1. Service Quality

2. Moments of Truth Each customer contact is called a moment of truth.
You have the ability to either satisfy or dissatisfy them when you contact them.
A service recovery is satisfying a previously dissatisfied customer and making them a loyal customer.

3. Dimensions of Service Quality
Reliability: Perform promised service dependably and accurately.
Example: receive mail at same time each day.
Responsiveness: Willingness to help customers promptly.
Example: avoid keeping customers waiting for no apparent reason.

4. Dimensions of Service Quality
Assurance: Ability to convey trust and confidence.
Example: being polite and showing respect for customer.
Empathy: Ability to be approachable.
Example: being a good listener.
Tangibles: Physical facilities and facilitating goods.
Example: cleanliness.

5. Perceived Service Quality
Word of
mouth
Personal
needs
Past
experience
Service Quality
Dimensions
Reliability
Responsiveness
Assurance
Empathy
Tangibles
Service Quality Assessment
1. Expectations exceeded
ES<PS (Quality surprise)
2. Expectations met
ES~PS (Satisfactory quality)
3. Expectations not met
ES>PS (Unacceptable quality)
Expected
service
Perceived
service

6. Service Quality Gap Model

7. Quality Service by Design
Quality in the Service Package
Budget Hotel example
Taguchi Methods (Robustness)
Notifying maids of rooms for cleaning
Poka-yoke (fail-safeing)
Height bar at amusement park
Quality Function Deployment
House of Quality

8. Classification of Service Failures with Poka-Yoke Opportunities
Server Errors
Task:
Doing work incorrectly
Treatment:
Failure to listen to customer
Tangible:
Failure to wear clean uniform
Customer Errors
Preparation:
Failure to bring necessary materials
Encounter:
Failure to follow system flow
Resolution:
Failure to signal service failure

9. House of Quality

10. Achieving Service Quality
Cost of Quality (Juran)
Service Process Control
Statistical Process Control (Deming)
Unconditional Service Guarantee

11. Costs of Service Quality
Failure costs Detection costs Prevention costs
External failure: Process control Quality planning
Loss of future business Peer review Training program
Negative word-of-mouth Supervision Quality audits
Liability insurance Customer comment card Data acquisition and analysis
Legal judgments Inspection Recruitment and selection
Interest penalties Supplier evaluation
Internal failure:
Scrapped forms
Rework
Recovery:
Expedite disruption
Labor and materials

12. Service Process Control
Customer
input
Service
concept
Customer
output
Resources
Service
process
Take
corrective
action
Monitor
conformance to
requirements
Establish
measure of
performance
Identify reason
for
nonconformance

13. Control Chart of Departure Delays
expected
Lower Control Limit
1998
1999

14. Unconditional Service Guarantee: Customer View
Unconditional (Big Bazaar)
Easy to understand and communicate (dish tv)
Meaningful (Domino’s Pizza)
Easy to invoke (Apparel)
Easy to collect (Manpower)

15. Unconditional Service Guarantee: Management View
Focuses on customers (British Airways)
Sets clear standards (FedEx)
Guarantees feedback (Manpower)
Promotes an understanding of the service delivery system (Bug Killer)
Builds customer loyalty by making expectations explicit

16. Customer Satisfaction
All customers want to be satisfied.
Customer loyalty is only due to the lack of a better alternative
Giving customers some extra value will delight them by exceeding their expectations and insure their return

18. Customer Feedback and Word-of-Mouth
The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems.
The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers.
About 60% of the complainers would stay as customers if their problem was resolved and 95% would stay if the problem was resolved quickly.
A dissatisfied customer will tell between 10 and 20 other people about their problem.
A customer who has had a problem resolved by a company will tell about 5 people about their situation.

19. Walk-Through-Audit
Service delivery system should conform to customer expectations.
Customer impression of service influenced by use of all senses.
Service managers lose sensitivity due to familiarity.
Need detailed service audit from a customer’s perspective.

21. Approaches to Service Recovery
Case-by-case addresses each customer’s complaint individually but could lead to perception of unfairness.
Systematic response uses a protocol to handle complaints but needs prior identification of critical failure points and continuous updating.
Early intervention attempts to fix problem before the customer is affected.
Substitute service allows rival firm to provide service but could lead to loss of customer.

