Definition and characteristics of service processes · 5 Slide 8© Gurvich “Symptoms” of service processes Customer participation in the service process – Product = Process

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Definition and characteristics of service processes

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Informationstructure

A process is a transformation of inputs into outputs through a network of activities and buffers, utilizing resources, IT and mgt

Outputs

GoodsServices

Inputs

Flow units/Entities(customers, data,

material, cash, etc.)

Labor & Capital

Resources

ProcessManagement

Network ofActivities and Buffers

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Questions to ask when adopting a process view

1. What are the process boundaries? What is the input and output?

2. What is the flow unit or the unit of analysis?

3. “Attach yourself to the flow unit” and record its process steps through the process.

4. Who does the work? What are the resources for each activity?

5. What information is required to perform each activity? Where does this information come from? This specifies the information flow(dashed lines).

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Advantages of Adopting a Process View of Organizations

– Applies to any organization– Applies at any level– “horizontal,” i.e., across functions, view of the organization in

contrast to the usual vertical views along the lines of functional departments Highlights externalities Highlights integration and problems

– Is always “customer aware” and focused on outcomes

Key Property: focus on flows rather than snapshots– Rationalized management (vs. fighting fires)– Focus on process rather than people has higher likelihood of

leading to cooperation and significant improvement→ the process view is a unified, customer-centric model of the

organization that facilitates analysis and improvement in a systematic manner

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The customer lifecycle coming to healthcareBPCI: Bundled payments for care improvements

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INDEX ADMISSION POST ACUTE CARE

READMISSIONS

COST TO MEDICARE

KEY

Data Source: CMS Limited Data Set, DataGenand Single Track Analytics BPCI360

Data Model; CHF “Completed” Bundle Episodes (includes MS‐DRGs 291, 292, 293)

NMH CHF Episodes: Q1 2013 – Q2 2014, n = 602

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What do you mean by “Operations”?

Operations management is concerned with the design, management and improvement of the processes through which an organization’s products and services are delivered

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What is a service process

With service processes, the customer provides significant inputs into the production process of the

“unit” he/she consumes

Inputs

InformationSelf Tangible belongings Effort

Nike ID

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Not all services are created equal: Levels of customer participation

Low: customer presence required during service delivery.– Payment may be the only required customer input

– Examples: Airline travel, motel stay, fast food restaurant

Moderate: client inputs customize a standard service.– Customer inputs are necessary for adequate outcome, but the service

firm provides the service

– Examples: Hair cut, Annual physical exam, Full service restaurant

High: Customer co-creates the service product– Service cannot be created apart from the customer’s active participation

– Example: Marriage counseling, health care, education, personal training, weight reduction

The customer may contribute both as a productive resource, and through influence on quality, satisfaction and value (their own and of others.)

Bitner et. al. 1997

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“Symptoms” of service processes

Customer participation in the service process– Product = Process in which Customers are Co-Producers

Simultaneity = Produced and consumed at the same time. – Some production can start only after the customer is present

Perishability (typically) can’t be inventoried

(e.g. empty plane seats, idle tele-agent)– Careful design, planning and management of resources/capacity

– Revenue management

Intangibility

Heterogeneity:– Customers are multi-type and Service providers are multi-skilled;

– Customization, in fact often “Mass-customization,” required;

– Matching types-skills is central (eg. Professional services)

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Process views: The customer in the process

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The designer’s view: customer journey

Technology supported by market‐place engineering: supply‐demand matching via dynamic pricing

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Buell et. al. “Operational transparency …’’

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Walking in the customers’ shoes: Journey Map

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Service process innovation

1. Technology and engineering

2. Delivery re-design (and sometimes revolution)

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Opportunities

Country Agri. Indus. Serv.

EU 1.8% 25% 73.1%

United States 1.1% 22.1% 76.8%

China 10.2% 46.9% 43%

India 18.5% 26.3% 55.2%

NY Times, November 2013

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This course

The engineering of customer contact processes

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The customer centric view and the process view are complementary.

We must understand the customer and how the customer interacts with the process (we do not control the customer)

We must understand how the process “responds” to the customers, the variability customers bring and what capabilities are required.

Service design: where user-centered meets process engineering

Service delivery system:

What are important features of the service: role of people? Technology? Resources? Layout? Procedures?

What capacity does it provide? Normally? At peak levels?

What is service engineering

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No magic: its all about the process

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A pause for rules of the game

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Organizing framework for service design and improvement

What is a good process?

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What is Good Operations Management?

Management of business processes

How to structure processes and manage resources to develop the appropriate capabilities to convert inputs to outputs.

What is an appropriate capability? What is a “good” process?

