UNIVERSITY OF PRETORIA
Graduate School of Technology Management
SYSTEMS ENGINEERING:
A DUAL SA ECONOMY PERSPECTIVE
Richard Weeks
1
ASPECTS TO BE ADDRESSED
• South Africa: the reality of a dual economy within a global
services driven economy
• Service science: the new South African frontier in a dual
services and manufacturing economy
• A Systems Engineering perspective of the new frontier
• Clarity as to the concept and nature of services
• Service system life cycle
• Service System Design
• Facility Design
• The service encounter (moment of truth)
• Service implementation and management
2
Nature of the global economyEmployment trends
3
Nature of the global economyGDP trends
4
Nature of the global economyRise of services economy
Source: 2004 IBM study, based on national labour data
5
Question?
• In your day-to-day life-world how many of
the purchases that you and your family
make are services related?
• Within the organisation you work for, how
many of the day-to-day activities
undertaken are services related?
6
Question?
• In your day-to-day life-world how many
of the purchases that you and your
family make are services related?
Medical – insurance – servicing of car – electricity banking/financial transactions – municipal services –
education of children – security services –
domestic cleaning – transportation (taxies) ………….
• Within the organisation you work for,
how many of the day-to-day activities
undertaken are services related?
May be external or internal to the organisation –
information - travel/transportation – training of staff –
salaries – taxation – IT support services ………….
7
Nature of the services sector
What are some everyday services?
 Transportation
Train, taxis, airlines, delivery, airports, shipping,
 Hospitality
Hotels, restaurants, cafeterias,
 Infrastructure
Communications, electricity, water, waste removal, roads, energy
 Government
Police, fire, water, waste removal, health, education,
 Financial
Banking, investments, insurance,
 Entertainment
Television, movies, concerts,
 Professional Services
Doctors, dentists, lawyers, skilled craftspeople, teachers,
 Health
Hospitals, dentists, clinics, doctors, medical aid, ambulance
8
Role of Services in a Network Economy
FINANCIAL
SERVICES
· Financing
· Leasing
· Insurance
INFRASTRUCTURE SERVICE
· Communications
· Transportation
· Utilities
· Banking
MANUFACTURING
Services inside company:
· Finance
· Accounting
· Legal
· R&D and design
BUSINESS SERVICES
· Consulting
· Auditing
· Advertising
· Waste disposal
DISTRIBUTION
SERVICES
· Wholesaling
· Retailing
· Repairing
PERSONAL SERVICES
· Healthcare
· Restaurants
· Hotels
CONSUMER
(Self-service)
GOVERNMENT SERVICES
· Military
· Education
· Judicial
· Police and fire protection
9
Economic Evolution
Economy
Agrarian
Industrial
Service
Experience
Economic
Offering
Food
Packaged
goods
Commodity
service
Consumer
services
Business
services
Function
Extract
Make
Deliver
Stage
Co-create
Nature
Fungible
Tangible
Intangible
Memorable
Effectual
Attribute
Natural
Standardized
Customized
Personal
Growth
Method of
Supply
Stored in
bulk
Inventoried
Delivered on
demand
Revealed over
time
Sustained over
time
Seller
Trader
Producer
Provider
Stager
Collaborator
Buyer
Market
Customer
Client
Guest
Collaborator
Expectation
Quantity
Features
Benefits
Sensations
Capability
10
Distribution of GDP in the US Economy
Product
Services
A
Physical
Information
B
6%
31%
37%
10%
53%
63%
C
D
16%
84%
11
Nature of Service Sector
Percent
Distribution of
Wage and Salary
Employment in
USA by Industry
Sector, 2006
12
We believe that the global economy has
passed a tipping point in the transition
from an industrial, good-centred to an
innovation, service-centred logic.
Dominant logic and innovative
technologies, methods and concepts evolve
in a particular way to form something
new.”
