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Service Process Design and Improvement with PCN Analysis

Dr. Scott Sampson, Brigham Young University, Provo, Utah, USA

This reading introduces the service design and improvement tool known as PCN Analysis. 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 this 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 himself.
If the equipment supplier installed the equipment it would instead be surrogate interaction.
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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 below. 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 this 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
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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.
Figure 3 below 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 wash
businesses 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.

This figure 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
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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 and strategic process positioning can also be the basis for service innovation. This
often begins by identifying customer pain points (depicted with  symbols) or opportunities for
enhancing customer value (). For the car wash, one customer pain point is driving to the car wash,
especially for busy people. A second pain point is reviewing options, since the customer may feel they
are being up-sold to more expensive options. Figure 4 below shows how those two pain point can be
resolved. First, the “review options” step could be handled on a mobile phone app, giving the customer
more control over that step and improving efficiency—which is an enabling innovation because it
enables the customer to meet their needs (moves it into the customer’s process domain). The “drive to
car wash” pain point can be relieved by providing a valet service of picking up the customer’s car—a
relieving innovation because it relieves customers of the step by moving it to the provider’s process
domain, which increases the provider’s costs (-$) but could also provide increased revenue (+$).

PCN Analysis has been applied in a wide variety of business settings with tremendous results.
This handout introduced basic PCN Analysis. More advanced analysis assesses the operational
characteristics of process configurations, considers the design of an operating environment,
demonstrates how process chains can be coordinated across a broad network of entities, and more.

More information about PCN Analysis is available from the http://services.byu.edu website and
from Dr. Sampson’s book Essentials of Service Design: Developing high-value service business with PCN
Analysis (book ordering link on the website). The website also links to articles, videos, and other
resources on PCN Analysis.
©2013 BYU, see http://services.byu.edu for use and permission information