeneficiarybeneficiarybeneficiary, i.e., each customer determined the value of a service based on personal needs at a specific time in a context asan experience.

Value to Customers

• „To win the service game the value proposition must consistently meet the customer expectations and behavioral needs (Schneider & Bowen, 1995).‰ (Chew, 2010)

• „Customer experience is a combined result of what is offered (i.e. function and outcome of the product or service) and how it is offered (i.e. process of usage, context of use, and emotional components of interaction; Patricio et al., 2008).‰ (Chew, 2010)


al., 2008).‰ (Chew, 2010)

• Value to Customers =

• People (customers, employees, and managers) = prominent key to success in service - promoting service excellence and innovation requires an understanding of the co-creation of value by and for people (Schneider & Bowen, 2010)

(Results + Quality of the Customer Experience)--------------------------------------------------------------

(Price + Access Costs)

(Heskett & Sasser, 2010)

Value to Customers

• Unique view of service organizations based on 3 tiers: customer tier, boundary tier, and coordination tier (Schneider & Bowen, 1995)

1. Customer tier = expectations for quality and needs; emphasis on customer needs for security, esteem and justice

a. Meeting customer expectations

b. Respecting customer needs

c. Utilizing customer talents


2. Boundary tier = interface between customers and a service delivery firm including people, equipment/technology, physical space

a. Managing personal contact through hiring and training

b. Managing personal contact through reward systems

c. Managing nonpersonal contact with a personal touch

3. Coordination tier = weaving together the various parties and elements of service, not controlling or managing them, per se

a. Designing a customer-focused service system

b. Creating a service culture

Literature

Books:• Bryson, J. R., Daniels, P. W. and Warf, B. Service Worlds: People, Organizations, Technologies, Routledge, London,

2004.

• Fitzsimmons, J. A. and Fitzsimmons, M. J. Service Management - Operations, Strategy, Information Technology, McGraw - Hill, 2011.

• Grönroos, C. Service Management and Marketing, John Wiley & Sons, Ltd, 1990.

• Lovelock, C., Writz, J. and Chatterjee, J. Services Marketing: People, Technology, Strategy, Pearson Education Ltd., New Jersey, 2006.

• Machlup, F. The Production and Distribution of Knowledge in the United States, Princeton University Press, 1962.

• Porat, M. U. and Rubin, M. R. The information economy, Office of Telecommunications Special Publication 77-12, 1977.


1977.

Papers:• Arnould, E. J. "Service-dominant logic and resource theory," Journal of the Academy of Marketing Science (36:1),

2008, pp. 21--24.

• Banavar, G., Hartman, A. and Ramaswamy, L. "A Formal Model of Service Delivery"'Handbook of Service Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James C., 2010.

• Chesbrough, H. and Spohrer, J. "A research manifesto for services science," Commun. ACM (49), 2006, pp. 35·40.

• Chew, E. K. "A Reflection From Telecommunications Service Perspective"'Handbook of Service Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James C., 2010.

• Edvardsson, B., Gustafsson, A., Kristensson, P. and Witell, L. "Service Innovation and Customer Co-Development"'Handbook of Service Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James C., 2010.

Literature

• Heskett, J. L. and W. Earl Sasser, J. "The Service Profit Chain - From Satisfaction to Ownership"'Handbook of Service Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James C., 2010.

• Karmarkar, U. S. "The Industrialization of Information Services"'Handbook of Service Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James C., 2010.

• Lovelock, C. H. "Classifying Services to Gain Strategic Marketing Insights," The Journal of Marketing (47:3), 1983, pp. 9·20.

• Patrício, L., Fisk, R. P. and e Cunha, J. F. "Designing Multi-Interface Service Experiences - The Service Experience Blueprint," Journal of Service Research (10), 2008, pp. 318 – 334.

• Schmenner, R. W. "How Can Service Businesses Survive and Prosper?," Sloan Management Review (27:3), 1986.

• Schneider, B. and Bowen, D. E. "Winning the Service Game"'Handbook of Service Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James C., 2010.

• Spohrer, J., Maglio, P. P., Bailey, J. and Gruhl, D. "Steps Toward a Science of Service Systems," Computer (40), 2007, pp. 71·77.


• Spohrer, J., Vargo, S. L., Caswell, N. and Maglio, P. P. "The Service System is the Basic Abstraction of Service Science"'Proceedings of the Hawaiian international conference on systems science (HICSS-2008)', 2008.

• Spohrer, J. C., Gregory, M. and Ren, G. "The Cambridge-IBM SSME White Paper Revisited" 'Handbook of Service Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James C., 2010.

• Vargo, S. L. and Akaka, M. A. "Service-Dominant Logic as a Foundation for Service Science: Clarifications," Service Science(1:1), 2009, pp. 32·41.

• Vargo, S. L. and Lusch, R. F. "From goods to service(s): Divergences and convergences of logics," Industrial Marketing Management (37:3), 2008, pp. 254·259.

• Vargo, S. L. and Lusch, R. F. "Evolving to a New Dominant Logic for Marketing," Journal of Marketing (68:1), 2004, pp. 1--17.

• Vargo, S. L., Lusch, R. F. and Akaka, M. A. "Advancing Service Science with Service-Dominant Logic - Clarifications and Conceptual Development" 'Handbook of Service Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James C., 2010.



Chair in Information and Service SystemsSaarland University, Germany

service management – introduction -...

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