22. Service Quality Gap Model

23. The key drivers of the Knowledge Gap
Ineffective market research
Insufficient market research
Market research that asks the wrong questions
Inadequate use of marketing research
Lack of upward communication
Lack of direct interaction between management and customers
Insufficient communication between contact employees and managers
Too many layers between customers and top management
Insufficient relationship focus
Lack of market segmentation – doing too little for too many
Focus on transaction rather than relationships
Focus on new customers at the cost of existing customers
Inadequate service recovery
Lack of listening to customer complaints
Failure to make amends when things so wrong
No recovery mechanisms in place 23 1

24. The key drivers of the Standards Gap
Poor service design
Unsystematic new service development process
Fuzzy service designs
Failure to connect service design to service positioning
Absence of customer-driven standards
Lack of standards
Absence of process management to focus on customer requirements
Absence of formal process for setting service quality goals
Inappropriate physical infrastructure and servicescape
Failure to develop tangibles in line with customer expectations
Servicescape design does not meet customer and employee needs
Inadequate maintenance and updating of the servicescape 24 1

25. The key drivers of the Delivery Gap
Poor human resource policies
Ineffective recruitment
Role ambiguity and role conflict
Poor employee-technology fit
Inappropriate evaluation and compensation
Lack of empowerment, control and teamwork
Customers who do not fulfill roles
Customers who lack knowledge of their roles and responsibilities
Customers who negatively impact each other
Problems with service intermediaries
Conflict over objectives and performance
Difficulty controlling quality and consistency
Tension between empowerment and control
Failure to match supply and demand
Failure to smooth peaks and valleys of demand
Inappropriate customer mix 25 1

26. The key drivers of the Communications Gap
Lack of integrated service marketing communications
Tendency not to coordinate distinct pieces of communication
Absence of interactive element
Absence of strong internal marketing program
Ineffective management of customer expectations
Absence of expectation management
Lack of adequate education for customers
Overpromising
In advertising
In personal selling
Through physical infrastructure cues
Inadequate horizontal communication
Between sales and operations
Between advertising and operations
Differences in policies and procedures across branches and units 26 1

27. K-S-D-C! Remember 27 Knowledge – Standards – Delivery – Communications
Do I know what the customers wants?
If I know what the customer wants, have I designed the service standards accordingly?
If I have designed the service standards well, am I delivering to those standards?
Am I managing communications with the customer to set expectations and influence service perceptions in the best way possible?
K-S-D-C! 27 1

28. Apply the GAP model of services to the project you have chosen
Potential projects
Apply the GAP model of services to the project you have chosen
Evaluate what are the main gaps that negatively effect the service experience. You may conduct in-depth interviews of customers at some stage to make sure the gaps are what you “think” they are.
Following from your analysis, what strategy should your client adopt to address each of the gaps? Detail the specific, actionable steps. 28
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29. Topic 3: Two broad service “metaphors”
Two extreme metaphorical interpretations of services:
Service as drama (the emotional criterion)
Service as process (the efficiency criterion)
Most services are designed according to the efficiency criterion. Adding some drama can help distinguish services and make them memorable. 29
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30. Combining the metaphors
Mix of drama AND process
Many great services reside here!!
All drama
All process 30
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31. Most services are process-intensive … some drama can help!
Dramatic gestures need not be expensive ones! Small hole-in-the wall eatery owners (in India) will often cool down your boiling hot tea of coffee by pouring it between two vessels from a height. 31
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32. Ways to inject drama Pizza dough takes a leap…
Rumali Roti cooked on a tawa 32
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33. Ways to inject drama
At the Jasmine Seafood Restaurant in San Diego, you can order fresh seafood or pick live seafood from one of six fish tanks. The claim: “Nothing is fresher than picking your own seafood swimming in the tanks.” 33
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34. Topic 4: Setting Standards and Designing services – Approaches and Tools
Employee-focused design
Service quality-focused design
Customer experience-focused design
Process flow-focused design
Time target-focused design
Physical environment-focused design
Activity ownership-focused design
Efficiency-focused design
Rewards and retention-focused design 34
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35. Standards and Design Approach 1: Employee-focused standards and design
Old model: Puts workers who deliver customer-service last.
New model: Puts frontline workers first and designs the business system around them.
Value investments in people as much as investments in machines and sometimes more.
Use technology to support, not replace, the frontline.
Make recruitment and training as crucial for the frontline workers as for the top-line managers.
Link compensation to performance at every level. 35

36. Core rationale for employee-focused standards and design
Let’s focus within the box…
The service-profit chain: Discuss 36
Courtesy:

37. How employee satisfaction drives employee loyalty and employee productivity: The Wegmans grocery chain
Wegmans does not hesitate to pay to attract really top culinary talent.
The company has shelled out $54 million for college scholarships to more than 17,500 full- and part-time employees over the past 20 years. It thinks nothing of sending, say, cheese manager Terri Zodarecky on a ten-day sojourn to cheesemakers in London, Paris, and Italy.
It invests in making employees experts in the foods they deal with.
It gives employees great flexibility in terms of what they can do to deliver great customer satisfaction. 37 1

