1. Minder Chen, Ph.D. Associate Professor of MIS CSU Channel Islands Minder.Chen@CSUCI.EDU Service Innovation & Customer Relationship Management

2. Services - 2 © Minder Chen, 2009 Distinguishing services from goods 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. Services - 3 © Minder Chen, 2009 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. Services - 4 © Minder Chen, 2009 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. Services - 5 © Minder Chen, 2009 Distinguishing services from goods Intangibility process  Process mapping  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. Services - 6 © Minder Chen, 2009 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.designcouncil.org.uk/Documents/Documents/OurWork/Insight/DesignForInnovation/DesignForInnovation_Dec20 11.pdf http://www.youtube.com/watch?v=2NK0WR2GtFs&feature=watc h-vrec

7. Services - 7 © Minder Chen, 2009 Industry vs. Services: A Matter of Degree

8. Services - 8 © Minder Chen, 2009 Services: The Front-stage Experience manufacturing

9. Services - 9 © Minder Chen, 2009 In-N-Out Burger http://www.in-n-out.com/menu.asp

10. Services - 10 © Minder Chen, 2009

11. Services - 11 © Minder Chen, 2009 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

12. Services - 12 © Minder Chen, 2009 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

13. Services - 13 © Minder Chen, 2009 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

14. Services - 14 © Minder Chen, 2009 iPod and iTune Apple - iPod + iTunes, http://www.apple.com/itunes/, Screen clipping taken: 2007/3/6, 08:02http://www.apple.com/itunes/

15. Services - 15 © Minder Chen, 2009 Apple Stores

16. Services - 16 © Minder Chen, 2009 Experience Economic: Build-A-Bear Workshop http://www.buildabear.com/aboutus/ourcompany/process.aspx

17. Services - 17 © Minder Chen, 2009 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

18. Services - 18 © Minder Chen, 2009 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

19. Services - 19 © Minder Chen, 2009 Difficult Conceptual Transitions Goods-Dominant Concepts Goods Products Feature/attribute Value-added Profit maximization Price Equilibrium systems Supply Chain Promotion To Market Product orientation Transitional Concepts Services Offerings Benefit Co-production Financial Engineering Value delivery Dynamic systems Value-Chain Integrated Marketing Communications Market to Market Orientation Service-Dominant Concepts Service Experiences Solution Co-creation of value Financial feedback/learning Value proposition Complex adaptive systems Value-creation network/constellation Dialog Market with Service-Dominant Logic (Consumer and relational)

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

21. Services - 21 © Minder Chen, 2009 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)

22. Services - 22 © Minder Chen, 2009 Service-Oriented Model & Architecture The service target may be the service client itself.

23. Services - 23 © Minder Chen, 2009 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 *See http://www.tsmc.com/english/c_services/c00_Service_Guide/c0100_Service_Guide.htmhttp://www.tsmc.com/english/c_services/c00_Service_Guide/c0100_Service_Guide.htm Smart sourcing: Beyond “lift and shift”.

24. Services - 24 © Minder Chen, 2009 Crowdsourcing Source: http://usercontribution.intuit.com/w/page/18238302/The%20Contribution%20Revolution%20linked%20version

25. Services - 25 © Minder Chen, 2009 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 Lewis http://www.metafilter.com/95152/Userdriven-discontent#3256046 http://www.metafilter.com/95152/Userdriven-discontent#3256046 ** See a counter argument at http://powazek.com/posts/3229http://powazek.com/posts/3229

26. Services - 26 © Minder Chen, 2009 Service innovation is inherently multidisciplinary Science & Engineering Business Administration and Management Social Sciences (Micro-lending/Microcredit) Global Economy & Markets Business Innovation Technology Innovation Social-Organizational Innovation Demand Innovation Knowledge sources driving service innovations… 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/ Business Model Innovation

27. Services - 27 © Minder Chen, 2009 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

28. Services - 28 © Minder Chen, 2009 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.

29. Services - 29 © Minder Chen, 2009 End-to-End Processes Customer Manufacturing Inventory Mgmt. Shipping Marketing/ Sales Account Receivable

30. Services - 30 © Minder Chen, 2009 Processes Are Often Cross Functional Areas Supplier Customer/ Markets Needs Value-added Products/ Services to Customers "Manage the white space on the organization chart!" "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."

