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Introducing PCN Analysis in a textbook
Dr. Scott Sampson, Brigham Young University
ses3-pcnt@sm.byu.edu
May 3, 2012
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PCN Analysis
PCN Analysis is a relatively new type of process analysis developed by Dr. Scott Sampson at
Brigham Young University1. PCN Analysis focuses on the ways in which processes can be
strategically designed to leverage interaction between firms and their customers. PCN stands
for Process-Chain-Network. A process chain is a sequence of steps that accomplishes an
identifiable purpose such as building a home, completing a tax return, or repairing a television.
The network is the set of entities that are involved in a particular process chain, making
decisions about parts of the process. A process entity can be a manufacturer, a service
provider, a customer, an agent of a customer, and so forth.
Each process entity has a process domain that includes the set of activities that the entity has
control over. An example of a process domain for a car wash service is shown in Figure 1. The
activities in the process domain are organized into three process regions:
1. The direct interaction region includes process steps that involve person-to-person
interaction between entities. For example, a car wash employee directly negotiates
with employees of an equipment supplier in purchasing car wash equipment.
2. The surrogate interaction region includes process steps in which one process entity is
acting on another entity’s resources such as their belongings, information, or
technologies. When the employees are washing the customer’s car they are interacting
with the car and not directly with the customer.
3. The independent processing region includes steps in which the entity is acting on
resources owned and controlled by that same entity. A lot of make-to-stock
manufacturing fits in this region. In the Figure 1 example the provider installs the
purchased car wash equipment themself. If the equipment supplier installed the
equipment it would instead be surrogate interaction.
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This basic introduction to PCN Analysis is adapted from the article “Visualizing Service
Operations” published in the May 2012 issue of the Journal of Service Research. More details
about PCN Analysis are in that article and on the http://services.byu.edu website.
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There are important operational distinctions between these three categories of process steps.
Process entities have more control over independent processing steps than they do over
surrogate or direct interactive steps, due to the need to give up some control in order to
interact. The slanted “roof” on a PCN Diagram reminds us of those different levels of control.
Service operations exist within the regions of direct and surrogate interaction. Service
operations are more personal than independent processing operations due to the interaction
between providers and customers. Independent processing such as mass-production
manufacturing can be tightly controlled by the manufacturer, can be located near low-cost
labor and natural resources, can give employees tightly defined job descriptions, can organize
the manufacturing facilities for maximum efficiency, and so forth. On the other hand, direct
interaction such as health care delivery cedes some control to the customers, should locate
facilities somewhat convenient to customers, provides employees with more flexible job
descriptions that allow responsiveness to varying customer needs, organizes facilities to
accommodate customer needs and expectations, and so forth. All three process regions have
similar operating issues—process control, facility location, job design, facility layout, etc.—but
the appropriate way of handling the issues differs across regions.
Since PCN Analysis considers networks of entities, it is more interesting to consider PCN
Diagrams involving more than one entity, such as shown in Figure 2. There, the car wash
provider is on the left and the customer is on the right, with only the adjacent regions of
interaction being depicted. An important feature of PCN Analysis is not only understanding the
provider firms’ operations, but also understanding relevant customer operations that are part
of the same process chain.
In the Figure 2 example the customer independently identifies the need for having his or her
car washed. The customer might check prices on the car wash firm’s website, which is
surrogate interaction with the car wash firm. In this example the customers may independently
choose to use the car wash firm or “do it yourself” (DIY) at home. DIY might be less expensive
on a variable cost basis (for each washing of the car), but may be more expensive if doing the
car wash requires specialized equipment and skills (which represent fixed costs). The car wash
provider has specialized equipment and skills that they use for many customers, thus providing
economies of scale. The quality of the car wash may depend on how much the specialized car
wash equipment and skills are needed—if they are essential then the provider could probably
provide a higher quality car wash, but if they are not essential then the customer could possibly
provide a higher quality car wash.
One valuable aspect of PCN Analysis is strategic process positioning wherein a process is
designed to achieve strategic operating objectives. A firm’s operations are strategic in that they
can define what type of business the firm is in and what value proposition they desire to
provide to customers. For example, some firms assume a low-cost strategy and some firms
assume a differentiation strategy. The operational strategy of a firm can be depicted in the
process regions of a PCN Diagram.
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Figure 3 shows various options for the “wash car” step. The first option is for the provider to
wash cars before delivering them to customers, which is what rental car firms usually do. The
next option has the provider wash the customer’s car without directly interacting for that step.
Washing a car through direct interaction seems unusual, but is a strategic option. Self-serve car
washes allow customers to use the specialized equipment of providers but also takes control of
the process step. The right-most option is for the customers to wash their cars just using
resources they own, as was suggested in the DIY option from Figure 2.
Figure 3 also depicts some major strategic implications of process positioning. If the firm wants
to achieve high economies of scale in their operations they should probably position the step
towards the independent processing region of their process domain. One way to achieve this is
to not wash cars directly but instead manufacture car wash kits that can be sold to customers
for their DIY use.
If the firm’s intended value offering focuses on customization then the step should be
positioned more towards the customers’ process domain. Note that a DIY option can achieve
maximum customization since the customer can do almost anything to perform the car wash
step, including things that are unusual such as using pickle juice to clean grime off of hubcaps.
PCN Analysis has been applied in a wide variety of business settings with tremendous results.
This section introduced basic PCN Analysis. More advanced analysis assesses the value
proposition of an operation including costs and benefits, considers the design of an operating
environment, demonstrates how process chains can be coordinated across a broad network of
entities, and more. More information is available from the http://services.byu.edu website.
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End-of-chapter material: Student exercise
1. Draw a two-entity PCN Diagram (like Figure 2) for one of the following processes and be
prepared to discuss it in class:
a. the process of having your computer repaired
b. the process of having a dental exam
c. the process of take-out pizza
d. the process of attending a concert
2. Review strategic process positioning options for the following steps in Figure 2,
discussing the operational impact of repositioning the process step:
a. drive to car wash (e.g., could the firm come to the customer?)
b. review options (i.e., car wash options provided by the firm)
c. process payment
3. Select a service business relating to your major that involves interaction between
customers and service providers, and create a PCN Diagram similar to Figure 2. Pick a
key step that could be performed either by the service provider or by the customers.
Show process positioning options for the step. Describe how the options compare in
terms of efficiency, economies of scale, and opportunity for customization.
Glossary
process chain: a sequence of steps that accomplishes an identifiable purpose (of providing
value to process entities).
process entity: an individual or organization that participates in a process chain, making
decisions about one or more process steps.
process domain: a set of process steps that a process entity has decision control over.
process region: a portion of steps within a process domain.
direct interaction region: process steps that involve person-to-person interaction between
entities.
surrogate interaction region: process steps that involve interaction between entities that is not
person-to-person.
independent processing region: process steps where an entity only acts on their own
resources.
strategic process positioning: changing the process region of one or more process steps in
order to achieve strategic operating objectives.