Service Operations Management Corrected

SERVICE OPERATIONS MANAGEMENT
NMIMS GLOBAL ACCESS

SCHOOL FOR
CONTINUING EDUCATION
o..w..3roi.. U NlVER.SlTY
COURSE DESIGN COMMITTEE
Chief Academic Officer

Dr. Sanjeev Chaturvedi
NMIMS Global Access -
School for Continuing Education
TOC Reviewer Content Reviewer

Furqan Shaikh Furqan Shaikh
Visiting Faculty, NMIMS Global Access - Visiting Faculty, NMIMS Global Access -
School for Continuing Education. School for Continuing Education.
Specialization : Strategy, Finance, Specialization: Strategy, Finance,
Operations Management Operations Management
Author: Sanjive Saxena

Reviewed By: Furqan Shaikh
Copyright:
2017 Publisher
ISBN:
978-93-86052-16-2
Address:
4435/7, Ansari Road, Daryaganj, New Delhi-110002
Only for
Nl\'111\'IS Global Access - School for Continuing Education School Address
V. L. Mehta Road, Vile Parle (W), Mumbai - 400 056, India.
II
C O N T E N T S
CHAPTER NO. CHAPTER NAME PAGE NO.
1 Introduction to Service Operations Management 1
2 Service Strategy Formulation and Execution 15
3 Service Design 35
/jP _
4 Service Process Desig n
/
) 61
5 Service Delivery
0 81
- - ,'
6 Service Quality 99
I
' " /
7 Service Productivity Measurement and Management 135
>"' Service Decoupling 157
10
"" Role of IT in Service Operations
Service Operations Management in Different Sectors

173
195
11 Case Studies 231
II
CURRICULUM
Introduction: What is service operations management, different types of services and service process-
es, characteristics of services, differences in the operations of services and manufacturing, role ofoper-
ations in services, challenges faced by service operations managers.
Service Strategy Formulation and Execution: Classification of service frameworks, systems view of
services, service process matrix, strategic hierarchy and consistency, strategic positioning, competitive
priorities.
Service Design: Service design, generic approaches to service design, service development process,
identifying customer requirements, service blueprinting, process design and improvement, resources
management and planning capacity management, layout of facilities.
Service Process Design: Service processes and their importance, understanding the nature of service
processes, engineering service processes, use of process flow diagrams, customer orientation in process
design, controlling service processes, use of simulation to improve process design, repositioning service
processes.
Service Delivery: Service delivery issues, location decision making concepts, transportation and deliv-
ery systems- concepts and models, managing the service operations, managing and motivating service
providers.
Service Quality and Strategy: Definition of service quality, dimensions of service quality, defining ser-
vice quality factors, delivering & measuring service quality, SERVQUAL model, specifying the service,
quality of design & design process.
Service Productivity Measurement: Performance measurement, quality measurement, tools, produc-

tivity measurement, measurement methods, role of work study, yield management, service implemen-
tation issues.
Service Decoupling: Introduction to services decoupling concept, front office and back office interface,
decoupling & cost, decoupling & quality, decoupling & delivery speed, decoupling & flexibility, decou-
pling & strategy.
Role of IT in Service Operations: Competitive role of information technology in services, limits in the
use of information, Internet as a service enabler, challenges in adopting new technologies in services,
the role of SMAC(Social, Mobile, Analytics and Cloud) in delivering service, the role of IoT in services.
Service Operations Management in Different Sectors: IT and BPO sector, financial and banking ser-
vices, health care and hospitality, telecommunication sector, education, media and entertainment.
II
CONTENTS
1.1 Introduction
1.2 Concept and Meaning of Services
1.2.1 Classification of Services
1.2.2 Characteristics of Services
1.2.3 Service Process: Meaning and Classification
Self Assessment Questions
Activity
1.3 Concept of Service Operations Management
1.3.1 Role of Operations in Services
1.3.2 Challenges Faced by Service Operations Managers
Activity
1.4 Service Operations vs. Manufacturing Operations
Activity
1.5 Summary
1.6 Descriptive Questions
1.7 Answers and Hints
1.8 Suggested Readings & References
NMIMS Global Access- School for Conhnumg Education