38. How does this impact employee loyalty?
All that means Wegmans' labor costs run between 15% and 17% of sales, compared with 12% for industry.
But its annual turnover rate for full-time employees is just 6%, compared to19% for similar grocery chains.
Almost 6,000 Wegmans employees—about 20%—have ten or more years of service, and 806 have a quarter-century under their belts.
All this in an industry where annual turnover costs can exceed profits by more than 40%,
While it has no publicly traded stock, its operating margins are about 7.5%, double what the big four grocers earn. Its sales per square foot are 50% higher than the $9.29 industry average. 38 1

39. An important point
If a service delivery fails, look for both “human” and “systemic” failures. Don’t just yell at the human, that’s the easy thing to do!
Horst Schulze, the legendary leader of Ritz-Carlton Hotels describes how a manager solved the problem of room-service breakfasts arriving late and cold.
If you were the hotel manager and received complaints about meals arriving cold, what would you do?
Typical response: The hotel manager yells at the room-service manager, the room service managers yells at his subordinates, who in turn yell at the cooks, and the food delivery staff.
What really happened? 39
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40. Employee-focused standards and design: What do you focus on?
Are you hiring employees right?
Are you hiring the right kind of people in terms of skills and capabilities?
Are you hiring the right kind of people in terms of personality fit?
Are you training employees right?
Are you providing your people with the depth and width of knowledge they require to perform excellently at their jobs?
Have you designed jobs so that your people can find meaning and joy at work?
Are you treating and motivating employees right?
Have you made employees feel valued?
Have you done away with dead-end jobs in your company?
Are you compensating your people well and saving money via higher retention, rather than trying to save by paying less in the short term? 40
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41. How do customers evaluate service quality? The SERVQUAL framework
Standards and Design Approach 2: Service quality-focused standards and design
How do customers evaluate service quality? The SERVQUAL framework
Tangible aspects
Physical facilities, equipment, appearance of personnel
Reliability
Ability to perform promised service dependably and accurately
Responsiveness
Willingness to help customers and provide prompt service
Assurance
Knowledge and courtesy of employees and their ability to inspire trust and confidence.
Empathy
Caring, individualized attention the firm provides its customers 41
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42. ASSURANCE RELIABILITY EMPATHY RESPONSIVENESS TANGIBLES
SERVQUAL Scale Items
ASSURANCE
RELIABILITY
Employees who instill confidence in customers
Making customers feel safe in their transactions
Employees who are consistently courteous
Employees who have the knowledge to answer customer questions
Providing service as promised
Dependability in handling customers’ service problems
Performing services right the first time
Providing services at the promised time
Maintaining error-free records
EMPATHY
Giving customers individual attention
Employees who deal with customers in a caring fashion
Having the customer’s best interest at heart
Employees who understand the needs of their customers
Convenient business hours
RESPONSIVENESS
Keeping customers informed as to when services will be performed
Prompt service to customers
Willingness to help customers
Readiness to respond to customers’ requests
TANGIBLES
Modern equipment
Visually appealing facilities
Employees who have a neat, professional appearance
Visually appealing materials associated with the service
Copyright Dr. Valarie Zeithaml

43. Implementing SERVQUAL
SERVQUAL is best implemented in a Satisfaction = Performance – Expectations framework.
Therefore, ideally, one should measure both expectations and performance.
Ideally, one should temporally separate the measures of expectations and performance.
Here are the systematic steps to follow… 43
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44. Implementing SERVQUAL: Step 1
Measure expectations using a 7 point Likert scale. Measure expectations for each item under Reliability, Assurance, Responsiveness, Empathy and Tangibles.
A typical item in this Expectations measurement survey could be:
Survey header: These questions pertain what you consider to be the absolutely excellent firms in the service category.
When customers have a problem, excellent firms will show a sincere interest in solving it.
Strongly disagree Strongly agree.
Ask these expectations for the “excellent firms” for all the items in the SERVQUAL instrument (see previous slide).
Important: At the end of the survey, ask participants to allocate 100 points between Reliability, Assurance, Responsiveness, Empathy and Tangibles 44
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45. Implementing SERVQUAL: Step 2
Let some time pass.
Measure performance evaluations for the target company using a 7 point Likert scale. Measure expectations for each item under Reliability, Assurance, Responsiveness, Empathy and Tangibles.
A typical item in this Expectations measurement survey could be:
When customers have a problem, company XYZ shows a sincere interest in solving it.
Strongly disagree Strongly agree.
Ask these evaluations for firm XYZ for all the items in the SERVQUAL instrument (see previous slide). Use consistent wordings as for the Expectations survey.
Important: At the end of the survey, ask the respondents for an overall measure of satisfaction with company XYZ’s service, using a 7 point scale (“Not at all satisfied” to “Very satisfied.”) 45
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46. Implementing SERVQUAL: Step 3
Analyze and report the data. Consider using the following format.
Alternatively, you can report the data at the level of the individual items.
You can also perform a regression with overall satisfaction as the dependent variable and the gap scores as the explanatory variables to understand what exactly is driving customer satisfaction… 46
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47. Service-quality focused standards and design: Summary
The SERVQUAL approach offers a well-tested, robust approach to measure service quality.
The focus here is on designing services that ultimately rate well when their quality is measured using the SERVQUAL framework. 47
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48. Careful attention to the pattern of customer experiences
Standards and Design Approach 3: Customer experience-focused standards and design
Careful attention to the pattern of customer experiences
Application of knowledge regarding customer perceptions and cognitions
Here are the systematic steps to follow… 48
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49. Step 1: Manage the timing of payments and consumption
Payments and consumption at a Chicago health club…
Figure from “Pricing and the Psychology of Consumption” by John Gourville and Dilip Soman in Harvard Business Review, September 2002. 49 1

