1. ISM 270 Service Engineering and Management Lecture 3: Technology in Services

2. Announcements Homework 1 due today Homework 1 due today Homework 2 due next week 1/31 Homework 2 due next week 1/31

3. Todays Lecture Role of Technology in Services, especially in new service development Role of Technology in Services, especially in new service development Dr Charles Ng, Demandtec Dr Charles Ng, Demandtec

4. Discussion Name an Internet site you believe will be successful in the long run - explain why.

5. Technology in Service

6. What roles can technology play?

7. Role of Technology in the Service Encounter Technology Customer Server Server Server Customer D. Technology-Mediated Service Encounter E. Technology-Generated Service Encounter A. Technology-Free Service Encounter B. Technology-Assisted Service Encounter C. Technology-Facilitated Service Encounter

8. Technology has led to the Evolution of Self-service Service IndustryHuman ContactMachine Assisted ServiceElectronic Service BankingTellerATMOnline banking GroceryCheckout clerkSelf-checkout stationOnline order/ pickup AirlinesTicket agentCheck-in kioskPrint boarding pass RestaurantsWait personVending machineOnline order/ delivery Movie theaterTicket saleKiosk ticketingPay-for-view Book storeInformation clerkStock-availability terminalOnline shopping EducationTeacherComputer tutorialDistance learning GamblingPoker dealerComputer pokerOnline poker

9. Self-service Technologies (SST) Does customer adoption of self-service follow a predictable pattern? Does customer adoption of self-service follow a predictable pattern? How do we measure self-service quality (e.g., ease of use, enjoyment, and/or control)? How do we measure self-service quality (e.g., ease of use, enjoyment, and/or control)? What is the optimal mix of SST and personal service for a service delivery system? What is the optimal mix of SST and personal service for a service delivery system? How do we achieve continuous improvement when using SST? How do we achieve continuous improvement when using SST? What are the limits of self-service given the loss of human interaction? What are the limits of self-service given the loss of human interaction?

10. Self-Service examples Airline industry Airline industry

11. Technology has led to service automation Fixed-sequence (F) - parking lot gate Fixed-sequence (F) - parking lot gate Variable-sequence (V) - ATM Variable-sequence (V) - ATM Playback (P) - answering machine Playback (P) - answering machine Numerical controlled (N) - animation Numerical controlled (N) - animation Intelligent (I) - autopilot Intelligent (I) - autopilot Expert system (E) - medical diagnosis Expert system (E) - medical diagnosis Totally automated system (T) - EFT Totally automated system (T) - EFT

12. Technology has led to a variety of services available via the web A retail channel (Amazon.com) A retail channel (Amazon.com) Supplemental channel (Barnes & Nobel) Supplemental channel (Barnes & Nobel) Technical support (Dell Computer) Technical support (Dell Computer) Embellish existing service (HBS Press) Embellish existing service (HBS Press) Order processing (Delta Airline) Order processing (Delta Airline) Convey information (Kelly Blue Book) Convey information (Kelly Blue Book) Organization membership (POMS.org) Organization membership (POMS.org) Games (Treeloot.com) Games (Treeloot.com)

13. Several technologies needed to converge to bring E-Business Internet Internet Global telephone system Global telephone system Communications standard TCP/IP (Transfer Control Protocol/Internet Protocol) Communications standard TCP/IP (Transfer Control Protocol/Internet Protocol) Addressing system of URLs Addressing system of URLs Personal computers and cable TV Personal computers and cable TV Customer databases Customer databases Sound and graphics Sound and graphics User-friendly free browser User-friendly free browser

14. E-Business has led to multiple business models ( Weill & Vitale, Place to Space, HBS Press, 2001) Content Provider: Reuters Content Provider: Reuters Direct to Customer: Dell Direct to Customer: Dell Full-Service Provider: GE Supply Co. Full-Service Provider: GE Supply Co. Intermediary: eBay Intermediary: eBay Shared Infrastructure: SABRE Shared Infrastructure: SABRE Value Net Integrator: 7-Eleven Japan Value Net Integrator: 7-Eleven Japan Virtual Community: Monster.com Virtual Community: Monster.com Whole-of-Enterprise: Government Whole-of-Enterprise: Government

15. Economics of E-Business Sources of Revenue: - Transaction fees - Information and advice - Fees for services and commissions - Advertising and listing fees Sources of Revenue: - Transaction fees - Information and advice - Fees for services and commissions - Advertising and listing fees Ownership - Customer relationship - Customer data - Customer transaction Ownership - Customer relationship - Customer data - Customer transaction