.- - . .
INTRODUCTORY CASELET
N O T E S
SERVICE OPERATIONS IN AVANTIKA HOSPITAL
Avantika Hospital is a small hospital situated in Indirapuram

area of Ghaziabad district ofUttar Pradesh. Over a period of time,
the hospital has grown tremendously. It started as a small nurs-
ing home owned by a team of dedicated and committed doctors.
With time, the nursing home's size, operations and reputation in-
creased and the owners decided to expand their business. They
wanted to transform the nursing home into a full-fledged hospital
catering to various types of patients.
The prime reason for the growth of this hospital was emphasis on
core aspects of the service sector industry. Also, people who were
in-charge ofexecuting day-to-day activities did their best to make
things convenient for patients and their attendants. The moment
the patient enters the hospital, he can feel its positive ambience.
In addition, the hospital is kept neat and clean which gives a
positive feeling to patients. Receptionists at the hospital are wel-
coming and cooperative. They give due consideration to each pa-
tient, ask a few relevant questions and direct the patient towards
the waiting area where they wait for their turn to meet doctors.
A nominal consultancy fee of 300 is charged by the hospital and
this is valid for 10 days.
Doctors who are on the panel are well qualified and give prop-
er consultation to patients. They do not unnecessarily prescribe
exorbitant drugs and medicines. Medicines prescribed by the
doctors are available in the hospital at nominal prices. Medicines
are made available at nominal prices. The supply is supervised
by a competent manager who ensures that medicines and other
life-saving drugs are available to doctors and patients at any time.
Thus, it can be observed that Avantika Hospital provides quality

service operations required for a service industry.

INTRODUCTION TO SERVICE OP.ERATIONS MANAGEMENT 3
N O T E S
@ LEARNING OBJECTIVES
After studying this chapter, you will be able to:

>- Describe the concept of service
>- Explain the classification and characteristics of services
>- List different service processes along with their classifica-
tion
>- Explain the concept of service operations management
>- Differentiate between service operations and manufactur-
ing operations
Ill INTRODUCTION
You must have observed that as consumers, we consume a lot of prod-
ucts and services. Products such as toothpaste, bread, milk, shampoo,
soaps, jewellery and clothes are required by us on a daily basis. Apart
from these, we also avail various services such as laundry, domestic
help, public transportation, etc. The services may be provided by an
individual or private commercial operator.
At some point or the other, you may also perform the role of a service
provider. Assume that youare a tour guide for Amer Fort. Your job is
to guide the tourists who come to see Amer Fort and ask you for your
services. This was an example of service provided by an individual.
However, when such services are provided by an organisation, they
are called service operations. Due to a large number of customers and
the sheer expanse of the work involved, it is required that service op-
erations of such organisations be managed.
Service operations management involves understanding the require-

ments of customers, managing processes through which a service is de-
livered and ensuring a smooth delivery of services. Service operations
require resources to deliver services. Service is not always between an
individual and an organisation. There are a few categories of services
such as Business-to-Consumer (B2C) services, Business-to-Business
(B2B) services, public services and not-for-profit services.
This chapter describes the concept, classification and characteristics

of services. It also explains the meaning of service process and service
operations management. The chapter discusses the role of service
operations managers and their challenges. The later section of this
chapter enlists major differences between service and manufacturing
■fj
operations.
CONCEPT AND MEANING OF SERVICES

At the end of World War II, most countries were left devastated and
their economies were badly affected. To rebuild their economies and

.- - . .
N O T E S
recover the losses, the countries strived for the revival of the manufac-
turing sector, which showed great potential at that time. The manufac-
tured products were easily sold in several countries across the world,
which served the purpose of revival of economies. However, over the
years, it was found that customers were expecting certain intangible
aspects apart from products. They wanted aftersales services for the
products they had bought. An aftersales service is all about address-
ing the problems of customers that they may face while using a prod-
uct. The concept of aftersales service led to the advent of the service
industry.
The term 'service' refers to an intangible product such as an action,