Davenport, Leibold & Voelpel - 2006
13
The realities of the
South African Economy
ESSENTIALLY SOUTH AFRICA HAS A
DUAL SERVICES & MANUFACTURING ECONOMY
AGRICULTURE
9%
MANUFACTURING
26%
SERVICES
65%
Fastest growing sector of the economy
14
The nature of the South African Services Economy
In relation to the Global Services Economy
Relative annual % growth in exports of services
Growth over the period 1997-2006
South Africa
Source: OECD
15
The nature of the South African Services Economy
In relation to the Global Services Economy
Relative annual % growth in imports of services
Growth over the period 1997-2006
South Africa
Source: OECD
16
The nature of the
South African Services Economy
Services trade balance: exports of services minus imports of services
Billion US dollars, average 2004-2006
Negative Trade Balance!!
South Africa
NOTE: SOUTH AFRICA IMPORTS MORE SERVICES
THAN IT EXPORTS
17
The nature of the
South African Economy
Trade balance: exports of goods minus imports of goods
Billion US dollars, average 2004-2006
Negative Trade Balance!!
South Africa
18
SARS TRADE STATISTICS
REPUBLIC OF SOUTH AFRICA
PRELIMINARY REPORT FOR JULY 2008
This is not a sustainable situation
19
SERVICE SCIENCE:
THE NEW SOUTH AFRICAN FRONTIER IN A DUAL
SERVICES AND MANUFACTURING ECONOMY
How is South Africa positioned to address the
challenge of the new frontier?
World Economic Forum: The 12 pillars of competitiveness
Service innovation critical for South Africa
to gain a competitive advantage
21
SA – Global
Competitive
Index
Global Competitiveness Index 2007 - 2008
SOUTH AFRICA’S RANKINGS
Rank
Score
2007-2008
South Africa's GCI
for 2007-2008
44
(Out of 131 countries/economies)
(Out of 7)
Global Competitiveness Index 2007-2008
44
4.42
Sub index A: Basic requirements
61
4.45
1st pillar: Institutions
39
4.55
2nd pillar: Infrastructure
43
4.22
3rd pillar: Macroeconomic stability
50
5.08
4th pillar: Health and primary education
117
3.96
Sub index B: Efficiency enhancers
36
4.44
5th pillar: Higher education and training
56
4.12
6th pillar: Goods market efficiency
32
4.73
7th pillar: Labor market efficiency
78
4.16
8th pillar: Financial market sophistication
25
5.19
9th pillar: Technological readiness
46
3.57
10th pillar: Market size
21
4.89
Sub index C: Innovation and sophistication
33
4.16
11th pillar: Business sophistication
36
12th pillar: Innovation
32
4.61
22
3.71
“Africa needs to improve its competitive
position in order to penetrate global
markets, its own national markets being too
small to constitute a solid basis for
sustainable growth and poverty reduction ”
Peter Watson
23
The South African Skills Paradox
South Africa has large numbers of unemployed
people (Estimate 25%) yet it also suffers from a
skills shortage at the same time –
The services economy requires
multi-skilled people
who can integrate
technology & business in developing innovative
product & service business solutions for clients,
with due regard to the human socio-cultural
operational factors involved
24
T-shaped people for the services economy
25
THE NEW SOUTH AFRICAN
DUAL SERVICES & MANUFACTURING
ECONOMIC FRONTIER
If the services sector is the largest and the fastest growing sector of
the global economy South Africa will need to capture a larger share
of the action within this highly competitive sector of the economy, if
it is to turn the negative trade balance around
In a Dual Economy the focus is on an innovative product/services
bundle or offering to gain a competitive advantage in the
marketplace
This by implication, from a systems engineering perspective, entails
the need to innovatively integrate the manufacturing and services
value chains at an operational level – particularly as it relates to
front and back stage operational and support systems
26
Trevor Manual –
SA Minister of Finance (SA Reality):
“The knowledge base of the population, the technology that
workers are able to use, the systems around which
production is organised, the innovation potential of a
workforce and the means of communication between agents
in the economy are all key factors that drive long run
economic growth”
“the world economy is far more skills intensive today”
YET
“South Africa faces an unprecedented shortage of skills.
While we have about four million unemployed people we have
about a million vacancies”
27
A Systems Engineering perspective
of the new frontier
28
Systems engineering perspective
Systems engineering in a dual services & manufacturing economic context
provides a framework for the integration of processes, tools, technology and
human resources in the planning, development, implementation and
management of innovative services and products that meet client’s needs.
