Welcome to Service Management Chapter 01 Role of Services in an Economy Chon-Huat Goh Rutgers University, Camden McGraw-Hill/Irwin Service Management: Operations, Strategy, and Information Technology, 6e Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved. Learning Objectives Identify traits that all services have in common. Discuss the central role of services in an economy. Identify and differentiate the five stages of economic activity. Describe the features of preindustrial, industrial, and postindustrial societies. Describe the features of the new service economy. Contrast the push vs. pull theories of innovation. Identify the sources of service sector growth. 1-2 Service Definitions Services are deeds, processes, and performances. Valarie Zeithaml & Mary Jo Bitner A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer. James Fitzsimmons 1-3 Definition of Service Firms Service enterprises are organizations that facilitate the production and distribution of goods, support other firms in meeting their goals, and add value to our personal lives. James Fitzsimmons 1-4 Role of Services in an Economy FINANCIAL SERVICES · Financing · Leasing · Insurance MANUFACTURING Services inside company: · Finance · Accounting · Legal · R&D and design BUSINESS SERVICES · Consulting · Auditing · Advertising · Waste disposal INFRASTRUCTURE SERVICE · Communications · Transportation · Utilities · Banking DISTRIBUTION SERVICES · Wholesaling · Retailing · Repairing PERSONAL SERVICES · Healthcare · Restaurants · Hotels CONSUMER (Self-service) GOVERNMENT SERVICES · Military · Education · Judicial · Police and fire protection 1-5 Percent Employment in Services Top Ten Postindustrial Nations Country 1965 1975 1985 1995 2005 United States 59.5 66.4 70.0 74.1 78.6 United Kingdom 51.3 58.3 64.1 71.4 77.0 The Netherlands 52.5 60.9 68.3 73.4 76.5 Sweden 46.5 57.7 66.1 71.5 76.3 Canada 57.8 65.8 70.6 74.8 76.0 Australia 54.6 61.5 68.4 73.1 75.8 France 43.9 51.9 61.4 70.0 74.8 Japan 44.8 52.0 57.0 61.4 68.6 Germany 41.8 n/a 51.6 60.8 68.5 Italy 36.5 44.0 55.3 62.2 65.5 1-6 2000 1990 1980 1970 1960 1950 1940 1930 1920 1910 1900 1890 1880 1870 1860 1850 Proportation of total employement Trends in U.S. Employment by Sector 90 80 70 60 Service 50 Manufacturing 40 Agriculture 30 20 10 0 Year 1-7 Distribution of GDP in the US Economy Product Services A Physical Information B 6% 31% 37% 10% 53% 63% C D 16% 84% 1-8 Stages of Economic Development Society Game Predominant Activity PreIndustrial Against Nature Agriculture Mining Industrial Against Goods Machine Individual fabricated production tending nature Postindustrial Among Services Persons Use of Human Labor Standard Unit of of Living Social Life Measure Structure Raw muscle power Extended household Subsistence Quantity of goods Technology Routine Simple hand Traditional tools Authoritative Bureaucratic Machines Hierarchical Artistic Community Quality of InterCreative life in terms dependent Intellectual health, education, recreation Information 1-9 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 1-10 The Four Realms of an Experience Customer Participation Passive Active Absorption Entertainment Education (Movie) (Language) Environmental Relationship Immersion Esthetic (Tourist) Escapist (ScubaDiving) 1-11 Experience Design Principles Theme the Experience (Forum shops) Harmonize Impressions with Positive Cues (O’Hare airport parking garage) Eliminate Negative Cues (Cinemark talking trash containers) Mix in Memorabilia (Hard Rock T-shirts) Engage all Five Senses (Mist in Rainforest) 1-12 Source of Service Sector Growth Information Technology (e.g. Internet) Innovation Push theory (e.g. Post-it) Pull theory (e.g. Cash Management) Services derived from products (e.g. Netflix) Exploiting information (e.g. Auto part sales) Difficulty of testing service prototypes Changing Demographics Aging of the population Two-income families Growth in number of single people Home as sanctuary 1-13 Typology of Services in the 21st Century Core Experience Essential Feature Examples Creative Present ideas Advertising, theater Enabling Act as intermediary Transportation, communications Experiential Presence of customer Massage, theme park Extending Extend and maintain Warranty, health check Entrusted Contractual agreement Service/repair, portfolio mgt. Information Access to information Internet search engine Innovation Facilitate new concepts R&D services, product testing Problem solving Access to specialists Consultants, counseling Quality of life Improve well-being Healthcare, recreation, tourism Regulation Establish rules and regulations Environment, legal, patents 1-14