deed or effort which is offered to a customer at the point of sale. Just
like products, services are also chargeable. There is an operations
aspect associated with services, which implies that services must be
planned, organised, directed, implemented and controlled. Business-
es that come under the service industry include tourism, education,
medicine, architects, etc. Let us understand the concept of service
with the help of an example.
Assume that youvisit a hotel where you check-in for a week-long stay.
The hotel provides a room to stay along with buffet for breakfast,
lunch and dinner. Apart from this, it provides laundry services, a busi-
ness centre facility, valet parking, currency exchange, room service,
concierge service, spas, parlours, boutiques, etc. Note that all these
services are intangible in nature as you can only experience what ser-
vices you received at the hotel. However, these services have to be
managed properly by the hotel's management so that they can be
delivered to customers without any hindrance. For this, the manage-
ment ofthe hotel has to decide what type of breakfast would be served
and at what time it would be served; what type of room services would
be provided; who would be doing what, and so on.
The nature of services provided by different businesses under the

service industry is quite diverse. Also, there can be a lot of services
under one business segment. For example, banking comes under the
service sector and it may offer services such as issuing drafts, provid-
ing cheque books, granting loans, issuing debit and credit cards, etc.
However, it should be noted that experience that a customer gets from
a product (tangible) is different from that he gets from a service (in-
tangible). For example, each time, you buy a packet of your favourite
chips, the taste remains the same. This is achieved by maintaining
standards of raw materials and the production process. This was an
example of product; however, the same does not apply in the case of
services. The quality of services may vary each time you consume that
service. For example, two teachers who teach the same subject may
teach the same concepts to the same set of students but eventually
the students would be in a position to tell which teacher taught better.
In this case, the experiences of the students also vary. This is due to
different styles and methods of teaching adopted by the two teachers.

N O T E S
1.2.1 CLASSIFICATION OF SERVICES
Services can be classified based on various criteria as shown m

Figure 1.1:
Classification of
Services
I
I I I
Based on
Based on Tangible Based on Intangible
Standardisation and
Actions Actions
Customisation
Figure 1.1: Classification of Services
Let usdiscuss the classification of services as follows:

□ Based on tangible actions: When services are given to custom-
ers or products are purchased by customers, it is categorised as
service based on the tangibility of action. For example, services
for customers include delivery of food, beauty and saloon services,
T.V. repair, etc. These services involve the service of people by peo-
ple (customers by staff). Services for products include aftersales
service or repair of water purifiers, television, AC, etc. These ser-
vices involve service of products done by staff.
□ Based on intangible actions: When the services are directed to-
wards customer's mind or on intangible assets; it is categorised as
service based on intangibility of action. For example, services such
as education, theatre, information processing, banking, insurance,
etc. are directed towards customers' mind.
□ Based on standardisation and customisation: This classification
is based on the amount of standardisation and customisation done
on the service. Standardisation and customisation depend on a
customer and the person providing services to the customer. For
example, a hair stylist does styling as directed by the customer;
however, he may also provide his suggestions. Customisation can
be done on various aspects of the service such as variety, speed,
convenience, etc. In such services, the amount charged by the ser-
vice provider depends on the degree of customisation. An exam-
ple of a standardised service is post-paid plans offered by telecom
companies. All customers who opt for a particular standardised
plan would get the same kind of services. For instance, if the plan
has provision of 100 free local calls plus100 free SMS, all customers
would get 100 free local calls plus 100free SMS. On the other hand,
an example of customisation is the option available to individuals
to choose and set a caller tune of his/her choice. For instance, a
customer 'N may choose song 1 as his/her caller tune whereas an-
other customer 'B' may choose song 2 as his/her caller tune.

.- - . .
N O T E S
1.2.2 CHARACTERISTICS OF SERVICES
Some important characteristics of services are as follows:

