1. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 1 Chapter 15: Organizing for Change Management and Service Leadership

2. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 2 Overview of Chapter 15  Effective Marketing Lies at the Heart of Value Creation  Integrating Marketing, Operations, and Human Resources  Creating a Leading Service Organization  In Search of Human Leadership  Change Management

3. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 3 Effective Marketing Lies at the Heart of Value Creation

4. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 4 The Service-Profit Chain (Fig 15.1) Target Market Service Concept Operating strategy and service delivery system Employees Loyalty Satisfaction Capability Service Quality Productivity and Output Quality Customers SatisfactionLoyalty Revenue growth Profitability Workplace design Job design Selection and development Rewards and recognition Information and communication Tools for serving customers Quality and productivity Improvements yield higher service quality and lower costs Lifetime value Retention Repeat business Referral Service Value Attractive value Service designed and delivered to meet targeted customers’ needs 213 4 - 7 InternalExternal

5. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 5 Qualities Associated with Service Leaders  Understands mutual dependency among marketing, operations and human resource functions of the firm  Has a coherent vision of what it takes to succeed  Strategies are defined and driven by a strong, effective leadership team  Responsive to various stakeholders  Value creates through customer satisfaction

6. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 6 Integrating Marketing, Operations, and Human Resources

7. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 7 Reducing Interfunctional Conflict  Top management needs to establish clear imperatives for each function that defines how a specific function contributes to the overall mission  The marketing imperative  The operations imperative  The human resources imperative

8. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 8 Defining the Three Functional Imperatives  Marketing Imperative  Target “ right ” customers and build relationships  Offer solutions that meet their needs  Define quality package with competitive advantage  Operations Imperative  Create and deliver specified service to target customers  Adhere to consistent quality standards  Achieve high productivity to ensure acceptable costs  Human Resource Imperative  Recruit and retain the best employees for each job  Train and motivate them to work well together  Achieve both productivity and customer satisfaction ― E.g., Online Buying

9. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 9 Creating a Leading Service Organization

10. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 10 From Losers to Leaders: Four Levels of Service Performance (1)  Service Losers (certain govt. organisations)  Bottom of the barrel from both customer and managerial perspectives  Customers patronize them because there is no viable alternative  New technology introduced only under duress; uncaring workforce  Service Nonentities (local diners and restaurants)  Dominated by a traditional operations mindset  Unsophisticated marketing strategies  Consumers neither seek out nor avoid them

11. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 11 From Losers to Leaders: Four Levels of Service Performance (2)  Service Professionals (Toni and Guy)  Clear market positioning strategy  Customers within target segment(s) seek them out  Research used to measure customer satisfaction  Operations and marketing work together  Proactive, investment-oriented approach to HRM  Service Leaders (Nestle or Educational Institutes)  The crème da la crème of their respective industries  Names synonymous with outstanding service, customer delight  Service delivery is seamless process organized around customers  Employees empowered and committed to firm’s values and goals

12. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 12 Dilbert’s Boss Loses Focus and His Audience Fig 15.3

13. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 13 In Search of Human Leadership

14. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 14 Leading a Service Organization Involves Eight Stages (1)  Creating a sense of urgency to develop the impetus for change  Putting together a strong enough team to direct the process  Creating an appropriate vision of where the organization needs to go  Communicating that new vision broadly Source: John Kotter

15. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 15 Leading a Service Organization Involves Eight Stages (2)  Empowering employees to act on that vision  Producing sufficient short-term results to create credibility and counter cynicism  Building momentum and using that to tackle tougher change problems  Anchoring new behaviors in organizational culture Source: John Kotter

16. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 16 Leadership versus Management  Leadership  Concerned with development of vision and strategies, and empowerment of people to overcome obstacles—make vision happen  Emphasis on emotional and spiritual resources  Works through people and culture  Produces useful change, especially non-incremental change  Management  Involves keeping current situation operating through planning, budgeting, organizing, staffing, controlling, and problem solving  Emphasizes physical resources—raw materials, technology, capital  Works through hierarchy and systems  Keeps current system functioning

17. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 17 Setting Direction versus Planning  Planning  A management process, designed to produce orderly results—not change  Setting direction  Involves creating visions and strategies that describe a business, technology, or corporate culture in terms of what it should become over long term and articulating feasible way of achieving goal  Many of best visions and strategies combine basic insights and translate them into realistic competitive strategy  “Stretch” — a challenge to attain new levels of performance and competitive advantage that might as first seem to be beyond the organization’s reach  Planning follows and complements direction setting, serving as useful reality check and road map for strategic execution

18. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 18 Individual Leadership Qualities  Possesses a special perspective  Able to believe in their employees and make communicating with them a priority  Love of the business  Being driven by a set of core value that they infuse into the organization  Need not be charismatic, but has to be principled  Must have personal humility blended with intensive professional will, ferocious resolve, and willingness to give credit to others but take blame themselves

19. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 19 Change Management

20. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 20 Evolution versus Turnaround (1)  Evolution involves continual mutations designed to ensure the survival of the fittest  Top management must proactively evolve the focus and strategy of the firm to take advantage of changing conditions and the advent of new technologies  Turnaround situations are where leaders seek to bring distressed organizations back from the brink of failure and set them on a healthier course  Can be advantageous to bring in a new CEO from outside the organization

21. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 21 Evolution versus Turnaround (2)  Hurdles that leaders face in reorienting and formulating strategy  Resource hurdles  Motivational hurdles  Political hurdles  Turning around an organization that has limited resources requires concentrating those resources where the need and the likely payoffs are greatest  A firm’s search for growth often involves expansion—even diversification into new lines of business  Example: IBM

22. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 22 Summary of Chapter 15: Change Management and Service Leadership (1)  Service profit chain provides useful summary of behaviors required of service leaders to manage effectively  Marketing, operations, and human resource management functions need to be closely coordinated and integrated in service businesses  Four levels of service performance  Service losers  Service nonentitites  Service professionals  Service leaders  Service leadership is not based on outstanding performance within a single dimension, but must cut across marketing, operations and human resources

23. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 23 Summary of Chapter 15: Change Management and Service Leadership (2)  Leading a service organization involves eight stages  To be effective, leaders need to understand difference between leadership versus management, as well as setting direction versus planning  Transformation of organization can take place in two ways:  Evolution  Turnaround  Role modeling is one of traits of successful leaders  Leaders play a big part in nurturing an effective organizational culture that transforms an organization into a successful one

24. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 15 - 24  Diff between management and leadership