50. Step 2: Manage the sequence of the service experience with care
Quality of service experience
Quiz: What would determine the final customer memories of the experience?
Time 50
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51. Finish strong and maintain strong “high points”
Cruise lines end each day with raffles, contests, shows.
End cruise with the captain’s dinner
Pass out keepsakes or wine bottles on reaching the home port 51
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52. Get the bad experiences out of the way early
Delayed planes: Let customers know about the delay and the reason as soon as possible.
Doctors: Perform uncomfortable procedures first.
Deliver the bad news as soon as possible. 52
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53. Step 3: Build commitment through choice
Giving customers choices makes them feel empowered.
XEROX: Had problems with providing service for customers on account of cross-scheduling and lack of timely appearance.
Xerox implemented a system that allowed customers to rate the severity of the problem and the time by which they needed attention.
personnel would arrive more quickly for an urgent problem than for a minor one.
Customer satisfaction increased sharply, and the number of repair calls went down. Discuss: Why? 53
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54. Step 4: Given people rituals and stick to them
Rituals help customers find comfort, familiarity, and order.
The famous McKinsey “uh-huh, uh-huh..” 54
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55. Step 5: Reduce the amount of “uncertain” wait
You have a doctor’s appointment at 9 AM.
You arrive at 8.40 AM.
You cheerfully wait until 9 AM.
But, by 9.04 AM, you are restless and unhappy.
You don’t know how much longer it is going to take. 55
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56. Summary: Customer experience-focused standards and design
Careful attention to the pattern of customer experiences
5 Steps to keep in mind towards designing the customer experience in the service environment. 56
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57. Key tool: “Service blueprint”
Standards and Design Approach 4: Process flow-focused standards and design
Key tool: “Service blueprint”
Breakdown of the service delivery process into:
Physical evidence
Customer actions
Onstage employee actions (employee “in touch” with customers)
Backstage employee actions
Service support processes
Example… 57
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58. 58
Reproduced from “Services Marketing” by Zeithaml, Bitner and Gremler.

59. Summary: Process flow-focused standards and design
Key tool: “Service blueprint”
Useful because:
It provides a certain concreteness to the service experience
It helps managers build new services
It helps managers redesign existing services
It helps managers understand how some actions at one part of the service process can affect outcomes that may seem distant from that part of the process (e.g., It helps ALL hotel staff to know that a particular guest has been let down by the hotel staff in some context.) 59
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60. The story of Jefferson Pilot Financial*:
Standards and Design Approach 5: Time target-focused standards and design
Careful attention to bringing down the total elapsed time between order and service delivery.
The story of Jefferson Pilot Financial*:
JPF undertook a detailed examination of its New Business Unit’s operations.
Considerable variation on service quality:
Applications requiring physician’s statement took 1-2 months for processing.
Processing times for other applications were even more variable – 35% standard deviation.
10% of all applications required rework.
JPF decided to learn from the manufacturing industry – a 5-person “lean team” was set up… 60
*Adapted from “The Lean Service Machine” by Cynthia Karen Swank in Harvard Business Review, October 2003.