□ Intangible nature: Services usually indicate towards processes,
actions or efforts and not towards any tangible product. For ex-
ample, a visit to the doctor does not result in any tangible prod-
uct. What the patient gets is the prescription containing the list of
medicines prescribed by the doctor. Prescription is a record keep-
ing system and not a product. Therefore, the intangible product in
this case is advice, precautions and medication prescribed to the
patient.
□ Human intervention and its degree: Services may or may not in-
clude human intervention and efforts for service delivery. Human
intervention may be involved at both the customer and service
provider's ends. For example, getting a hair colour done involves
human effort from the service provider whereas making payment
for an online order using Paytm involves human intervention from
customer's end. Different services involve a different degree of hu-
man intervention. For example, earlier, surgeons used to perform
surgeries completely; however, nowadays robots are used by sur-
geons for performing complex surgeries.
□ Mechanisation/automation: Services may be manual or auto-
mated or a combination of both. For example, getting a pedicure
involves manual labour, whereas getting you a cold drink from a
vending machine is an automated process.
0 Perishability: Services are consumed or availed at the point of
sale at one-time only. Unlike products, a service cannot be stored
for use at some other time in the future. For example, if you book a
movie ticket for 1 pm but you get late by 45 minutes, you will miss
45 minutes movie.
□ Fluctuation of demand: The demand for services varies at differ-
ent points of time. For example, the demand for ACservice and
repair increases during the summer season and decreases during
the winter season.
□ Inseparability of service from provider: Services cannot be sepa-
rated from the service provider which may either be a machine or
a person. For example, a doctor can provide his services only when
a patient is present. Similarly, students can be taught only when
there is a teacher present in the class.
□ Heterogeneity and service quality:This characteristic means that
each service experience is different and it is very difficult to make
the entire customer service experience identical. For example, the
first time you go to a doctor, the medicines prescribed by him work
for you and you get well. Thus, it gave you a pleasant experience.
Now, assume that after a gap of six months, you again fell sick and
went to the same doctor. He prescribed you some medicines. You

N O T E S
took all medicines on time but this time, the medicine did not work
for you and your ailment remains. Thus, it gave you an unpleasant
experience despite the fact that the service provider remains the
same.
□ Pricing of services: In the service industry, there is great variabil-
ity in the prices of similar type of services. For example, a plumber
may charge higher for fixing a stainless steel tap than for fixing a
plastic tap.
1.2.3 SERVICE PROCESS: MEANING AND CLASSIFICATION

Service process refers to the procedure followed by a person or an or-
ganisation in delivering a service to a customer. It involves a specified
way of doing things. Let us understand the concept of service process
with help of an example. When faced with an illness, you usually go to
a doctor's clinic. After enquiring at the reception, you are required to
pay a registration fee along with certain other details such as patient
name and age which is duly recorded in prescription and clinical re-
cords. After successfully registering yourself, you wait for your turn
to meet the doctor. The doctor then asks several questions to make a
correct diagnosis. After preliminary examination, he prescribes some
medicines and gives instructions as to how these medicines are to be
taken. With this, the service process is completed.
Service processes are classified into various types based on the type
of service provided by the service organisation and the degree ofcon-
tact. The following are different types of service processes:
□ Line operation processes: In line operation processes, there is a
pre-designed sequence ofoperations. It means that operations are
carried out one after the other in a pre-decided sequence. Services
are produced as a result of these operations. For example, treat-
ment of cataract requires conducting an operation of the affect-
ed eye(s). However, the doctor cannot straightaway conduct the
operation. He needs to conduct a variety of tests such as blood
pressure, blood sugar, followed by atropine medicine for dilation
of eyes, verifying the dilation of the eyes, measuring the eye pres-
sure, etc. In line operations, processes must be executed in a se-
quential manner as prescribed and no process can bypass another
process. Note that line processes are used in service organisations
which usually have high volumes of consistent demand patterns
and services offered are standardised in nature.
□ Intermittent operation processes: Intermittent operations are
those operations that an organisation does not conduct very fre-
quently. These are project and need-based operations and after
the need has been satisfied, operations are not repeated. Such op-
erations are executed through intermittent service processes. For
example, designing a new advertising campaign or constructing
an amphitheatre.

.- - . .
N O T E S
□ Job shop operation Gobbing) processes: Job shop operations in-

volve different combinations and sequences of activities which
result in different kinds of services. This means that services are
customised as per the order given by the client. Service organi-
sations that require a large degree of customisation use job shop
processes. For example, restaurants usually have set menus and
dishes are prepared in a standardised manner. However, food may
also be prepared apart from the set menu in case of special de-
mand of customers.
In addition to the above types of service operation processes, service

processes also vary according to the degree of customer contact in-
volved. It is very complex and difficult to manage service processes
that involve a high degree of customer contact as compared to that
involving a low degree of customer contact. This is because high cus-
tomer contact service processes involve high intervention by the cus-
tomer inn terms of his/her needs and inputs, which may delay service
deliverables.
SELF ASSESSMENT QUESTIONS
1. The concept of aftersales service led to the advent of the

service industry. (True/False)
2. List one example of a service based on intangible actions.
3. Each service experience is different and it is very difficult to
make the entire customer service experiences identical. This
characteristic of service is known as
ACTIVITY
Study any case based on service pricing and make a synopsis of the
same.
CONCEPT OF SERVICE OPERATIONS

