Towards a Theory of Service Improvisation Competence

1. Towards a Theory of Service Improvisation Competence Enrico Secchi Ph.D. Candidate, Clemson University Aleda V. Roth Burlington Industries Distinguished Professor of Supply Chain Management, Clemson University The Art & Science of Service 8-10 June 2011, IBM Research – Almaden San Jose, California

2. Service Improvisation CompetenceTM The aggregate ability of the firms’ employees to deviate from established service processes in order to timely respond to unanticipated events, using the available resources. The Art & Science of Service 2011 San Jose, California

3. Research Goal The purpose of this research is threefold: • Define the meaning and role of improvisation in a service context; • Develop a set of service delivery system design choices that create the ability to improvise (Service Improvisation Competence); • Investigate the effectiveness of the development of a Service Improvisation Competence in managing variability in service systems. The Art & Science of Service 2011 San Jose, California

4. Agenda • Variability in Service Systems • Definition of Service Improvisation Competence (SIC) • Antecedents of Service Improvisation Competence • Outcomes of Service Improvisation Competence • Conclusions The Art & Science of Service 2011 San Jose, California

5. Customer-Induced Variability • Customers introduce variation in service systems (Berry 1980, Chase and Tansik 1983, Frei 2006) • The management of such variability significantly impacts service outcomes (Bitner, Booms, and Tetreault 1990) • Two approaches to variability management in service operations: The Art & Science of Service 2011 San Jose, California

6. Managing Customer-Induced Variability:Variability-Reduction Approach Variation in Service Processes Customer Requests/Expectations Service Delivery System Reduce Customer Choice (Frei 2006) Standardize Processes (Levitt 1976; Shostack, 1984) Decouple Front and Back Office (Chase 1981; Chase and Tansik 1983) The Art & Science of Service 2011 San Jose, California

7. Problems with Variability Reduction Feasibility Effectiveness A decrease in variance can convey the feeling of a less personalized service (John et al. 2006) Standardization can detract from the feeling of authenticity essential in many face to face services • Reducing customer choices can be feasible only up to some point (without loosing competitiveness) • The customer might require a significant amount of face-to-face time The Art & Science of Service 2011 San Jose, California

8. Managing Customer-Induced Variability: Adapting to Variability SDS Responses D: Set of disturbances := d1, d2,… R: Set of responses := r1, r2,… To achieve a satisfactory outcome, the set of responses has to be as large as the set of disturbances Customer-Induced Variability The Law of Requisite Variety suggests that “only variety in R can force down variety due to D; variety can destroy variety” (Ashby 1956, p.207). The Art & Science of Service 2011 San Jose, California

9. The Role of Improvisation • The ability to deviate from established processes and routines can provide an efficient and effective way to multiply the set of responses in high-contact services: • The use of improvisation reduces the need for detailed contingency planning, therefore avoiding the potential waste involved in excessive planning (John, Grove, and Fisk 2005) • The use of improvisation allows for the delivery of a more personalized and authentic service experience (Victorino, Verma, and Wardell 2008) These benefits are contingent on the other elements that characterize the service offering, such as the service concept and the target market The Art & Science of Service 2011 San Jose, California

10. A brief background of Organizational Improvisation • The idea of organizational improvisation was first advanced as a useful metaphor to understand coordination and adaptation within organizations (Barrett and Peplowski 1998; Moorman and Miner 1998; Weick 1998) • Research moved beyond the analogy with Jazz music and theater, and characterized as a distinct organizational phenomenon (Crossan and Sorrenti 2002; Kamoche et al. 2003; Vera and Crossan 2005) • The concept of organizational improvisation is closely linked to the distinction between planned and realized strategies (Mintzberg 1978, 1994; Brown and Eisenhardt 1997). The Art & Science of Service 2011 San Jose, California