It is defined by the International Council on Systems Engineering (INCOSA)
as:
an engineering discipline whose responsibility is creating and executing an
interdisciplinary process to ensure that the customer and stakeholder's needs
are satisfied in a high quality, trustworthy, cost efficient and schedule
compliant manner throughout a system's entire life cycle”
29
Service Systems Engineering Defined:
Service Systems Engineering applies
engineering methods, ingenuity, and
integrative techniques to design service
processes and systems for improving the
human condition and quality of life.
Michigan University of Technology . Definition, 6/07
30
Definition:
Engineering Services Management (ESM)
A melding together of strategy, engineering,
business processes & infrastructure, and
human socio-cultural systems into an
innovative and dynamic response that adds
value in realising client needs and
expectations in order to gain a competitive
advantage within the global and local
services and manufacturing marketplace
University of Pretoria: GSTM
31
Clarity as to the concept and nature of services
32
Clarity as to the concept and nature of services
33
Clarity as to the concept and nature of services
Provider
 An entity (person or institution) that makes preparations to meet a need
 An entity that serves
Client
 An entity (person, business, or institution) that engages the service of
another
 An entity being served
Some general relationship characteristics are that the client
 Participates in the service process (also known as the service engagement)
 Co-produces the value
 The quality of service delivered depends on customers preferences,
requirements, expectations and perception of the services encounter
(Moment of truth)
34
Value proposition
Employees &
Stockholders
Community
Customer
Value
Value
Service
Provider
Value
Service
Experience
Service System
Partners
Competition
Source: Adapted from Stephen K. Kwan & Jae H. Min, 2008
35
Clarity as to the concept and nature of services
 Simultaneity: services created & consumed simultaneously - cannot be stored,
It eliminates opportunity for quality-control intervention before delivery. Capacity
management critical to meet demand or queuing ensues.
 Perishability: cannot establish a services inventory as backup, leads to a loss of
opportunity of idle capacity and a need to match supply with demand – an airline
seat no filled or a dentist appoint not kept results in a revenue loss.
 Intangibility: services are concepts and ideas in contrast to products as things.
Difficult for client to evaluate beforehand what is being offered and what they will
get for their money. Creative advertising, no patent protection, importance of
reputation assume relevance.
 Heterogeneity: customer involvement and the human element in services
delivery process results in variability. Interaction involved and perceptions of the
interaction in relation to prier expectations in terms thereof is subjective in nature.
 Customer Participation in the Service Process: attention to facility design and
the services encounter. Issues of consideration: opportunities for co-production,
concern for customer and employee behavior.
 Non-Ownership: unlike goods there is not a transfer of ownership - what are
clients buying? Gaining access to a resource for a period of time. Sharing
resources between clients presents management challenges i.e. queuing.
36
Non-ownership Classification of Services
Type of Service
Customer value
Examples
Management
Challenge
Goods rental
Obtain temporary
right to exclusive
use
Vehicles, tools,
furniture,
equipment
Site selection and
maintenance
Place and
space
rental
Obtain exclusive use
of defined
portion of a
larger space
Hotel room, seat on
airplane, storage
unit
Housekeeping and
achieving
economies of
scale
Labor and
expertise
Hire other people to
do a job
Car repair, surgery,
management
consulting
Expertise is a
renewable
resource, but time
is perishable
Physical
facility
usage
Gain admission to a
facility for a
period of time
Theme park, camp
ground, physical
fitness gym
Queuing and crowd
control
Network usage
Gain access to
participate
Electric utility, cell
phone, internet
Availability and
pricing decisions
37
Implications of Rental/Usage Paradigm
 Creates the option of renting a good upon
demand rather than purchase.
 Service often involves selling slices of larger
physical entities.
 Labor and expertise are renewable resources.
 Time plays a central role in most services.
 Service pricing should vary with time and
availability.
Question: Can services in general be described as customers sharing resources?