31. Services - 31 © Minder Chen, 2009 Empowered Customer-Focus Processes Values and Quality delivered to Customers timely Empowered Font-line worker Customer-facing Process Manager as Coach Teamwork

32. Services - 32 © Minder Chen, 2009 Customer Life Cycle Welcome Awareness Getting To Know Winback Targeting Account Management Intensive Care Pre-Divorce/ Divorce Translate Failure into Success! The Proof! "Moments of Truth" Cross-Selling, Profit Opportunities Delivery, Welcoming service and Continuous Contact Processes Sales Processes (Including Business Partners) Market and Customer Research and analysis

33. Services - 33 © Minder Chen, 2009 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

34. Services - 34 © Minder Chen, 2009 The Business Context of Business Networking Company Customer Customer's Customer Suppliers/ Partner N C 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. Virtual Enterprising Competitor Share: Costs Skills Market access Technology

35. Services - 35 © Minder Chen, 2009 TI Semiconductor Business Process Map Manufacturing Capability Development Strategy Development Product Development Customer Design & Support Order Fulfillment Concept Development Manufacturing Market Customers Customer Communication Source: Adapted from Hammer and Champy, 1993, p. 119.

36. Services - 36 © Minder Chen, 2009 Service Value Chain Framework

37. Services - 37 © Minder Chen, 2009 Service blueprint components Physical evidence Customer actions Onstage Employee actions Backstage Employee actions Support processes Line of interaction Line of internal interaction Line of visibility Desktop PC and applications, ticket, records IT request, problem call to help desk, etc Takes call, opens ticket, visit to employee desk side Refers to manuals, asks for help from team Time recording, payroll, training, etc

38. Services - 38 © Minder Chen, 2009 Service Blueprint (Service Blueprint) Source: http://digiservices.files.wordpress.com/2009/11/blueprinting2.pnghttp://digiservices.files.wordpress.com/2009/11/blueprinting2.png

39. Services - 39 © Minder Chen, 2009 Customer Journey MOTs : Netflix vs. Blockbuster

40. Services - 40 © Minder Chen, 2009 what really counts major preoccupations, worries & aspirations what friends say what boss says what influences say environment friends what the markets offers attitude in public appearance behavior towards others http://www.gogamestorm.com/?p=42 http://www.slideshare.net/AdilsonJardim/empathy-map-poster-3201288EmpathyMap GAIN “wants”/needs, measures of success, obstacles PAIN fears, frustrations, obstacles Customer (user) Empathy Map

41. Services - 41 © Minder Chen, 2009 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.

42. Services - 42 © Minder Chen, 2009 Field Research Findings of Mopping the Floor A team of ethnographic researchers set out to watch how people cleaned their kitchen floors, and they discovered: Most people swept their floors before they mopped. People assemble a system of largely unbranded products to get the job done. [ user-generated innovation, wisdom of the crowd ] Mops worked mostly by the adhesion of dirt to the mop and people seemed to spend almost as much time rinsing their mop as they did cleaning the floor. People wore old clothes when they were cleaning because it was a dirty job. Source: http://continuuminnovation.com/work/swiffer/

43. Services - 43 © Minder Chen, 2009 Employees and Customers “You don’t get happy guests with unhappy employees.” J. W. Marriot

44. Services - 44 © Minder Chen, 2009 The Inverted Organizational Pyramid

45. Services - 45 © Minder Chen, 2009 Service Profit Chain Source: Putting the Service-Profit Chain to Work (HBR Classic)

46. Services - 46 © Minder Chen, 2009 The Service Triangle WOM: Words of Mouth

47. Services - 47 © Minder Chen, 2009 Southwest Airline Flight Attendant doing raps!! at http://www.youtube.com/watch?v=ivjybzdXVmI http://www.youtube.com/watch?v=ivjybzdXVmI

48. Services - 48 © Minder Chen, 2009 Lifetime Value of a Customer CLTV: Customer Life Time Value = $8,000

49. Services - 49 © Minder Chen, 2009 Customer Loyalty From why satisfied customers defect. By Jones, T. D. & Sasser Jr., W. E. Harvard business Review, (November–December), 1995 p. 91.

