ISM 270

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ISM 270

• Service Engineering and Management
• Lecture 3 Technology in Services

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Announcements

• Homework 1 due today
• Homework 2 due next week 1/31

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Todays Lecture

• Role of Technology in Services, especially in new
  service development
• Dr Charles Ng, Demandtec

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Discussion

• Name an Internet site you believe will be
  successful in the long run - explain why.

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Technology in Service
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What roles can technology play?
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Role of Technology in the Service Encounter
 

Technology
Technology
Technology
Customer
Customer
Server
Server
Server
Customer
A. Technology-Free Service Encounter
B. Technology-Assisted Service Encounter
C. Technology-Facilitated Service Encounter
Technology
Technology
Server  
Server  
Customer
Customer
D. Technology-Mediated Service Encounter
E. Technology-Generated Service Encounter
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Technology has led to the Evolution of
Self-service
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Self-service Technologies (SST)

• Does customer adoption of self-service follow a
  predictable pattern?
• How do we measure self-service quality (e.g.,
  ease of use, enjoyment, and/or control)?
• What is the optimal mix of SST and personal
  service for a service delivery system?
• How do we achieve continuous improvement when
  using SST?
• What are the limits of self-service given the
  loss of human interaction?

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Self-Service examples

• Airline industry

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Technology has led to service automation

• Fixed-sequence (F) - parking lot gate
• Variable-sequence (V) - ATM
• Playback (P) - answering machine
• Numerical controlled (N) - animation
• Intelligent (I) - autopilot
• Expert system (E) - medical diagnosis
• Totally automated system (T) - EFT

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Technology has led to a variety of services
available via the web

• A retail channel (Amazon.com)
• Supplemental channel (Barnes Nobel)
• Technical support (Dell Computer)
• Embellish existing service (HBS Press)
• Order processing (Delta Airline)
• Convey information (Kelly Blue Book)
• Organization membership (POMS.org)
• Games (Treeloot.com)

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Several technologies needed to converge to bring
E-Business

• Internet
• Global telephone system
• Communications standard TCP/IP (Transfer Control
  Protocol/Internet Protocol)
• Addressing system of URLs
• Personal computers and cable TV
• Customer databases
• Sound and graphics
• User-friendly free browser

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E-Business has led to multiple business
models(Weill Vitale, Place to Space, HBS
Press, 2001)

• Content Provider Reuters
• Direct to Customer Dell
• Full-Service Provider GE Supply Co.
• Intermediary eBay
• Shared Infrastructure SABRE
• Value Net Integrator 7-Eleven Japan
• Virtual Community Monster.com
• Whole-of-Enterprise Government

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Economics of E-Business

• Sources of Revenue- Transaction fees-
  Information and advice- Fees for services and
  commissions- Advertising and listing fees
• Ownership- Customer relationship- Customer
  data- Customer transaction

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Electronic vs. Traditional Services
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Grocery Shopping Comparison
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Economics of Scalability
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E-Business Supply Chain (Network) Elements

• Major entities including firm of interest and its
  customers, suppliers, and allies
• Major flows of product, information, and money
• Revenues and other benefits each participant
  receives
• Critical aspects participants, relationships,
  and flows
• Example 7-Eleven Japan

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Japanese 7-Eleven

• Read case in text
• (p103, 6th edition, p122 5th edition)

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(No Transcript)
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Evolution of B2C E-Commerce in Japan

• What features of the 7-Eleven Japan distribution
  system illustrate the Value Net Integrator
  e-business model?
• Does the 7-Eleven Japan distribution system
  exhibit scalability economics?
• How does the 7-Eleven example of B2C e-commerce
  in Japan illustrate the impact of culture on
  service system design?
• Will the 7-Eleven Konbini and Mobile system be
  adopted in the United States?

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New Service Development
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Video
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Levels of Service Innovation

• Radical Innovations
• Major Innovation new service driven by
  information and computer based technology
• Start-up Business new service for existing
  market
• New Services for the Market Presently Served new
  services to customers of an organization
• Incremental Innovations
• Service Line Extensions augmentation of existing
  service line (e.g. new menu items)
• Service Improvements changes in features of
  currently offered service
• Style Changes modest visible changes in
  appearances

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Technology Driven Service Innovation

• Power/energy - International flights with jet
  aircraft
• Physical design - Enclosed sports stadiums
• Materials - Astroturf
• Methods - JIT and TQM
• Information - E-commerce using the Internet

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Service Design Elements

• Structural- Delivery system- Facility design-
  Location- Capacity planning
• Managerial- Service encounter- Quality-
  Managing capacity and demand- Information

