01 the Role of Services in an Economy

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Welcome to Service Operations

Management

Douglas M. Stewart, Ph.D.Associate Professor of Operations Management

Anderson Schools of Management

University of New Mexico

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The Role of Services in an

Economy

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Learning Objectives

Describe the central role of services in aneconomy.

Discuss the evolution of an economy from anagrarian society to a service society.

Describe and contrast the features of the newexperience economy with that of previous

economies.Describe the features of the new service economy

Discuss the role of service managers with respectto innovation, social trends, and management

challenges.

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Interactive Role of Services

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Service Definitions

A Service is a Time-perishable, Intangible

Experience Performed for a Customer

Acting in the Role of a Coproducer.

- James Fitzsimmons

Services are deeds, processes, and

performances.

- Valarie Zeithaml & Mary Jo Bitner

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Definition of Service Firms

Service Enterprises are Organizations that

Facilitate the Production and Distribution

of Goods, Support Other Firms in MeetingTheir Goals, andAdd Valueto Our

Personal Lives.

- James Fitzsimmons

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Stages of Economic

Development

Features

Pre- Use of Standard

dominant human Unit of of living

Society Game activity labor social life measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple hand

Industrial Nature Mining muscle household sistence Traditional tools

power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines

fabricated production tending of goods Hierarchical

nature

Post- Among Services Artistic Community Quality of Inter- Informationindustrial Persons Creative life in terms dependent

Intellectual of health, Global

education,

recreation

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Trends in U.S. Employment by

Sector

010

20

30

40

50

6070

80

90

1850

1870

1890

1910

1930

1950

1970

1990

Year

P

roportationofto

tal

employement

Service

Manufacturing

Agriculture

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Percent Service Employment for

Selected Industrialized Nations

Country 1980 1987 1993 1999

United States 67.1 71.0 74.3 80.4

Canada 67.2 70.8 74.8 73.9Japan 54.5 58.8 59.9 72.4

France 56.9 63.6 66.4 70.8

Israel 63.3 66.0 68.0 70.7

Italy 48.7 57.7 60.2 61.1

China 13.1 17.8 21.2 26.4

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The New Experience Economy

Economy Agrarian Industrial Service Experience

Function Extract Make Deliver Stage

Nature Fungible Tangible Intangible Memorable

Attribute Natural Standardized Customized Personal

Method of

supply

Stored inbulk

Inventoried Deliveredon demand

Revealedover time

Seller Trader Manufacturer Provider Stager

Buyer Market User Client Guest

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The Four Realms of an Experience

Customer Participation

Passive Active

Environmental

Absorption Entertainment

(Movie)

Education

(Language)

Relationship Immersion Esthetic

(Tourist)

Escapist

(Skydiving)

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Experience Design Principles

Theme the Experience (Forum shops)

Harmonize Impressions with Positive Cues

(OHare airport parking garage)Eliminate Negative Cues

(Cinemark talking trash containers)

Mix in Memorabilia (Hard Rock T-shirts)Engage all Five Senses (Mist in Rainforest)

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Role of the Service Manager

Entrepreneurial Innovation

Capitalizing on Social Trends

Management ChallengesEconomies of Scale (MRI scanner)

Economies of Scope(Convenience store)

Complexity (Yield Management)

Boundary Crossing (Bank vs Brokerage)

International Competitiveness(Diversity)

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Discussion Topics

Illustrate how the type of work he or she doesinfluences a persons lifestyle.

Is it possible for an economy to be based entirelyon services?

Speculate on the effect that the Internet will haveon the delivery of services.

What is the value of self-service in an economy?Comment on the role that marketing plays in the

service innovation process.

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Interactive Class Exercise

Break into small groups. Each group is to

identify service firms that should be listed

in the Fortune 100 and place them in rankorder of annual revenue.