50. Services - 50 © Minder Chen, 2009 Zappos Culture via Its Core Values Deliver WOW Through Service Embrace and Drive Change Create Fun and A Little Weirdness Be Adventurous, Creative, and Open-Minded Pursue Growth and Learning Build Open and Honest Relationships with CommunicationBuild Open and Honest Relationships with Communication Build a Positive Team and Family Spirit Do More with Less Be Passionate and Determined Be Humble

51. Services - 51 © Minder Chen, 2009 HaiDiLao Hot Pot Founded in 1994 by Zhang Yong in Sichuan Province 73 stores in China

52. Services - 52 © Minder Chen, 2009 Lead by Example An open letter to Delta CEO Richard Anderson: Thursday was one of my more harrowing flying days. Due to weather, there were multiple delays, cancellations, re-routings and even a mechanical failure. A 2 hour flight turned into an entire day. By 9:30pm, I was just halfway home, waiting standby in DC hoping to make it out before the 10pm curfew. During it all, I had contact with at least a dozen Delta employees – by phone, at the counter, at the gate, in the SkyClub… Without exception, they were all calm, kind, diligent, funny… and really went out of their way to try to help me. All this, while at the same time facing a firestorm of angry passengers because there had been so many disrupted flights. I was 8th on the standby list, showing 0 seats left. I was about to give up, but the counter agent stopped me from leaving. He called 7 names… and then, finally, I was the last to be called. As we rushed down the jetway, the flight attendant at the plane shook her head – not a good sign – but then paused, talked to someone, and waved us down anyway. A vaguely familiar face met me at the doorway, not in uniform so probably an off-duty pilot I had seen before. He quickly grabbed my roll-aboard, helped clear a space in the overhead, and showed me to my seat. It was important for me to get home – not important enough to tell anyone – but Friday I was to pick up my Type 1 Diabetic 12 year old from her diabetes summer camp. I’m sure she would have been fine if someone else had shown up in my place, but it’s a special moment for me. Camp Kudzu gives my daughter 5 days a year when she feels “normal.” Pick-up day gives me a glimpse into that special world where she’s just like everyone else, and she’s a little bit of a different person for the rest of the day. By the next day, it’s back to the harsh realities of managing a difficult, deadly, incurable disease that kills 1 in 20 before the age of 18. Most people just don’t understand how different it is from regular diabetes. As the plane descended into Atlanta, the flight attendant announced that there was a special guest on board. He was riding in a jump seat, because he had given up his place to allow one more person on that flight. That special guest was you: Richard Anderson, CEO of Delta. Suddenly I realized that “familiar face” was not an off-duty pilot. It was you, the CEO of Delta, vaguely familiar from the safety video. It was you, Richard Anderson, who gave up your seat for me. It was you, the Delta CEO, who helped me with my bag. It was you, acting just like an ordinary Mr. Anderson, who showed me to my seat. You, Richard Anderson, the CEO of Delta, did all that for me, just an average, middle-aged, woman with, as far as anyone at Delta knew, no special reason to get home. But more importantly, it was all of your employees that day that did so much helping me to get home – and now I know why. Because Delta is led by you, Richard Anderson, a dedicated and inspiring leader who so clearly demonstrates, at his very core, that he leads by example, and does not set himself above all those who allow this airline to exist. Thank you, Richard Anderson. As a result of your leadership and the actions of yourself and your employees, I had my special day with my special child. You and your employees gave us both one more day of happiness, and for that, we are both very grateful. I have always been a loyal Delta customer, but Thursday solidified that loyalty for life! To all Delta employees who helped me on Thursday: thank you again. Jessica Frank https://www.facebook.com/delta/posts/617363794949473