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New Service Development Cycle

• Full-scale launch
• Post-launch review

Full Launch
Development
Enablers

• Formulation
• of new services
• objective / strategy
• Idea generation
• and screening
• Concept
• development and
• testing

People
Organizational Context
Teams

• Service design
• and testing
• Process and system
• design and testing
• Marketing program
• design and testing
• Personnel training
• Service testing and
• pilot run
• Test marketing

Product
Technology
Systems
Tools
Analysis
Design

• Business analysis
• Project authorization

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Service Blueprint of Luxury Hotel
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Strategic Positioning Through Process Structure

• Degree of Complexity Measured by the number of
  steps in the service blueprint. For example a
  clinic is less complex than a general hospital.
• Degree of Divergence Amount of discretion
  permitted the server to customize the service.
  For example the activities of an attorney
  contrasted with those of a paralegal.

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Structural Alternatives for a Restaurant

TAKE RESERVATION SEAT GUESTS, GIVE MENUS SERVE
WATER AND BREAD TAKE ORDERS PREPARE ORDERS Salad
(4 choices) Entree (15 choices) Dessert (6
choices) Beverage (6 choices) SERVE
ORDERS COLLECT PAYMENT
LOWER COMPLEXITY/DIVERGENCE
CURRENT PROCESS HIGHER
COMPLEXITY/DIVERGENCE
No Reservations Self-seating. Menu on
Blackboard Eliminate Customer Fills Out
Form Pre-prepared No Choice Limit to Four
Choices Sundae Bar Self-service Coffee, Tea,
Milk only Serve Salad Entree Together Bill and
Beverage Together Cash only Pay when Leaving
Specific Table Selection Recite Menu Describe
Entrees Specials Assortment of Hot Breads and
Hors Doeuvres At table. Taken Personally by
Maltre d Individually Prepared at
table Expand to 20 Choices Add Flaming
Dishes Bone Fish at Table Prepare Sauces at
Table Expand to 12 Choices Add Exotic Coffees
Sherbet between Courses Hand Grind
Pepper Choice of Payment. Including House
Accounts Serve Mints
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Taxonomy of Service Processes

• 
  Low divergence
  High divergence
• 
  (standardized service)
  (customized service)
• 
  Processing Processing Processing
  Processing Processing Processing
• of
  goods Information of people
  of goods Information of people
• Dry
  Check
  Auto repair Computer
• No Cleaning
  processing
  Tailoring a programming
• Customer Restocking
  Billing for a
  suit Designing a
• Contact a vending
  credit card
  building
• 
  machine
• 
  Ordering
  Supervision
• Indirect
  groceries
  of a landing
• customer
  from a home
  by an air
• contact
  computer
  controller
• 
  
  
• No Operating
  Withdrawing Operating Sampling
  Documenting Driving a
• customer- a vending
  cash from an elevator food at
  a medical rental car

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Generic Approaches to Service Design

• Production-line
• Limit Discretion of Personnel
• Division of Labor
• Substitute Technology for People
• Standardize the Service
• Customer as Coproducer Self Service
  Smoothing Service Demand
• Customer Contact Degree of Customer Contact
  Separation of High and Low Contact Operations
• Information Empowerment Employee
• Customer

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Customer Value Equation
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Amazon.com

• Discussion
• What were / are the key drivers of success?
• What role has technology played?

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Discussion

• Name
• An existing service that could be improved by new
  technology
• A new service that could be introduced if new
  technology were developed
• A technology that hasnt yet converged to a
  service

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Aside Transportation and Location Problems

• Appear frequently in service design
• Homework 2 has an example

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Clarke-Wright for homework 2

• Traveling Salesman-type problems very common in
  services
• Delivery of goods
• Mail routes
• Sales tour
• Standard problem
• Given the distance between each city pair, visit
  all N cities in some order, ending back at the
  base
• Objective Minimize total distance traveled

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Traveling salesman

• Standard problem is very difficult to solve (NP
  complete)
• We will use the Clarke-Wright Algorithm (page 499
  of text)
• C-W algorithm intuition
• Start with the path that returns to base between
  every node
• Add links between nodes instead of returning in
  order of distance gained
• Stop when no gain can be made
• Note This is a good heuristic
• Performs well in practice, but not guaranteed to
  find the best solution.

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Next Week

• Service Quality
• Frank Tung

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Charles Ng

• Optimization Engineer, DemandTec
• Previously Vivecon Corporation, a startup in
  supply chain analytics. 
• Ph.D. Stanford 2004 Management Science and
  Engineering
• Visiting researcher University of Geneva
• Researcher, International Institute of Applied
  Systems Analyses