61. Targets and results at Jefferson Pilot Financial
Figure from “The Lean Service Machine” by Cynthia Karen Swank in Harvard Business Review, October 2003. 61

62. Broad transformation approach follows. Steps to be followed…
The secret?
Adoption of the “model-cell” approach in which the company sets up a fully functioning microcosm of its entire process in one of its businesses.
The serves almost as an experiment – learning helps refine the process design.
Broad transformation approach follows.
Steps to be followed… 62
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63. Steps to design such a process in a service context…
Cellular production
The cellular approach is to organize the entire manufacturing process for particular or similar products into one group of team members and machines known as a "Cell". These "cells" are arranged in continuous layout to facilitate a variety of operations.
Steps to design such a process in a service context… 63
From:
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64. Cellular service “production” : Step 1: Co-locate linked processes
All steps in the process should physically proximate.
At JPF, work groups were located by function.
Employees receiving applications from independent advisors/agents and those sorting them were on different floors – one day or more for the files to be transferred by internal mail.
Once receivers and sorters were co-located, it took just a few minutes.
Another advantage: The old attitude: “All I’m responsible for is XYZ” began to fade. 64
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65. Step 2: Standardize procedures
JPF had given employees considerable latitude in managing their work.
What resulted was a mix of filing and sorting systems – some did it by policy holder, others by policy numbers…
When employees were absent, substitutes found it difficult to manage.
The lean team insisted that all files be stored alphabetically in a specific drawer at each work station.
Physical workspace was reconfigured so that the supervisor could, while walking by, determine the level of pending and processed files. 65
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66. Step 3: Eliminate “loopbacks”
A loopback occurs when work returns to a previous stage for processing.
JPL recognized that all sections of the initial application were sent back to the receiver to be sorted, physically assembled and turned in to the insurance advisor interacting with the client…this led to delays in processing new applications…leaving the downstream idle.
JPL split the receiving team in half, allocating the halves separately to receiving and to reassembling policies.
The change also eliminated role and effort allocation confusion on the part of employees and reduced delays. 66
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67. Step 4: Set a common tempo
JPL smoothed out the work flow by applying the concept of “takt” time (German for musical meter)
To satisfy market demand, each cell in the New Bus. division had to process 10 applications/hour.
The takt time was one application every 6 minutes.
The lean team members timed each work element of the model cell, such as retrieving the application, keying in information, etc.
They established a “base time” for each application, and challenged the cell members to beat it. 67
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68. Step 5: Balance loads in the service production line
JPL recognized that its work allocation system was inefficient. JPF had allocated incoming applications by channel (doctor/no-doctor) and then alphabetically.
Therefore, an application from Tom Anderson would go to the A-C team even if another team was idle.
In the model cell, alphabetical allocation was replaced by sequential allocation so each team received the same number of allocations.
This utilized employees better and was also perceived to be more fair. 68
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69. Step 6: Segregate complexity
Ever stood in line at a bank behind a customer who took forever?
At JPL, applications that needed and did not need a physician’ statement were all processed together.
The model cell divided itself into two groups to handle each of these application types.
The turnaround time for cases not needing a doctor’s statement fell more than 80%! 69
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70. Step 7: Establish appropriate target metrics and post results
A firm’s metrics may impede productivity. For example, a call center that measures time spent on phone by reps could suffer from repeat calls and unsatisfied customers.
Lean production principle: Measure performance and productivity from the customer’s perspective.
Old metric: Time from application receipt by the New Business division to the time the approved policy was bound and printed. New metric: Time from application mailing by customer to the time the independent advisor receives a completed policy. 70
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71. Step 7: Establish appropriate target metrics and post results71
Figure from “The Lean Service Machine” by Cynthia Karen Swank in Harvard Business Review, October 2003. 1

72. Summary: Time target-focused standards and design
Careful attention to the time spent in processing customer services.
Redesign of the service “factory” using lessons from cellular manufacturing.
7 Steps to keep in mind towards reducing the total time required to deliver the customer service (as viewed from the customer’s perspective). 72
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73. 73
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74. The story of the Mayo Clinic*:
Standards and Design Approach 6: Physical environment-focused standards and design
Careful attention to designing the “props” or the elements of the physical environment in which the service is delivered.
The story of the Mayo Clinic*:
Mayo understands that its customers look for evidence of competence, caring and integrity, drawing inferences about what they cannot see from what they can see.
Mayo does not leave the nature of the physical evidence to chance – instead it uses every opportunity to offer patients and their families concrete and convincing evidence of its strengths and values.
This process of “evidence management” is an organized, explicit approach to present customers with coherent, honest evidence of your capabilities.
How does the evidence management process work at Mayo Clinic? 74
*Based on “Clueing in Customers” by Leonard L. Berry and Neeli Bendapudi in Harvard Business Review.

