Minder Chen, Ph.D. Professor of MIS CSU Channel Islands Minder.Chen@CSUCI.EDU

1. Service Innovation & Customer Relationship Management: A Process Reengineering Viewpoint Minder Chen, Ph.D. Professor of MIS CSU Channel Islands Minder.Chen@CSUCI.EDU

2. Distinguishing services from goods • A service is a deed, a performance, a process, an effort. • Inseparability • Services are created and consumed at the same time • Services cannot be inventoried • Demand fluctuations cannot be solved by inventory processes • Quality control cannot be achieved before consumption • Consideration: Does the ability to tailor and customize goods to the customers’ demands and preferences mean that these goods also have an inseparability characteristic?

3. Distinguishing services from goods • Heterogeneity • From the client’s perspective, there is typically a wide variation in service offerings: • Personalization of services increases their heterogeneous nature • Perceived quality-of-service varies from one client to the next • Consideration: Can a homogeneous perception of quality due to customer preference idiosyncrasies (or due to customization) also benefit the goods manufacturer?  Standardization vs. Customization/ Personalization

4. Distinguishing services from goods • Perishability Any service capacity that goes unused is perished • Services cannot be stored so that when not used to maximum capacity the service provider is losing opportunities. (No inventory) • Service capability estimation and planning as well as pricing via revenue management are key aspects for service management • Consideration: Do clients who participate in some service process acquire knowledge which represents part of the stored service’s value? What might the impact be?  Priceline.com

5. Distinguishing services from goods • Intangibility • Services are ideas and concepts that are part of a process  Process mapping • The client typically relies on the service providers’ reputation and the trust they have with them to help predict quality-of-service and make service choices.  WOM Effect • Regulations and governance are means to assuring some acceptable level of quality-of-service (Service-level agreement)  Service performance measure • Consideration: Do most services processes involve some goods?

6. Definition of Innovation • An innovation is the creation and application of a new or significantly improved technology, product/service, process, or business model that is accepted by markets and society. • Adapted from OECD 2005 and Wikipedia. • Innovation applies ideas and new knowledge to the production of goods and services to improve product/service quality and process performance. • UK Design Council http://www.youtube.com/watch?v=2NK0WR2GtFs&feature=watch-vrec http://www.designcouncil.org.uk/Documents/Documents/OurWork/Insight/DesignForInnovation/DesignForInnovation_Dec2011.pdf

7. Formula for True Innovation • America’s advantage, if it continues to have one, will be that it can produce people who are also more creative and imaginative, those who know how to stand at the intersection of the humanities and the sciences. • That is the formula for true innovation, … • Walter Isaacson is the author of “Steve Jobs.” • http://www.nytimes.com/2011/10/30/opinion/sunday/steve-jobss-genius.html?pagewanted=all&_r=0

8. Definition of Reengineering The fundamental rethinking and radical redesign of core business processes to achieve dramatic improvements in critical performance measures such as quality, cost, and cycle time. Source: Adapted from Hammer and Champy, Reengineering the Corporation, 1993

9. Definition of Process • A process is simply a structured, measured set of activities designed to produce a specific output for a particular customers or market. -- Thomas Davenport • Characteristics: • A specific sequencing of work activities across time and place • A beginning and an end (e.g., Marketing is a function not a process.) • Clearly defined inputs and outputs • Customer-focus/customer facing  Service-oriented • How the work is done • Process ownership • Measurable and meaningful performance

10. Industry vs. Services: A Matter of Degree

11. Services: The Front-stage Experience manufacturing

12. In-N-Out Burger http://www.in-n-out.com/menu.asp

14. Japanese teppanyaki cooking: Hibachi-style • Moving the backstage to the frontstage • Dining + Entertaining (Showmanship) • http://www.benihana.com/about/the-benihana-story • http://www.youtube.com/watch?v=P9SUw0ARqwc&feature=related • http://www.youtube.com/watch?v=aX6gUMRqJjA&feature=related • http://www.youtube.com/watch?v=J1LGJ4rKX0g&feature=related • http://www.youtube.com/watch?v=3zATulLPfVc&feature=related • http://en.wikipedia.org/wiki/Teppanyaki