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What defines a “good process”?Performance: Financial Measures

Absolute measures: – revenues, costs, operating income, net income

– Net Present Value

Relative measures:– Return on assets (ROA), ROI, ROE

Survival measure:– cash flow

Problems with financial measures:– Infrequent

– Aggregate

– Lagging Need operational or process measures

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What defines a “good process”? Ultimately, all organizations compete on delivered value

Delivered value of process =

benefit to process customers – total process cost

Benefit driven by customer value

Variety V(flexibility)

Quality Q:•of product or outcome•of service

Time T:•Rapid, reliable delivery•New product development

Price p(Cost)

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A Strategic Framework for Process Design and Improvement: Three questions

1. What is our strategic position: how do we compete & provide value in the market?

What is the value proposition to our customers?

Rank (p, T, Q, V)

2. Given our strategic position, what must operations do particularly well?

Which competencies must ops develop?

Rank (c, T, Q, Flex)

3. Given needed competencies, how should operations processes be structured to develop competencies that support strategy? Process choice (structure) and management

competitivestrategy

Processstructure & mgt

operationsstrategy

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The Fundamentals: Competitive Strategy

1. Defines your sand box

– Your market

– Your core activities in the value chain

2. Prioritizes your value proposition

– Cost, Quality, Variety, Time

What are your priorities?Cost efficiency

Time

Speed

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Strategy vs. Operational Effectiveness: The Operations Frontier as the minimal curve containing all current positions in an industry

Focus as a way to be on the frontier

Responsiveness

operationsfrontier

A

B

C

PriceHigh Low

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Shouldice Hospital

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Shouldice Hospital

• What is Shouldice?

• What is their strategic positioning? What competencies are needed to execute this?

• How successful is it?

• Why does the hospital run so smoothly?  

• What are its key processes? What are the resources? What does the service system consists of?

• How are operation costs kept low?

• How is quality controlled?

• What actions, if any, would you take to expand the hospitalʹs capacity?

•

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Price

Variety in care

B

AHigh Low

Question 1: Representation of Strategy:Strategic Position in customer value space

Question 1: What is Shouldice’s position?

Question 2: Which process competencies are needed to execute this value proposition?

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Price

Variety

Shouldice

High Low

Question 2: Need competencies to deliver value proposition

Question 2: Which process competencies are needed to execute this value proposition?

Question 3: What is the best process design to deliver the needed competencies?

Customer valueproposition

Cost

Flexibility

B

AHigh Low

Needed ProcessCompetencies

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Question 3: what is the best process design that has the right process competencies to deliver customer value proposition?

A focused process attempts to deliver one specific and narrow customer value proposition (i.e., its priority ranking is clear and constant for all patients)

– It is optimized to deliver the needed competencies for one narrow patient segment

– Focus does not imply standardization: ER is focused on providing timeliness and flexibility to patient needing emergency care

Cost efficiency

Flexibility(responsiveness)

World-classEmergency Room

World-classspecialty non-emergencyShouldice Hospital

One generalhospital

Productivity frontier = current state of best practice

Needed competencies for a

given patient type/segment

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An organizing framework

Source: Frei ``The four things a service business must get right”

Funding Mechanism

Service Offering

Employee Management

System

Customer Management 

System

Processes

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What does a service business have to get right

The offering: You must be bad in the service of good. Excellence requires underperforming on the dimensions your customers value least so that you can over-perform on the dimensions your customers value most.

Funding Mechanism Charging for service in a palatable way.

Creating a win-win between operational savings and value-added services.

Spend now to save later.

Have the customer do the work.

Customer Management (Selection, Training, Discretion, Motivation)

Employee Management: What makes our employees reasonably able to achieve excellence?

What makes our employees reasonably motivated to achieve excellence?

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Challenges with customer operators:Zipcar: “Wheels when you want them”

The United States is now host to about 560,000 car‐sharers

Zipcar has 673,000 members globally                          Rand report May 2012

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Zipcar rules

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A different example of sharing

Trips longer than 30 minutes incur overtime fees:

30:01 60:00 minutes: $2.00

60:01 90:00 minutes: $6.00

Each additional 30 minutes: $8

Trips longer than 360 minutes: $102

Divvy took in about $2.5 million in user fees during its first five months, with roughly $703,500 coming from late fees. The vast majority of these fines were paid by daily pass users, many of whom are tourists, rather than annual membership holders.

− December 2013, Chicago Tribune

Repeated vs. one-time users

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The operational impact of baggage fees

The SITA 2010 Baggage Report … reports a drop of 23.8% in the number of air passengers’ bags mishandled last year, resulting in savings of $460 million for the world’s airlines. -- March 25, 2010

Airlines have claimed reduced baggage handling and reduced workers’ compensation claims.

GAO reports that some airlines have seen checked bags drop 40 – 50%.“The Math Behind New Baggage

Fee,” WSJ, April 29, 2010

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Management/training for operational compatibility

TSA Call center: “To make a new

reservation press …”

Customer self selection