16. Electronic vs. Traditional Services

17. Grocery Shopping Comparison

18. Economics of Scalability Dimensions High Scalability Low E-commerce continuum Selling information (E-service) Selling value- added service Selling services with goods Selling goods (E-commerce) Information vs. Goods Content Information dominates Information with some service Goods with support services Goods dominate Degree of Customer Content Self-serviceCall center backupCall center supportCall center order processing Standardization vs. Customization Mass distributionSome personalization Limited customization Fill individual orders Shipping and Handling Costs Digital assetMailingShippingShipping, order fulfillment, and warehousing After-sales serviceNoneAnswer questionsRemote maintenanceReturns possible Example ServiceUsed car pricesOnline travel agentComputer supportOnline retailer Example FirmKbb.comBiztravel.comEverdream.comAmazon.com

19. E-Business Supply Chain (Network) Elements Major entities including firm of interest and its customers, suppliers, and allies Major entities including firm of interest and its customers, suppliers, and allies Major flows of product, information, and money Major flows of product, information, and money Revenues and other benefits each participant receives Revenues and other benefits each participant receives Critical aspects: participants, relationships, and flows Critical aspects: participants, relationships, and flows Example: 7-Eleven Japan

20. Japanese 7-Eleven Read case in text Read case in text (p103, 6 th edition, p122 5 th edition) (p103, 6 th edition, p122 5 th edition)

22. Evolution of B2C E-Commerce in Japan 1. What features of the 7-Eleven Japan distribution system illustrate the Value Net Integrator e-business model? 2. Does the 7-Eleven Japan distribution system exhibit scalability economics? 3. How does the 7-Eleven example of B2C e- commerce in Japan illustrate the impact of culture on service system design? 4. Will the 7-Eleven Konbini and Mobile system be adopted in the United States?

23. New Service Development

24. Video

25. Levels of Service Innovation Radical Innovations Major Innovation: new service driven by information and computer based technology Major Innovation: new service driven by information and computer based technology Start-up Business: new service for existing market Start-up Business: new service for existing market New Services for the Market Presently Served: new services to customers of an organization New Services for the Market Presently Served: new services to customers of an organization Incremental Innovations Service Line Extensions: augmentation of existing service line (e.g. new menu items) Service Line Extensions: augmentation of existing service line (e.g. new menu items) Service Improvements: changes in features of currently offered service Service Improvements: changes in features of currently offered service Style Changes: modest visible changes in appearances Style Changes: modest visible changes in appearances

26. Technology Driven Service Innovation Power/energy - International flights with jet aircraft Power/energy - International flights with jet aircraft Physical design - Enclosed sports stadiums Physical design - Enclosed sports stadiums Materials - Astroturf Materials - Astroturf Methods - JIT and TQM Methods - JIT and TQM Information - E-commerce using the Internet Information - E-commerce using the Internet

27. Service Design Elements Structural - Delivery system - Facility design - Location - Capacity planning Structural - Delivery system - Facility design - Location - Capacity planning Managerial - Service encounter - Quality - Managing capacity and demand - Information Managerial - Service encounter - Quality - Managing capacity and demand - Information

28. New Service Development Cycle People Technology Systems Product Full Launch Development Design Analysis Organizational Context Teams Tools Enablers Formulation of new services objective / strategy Idea generation and screening Concept development and testing Business analysis Project authorization Full-scale launch Post-launch review Service design and testing Process and system design and testing Marketing program design and testing Personnel training Service testing and pilot run Test marketing

29. Service Blueprint of Luxury Hotel

30. Strategic Positioning Through Process Structure Degree of Complexity: Measured by the number of steps in the service blueprint. For example a clinic is less complex than a general hospital. Degree of Divergence: Amount of discretion permitted the server to customize the service. For example the activities of an attorney contrasted with those of a paralegal.

31. Structural Alternatives for a Restaurant No Reservations Self-seating. Menu on Blackboard Eliminate Customer Fills Out Form Pre-prepared: No Choice Limit to Four Choices Sundae Bar: Self-service Coffee, Tea, Milk only Serve Salad & Entree Together: Bill and Beverage Together Cash only: Pay when Leaving TAKE RESERVATION SEAT GUESTS, GIVE MENUS SERVE WATER AND BREAD TAKE ORDERS PREPARE ORDERS Salad (4 choices) Entree (15 choices) Dessert (6 choices) Beverage (6 choices) SERVE ORDERS COLLECT PAYMENT Specific Table Selection Recite Menu: Describe Entrees & Specials Assortment of Hot Breads and Hors Doeuvres At table. Taken Personally by Maltre d Individually Prepared at table Expand to 20 Choices: Add Flaming Dishes; Bone Fish at Table; Prepare Sauces at Table Expand to 12 Choices Add Exotic Coffees; Sherbet between Courses; Hand Grind Pepper Choice of Payment. Including House Accounts: Serve Mints LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE

32. Taxonomy of Service Processes Low divergence High divergence Low divergence High divergence (standardized service) (customized service) (standardized service) (customized service) Processing Processing Processing Processing Processing Processing Processing Processing Processing Processing Processing Processing of goods Information of people of goods Information of people of goods Information of people of goods Information of people Dry Check Auto repair Computer Dry Check Auto repair Computer No Cleaning processing Tailoring a programming No Cleaning processing Tailoring a programming Customer Restocking Billing for a suit Designing a Customer Restocking Billing for a suit Designing a Contact a vending credit card building Contact a vending credit card building machine machine Ordering Supervision Ordering Supervision Indirect groceries of a landing Indirect groceries of a landing customer from a home by an air customer from a home by an air contact computer controller contact computer controller No Operating Withdrawing Operating Sampling Documenting Driving a No Operating Withdrawing Operating Sampling Documenting Driving a customer- a vending cash from an elevator food at a medical rental car customer- a vending cash from an elevator food at a medical rental car service machine an ATM Riding an buffet dinner history Using a service machine an ATM Riding an buffet dinner history Using a worker Assembling escalator Bagging of health club worker Assembling escalator Bagging of health club interaction premade groceries Searching for facility interaction premade groceries Searching for facility (self- furniture information (self- furniture information service) in a library Direct Customer Food Giving a Providing Home Portrait Haircutting Contact service service in a lecture public carpet painting Performing worker restaurant Handling transport- cleaning Counseling a surgical worker restaurant Handling transport- cleaning Counseling a surgical interaction Hand car routine bank ation Landscaping operation interaction Hand car routine bank ation Landscaping operation washing transactions Providing service washing transactions Providing service mass mass vaccination vaccination

33. Generic Approaches to Service Design Production-line Production-line Limit Discretion of Personnel Limit Discretion of Personnel Division of Labor Division of Labor Substitute Technology for People Substitute Technology for People Standardize the Service Standardize the Service Customer as Coproducer Self Service Smoothing Service Demand Customer as Coproducer Self Service Smoothing Service Demand Customer Contact Degree of Customer Contact Separation of High and Low Contact Operations Customer Contact Degree of Customer Contact Separation of High and Low Contact Operations Information Empowerment Employee Information Empowerment Employee Customer Customer

34. Customer Value Equation

35. Amazon.com Discussion: Discussion: What were / are the key drivers of success? What were / are the key drivers of success? What role has technology played? What role has technology played?

36. Discussion Name Name 1. An existing service that could be improved by new technology 2. A new service that could be introduced if new technology were developed 3. A technology that hasnt yet converged to a service

37. Aside: Transportation and Location Problems Appear frequently in service design Appear frequently in service design Homework 2 has an example Homework 2 has an example

38. Clarke-Wright for homework 2 Traveling Salesman-type problems very common in services Traveling Salesman-type problems very common in services Delivery of goods Delivery of goods Mail routes Mail routes Sales tour Sales tour Standard problem: Standard problem: Given the distance between each city pair, visit all N cities in some order, ending back at the base Given the distance between each city pair, visit all N cities in some order, ending back at the base Objective: Minimize total distance traveledObjective: Minimize total distance traveled

39. Traveling salesman Standard problem is very difficult to solve (NP – complete) Standard problem is very difficult to solve (NP – complete) We will use the Clarke-Wright Algorithm (page 499 of text) We will use the Clarke-Wright Algorithm (page 499 of text) C-W algorithm intuition: C-W algorithm intuition: Start with the path that returns to base between every node Start with the path that returns to base between every node Add links between nodes instead of returning in order of distance gained Add links between nodes instead of returning in order of distance gained Stop when no gain can be made Stop when no gain can be made Note: This is a good heuristic Note: This is a good heuristic Performs well in practice, but not guaranteed to find the best solution. Performs well in practice, but not guaranteed to find the best solution.

40. Next Week Service Quality Service Quality Frank Tung Frank Tung

41. Charles Ng Optimization Engineer, DemandTec Optimization Engineer, DemandTec Previously: Vivecon Corporation, a startup in supply chain analytics. Previously: Vivecon Corporation, a startup in supply chain analytics. Ph.D. Stanford 2004 Management Science and Engineering Ph.D. Stanford 2004 Management Science and Engineering Visiting researcher University of Geneva Visiting researcher University of Geneva Researcher, International Institute of Applied Systems Analyses Researcher, International Institute of Applied Systems Analyses