Designing Service Processes to Unlock Value, Third Edition

Joy M. Field

• Publisher: Business Expert Press
• Year: 2020
• ISBN:
  9781953349279
• Topic: Betriebswirtschaft
• Subtopic: Dienstleistungsbranche

Designing Service Processes to Unlock Value explores how service processes can be designed to leverage the expanding range of opportunities for service providers and customers to co-create value.

The service process design landscape is changing, with many of the previous limitations disappearing on how and by whom services are delivered. Opportunities for new service design configurations are being supported, to a large extent, by technology-enabled innovations; many tasks previously performed by the service provider may now be performed by either the customer or the service provider. As a result, customers are playing a more active role in the service process, not only through self-service but also by providing information to the service provider to create a more personalized service experience.

Designing Service Processes to Unlock Value explores how service processes can be designed to leverage the expanding range of opportunities for service providers and customers to co-create value. Readers will learn about frameworks for value co-creation and models for designing all types of service processes, as well as the unique challenges of designing knowledge-intensive services. And with the growing number of alternatives for designing service processes and determining who performs the various service tasks, service performance outcomes are increasingly dependent on the knowledge, skills, and abilities—that is, capabilities—of both service providers and customers. Thus, the book concludes with approaches to unlock these capabilities–and further boost value co-creation.

CHAPTER 1

Introduction

As firms strive to grow their revenues and profits, they increasingly look to services as a source of competitive advantage. Traditional service process designs—where the service provider takes the lead and the customer is the recipient of the service product—have given way to a different paradigm in which the service provider and customer work together to co-create value. Oftentimes this involves the use of innovative technologies that support new ways of delivering services. Service providers who embrace this model are enhancing their competitive position through service processes that provide more value to customers and higher profits to the firm.

But what exactly are service providers and customers doing to unlock the tremendous value co-creation potential from this new approach to service process design? Based on my research and experience, I wrote this book to help answer that question and to share the stories of how service firms and their customers are leveraging the new opportunities to design state-of-the-art service processes while confronting the inevitable challenges that arise.

Before continuing, it is important to be clear about what is meant by a service process. Processes, in general, can be defined as “any transformation that converts inputs to outputs.”1 Of course, for business processes, the goal is not just to convert inputs to outputs but to add value in the process. The elements of the transformation include a network of activities or tasks to be performed, along with the process resources (labor, capital, information) that are necessary to complete the tasks. For a service process, in particular, “the customer provides significant inputs [resources] into the production [transformation] process.”2 Customer inputs include self-inputs (themselves, their labor), tangible belongings (their property), and/or customer-provided information. In other words, customers and their resources are always involved in some way in their own service process.

An example of a supermarket grocery shopping process will help to make these concepts more concrete. For illustrative purposes, assume that the “transformation” process starts when customers arrive at the supermarket and ends when they complete their shopping. Inputs to the process include customers, their shopping lists, and payment method. The shopping process, in brief, involves finding the desired items, placing them in a cart (resource), and checking out. Other resources are the store itself, products on the shelves (or in the freezer, refrigerator, behind the counter), employees, information (e.g., signs indicating what types of products are in each aisle), and various technologies (e.g., for checkout). The outputs (or “service products”) are the bagged and purchased groceries and (hopefully) satisfied customers.

But the in-store grocery shopping process is not immune to the changes happening in the increasingly dynamic business environment for services. In fact, the industry is undergoing the type of paradigm shift mentioned above. Traditional supermarkets are facing escalating competition due to the proliferation of store formats (convenience store to super-store) and from online delivery channels. Grocery services delivered through an online channel are now being offered by brick-and-mortar chains as well as online-only players such as Amazon Fresh and Peapod. More recently, online firms such as Blue Apron, Plated, and Hello Fresh have started delivering fresh ingredients to conveniently prepare meals at home, providing the exact amount of ingredients needed with no waste. In addition, changes to in-store processes are altering the way in which the service providers and customers co-create value; the introduction of new technologies—customer-operated scanners, self-service checkout, digital kiosks—allow (or, in some cases, require) customers to perform tasks previously done by store employees. However, the ever-evolving example of the self-service checkout should serve as a cautionary tale of the challenges firms encounter when changing the way services are delivered. In fact, a good starting point for identifying the opportunities and challenges facing service process designers is with self-service technologies and their incorporation into the service process.

Why Customers Love Automatic Teller Machines… But Have a Love/Hate Relationship with Self-Service Checkout

Consider two service processes we’re all familiar with: personal banking and supermarket checkout. For years, both processes have had a self-service option—automatic teller machines (ATMs) and self-service checkout kiosks—yet, historically, ATMs have been met with a much higher level of customer acceptance and use. Why is that?