38
The Service Process Matrix
Degree
of labor Intensity
Low
High
Degree of Interaction and Customization
Low
High
Service Factory
Service Shop
* Airlines
* Hospitals
* Trucking
* Auto repair
* Hotels
* Other repair services
* Resorts and recreation
Mass Service
* Retailing
* Wholesaling
* Schools
* Retail banking
Professional Service
* Doctors
* Lawyers
* Accountants
* Architects
39
Service Classification
(Nature of Demand and Capacity)
Extent of Demand Fluctuation over Time
Extent to Which Demand
Exceeds Capacity
Peak demand can
met without a major delay
Peak demand regularly
exceeds capacity
Wide
Narrow
Electricity
Insurance
Telephone
Legal services
Police emergency
Hospital maternity unit
Banking
Laundry and dry cleaning
Tax preparation
Fast food restaurant
Passenger transportation
Movie theater
Hotels and motels
Gas station
40
The ESM Ecosystem
41
Product / Service transformation analogy
James Teboul, 2006.
42
The Services Product bundle or offering
 Process of value enhancement in services and manufacturing systems integration –
client & provider customisation of product and associated services, design, testing
manufacturing, delivery, after sales service, training in use of product, maintenance,
phasing out of product taking environmental considerations into account.
 Products and services in nature are fundamentally very different and this in itself
presents inherent challenges in defining the bundle offered and purchased.
 Innovation and creativity assumes specific relevance in product and services design
and delivery, as well as their integration to gain a competitive advantage in the
marketplace.
 The inherent human interaction aspects involved in services introduces emotions,
feelings, perceptions, values, beliefs and similar difficult considerations that need to
be taken into consideration.
 Introduction of front stage client facing and backstage institutional & support systems
and activities that need to be integrate
 Services in support of goods has become a means of differentiating a firm’s products.
43
The Increasing Role of Service in Manufacturing
Examples of Services
 Product / service customization
 Information
 Warranties
 Leasing, licensing, and rentals
 After sales services
 Staff training
 Customer support
 Maintenance
Service adds value (and profitability)
 Service margins can be greater than associated product margins
 Additional services providing a competitive advantage I marketplace
 Bundle providing innovative packaged offering exceeding value of
individual elements added together
 Outsourcing resulting is lowering of cost to client and enhanced services
 Client access to: ongoing research; technology; staff expertise & experience
44
SERVICE SYSTEM LIFE CYCLE
Service
Conceptualisation
Service
Design
Service
Testing
Systems engineering in
a dual services & manufacturing economic
context provides
a framework for the integration of
processes, tools, technology and human
resources in the planning, development,
implementation and management of
innovative services and products that
meet client’s needs.
Service
Implementation
Service
Management
Service
Phase-out
45
SERVICE SYSTEM DESIGN
46
Service Design Elements
 Structural
- Service vision
- Delivery system
- Location
- Facility design
- Capacity planning
 Managerial
- Service encounter
- Quality
- Managing capacity and demand
- Information
47
New Service System Design
• Full-scale launch
• Post-launch
review
Full Launch
• Service design
and testing
• Facility design and
testing
• Process and system
design and testing
• Marketing program
design and testing
• Personnel training
• Service testing and
pilot run
• Test marketing
Design
Development
Enablers
• Formulation
of new services
objective / strategy
• Idea generation
and screening
• Concept
development and
testing
People
Product
Technology
Systems
Tools
Analysis
• Business analysis
• Project
authorization
48
Service Vision
Service Delivery System
 What are important features of the service delivery
system including: role of people, technology,
equipment, layout, procedures?
 What capacity does it provide, normally, at peak
levels?
 To what extent does it, help insure quality standards,
differentiate the service from competition, provide
barriers to entry by competitors?
49
Services Design considerations
Element
Considerations
Delivery system
What does the customer see, where does production occur? In B2B can we
seamlessly move information from one processing point to the next?
Facilities design
Size, layout, how does it feel? Important in B2C – if people are uncomfortable
they probably won’t come back.
Capacity planning
Queues and demand. Typically we don’t plan for full capacity which would
result in waste. What do we do with excess capacity? What do we do with
customers when we have to make them wait?
Service encounter
Employee training and empowerment. The culture & climate people experience
influences their behaviour which in turn affects customer relationships.
Quality
Service quality is subjective client assessment that relates client’s service
expectation to perceived services rendered by the provider
Managing
capacity and
demand
Adjusting your plans to accommodate customer requirements, or is there a way
to drive demand to map to your ability to deliver (think of happy hour).