75. STEP 1: Setting up the clues in people Make customers the center of the organization
Mayo patients describe their care as being organized around their needs rather than the doctor’s schedule or the hospital’s processes.
Consistent focus on patients is the Mayo culture:
“When I had a colonoscopy, my doctor waited personally to tell me I had a polyp because he remembered my husband died from small bowel cancer and he knew I would be worried I had the same thing.”
“My oncologist is…the kindest man I have ever met. He related some of his personal life to me. I was more than my problem to him. He related to me as a person.”
William Mayo’s credo: The best interest of the patient is the only interest to be considered.” 75
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76. Setting up the clues in people Hire customer-oriented people
Mayo’s interviews of prospective employees are focused on eliciting information about their values, rather than getting them to choose the correct “answer.”
For example, an applicant who identifies making a difference in a patient’s life as their proudest moment is more likely to fit in with the Mayo culture than one who recounts achieving a career milestone.
The feeling of pride and the alignment of the employees’ attitudes with the Mayo culture lowers turnover across the board – 4% versus industry-wide 20% for nurses. 76
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77. Setting up the clues in people Use storytelling to set lofty employee standards
Another STORY recounted during training…
A critically ill patient was admitted to the Scottsdale hospital just before her daughter’s wedding and was unlikely to live to see it.
The bride told the hospital chaplain how much she wanted her mother to witness the wedding.
Within hours, the hospital atrium was transformed into a wedding chapel with flowers, balloons and confetti. The cake was supplied by the employees, and hospital chaplain officiated. A volunteer played the piano.
On every floor, hospital staff, patients, and visiting families ringed the atrium balconies, like “angels from above” to quote the bride. 77
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78. STEP 2: Setting up the clues in collaboration Coordinate resources towards delivering customer service
From Mayo, patients perceive an integrated coordinated response to their medical conditions, AND to their psychological, social, spiritual, and financial needs.
If a doctor cannot answer a question, she freely admits it to the patient and brings the relevant expert into the team.
Patient: “I have a lot of problems, and I like that I can go to Mayo and be seen by a team of specialists who work together to see the big picture.” 78
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79. A physician: “I never feel I am in a room by myself, even when I am.”
STEP 2: Setting up the clues in collaboration Design incentives to support coordination
All physicians are salaried so they don’t lose money by referring patients to colleagues.
A cardiac surgeon: “By not having our economics tied to our cases, we are free to do what comes naturally…to help one another.”
The “star billing” system is discouraged… doctors who want to shine alone and maximize income don’t work at Mayo.
A physician: “I never feel I am in a room by myself, even when I am.” 79
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80. STEP 2: Setting up the clues in collaboration Create technologies and abilities that support coordination
Mayo admitted a skin cancer patient at risk for metastasis, and owing to impending surgery at risk for nerve injury and disfigurement.
The Mayo ENT specialist in Scottsdale called together 20 doctors from 3 campuses to discuss the case.
The team, assembled in a day, met by videoconference for 1.5 hours and reached a consensus on the course of treatment, including how to sample the patient’s lymph nodes and reconstruct the surgical wound. 80
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81. STEP 2: Setting up the clues in collaboration Make the coordination transparent to the patient
Mayo’s electronic medical record (EMR) system improves the clinic’s ability to present a seamless, collaborative organization to the patient.
A patient: “On my last visit, the doctor pulled up all my test scores from the past five years on a computer and showed me the trends and we discussed what to do. I thought that was excellent.” 81
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82. STEP 3: Setting up the clues in tangibles Make the “entry” and public spaces friendly
Mayo’s facilities have been designed explicitly to relieve stress, offer refuge, and create positive distractions.
Architect: “I would like the patients to feel a little better before they see their doctors.”
The Gonda building has spectacular open spaces, marble stairwell and floor, and a multistory wall of windows overlooking a garden.
Mayo Clinic’s Gonda Building in Rochester, MN. 82
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83. STEP 3: Setting up the clues in tangibles Make the private spaces more accessible and friendly
In examination rooms, the physician’s desk is adjacent to a sofa large enough for the patient and family members – this removes the desk as a barrier between doctors and patients.
Staff members write down the names of attending doctors and nurses in every patient’s room, which helps patients keep track of multiple caregivers and lets them know that there’s a real person in charge.
In hospital showers, microwaves, and chairs that convert to beds are available for family members.
Mammography room at Mayo Clinic’s Gonda Building in Rochester, MN. 83
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84. STEP 3: Setting up the clues in tangibles Make the private spaces more accessible and friendly
The resuscitation equipment in pediatric examination is hidden behind a large picture (which slides out of the way when the equipment is needed).
At the Scottsdale campus, a car was lifted into the building to help patients in physical rehabilitation practice getting in and out in the privacy of the hospital.
Buildings include quiet, darkened spaces where patients can rest between appointments.
A patient: “It did not seem like a doctor’s office when we went to Mayo. There was no tension.”
Mayo Clinic’s Gonda Building in Rochester, MN: A library is available for patients to learn more about their diagnosis, with access to health educators to assist in their research. 84
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85. Story of the dirty shoelace, as recounted by employee Mary Ann Morris
STEP 3: Setting up the clues in tangibles Pay attention to detailed physical evidence
Story of the dirty shoelace, as recounted by employee Mary Ann Morris
A supervisor noticed that her shoelaces were dirty where they were threaded through the eyelets of the shoes and asked her to clean them.
Morris was offended and noted that she worked in a lab, not with patients.
Her boss replied that Morris has contact with patients in ways she did not recognize – in the street with her badge on, or passing them on the hospital floors.
Morris understood, over time, that everything she did, down to her shoelaces, represented her commitment and that of the Mayo Clinic to patients and visitors. 85
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86. Summary: Physical environment-focused standards and design
Careful attention to designing the “props” or the elements of the physical environment in which the service.
Organizations must “clue-in” customers by paying attention to:
Setting up clues in people
Setting up clues in the collaborative process
Setting up clues in the tangibles 86
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87. The story of National Semiconductor’s Webench*:
Standards and Design Approach 7: Activity ownership-focused standards and design
Careful attention to how you can design services that address the customer’s broader problem “scenario.” Particularly useful in the context of the Internet.
The story of National Semiconductor’s Webench*:
Design engineers construct electronic devices for their companies or for their manufacturing agents.
The design engineers do not buy in bulk but their role early in the product development process can lead to large orders down the road.
In 1994, NS established a website to provide product information to design engineers – the website was successful, but Phil Gibson, NA’s vice-President of Web business believed it could do much more.
In the late 1990s, Gibson launched an ambitious effort to better understanding how design engineers work and how they could be supported… 87
* Based on “Get inside the lives of your customers” by Patricia B. Seybold in Harvard Business Review (May 2001).