15. Service Layering • Pure service: Legal service, barber shop • IT-enabled Service/Self service: Google for information search, eBay for online auction services, WebMD for online health information, Facebook, Twitter, etc. • IT Services: IT outsourcing service provider (IBM Global Service), on-demand data center (EDS), on-demand computing (IBM) • Service-wrapped IT products: iTune and iPod; GM OnStar (Emergency service + remote diagnosis & sensing + GPS & Navigation) • Manufacturing services: IC design houses, TSMC foundry service • Pure manufacturing: Manufacturing of commodity products Source: Minder Chen, 2007

16. OnStar Service from GM OnStar By GM | OnStar.com, Car Safety Device and Vehicle Security System http://www.onstar.com/us_english/jsp/index.jsp Screen clipping taken: 2007/3/6, 上午07:56

17. iPod and iTune Apple - iPod + iTunes, http://www.apple.com/itunes/, Screen clipping taken: 2007/3/6, 08:02

18. Apple Stores

19. Experience Economic: Build-A-Bear Workshop http://www.buildabear.com/aboutus/ourcompany/process.aspx

20. Computing Clouds: Amazon Web Services Amazon Web Services Developer Connection : AWS Solutions Catalog http://solutions.amazonwebservices.com/connect/index.jspa Screen clipping taken: 2007/3/6, 上午08:08

21. Characteristics of Cloud Services NIST identifies several characteristics for a service to be considered “Cloud”: • On-demand self-service: The ability for an end user to sign up and receive services without the long delays that have characterized traditional IT. • Broad network access: Ability to access the service via standard platforms (desktop, laptop, mobile etc). • Resource pooling: Resources are pooled across multiple customers. • Rapid elasticity: Capability can scale to cope with demand peaks. • Measured Service: Billing is metered and delivered as a utility service can be acquired quickly and easily. http://resources.idgenterprise.com/original/AST-0032300_Understanding_the_Cloud_Computing_Stack.pdf

22. Platform Continuum Own  Rent  Rent (fixed) (on-demand) On-Premises Servers Hosted Servers Cloud Platform • Bring your own machines, connectivity, software, etc. • Complete control • Complete responsibility • Static capabilities • Upfront capital costs for the infrastructure • Renting machines, connectivity, software • Less control • Fewer responsibilities • Lower capital costs • More flexible • Pay for fixed capacity, even if idle • Shared, multi-tenant infrastructure • Virtualized & dynamic • Scalable & available • Abstracted from the infrastructure • Higher-level services • Pay as you go

23. Fulfilled by Amazon Software as a service (SaaS) http://www.salesforce.com/ Google AppEngine PaaS http://aws.amazon.com/ Amazon's EC2 (Elastic Compute Cloud)

24. Fulfilled By Amazon Source: • http://services.amazon.com/fulfillment-by-amazon/how-it-works.htm • http://amazongenius.com/fulfillmentbyamazon/ Business to business service

25. Products vs. Services • Products can be seen as the physical embodiment of the service provided. • Cars • provide comfortable transportation services • Televisions • deliver entertainment • Cosmetics • offer beatification services • Cameras • provides services for wonderful memory

26. Difficult Conceptual Transitions

27. More T-shaped People to work in, study, and innovate service systems Engineering (Technology) Management (Business) Social Science (People) Slide by Jean Paul Jacob

28. Which Has More Value? Nike provide service to distribute comfortable shoes and an imagination (90% value) A factory in Indonesia produces shoes (10% value) Apple offers iPhones for better communication and entertainment (85% value) Foxconn manufactures iPhones for Apple (15% value)

29. Service-Oriented Model & Architecture The service target may be the service client itself.

30. Classification of Outsourcing: Service Types • Manufacturing Outsourcing • FoxConn’s eCMMS stands for e-enabled Components, Modules, Moves and Services • TSMC emphasizes collaborative services* • Information Technology Outsourcing • Business Process Outsourcing • Knowledge Processing Outsourcing • Innovation Outsourcing • Open innovation and crowd-sourcing Smart sourcing: Beyond “lift and shift”. *See http://www.tsmc.com/english/c_services/c00_Service_Guide/c0100_Service_Guide.htm

31. Crowdsourcing Source: http://usercontribution.intuit.com/w/page/18238302/The%20Contribution%20Revolution%20linked%20version

32. Providing Free Services: Is There a Free Lunch? • Facebook/Google and You If you are NOT paying for it, you’re not the customer. You are the product being sold.* *Andrew Lewishttp://www.metafilter.com/95152/Userdriven-discontent#3256046 ** See a counter argument at http://powazek.com/posts/3229

