Service Operations Management: The total experience SECOND EDITION

1. Service Operations Management: The total experienceSECOND EDITION Chapter Eleven Pursuit of Simplicity in Service Operations

2. Complexity and Growth Typically, when an organization expands its service offering, there is a consequential increase in risks and associated overheads The net result is that not all the service offering bring a financial return or a profit. Pareto analysis often shows that if hidden costs are properly accounted for, up to 80 per cent of services are not directly contributing to the bottom-line. Complexity is invariably borne of expansion and the desire to increase the customer base and market share.

3. Fig. 11.1 Implications of service growth

4. Organizational Growing Pains • In particular it can be seen that as a business grows, and invariably information proliferates, the management approach includes: • tight control procedures to regulate processes • hierarchical reporting structures to establish order • increased controls to reduce perceived risks • problem solving through reductionist, activity-breakdown and allocation to a specific accountable person • and, an intrinsic slowness to deal with issues.

5. Evidence of Complexity • This complexity is manifest in various business elements: • Services and customer proliferation in the search for sales revenue growth • Service complexity to make it more difficult for competitors to follow or in some cases for customers to follow (e.g., ABC Learning) • Supplier proliferation in the search for low cost inputs to the business e.g., low level of wages • Complex organization structures and decision-making processes • Highly educated employees looking for complexity because they like it • Employees seeking to secure their own positions by making their jobs more complex so that others will not be able to do them • Information management systems that provide increasing detail because they are now technologically able to do so • Business processes that are regularly ‘enhanced’ by new managers to be increasingly sophisticated and capable

6. Fig.11.2 Relationship between complexity and management systems

7. Fig.11.3 Case examples: complexity and management systems

8. Ease of doing business Such is the importance of global economics and associated ‘ease of doing business’ between countries, that the World Bank[undertakes regular surveys and assessment of how difficult (complex) it is to carry out a range of business activities and establish an off-shore presence. Some 183 countries are surveyed against criteria such as: • Protecting Investors • Paying Taxes • Trading Across Borders • Enforcing Contracts • Closing a Business • Starting a business • Dealing with construction permits • Employing workers • Registering Property • Getting Credit

9. Table 11.1 Ease of Doing Business Ranking 2016 [Abreviated version] [Source: www.doingbusiness.org World Bank]

10. Simplification in response to complexity These service organizations have gained new insights, specifically: • An understanding of the main business processes and the main constraints as they impact on value to customers • An understanding of the contribution to profitability of different types of services the business offers • Need for problem-solving at the source • Information systems that help provide understanding of profitability and the key business processes • Income Statement and Balance Sheet that show the health of the business but do not point to how to improve it.

11. Fig.11.4 Performance analysis [Adapted from: IBM, Capitalising on Complexity, 2010]

12. IBM Interviews • The vast majority of CEOs anticipate even greater complexity in the future, and more than half doubt their ability to manage it. • CEOs stated that creativity is the most important leadership quality. Creative leaders encourage experimentation throughout their organizations. • The most successful organizations co-create services with customers, and integrate customers into core processes. They adopt new channels to engage and stay in tune with customers, and glean more intelligence from the barrage of available data to make customer intimacy their number-one priority. • Better performers manage complexity on behalf of their organizations, customers and partners. They do so by simplifying operations and products, and increasing dexterity to change the way they work, access resources and enter markets around the world. Dexterous leaders expect to generate 20 percent more of their future revenues from new sources than other CEOs.

13. Removing complexity and barriers to service operations excellence • Most common obstacles are: • lack of senior-level leadership and substantive involvement by top management in the initiative • unreliable methods for integrating service quality with business planning and not involving all employees in the change effort. • too little investment in support systems to sustain the effort. • focus on designing policies and procedures for the convenience of internal departments rather than the customer's benefit with resultant complexity.

14. E.N.E.R.G.I.S.E. • Enlightenment – once a high-priority barrier to service excellence has been identified and selected for elimination, there must be clear definition of the issue and a deep understanding of its impact on customer satisfaction. • Now situation– report on the current process, collect comprehensive. • Examine - to identify and gain an understanding of all probable causes, choose the most likely causes based on facts and data, and then select cause(s) - root cause analysis is highly beneficial in this phase. • Reality check- this activity requires the development of a list of possible improvements, and then selects preferred options. • Grounding - design a limited test of the planned improvement. • Indices - measure and evaluate the results in terms of the goals of the pilot, and compare also with pre-pilot data. • Evaluate – Appraise the improvement and prepare documentation of the new, more reliable process.

15. Support Systems Project-based management Communications Rewards and Recognition Measurements Continuous change culture

16. Customer emotions Over the past decade there has been a shift of emphasis in the psychology of customer care - 'comforting' and 'cosseting' are giving way to approaches based on 'engaging' and 'enabling' the customer. Past ideas are based on the psychological concept of the customer as a more or less passive consumer whose role is external to the supplying organization. More recently, a new perspective is recognised as giving a greater explanation to current market conditions and attitudes and emotions of customers.

17. Fig. 11.5 Historical view of service operations

18. Fig. 11.6 Current view of service operations

19. Fulfilling customer emotions The new psychology of emotional awareness includes recognition of the customer as a resource. Thus, as 'co-partner' the customer shares responsibility for levels of care; as 'supplier of information' the customer makes various contributions to the desired outputs; as 'change-driver', to the values, the customer informs what is required, and as ‘experience shaper’ the customer takes a lead role.

20. Customer-value management • Customer-value management expects building processes and mechanisms that will: • get closer to the customer • understand evolving needs and expectations • how to be customer-driven • gain perceived quality and value relative to competitors • get closer to the market (customers and competitors' customers) than your competitors do • using customer value analysis to view performance versus competitors as customers do • understanding clearly why orders are won or lost (and to whom) • being market-driven • alignment of the entire organization with the needs of the market