MD254 e-Service Operations Management

1. 1 MD254 e-Service Operations Management Background on Operations Management

2. 2 Overview Evolving views of E-Commerce Changing Competitive Environment Operations Strategy Critical Success Factors

3. Evolving Theories of E-Commerce

4. 4 Evolving Theories Business 2.0 Principle of 2000: MATTER MATTERS LESS “information processing more powerful and cost-effective than moving physical products” “value is found more in intangibles than in tangibles” Criticism Our command over matter now often matters even more Information processing is only a facilitator of this command over matter Real value is often derived through integration of matter and information Business 2.0 Annotated Principle of 2001 HMMM, maybe we were wrong

5. 5

6. 6

7. 7

8. 8 Evolving Theories Business 2.0 Principle of 2000: GROWTH IS ACCELERATED BY THE NETWORK Increasing returns Explosive growth Criticism: Increasing returns have been oversold, and are very difficult to create an e-Service environment for Networks affect growth in a variety of ways: Collaborative Peer-to-Peer can fractionate consumer markets and limit growth and economies Expansion of service-product design variety Business 2.0 Annotated Principle of 2001 OOPS, NETWORK EFFECTS … sprinkled like pixie dust on thousands of business plans

9. 9

10. 10

11. 11 Evolving Theories Business 2.0 Principle of 2000: POWER BALANCE IS SHIFTING IN MARKETS Buyers have new power Sellers have new opportunities Intelligent software will help buyers find the best deal Criticism: We haven’t seen much intelligent software in e-Services yet e-Services still mainly competing on “search and sort” Business 2.0 Annotated Principle of 2001 WELL … MAYBE, but in general, humans are much too lazy to grasp the power

12. 12 Evolving Theories Business 2.0 Principle of 2000: TRANSACTIONS WILL BECOME PERSONALIZED Information is easier to customize than hard goods Criticism (In Agreement) Some types of manufacturing, because of their network technology, directly facilitate customized hard goods Business 2.0 Annotated Principle of 2001 STILL TRUE

13. 13 Evolving Theories Business 2.0 Principle of 2000: IMPULSE BUYING IS KING Every product is available everywhere Impulses to buy no longer separated by physical distance and mental barriers Processes for marketing, sales, and fulfillment are merging Criticism: Stimulus-response is much harder to study and understand Marketing models not sufficient for analyzing hordes of real-time data Personalization technologies need to scale to enterprise level, requiring lots of O.R. Business 2.0 Annotated Principle of 2001 THE JURY IS STILL OUT

14. Evolving Theories Theories that were corrected MATTER MATTERS LESS SPACE/DISTANCE HAS VANISHED GROWTH IS ACCELERATED BY THE NETWORK VALUE RISES EXPONENTIALLY WITH THE MARKET SHARE POWER BALANCE IS SHIFTING IN MARKETS IMPULSE BUYING IS KING The reason why each of these was misinterpreted was largely due to a lack of an understanding of manufacturing, service, and e-service operations issues

15. Modern Strategic Environment Affecting Operations Management

16. Strategic Environment Executive expectations of future business environment Continuous discontinuity (52%) One-time discontinuity, followed by continuous but incremental change (25%)

17. Strategic Environment “Sense and Respond” organization Identifies changing customer needs Identifies new business challenges as they happen Responds to changing needs and challenges quickly and appropriately, before the new opportunities disappear Characterized by … Flexibility Agility Responsiveness Adaptiveness

18. Strategic Environment Old Environment Think Firm-forward Push Forecast (plan) and produce Certainty (if only statistically) New Environment Think Customer-back Pull Sense and respond Certainty of uncertainty

19. Strategic Environment Challenge Matching up various strategies and their implementation so the “fit” together, or are “aligned” or “complement” each other “Fit” or “Alignment” Identify issues in external environment Identifying competitive strategy that responds (“fits”) well to competitive environment Identifying operations strategy that “fits” well with business strategy Identifying IS strategy that “fits” well to operations strategy and business strategy

20. Strategic Environment

21. Operations Strategy

22. Operations Strategy “A Web site is merely another type of operation” (p. 64, E-Commerce Operations Management)

23. Operations Strategy Operating environments Traditional manufacturing Traditional services Internet services/e-Services

24. Operations Strategy Operational responsibilities in each operating environment Manufacturing Goods Services Produce person-to-person services Provide information about service Transform/use a good that facilitates the service Internet services/e-Services Online content + online services Goods Information Offline services

25. Operations Strategy Operations Strategies (in any environment) Cost/Price Quality Flexibility Delivery/Time

26. Operations Strategy Resources available (in any environment) Capital Technology Information People Materials Energy

27. Critical Success Factors

28. Critical Success Factors Tasks within realm of Operations Management increases in e-Services Manufacturing Internally, goods-focused Services Externally focused on customer perceptions e-Services Internal External focus Additional change-oriented and IT-oriented operations tasks

29. Critical Success Factors Transformation process during service delivery Functionality of electronic services Website Phone/PDA/etc. Transactions involving traditional goods and services, and possibly their integration to the electronic services

30. Critical Success Factors Difficulty Each e-Service will have different operational priorities placed upon each of the (goods, services, e-service) involved in the overall service

31. 31 Critical Success Factors Functions of e-Service Operations Management Customer service and support Quality of products and services: Product design Technical infrastructure: Process design Human resources management Forecasting and scheduling Inventory management Supplier management Distribution and logistics Change management Security and disaster recovery management

32. Critical Success Factors Underlying Theme is a Focus on High Quality High quality customer service/support Quality inventory management processes Quality distribution and logistics Quality technical infrastructure Quality supplier relationships Quality of security and disaster recover plans Quality of change management plan

33. Critical Success Factors Quality Motivates Operational Design Build in quality/Design for quality (in product and system) Design system to facilitate monitoring of quality (of product, process, supply chain activities) while the system is up and running Need to be able to quantify what is taking place in your e-Service operations

34. Critical Success Factors Customer as a “Co-Producer” Customers are usually passive recipients of service in many person-to-person service environments In e-Services, the customer becomes an active “co-producer” of the service Customer takes over the roles/activities that would usually be performed by service employee

35. Critical Success Factors Issues of Customer as a “Co-Producer” Since customers will now be performing work like employees, you need to facilitate their ability to do work easily and well Easy to train employees, difficult to train customers Need to design systems both from a “customer co-production” as well as a “customer consumption” perspective Providing customers access to your critical business systems and processes exposes you to your current and future competition New strategic risks

36. Critical Success Factors Inter-Organizational Factors Suppliers’ systems are now linked to your e-service system Their mistakes will affect your quality of service Your customer’s perceptions of quality will be hurt Suppliers might not be hurt Your e-Service system mistakes will affect their ability to serve you They end up shipping incorrect items, or not shipping on time for the promises you make to customers You probably have to cover the costs of correcting problems

37. Summary Evolving views toward e-commerce are taking account of impact operations management has on e-commerce concepts Competitive environment has been changing Operations strategy stays the same, but with additional issues Critical success factors in e-Services change, based upon new issues in e-Service business model