Information
What to collect, keep, for competitive advantage. At issue here is privacy and
who really ‘owns’ the data? Can you think of any service that doesn’t depend
on information?
50
Typical Customer Criteria used in
selecting a service provider
•
•
•
•
•
•
•
•
•
Availability
Convenience
Dependability
Personalization
Price
Quality
Reputation
Safety
Speed
(24 hour ATM)
(Site location)
(On-time performance)
(Know customer’s name)
(Quality surrogate)
(Perceptions important)
(Word-of-mouth)
(Customer well-being)
(Avoid excessive waiting)
The services economy is a highly competitive business environment
and how the institution hopes to gain an advantage needs to be taken
into consideration in the service design i.e. availability, quality etc
51
Technology-Driven Service Innovations
Source of
Technology
Service Example
Service Industry Impact
Power/energy
Jet aircraft
Nuclear energy
International flight is feasible
Less dependence on fossil fuel
Facility design
Hotel atrium
Feeling of grandeur/spaciousness
Enclosed sports stadium Year-around use
Materials
Photochromic glass
Synthetic engine oil
Energy conservation
Fewer oil changes
Methods
Just-in-time (JIT)
Six Sigma
Reduce supply-chain inventories
Institutionalize quality effort
Information
E-commerce
Satellite TV
Increase market to world-wide
Alternative to cable TV
52
Taxonomy of Service Processes
Low divergence (Standard service)
Processing
of goods
Dry
Processing
Information
Check
No
Cleaning
processing
Customer
Restocking
Billing for a
Contact
a vending
machine
credit card
Indirect
customer
contact
No
customerservice
worker
interaction
(self-
Direct
Customer
Contact
service)
Customer
service
worker
interaction
Processing
of people
High divergence (Customized service)
Processing
of goods
Auto repair
Processing
Information
Computer
Tailoring a
programming
suit
Processing
of people
Designing a
building
Ordering
Supervision
groceries
from a home
computer
of a landing
by an air
controller
Operating
a vending
machine
Assembling
premade
furniture
Withdrawing
cash from
an ATM
Operating
Sampling
Documenting
an elevator food at a
medical
Riding an
buffet dinner history
escalator
Bagging of
groceries
Searching for
information
Food
service in a
restaurant
Hand car
washing
Giving a
lecture
Handling
routine bank
transactions
Providing
public
transit
Mass
vaccination
in a library
Home
Portrait
carpet
painting
cleaning
Counseling
Landscaping
service
Driving a
rental car
Using a
health club
facility
Haircutting
Performing
a surgical
operation
53
Framework for Services Blueprint
Physical evidence
Customer actions
Front stage
Facilities, Aesthetics, Documentation etc.
Service
Encounter
Line of
Client/Employee
Interaction
Employee actions
Line of
visibility
Backstage
Employee actions
Support staff activities
Line of
Internal interaction
Support Systems
Information Systems, Technology, CRM,
ERP, Employee Training, etc.
54
Services Blueprint: Three Star South African Hotel
55
The Service Quality: Design versus Client Perception
Causes of Gaps
Service Quality
Sales Generated
Expectation
Management’s
Perceived Client
Expectation
Inflated Expectation
Communication
Real Expectation
Marketing
Design
= Service Quality Gap
Service Design
Specification
Conformance
Service
Delivered
Service Provider’s
Perspective
Service Received
Client’s
Perception
56
The Supporting Facility Design
(servicescapes)
Creating the Right Environment
57
Facility Design Considerations
 Nature and Objectives of Service Organization
 Land Availability and Space Requirements with
future development considerations in mind
 Location of facilities with respect to client access
 Technology service support systems
 Flexibility
 Security
 Aesthetic Factors
 Symbols & artifacts
 The Community and Environment impact
58
SERVICESCAPE FRAMEWORK
59
Location Considerations
External
Customer
(consumer)
Internal
Customer
(employee)
Front Office
Back Office
Is travel out to customer or
customer travel to site?
Can electronic media
substitute for physical
travel?
Is location a barrier to
entry?
Is service performed on
person or property?
Is co-location
necessary?