To answer the question we need to look at how each of these self-service options creates value for the participants in the service process and how it compares to the full-service option. Value is created when “benefits (including access to resources and capabilities) are perceived to be greater than costs—which include money, time, and effort—associated with obtaining these benefits.”3 For a service process to be provided by the firm and used by the customer, both parties must individually realize value. However, the value the firm and customers acquire from the service process are not independent of each other. Because of this, and due to the significant inputs that customers have into the service process, it follows then that joint firm and customer value is necessarily co-created through the interactions of service providers with the customers themselves, their property, and/or their information. (Note that co-creation is different from co-production; co-production refers specifically to the labor contributed by participants in the service process to complete service tasks.) With this in mind, let’s contrast value co-creation for self-service banking using an ATM with self-service checkout at the supermarket.

From the perspective of a bank or a supermarket, these self-service technologies reduce the number of employees needed by transferring service tasks to the customers. So the customer’s unpaid labor replaces the paid labor of the bank teller and the supermarket cashier. This labor cost reduction benefit is offset by the costs to buy, install, support, and maintain the ATMs and self-service checkouts. Support and maintenance costs for ATMs include access to employees when customers have questions or problems, collection of deposits and restocking cash, and preventative maintenance or unscheduled repair of a malfunctioning ATM. Self-service checkout kiosks still require employee support, with one employee monitoring several kiosks to aid customers, prevent theft, and verify purchases with age restrictions. Although support and maintenance costs are somewhat variable by customer volume, the cost of buying and installing an ATM or self-service checkout kiosk is essentially fixed. As a result, the value of these technologies to the firm increases as customer utilization of the self-service option increases and fewer employees are needed.

Although the basic value calculations from the firm’s standpoint are similar for ATMs and self-service checkouts, they differ radically from the customer’s viewpoint. First, think about what banking services are offered by an ATM. ATMs are designed so that only standardized and simple transactions such as withdrawing cash or depositing checks can be completed by the customer through this self-service channel. As a result, the customer interface with the ATM is correspondingly standardized and simple, making it easy for the customer to learn and use. For other banking services such as error resolution or renting or accessing a safe deposit box, the customer must still interact with a bank employee either because of the complexity of the service or for security reasons. Because the standard and simple services available from ATMs are also the most common ones, customers have the choice of using the ATM rather than a teller for a majority of their banking needs.

However, service task types are not as neatly separable when using self-service checkouts. While scanning barcodes on prepackaged products is straightforward, the checkout process for items without barcodes, such as fresh fruits and vegetables and bakery goods, is more complicated and involves entering the item identifier and the number of items. In fact, a study of checkout times at a discount retailer has found that for a similar basket of items, it takes an average of 50 percent longer for self-service checkout compared to full-service checkout with cashiers who are trained to efficiently handle all types of items. And to add to their burden, self-service customers are often responsible for performing additional steps not part of the full-service process—such as weighing the individual items—that help prevent theft. This is the situation faced by a typical customer with a mix of items when deciding whether to use self-service or full-service checkout. Compared with ATMs that limit self-service transactions to ones that are standardized and simple for the customer to perform, self-service checkout involves a wider range of task difficulty requiring more customer time and effort, which many customers, frankly, find intimidating.

But what about the benefits to customers? How do ATMs compare with self-service checkout? The most obvious benefit of ATMs is their convenience in terms of time and place; customers can access ATMs 24/7 at branches as well as other locations close to work and home. In fact, as the network of ATMs grows and accessing an ATM becomes even more convenient, the value of this self-service channel to the customer increases in what is known as a network effect. Customers are no longer limited to “banker’s hours” for common transactions. In contrast, self-service checkout is available only during supermarket store hours and only for customers shopping at that particular store. In addition, three-quarters of the respondents to a Harris poll for Digimarc said that they sometimes avoid self-service checkouts often because of anticipated technical problems.4 Another survey found that one in three shoppers have actually walked out of a store without the items they intended to buy because of a bad experience with a self-service checkout.5

Ironically, because many customers do not perceive that the benefits outweigh the costs, customers who are comfortable using self-service checkout may benefit if it results in underutilization of this channel.6 And even customers who would otherwise be willing to use self-service checkout with a short line over full-service checkout with a longer line might think twice before choosing self-service. After all, any customer ahead of them in the self-service line is an unknown variable compared to the more reliable checkout process with a cashier.7 Underutilization, in turn, negatively impacts the value of self-service checkout to the company as the ex...