MANAGEMENT
Before we understand the concept of service operations management,
let us understand the meaning of two words viz. 'operations' and 'op-
erations management'. The word 'operations' refers to the process of
gathering raw materials and converting them into a final product us-
ing processes, tools and techniques. On the other hand, operations
management refers to all those activities that are involved in the de-
sign and control ofgoods and services along with activities involved in
the redesign of business operations.
Operations management in the service industry is called service oper-

ations management. A service operation is a transformation process

N O T E S
that converts inputs (consumers) to desired outputs (satisfied con-

sumers). This transformation is achieved with the help of resources
and processes such as material, labour, information, etc. Service op-
erations management is a process of planning, executing, monitoring
and controlling service operations.
1.3.1 ROLE OF OPERATIONS IN SERVICES
An efficient service operation helps in achieving effective and timely

service delivery. This ensures value for the customer and the service
provider. The role of operations in services can be described in the
following points:
0 Operations in a service organisation help in generating value for
the customer and the service provider. For example, if the restau-
rant fails to provide quality food as demanded by the customer,
the customer is unlikely to visit the restaurant again in the future.
Similarly, assume that the number of the selection of candidates
from a reputed coaching centre drops significantly. It can be pre-
dicted that the number ofadmissions to the coaching centre would
reduce. This means that the restaurant and the coaching centre
both fail at providing value to clients.
0 Service operations help toensurethat thereis co-ordination among
people, processes and systems. In other words, it can be said that
people, processes and systems are responsible for a smooth and
successful running ofvarious operations in a service organisation.
For example, in an organisation, it is the staff members who work
according to organisational processes and systems; thereby ensur-
ing uninterrupted services to the client.
0 Operations help in ensuring that services are delivered on or be-
fore the recommended time deadline. However, the service deliv-
erable's accuracy, precision and quality must not be compromised.
For example, a restaurant decides that there must be one waiter
who serves each table and he must not take more than five min-
utes in serving water to customers after they have arrived.
0 Operations ensure that the quality of service is maintained. For
example, operations required to take back demonetised notes sub-
mitted in banks and issue new currency notes during the period
of demonetisation done by the Government of India were very
carefully designed to ensure smooth transactions and avoid any
mishaps.
0 Operations ensure efficient and effective utilisation of resources
that are used in service processes. For example, at a car service
centre, operations are defined that the service of one car should
not take more than 45 minutes when four mechanics are working
on it simultaneously. Moreover, operations are also defined that no
more than 200 ml of car wash shampoo should be used foreach car.
All these operations would lead to the proper utilisation of assets.

N O T E S
1.3.2 CHALLENGES FACED BY SERVICE OPERATIONS

MANAGERS
Managing service operations is different and a bit tougher than man-

aging manufacturing operations. Some major challenges faced by ser-
vice operations managers are as follows:
0 Managing a large number of customers having their specific re-
quirements
0 Understanding the nature of service and how different customers
may differ in their expectations from the service
0 Managing the way in which a service process is carried out be-
cause it affects the final outcome of service and the customer's ex-
perience depends on it
0 Interacting and managing each individual customer during the
process of service and afterwards in order to understand their ex-
perience and take a feedback of the same
0 Coordinating and managing various assets, processes and human
resources involved in the service process
0 Understanding the impact of operational decisions on the success
of the organisation
0 Understanding, implementing and influencing a service strategy
0 Managing conflicts and issues and making efficient utilisation of
resources
□ Upgrading knowledge and skills of staff members along with ser-
vice processes and systems in order to meet changes posed by glo-
balisation
0 Managing operations in such a way as to increase or maintain
profits
0 Acquiring new technology in terms of processes and resources and
integrating them with the existing processes
4. Service operations ensure that the of service is

maintained.
5. List any one challenge faced by service operations manager.
ACTIVITY
Visit any mobile's authorised service centre and talk to the man-
ager. Ask him about the difficulties he faces in managing services
successfully.