11. Definitions of Organizational Improvisation The Art & Science of Service 2011 San Jose, California

12. Designing Service Improvisation Competence • Given the relevance of the theatrical aspect of experiential services to our research, we adopt Voss, Roth, and Chase’s (2008) terminology, and refer to design choices as follows: • Stageware choices concern the physical appearance and layout of the service environment (structural choices) • Orgware choices concern management systems and organizational policies (infrastructural choices) • Linkware choices concern communication and information exchange systems (integration choices) • Customerware choices concern when and how the customer encounter takes place The Art & Science of Service 2011 San Jose, California

13. Stageware The physical environment of services has been recognized as an important driver of service operations effectiveness and outcomes (Bitner 1992; Grove and Fisk 1992) Ability to evaluate System State SIC Availability and Accessibility of Resources Proposition 1. The design of an operating environment that is accessible and transparent increases the relative degree of SIC. The Art & Science of Service 2011 San Jose, California

14. Orgware In order to provide employees with the freedom and correct incentives to improvise, the orgware should be designed to encourage trial and error activities and provide employees with the knowledge and freedom to make judgment calls (Hartline and Ferrel 1996, Weick 1998) Empowerment Problem Solving Oriented Incentive Structure SIC Training Hiring for Attitude Proposition 2. Organizational design choices that foster and encourage employee empowerment, provide incentives that stimulate personal initiative, seek employees with a service attitude, and offer the necessary mentoring and training for employees to consciously act on the system increase SIC. The Art & Science of Service 2011 San Jose, California

15. Linkware In order to allow rapid and effective actions, the employees’ cognitive load must be reduced by disseminating relevant information both horizontally and vertically within the organization (Galbraith 1973) Information Exchange Activities SIC Use of Information Systems Proposition 3. Linkware design choices that serve to increase the frequency and quality of vertical and horizontal information exchanges about processes and customers increase SIC The Art & Science of Service 2011 San Jose, California

16. Customerware The literature on organizational improvisation suggests that, in order to allow for improvisation, the service encounter should be based on procedures that are not too complex or binding, referred to as minimal structures (Kamoche et al. 2003; Cunha et al. 2009). Degree of Scripting SIC (-) Proposition 4. Customerware design choices that rely on minimal scripting in the service encounter increase SIC The Art & Science of Service 2011 San Jose, California

17. Outcomes of Service Improvisation Competence • We propose that the ability of the high-contact service employees to respond through improvisation to unexpected events will produce two important outcomes: • Increase customer satisfactionby proactively adapt to customers’ preferences and special requests • Increase the amount of service innovation through a continuous effort to meet customers’ needs which are unfulfilled by the current system, and through experimenting with variations of service delivery processes. The Art & Science of Service 2011 San Jose, California

18. Customer Satisfaction In high-touch service systems, the ability to accommodate each individual customer request can be an important differentiator. Service Concept SIC Customer Satisfaction Proposition 5a. The development of a Service Improvisation Competence increases customer satisfaction. Proposition 5b. The relationship between SIC and customer satisfaction is moderated by the characteristics of the service concept (e.g. customization, experiential content). The Art & Science of Service 2011 San Jose, California

19. Service Innovation The use of improvisation will increase the frequency by which new ideas and solutions are found (Eisenhardt and Tabrizi, 1995; Miner et al., 2001; Bansler and Havn, 2003). However, the amount of innovations will depend on the presence of systems to retain the newfound solutions (Miner et al., 2001). Feedback Mechanisms SIC Service Innovation Proposition 6a. The development of a Service Improvisation Competence increases the frequency in number of service innovations. Proposition 6b. The relationship between SIC and service innovations is positively moderated by the presence of systems that allow for the dissemination and retention of successful innovations. The Art & Science of Service 2011 San Jose, California

20. Contributions • With this research, we offer several contributions to the literature and practice of service delivery systems design • We propose SIC as a way to manage customer-induced variability in services, alongside other methods offered by previous service operations literature. • By operationally defining the construct of Service Improvisation Competence, we enrich the understanding of service experiences with the insights that come from the organizational improvisation literature, as well as posing the basis for rigorous empirical analysis. • We build an empirical model that identifies the general characteristics of the service delivery design elements that influence the development of the ability to improvise, as well as its performance oucomes. The Art & Science of Service 2011 San Jose, California

21. Questions? Thank You!