How is communication
accomplished?
Availability of labor?
Are self-service kiosks an
alternative?
Are economies of scale
possible?
Can employees work
from home?
Is offshoring an option?
60
Site Selection Considerations
. Access:
Convenient to freeway exit and
entrance ramps
Served by public transportation
Communication facilities & networks
2. Visibility:
Set back from street
Surrounding clutter
Sign placement
3. Traffic:
Traffic volume on street that may
Indicate potential impulse buying
Traffic congestion that could be a
hindrance (e.g.., fire stations)
1
4. Parking:
Adequate off-street parking
5. Expansion:
Room for expansion
6. Environment:
Immediate surroundings
should complement the
service
7. Competition:
Location of competitors
8. Government:
Zoning restrictions
Taxes
Services (telephone, water,
electricity, waste removal)
61
Matching Capacity and Demand for Services
MANAGING
DEMAND
Developing
complementary
services
Developing
reservation
systems
MANAGING
CAPACITY
Partitioning
demand
Sharing
capacity
Establishing
price
incentives
Crosstraining
employees
Promoting
off-peak
demand
Using
part-time
employees
Increasing
customer
participation
Scheduling
work shifts
Creating
adjustable
capacity
Yield
management
62
Managing Waiting Lines
• “Americans hate to wait. So business is trying a
trick or two to make lines seem shorter…” The New
York Times, September 25, 1988
• “An Englishman, even when he is by himself, will
form an orderly queue of one…” George Mikes, “How to
be an Alien”
• “In the Soviet Union, waiting lines were used as a
rationing device…” Hedrick Smith, “The Russians”
• “In South Africa it is a way of life” Richard Weeks
63
Where the Time Goes
In a life time, the average
person will spend:
SIX MONTHS Waiting at stoplights
EIGHT MONTHS Opening junk mail
ONE YEAR Looking for misplaced 0bjects
TWO YEARS
FOUR YEARS
FIVE YEARS
SIX YEARS
Reading E-mail
Doing housework
Waiting in line
Eating
64
Laws of Service
• Maister’s First Law:
Customers compare expectations with perceptions.
• Maister’s Second Law:
Is hard to play catch-up ball.
• Skinner’s Law:
The other line always moves faster.
• Jenkin’s Corollary:
However, when you switch to another other line, the line you
left moves faster.
65
Remember Me
 I am the person who goes into a restaurant, sits down, and
patiently waits while the wait-staff does everything but
take my order.
 I am the person that waits in line for the clerk to finish
chatting with his buddy.
 I am the one who never comes back and it amuses me to
see money spent to get me back.
 I was there in the first place, all you had to do was show
me some courtesy and service.
The Customer
66
Psychology of Waiting
• That Old Empty Feeling: Unoccupied time goes slowly
• A Foot in the Door: Pre-service waits seem longer that inservice waits
• The Light at the End of the Tunnel: Reduce anxiety with
attention
• Excuse Me, But I Was First: Social justice with FCFS
queue discipline
• They Also Serve, Who Sit and Wait: Avoids idle service
capacity
67
Approaches to Controlling Customer Waiting
• Animate: Disneyland distractions, elevator
mirror, recorded music
• Discriminate: Avis frequent renter treatment (out
of sight)
• Automate: Use computer scripts to address 75%
of questions
• Obfuscate: Disneyland staged waits (e.g. House
of Horrors)
68
Arrival Process
Arrival
process
Static
Dynamic
Random
arrivals with
constant rate
Random arrival
rate varying
with time
Facilitycontrolled
Accept/Reject
Price
Appointments
Customerexercised
control
Reneging
Balking
69
Queue Configurations
Multiple Queue
Single queue
Take a Number
Enter
3
4
8
2
6
10
12
11
7
9
5
70
SERVICES ENCOUNTER
(Moment of Truth)
71
The Service Triangle
Service
Organization
Control
versus
autonomy
Efficiency
versus
satisfaction
Contact
Personnel
Customer
Perceived
control
Note: Perceived control determines if a relationship or encounter
is established between contact personnel and customer.