INTRODUCTION TO SERVICE OPERATIONS MANAGEMENT 11
N O T E S
SERVICE OPERATIONS VS.

MANUFACTURING OPERATIONS
Service operations involve a direct contact of the customer and ser-
vice processes whereas manufacturing operations do not require the
presence of the customer. Some key differences between service and
manufacturing operations are described in Table 1.1:
TABLE 1.1: DIFFERENCES BETWEEN SERVICE AND

MANUFACTURING OPERATIONS
s. Manufacturing Operations Service Operations
No.
1. Output of manufacturing opera- Output of service operations is
tions is tangible in nature. intangible in nature. Asmentioned
earlier, the services must be con-
sumed at the point of sale itself.
2. Ambience or the conditions Ambience or the conditions where
where products are manufac- the services are provided matter
tured does not affect the future a lot. Nocustomer would like to
prospects of the sale of prod- consume a service at an unattrac-
ucts because customers do not tive and negative ambience. Can
consume products at the site of you imagine taking a head wash in
manufacturing. a parlour with stinking or unclear
water? Most people would not.
3. Manufacturing operations are Service operations are usually
usually highly automated. It labour intensive and the success of
means that manufacturing opera- business and different business cen-
tions are capital intensive. tres depends majorly on the skills
and performance of its employees.
4. Manufacturing operations are Service operations cannot be car-
carried out on the basis of the ried out in the absence of demand
expected demand. Manufacturing from customers.
operations may also be carried
out in the absence of any demand
(when the business is set up).
5. Customisation and changes can Customisation and changes can be
be made in products only after made in the service for each service
it is necessary and approved by being rendered without any delay.
major stakeholders. For exam- For example, when you visit a beau-
ple, assume that a cold drink ty parlour, you can customise your
manufacturer conducts a survey services as per your wish. You may
and finds that consumers find get a facial done after telling the
the amount of sugar bit high and practitioner about the way you want
would engage in repeat purchase it. You may add or delete certain
only if sugar content is lowered. steps.
This involves making changes
to the cold drinks' syrup formu-
la which needs to be approved
by the management team, R&D
team and eventually the new for-
mula needs to be trademarked.

N O T E S
s. Manufacturing Operations Service Operations

No.
6. Value perceived by the customer Value perceived by the customer
depends on the performance of depends on the performance of the
the product. service process.
7. Manufacturing operations usually Service processes usually do not
require maintaining optimum require maintaining large amounts
levels of inventory. of inventory.
(;r SELF ASSESSMENT QUESTIONS

6. In case ofservices, value perceived by a customer depends on
the performance of the _
7. Manufacturing operations are usually labour intensive. (True/
False)
ACTIVITY
Make a list of three services that youusein your daily life. For each
service, list activities and processes that the service provider uses
to successfully deliver the required service.
IIJsuMMARY
□ Services can be classified based on tangible actions, intangible ac-
tions and standardisation and customisation.
□ Some important characteristics of services are human interven-
tion, perishability, fluctuation of demand, inseparability of service
from provider, heterogeneity and service quality, etc.
□ Service process refers to the procedure followed by a person or an
organisation in delivering a service to a customer.
□ Various service processes based on the type of service are line op-
eration processes, intermittent operation processes and job shop
operation processes.
□ At a broad level, service processes may be divided into high con-
tact and lowcontact.
□ A service operation is a transformation process that converts in-
puts (consumers) to desired outputs (satisfied consumers). This
transformation is achieved with the help of resources and process-
es such as material, labour, information, etc. Service operations
management involves planning, executing, monitoring and con-
trolling the service operations.