33. Service innovation is inherently multidisciplinary Knowledge sources driving service innovations… Business Administration and Management Technology Innovation Business Innovation Science & Engineering Business Model Innovation Global Economy & Markets Social-Organizational Innovation Demand Innovation Social Sciences (Micro-lending/Microcredit) Gang Run Printing合板印刷 /Groupon http://abcnews.go.com/Business/groupon-grows-leaps-bounds/story?id=11681785 http://money.cnn.com/video/technology/2010/10/12/t_40u40_groupon.fortune/

34. Describe a Business Model: 9 Building Blocks How What Who Partner Network Customer Relationships CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS Offer Customer Segments CLIENTS Key Issues To Solve CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS Competencies, Activities, Resources Distribution Channels CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS Cost Structure Revenue Streams CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS How Much? Source: Describe and Improve Your Business Model

35. Reverse Engineering Facebook’s Business Model with Ballpark Figures http://www.businessmodelalchemist.com/

36. Customer Relationship Management (CRM) The measures an organization takes to • identify, • select, • acquire, • work with, and • retain its customers. Acquiring new customer vs. retaining existing customer Acquisition costs vs. customer life time value

37. Objectives of CRM • The right offer (products or services) • To the right person (target marketing) • At the right time (spacing outbound calls) • Through the right channel (direct vs. channel) • Via appropriate media (phone, email, Web) • By the right employees and service partners.

38. End-to-End Processes Customer Account Receivable Marketing/ Sales Shipping Inventory Mgmt. Manufacturing

39. Processes Are Often Cross Functional Areas "Manage the white space on the organization chart!" Customer/ Markets Needs Supplier Value-added Products/ Services to Customers "We cannot improve or measure the performance of a hierarchical structure. But, we can increase output quality and customer satisfaction, as well as reduce the cost and cycle time of a process to improve it."

40. Empowered Customer-Focus Processes Manager as Coach Teamwork Customer-facing Process Empowered Font-line worker Values and Quality delivered to Customers timely

41. Customer Life Cycle The Proof! Translate Failure into Success! Pre-Divorce/ Divorce Awareness Winback "Moments of Truth" Targeting Intensive Care Market and Customer Research and analysis Welcome Sales Processes (Including Business Partners) Account Management Getting To Know Cross-Selling, Profit Opportunities Delivery, Welcoming service and Continuous Contact Processes

42. MOT Analysis Example: A Credit Card Company • Pri to MOT • Recognition • Information gathering • Comparison • MOT • Applying for Credit Card • Receiving Credit Card • Using Credit Card • Providing Information • Changing and Upgrading • Gifts giving • Emergency Assisting • After MOT • No usage follow-up • Stop membership follow-up

43. The Business Context of Business Networking • Share: • Costs • Skills • Market access • Technology Virtual Enterprising Customer's Customer Suppliers/ Partner Company Customer N C N C N C N C Competitor N: Needs and Perceived Needs C: Capabilities Source: Adapted from Charles M. Savage, "The Dawn of the Knowledge Era," OR/MS Today, pp. 18-23.

44. TI Semiconductor Business Process Map Customer Communication Market Customers Concept Development Manufacturing Customer Design & Support Strategy Development Product Development Order Fulfillment Manufacturing Capability Development Source: Adapted from Hammer and Champy, 1993, p. 119.

45. Service Value Chain Framework

46. Service blueprint components Physical evidence Customer actions Onstage Employee actions Backstage Employee actions Support processes Desktop PC and applications, ticket, records IT request, problem call to help desk, etc Line of interaction Takes call, opens ticket, visit to employee desk side Line of visibility Refers to manuals, asks for help from team Line of internal interaction Time recording, payroll, training, etc

47. Service Blueprint (Service Blueprint) Source: http://digiservices.files.wordpress.com/2009/11/blueprinting2.png

48. Customer Journey MOTs : Netflix vs. Blockbuster

49. Empathy Map Customer (user) what really counts major preoccupations, worries & aspirations Empathy Map environment friends what the markets offers what friends say what boss says what influences say GAIN “wants”/needs, measures of success, obstacles PAIN fears, frustrations, obstacles attitude in public appearance behavior towards others http://www.gogamestorm.com/?p=42 http://www.slideshare.net/AdilsonJardim/empathy-map-poster-3201288

50. Swiffer – P&G and Contiuum • “There has got to be a better way to clean a floor. Current mops are the cleaning equivalent of the horse drawn carriage – where’s the car?” Procter & Gamble’s 2nd most popular consumer product.