Towards a Classification of Service Processes Paper #2

1. Towards a Classification of Service Processes Paper #2 Authors: Rhian Silvestro Lin Fitzgerald Robert Johnston Christopher Voss

2. Purpose/Objective • To understand the 11 for-profit UK company’s “competitive strategies and the nature of the service processes and the consequent tasks and challenges encountered by service managers”. • Look at the data gathered by the 11 companies and… • Rank them by the volume of customer on a typical day • Determine if there are any similar features between the service organizations who have relatively comparable amounts of customers. • Organize these clusters into categories that allow services to be studied better.

3. Previous Work 1. Schmenner R. “How Can Service Businesses Survive and Prosper?”, Sloan Management Review, Spring 1986, pg. 21-32. • Manufacturers have been unified by certain terminology connecting “generic production processes”. • This shows that not all manufacturers face completely unique problems, some can be classified together. • This has also led the way to easily organizing manufacturing into the educational system. • Developed the continuum of mechanistic/organic operations from the degree of customization and interaction of the server and customer. 2. Lovelock, C.H. “Classifying Service to Gain Strategic Marketing Insights.” Journal of Marketing, Vol. 47, Summer 1983, pages 9-20. • “Service industries remain dominant by an operations orientation that insists each industry is different.” Lovelock. • This idea has limited the education and communication between different service industries.

4. Previous Work • 3. Hill, T. Manufacturing Strategy: The Strategic Management of the Manufacturing Function, Macmillan, London, 1985. • Adds 9 more service characteristics to the original 5. • Original 5: Project, Jobbing, Batch, Line, and Continuous Process Operations. • Additional 9: • Product range • Customer order size • Degree of product change accommodated • Ability of operations to cope with new developments • Orientation of innovation • Performance criterion • Nature of the process technology • Number and expense of set-ups • Control of quality

5. Previous Work • 4. Sasser, W.E., Management of Service Organizations, Allyn and Bacon, Boston 1982. • Claimed that you were able to transfer the manufacturing characteristics onto the service industry. • 5. Thomas, D.R.E., “Strategy is Different in Service Businesses”, Harvard Business Review, Vol. 53, No. 4, July-August 1975, pages 158-65. • and • Kolter, P., Principles of Marketing, Prentice-Hall International, Inglewood Cliffs, NJ, 1980. • Noted the difference between equipment-based (airlines, vending machines) and people-based services (appliance repair, management consultants).

6. Previous Work • 6. Chase, R.B., “The Customer Contact Approach to Services: Theoretic Bases and Practical Extensions”, Operations Research, Vol. 29, No. 4, 1981. • Suggested classifying services along a continuum based on the length of time the customer is in contact with the service (high to low). • Says the service measures will vary greatly given the different on the continuum. • 7. Maister, D. and Lovelock, C.H., “Managing Facilitator Services”, Sloan Management Review, Summer 1982, pages 19-31. • Adds service customization and front/back office value added to Chase’s service classification. • Says that there is a 4 way customization matrix:

7. Previous Work • 8. Haynes, R.M., “Service Topologies: A Transaction Modeling Approach”, International Journal of Service Industry Management, Vol. 1, No. 1, 1990. • Used the previous works of Schmenner and Schostack, to create a 2x2 matrix with one axis denoting operational complexity, and the other the degree to which the operation is mechanistic or organic. • The term “complexity” was not clearly defined in any of the three authors’ pieces.

8. Methods • 11 for-profit UK service organizations were studied: • Interviews were conducted with the management and staff. • The company’s documentation and information flows were studied. • Data was also used from case studies.

9. Variable Definitions • Contact time: the length of time the customer contact time per transaction. • High customer contact: the customer spend hour, days, or weeks in the service system, per transaction. • Low customer contact: contact with the service system is just a few minutes per transaction. • Equipment/People Focus: • Equipment-focused services: certain equipment is the core element in the service delivery • People-Focused Services: the contact staff is the core element in the service delivery. • Degree of Customization: • High degree: the service process can be adapted to suit the specific needs of individual customers. • Low degree: there is a non-varying degree of standardization, (may be offered many routes, but the availability of the route may be predetermined).

10. Variable Definitions • Value added back office/front office: • Back-office-oriented service: the proportion of front office (customer contact staff) to the total staff is small. • Front-office-oriented service: the proportion of front office staff to total staff is large. • Degree of Discretion: • High: front office personnel can exercise judgment in altering the service packages or process without referring to a supervisor. • Low: changes to the service packages or process can only be made with the authorization of the supervisor. • Product/Process focus: • Product oriented service: the emphasis is on what the customer buys. • Process oriented service: the emphasis is on how the service is delivered to the customer.

11. The 11 companies were than ranked from 1 being the lowest volume of customers to 11 being the highest volume of customers.

12. The companies were then defined on the remaining 5 dimensions.

13. Results • As the number of customers processed per day increased the trend showed that: • Focus moves from a people to an equipment orientation • Length of contact time moves from high to low • Degree of customization moves from high to low • Level of employee discretion moves from high to low • Value added moves from front office to back office (the focus moves from a process to a product orientation)

14. Results People Focus (Low number of customers) Equipment Focus (High number of customers

15. Results • Three service categories can then be developed: Professional Service Shops Mass Services

16. Conclusion • Professional Services: • Very few transactions • highly customized • process-oriented • Relatively long contact time • Most value added in the front office • considerable judgment is applied in meeting customer needs. • Mass Services: • Many customer transactions • Limited contact time • Little customization • Mostly product-oriented • Most value added in the back office • Little judgment applied by the front office staff • Service Shops: • Falls between the two extremes