88. Going about it: Map customer activities
On studying the design engineer’s scenario in the context of building a power supply unit, the SWAT team assembled by Gibson broke down their tasks into 4 steps:
Choose a part
Create a design
Analyze the design (using powerful simulation tools)
Build a prototype 88
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89. Going about it: Facilitating the mapped activities
NS created a set of online applications called Webench:
The engineer specifies the overall parameters of the power supply unit and identify key components.
Webench automatically generates possible designs, tech specs, parts lists, prices, and cost-benefit analyses.
The engineer refines designs until a satisfactory one appears.
The engineer can run real-time simulations of the design, using a software NS has licensed and offers on the site.
The engineer can alter the design and rerun the simulation as often as needed.
The engineer can save all the iterations in a private portfolio or them to colleagues who can run the simulations.
With a mouse click, the system can generate a bill of material for the final prototype that may include parts from NS and other companies. 89
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90. Going about it: Some early missteps
At the outset, NS decided to charge engineers to use the simulation tool to recoup the costs of licensing the software.
Engineers came to the site in droves but backed out when asked to input their credit card number. Comment?
Solution
NS realized that instead of nickel and dime-ing customers, the bigger rewards were down the road –large orders!
Gibson: “One integrated-socket win with Nokia translates into 40 million units for us”
It provided the simulation facility for free. 90
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91. Webench configured 20,000 power supplies/year.
The result
Webench configured 20,000 power supplies/year.
Engineers finished in hours what took them days.
They explored alternatives they would never have before…one engineer went through 250 iterations.
Engineer: “Using these tools, I can go from an idea to a prototype in a few clicks. NS has thought of everything I need—from a huge catalog of parts to fast simulations.”
By Fall 2000, individuals were visiting the website and generating 3000 orders every day.
NS estimates it saves customers an average of 50 hours, or $3000 in monetary savings per design.
Expanded concept to design circuitry as well. 91
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92. Summary: Activity ownership-focused standards and design
Careful attention to how you can design services that address the customer’s broader problem “scenario.”
By focusing on the problems that customers face rather than the offerings that they buy, you can find ways to make life easier for them. 92
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93. Standards and Design Approach 8: Efficiency-focused design
Careful attention to how you can design services that give the greatest (output/input) ratio.*
Need to consider both the customer and the provider perspectives.
The following principles can help find opportunities for designing efficient services… 93
* Based on “Lean Consumption” by James P. Womack and Daniel T. Jones in Harvard Business Review (March 2005).