72
The Customer
 Expectations and Attitudes




Economizing customer – wants value for money, time & effort
Ethical customer - social & environmental conscious
Personalizing customer – wants personal customized friendly attention
Convenience customer – hassle free service without red tape
 Customer as Coproducer
 Scripts defined by context determine service encounter behaviour e.g.
Self-service in a cafeteria, check-out encounters at a store etc.
 Use of technology e.g. automation of services such as ATMs
 View of service quality subjective
73
Difficult Interactions with Customers
Unrealistic customer expectations
1. Unreasonable demands
2. Demands against policies
3. Unacceptable treatment of
employees
4. Drunkenness
5. Breaking of societal norms
6. Special-needs customers
Unexpected service failure
1. Unavailable service
2. Slow performance
3. Unacceptable service
(Use scripts to train for proper response)
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The Service Organisation
(Aspects influencing services encounter)
The service organisation establishes the
environment for the service encounter – the
organisational culture serves as a behavioural
determinant – physical surroundings (Servicescape)
inherently influence the atmosphere in which
encounter takes place.
Case in point: McDonalds – people know what is
expected and what they will get – consistency in
services rendered – Staff trained to comply.
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Contact Personnel
 Selection (getting staff with correct personality attributes – e.g. flexibility,
tolerance for ambiguity, empathy for clients etc.)
 Abstract Questioning – open ended interviews allows them to reveal their
views and feelings
 Situational Vignette – questions relating to specific situations that may be
encountered in dealing with clients – “can they think on their feet”
 Role Playing – simulated situations.
 Training – skills to perform the service tasks
 Unrealistic customer expectations - client expectations that cannot be
delivered by the system e.g. passengers wanting to take oversized luggage
onto an aircraft – demands that go against company policies, unexcitable
treatment of employees, breaking social norms
 Unexpected service failure – places burden on contact staff who need to show
innovation in dealing with situations that may arise so they do not get worse
 Ethics – standards cannot be compromised in service encounters by
contact staff even if it means losing a client in the process as it can have
longer term and far reaching implications on future serve encounters
with clients.
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Examples of Unethical Behaviour
Misrepresenting the
Nature of the
Service
• Promising a
nonsmoking room
when none is
available
• Using bait-and-switch
tactics
• Creating a false need
for service
• Misrepresenting the
credentials of the
service provider
• Exaggerating the
benefits of a specific
service offering
Customer
Manipulation
• Giving away a
guaranteed
reservation
• Performing
unnecessary
services
• Padding a bill with
hidden charges
• Hiding damage to
customer
possessions
• Making it difficult to
invoke a service
guarantee
General Honesty and
Integrity
• Treating customers
unfairly or rudely
• Being unresponsive
to customer
requests
• Failing to follow
stated company
policies
• Stealing customer
credit card
information
• Sharing customer
information with
third parties
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Satisfaction Mirror –
(When a strong sound relationship develops between client and staff)
More
Repeat
Purchases
Stronger
Tendency to
Complain about
Service Errors
More Familiarity
with Customer Needs
and Ways of Meeting
Them
Greater
Opportunity for
Recovery
from Errors
Higher Employee
Satisfaction
Higher Customer
Satisfaction
Lower
Costs
Better
Results
Higher
Productivity
Improved Quality
of Service
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Service Profit Chain
Internal
External
Operating strategy and
service delivery system
Service
concept
Target market
Loyalty
Revenue
growth
Customers
Satisfaction
Employees
Capability
Productivity
&
Output
quality
Service
value
Satisfaction
Loyalty
Profitability
Service
quality
Customer orientation/quality emphasis
Allow decision-making latitude
Selection and development
Rewards and recognition
Information and communication
Provide support systems
Foster teamwork
Quality & productivity
improvements yield
higher service quality
and lower cost
Attractive Value
Service designed
& delivered to
meet targeted
customers’ needs
Solicit customer
feedback
Lifetime value
Retention
Repeat Business
Referrals
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SERVICE IMPLEMENTATION
It is all about managing change and people do not feel
comfortable with change that impacts on their well
established comfort zones
and
ways of doing things around here – organisational culture
It is a human thing
and that makes service implementation and management
complex to deal with in practice
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THANK YOU FOR YOUR ATTENTION
Guess our time is up
Any questions or comments?
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