INTRODUCTION TO SERVICE OPERATIONS MANAGEMENT 13
N O T E S
□ A service operation helps in achieving effectiveness and efficiency

in delivery of services.
□ Some of the major challenges faced by service operations man-
agers are: managing a large number of customers all having their
specific requirements; coordinating and managing various assets,
processes and human resources involved in the service process,
etc.
□ Some of the key differences between service and manufacturing
operations are:
♦ Outputs of manufacturing operations are tangible in nature
whereas the outputs of service operations are intangible in na-
ture.
♦ Services must be consumed at the point of sale itself whereas
products can be stored and consumed at later time.
♦ In case of manufacturing, value perceived by the customer de-
pends on the performance of the product whereas in case of
service, the value perceived by the customer depends on the
performance of the service process.
II KEYWORDS
□ Inventory: Raw materials or other semi-finished goods that are

required for producing certain products by a company.
□ Service operation: A transformation process that converts in-
puts (consumers) to desired outputs (satisfied consumers).
□ Service provider: An individual or an entity that provides the
service. For example, mobile operators are service providers.
They provide network, Internet and mobile services.
□ Service: An intangible economic activity that cannot be stored
and does not result in ownership.
□ Tangibility: The traits of being touched or felt. For example,
you can touch a table but you cannot touch or feel the goodwill
of a company.
Ill DESCRIPTIVE QUESTIONS

1. Explain major characteristics of services.
2. Describe the role of operations in the service industry.

3. Distinguish between manufacturing and service operations.

N O T E S
IDANSWERS AND HINTS

ANSWERS FOR SELF ASSESSMENT QUESTIONS
Topic Q. No. Answers

Concept and Meaning of Services 1. True
2. Banking service
3. Heterogeneity
Concept of Service Operations 4. Quality

Management
5. Managing large number of
customers
Service Operations vs. Manufac- 6. Service process

turing Operations
7. False
HINTS FOR DESCRIPTIVE QUESTIONS

1. Some important characteristics of services are intangible nature,
human intervention, etc. Refer to Section 1.2 Concept and
Meaning of Services.
2. Operations in a service organisation must be able to generate
value for the customer and the service provider. Refer to Section
1.3 Concept of Service Operations Management.
3. Some of the key differences between service and manufacturing
operations are output of manufacturing operations are tangible
in nature whereas they are intangible in case ofservices. Refer to
■
Section 1.4 Service Operations vs. Manufacturing Operations.
II: SUGGESTED READINGS & REFERENCES
SUGGESTED READINGS
0 Johnston, R., Clark, G., & Shulver, M. (2012). Service Operations
Management (2nd ed.). Harlow, England: Pearson.
0 Parker, D. (2012). Service Operations Management (1st ed.). Chel-
tenham: Edward Elgar Publishing.
E-REFERENCES
0 Sayers, J. (2017). Challenges facing serviced managers. Service-thlink-
ing.blogspot.in. Retrieved 21 March 2017, from http://service-thlink-
ing.blogspot.in/2013/07/challenges-facing-serviced-managers.html
0 Cite a Website - Cite This For Me. (2017). Shsu.edu. Retrieved 21
March 2017, from http://www.shsu.edu/~mgt_ves/mgt560/Service-
Management.ppt

CONTENTS
2.1 Introduction
2.2 Concept of Service Strategy
Activity
2.3 Service Framework and its Elements
Activity
2.4 Systems View of Services
Activity
2.5 Service Process Matrix
Activity
2.6 Strategic Hierarchy and Consistency
Activity
2.7 Strategic Positioning
Activity
2.8 Competitive Priorities
Activity
2.9 Summary

N O T E S
PIZZA DELIVERY BY DOMINO'S WITHIN 30 MINUTES OR FREE
Domino's Pizza is a multinational chain of pizzas. It employs more

than 20,000 people across 118cities. The chain has established a
niche in providing quality pizza to customers across the world.
Customers have an option of enjoying Domino's offerings at its
outlets or they may order the pizza for delivery at their homes
by availing the free home delivery service. Domino's competitors
were fast catching up with it in terms of providing quality pizzas
and the free home delivery service. However, the Domino's man-
agement wanted to further strengthen their leadership position.
So, they came up with a well-thought-out strategy of'Guaranteed
pizza delivery within 30 minutes or free'. Under this strategy, the
pizza was to be delivered to the customer within 30 minutes of
receiving the customer order. If the pizza delivery happened be-
yond the 30-minute promised duration, the pizza would be deliv-
ered to the customer free of cost.
Domino's has implemented the strategy after a thorough evaluation