94. Principle 1: Tackle the source, not the symptoms of inefficiency
Fujitsu Services provides IT services and call centers globally. Fujitsu was often paid “per complaint handled.”
Fujitsu took over the desk contract for BMI Airlines in Fujitsu found that over half the calls to the help desks were from airline agents whose printers broke down. – they could not print boarding passes and baggage tags. Even flights were delayed on this account.
Fujitsu determined that the problem was with the low quality printers deployed by BMI. Fujitsu convinced BMI to upgrade these printers.
The number of printer related calls were cut down by more than 80% in 18 months.
Simultaneously, Fujitsu negotiated with BMI to change its payment terms to “number of potential users of the IT desk services.” 94
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95. Principle 2: Manipulate demand to maximize asset utilization
Demand for tennis at a Southeastern US resort peaked in July and August, way beyond capacity.
New, distant courts would cost $12,000 each.
How the resort managers reacted:
Warned guests about overcrowding.
Reservation system that steered demand to non-peak times of the day
Charged double play the same as single play
Set up tennis mixers and round robins to facilitate partner picking for doubles play
Opened courts at 6 AM
Added floodlights for night play
Intensively promoted alternative activities
Tennis became a profitable operation! 95
* Based on “Match supply and demand in service industries ” by Earl Sasser in Harvard Business Review (December 1976). 1

96. Principle 3: Increase customer participation
Vinoklet Winery in Cincinnati takes self-serve to a new level: On weekend evenings, you grill your own meal.
Customer review: “After helping ourselves to bread and crunchy green salad (included), our uncooked entrees arrived at our outdoor table. With some trepidation I headed toward the huge industrial grill, surrounded by repeat Vinoklet visitors who extolled the virtues of this beautiful place while deftly seasoning and turning their own meals, not needing the posted directions.”
I did a bang-up job on our New York strip steak ($17.95)…”
Some of the foods available for self grilling at include chicken, steak, fish,and pork chops. 96
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97. Principle 4: Move away from the culture of “face time”
Marriott managers had to cope with a historical culture of “face time”—the longer you were at work, the better.
Result: Discontented employees who did not see their future there.
“Management Flexibility” test program was launched at 3 Marriott hotels.
Only truly necessary meeting were scheduled.
Managers attended only those parts of the meeting that were relevant to them.
Front desk managers’ schedules traditionally overlapped one hour—reduced to 15 minutes.
At the end of the test, managers at the 3 hotels were working 5-7 hours less per week.
Customer satisfaction and managerial productivity stayed strong; retention improved.
Boston’s Copley Marriott was one of the program test sites. 97
* Based on “Changing a culture of face time” by Bill Munck in Harvard Business Review (November 2001). 1

98. Move away from the culture of “face time”
PERCENTAGE OF MARRIOTT MANAGERS WHO SAID…
“The emphasis is on hours worked, not on things accomplished.”
“My job is so demanding, I can’t take care of personal/family responsibilities”
“I feel drained at the end of the day”
“Management is supportive of less face-time.”
43%
15%
77%
36%
83%
59%
56%
73%
Before pilot test
After pilot test 98 1

99. Summary: Efficiency-focused design
Careful attention to how you can design services that give the greatest (output/input) ratio.*
Need to focus on creating both internal (within-firm/operational) and external (customer-focused) efficiencies.
We covered 4 principles can help find opportunities for designing efficient services. 99

100. Standards and Design Approach 9: Rewards and retention-focused design
Careful attention to how you can design services and associated rewards that promote customer loyalty and increased spending.
Closely related to the customer lifetime value concept.
The following principles can help managers design the RIGHT kind of loyalty and retention programs…
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101. Design discount programs and other customer incentives that create, rather than transfer, value
Rewards Network offers discounts at chosen restaurants for an upfront payment.
Rewards Network pays restaurant owners some cash upfront to participate in the program – mostly cash-strapped ones jump in.
Faced with this competition, other well-performing restaurants have jumped in.
In the long run, the restaurants do not benefit – customers and Rewards Network do! Why?
Problem with incentive design: Restaurant goers get the same discount at any restaurant – not linked to consumption patterns.
The fact that the discount is available at multiple restaurants promotes switching.
Little real value is created – the program does not ensure that customers will dine out more often or that they will focus on a single or a few restaurants.
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102. Summary: Rewards and retention-focused design
Rewards and retention strategies must aim to reward the right customers, must ideally be linked to usage patterns and must ultimately benefit the FIRM that provides the rewards.
Your best customers may not need the rewards…make sure you are not overspending on them.
Managers must design the RIGHT kind of loyalty and retention programs…
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103. Designing and delivering quality services – done so far…
Employee-focused design
Service quality-focused design
Customer experience-focused design
Process flow-focused design
Time target-focused design
Physical environment-focused design
Activity ownership-focused design
Efficiency-focused design
Rewards and retention-focused design
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