of functional, operational and economic issues of its business. The
delivering outlet has to ensure that the quality of the pizza remains
the same for each order. Domino's 30-minute guaranteed pizza de-
livery is applicable to orders amounting to <300 or less. If the bill
amount is more than <300, the late pizza delivery will entitle the
customer cash back of only <300, the balance amount he/she will
have to pay. Single orders for more than four pizzas are considered
as bulk orders, hence not covered by the 30-minute delivery service
guarantee. The delivery guarantee is also not applicable to orders
from areas that are more than 3 kmaway from a Domino's outlet.
The process for honouring the 30-minute delivery guarantee be-

gins with the flashing of a received order on the kitchen screen.
The activities of taking the order, passing it to the kitchen and the
time needed to prepare and place the pizza into the oven should
not take more than 4 minutes. Baking the pizza should not take
more than 6 minutes. When the baking is over, all the pizzas are
moved to the routing table where they are packed in boxes and
handed over to the delivery boys for delivery. Cutting, packing
and pick-up take another 4 to 5 minutes. The delivery time should
not be more than 8 minutes. In all, the total time taken is 23min-
utes and there is a buffer of 7 minutes. The store deploys about
6 to 7 employees for each process such as order taking, kitchen,
routing, packaging, etc.
The delivery persons are designated as SDPs or the Safe Delivery

Persons. The SDPs have to adhere to a speed limit of 40 kmph.
You may have observed that the entire chain of operations and
processes is synchronised in a manner so as to ensure pizza deliv-
ery within the guaranteed 30minutes.

N O T E S
@) LEARNING OBJECTIVES

>- Explain the concept of service strategy
>- Classify various service frameworks and their elements
>- Explain the systems view of services
>- Describe the importance and role of the service process
matrix
>- Discuss the concept of strategic hierarchy and consistency
>- Define strategic positioning
>- Explain the concept of competitive priorities
Ill INTRODUCTION
In the previous chapter, youstudied the basic concepts ofservices and
service operations management. In addition, you studied how service
operations differ from manufacturing operations. In this chapter, you
will study strategy formulation and execution in the case ofservices.
A service strategy refers to a plan of action that is implemented by a

service organisation to achieve its long-term goals. It aims to develop
the organisation's service capabilities by modifying or changing its ser-
vice processes. A service organisation may provide different types of
services. However, each service is developed as a combination of var-
ious service elements. The collection of all service elements of an or-
ganisation is called the service framework. For each service element in
the service framework, there are one or more associated deliverables.
The systems view of the services means that a service is delivered

through a formal system that is created by a combination of process-
es, mechanisms, participants and/or networks. Major components of a
service system include system, people, place, process and technology.
A service process matrix classifies service organisations into four

types based on the characteristics of service processes. Organisations
create strategies at three different levels of the organisation, namely
the corporate level, the business unit level and the functional level.
For service organisations, it is important to position their services as
distinct from those being offered by the competitors so as to gain the
maximum market share. This is achieved by strategic positioning.
An organisation may also compete with its rivals based on different
parameters. These are called competitive priorities.
In this chapter, you will study the concept of service strategy, service
framework and its elements, systems view of services, service process
matrix, strategic hierarchy and consistency, strategic positioning and
competitive priorities.

N O T E S
ill CONCEPT OF SERVICE STRATEGY

The word strategy originated in the early 19th century and it has been
derived from two root words namely French word strategie and Greek
word strategia. The word strategy was used extensively during the
World War II. The army was required to plan and execute battlefield
moves (strategy) constantly to gain advantage over enemy forces.
However, over the years, the word 'strategy' started to be used exten-
sively in management studies.
In the context of management, a strategy refers to a plan (or a set

of actions) that is created to fulfil the objectives of an organisation.
All manufacturing organisations have a product strategy in place.
A product strategy is a plan for marketing a product that is formulated
after analysing the characteristics of the target market, the features
the product is intended to have, market share to be achieved, profit to
be anticipated, etc. Astrategy helps an organisation helps in increas-
ing sales and eventually its profits; thereby achieving a competitive
advantage in the market.
In the service sector, service organisations have to perform a large

number of operations in order todeliver quality services to customers.
For ensuring the successful delivery of services, an effective strategy
should be in place. A service strategy involves planning, execution,
evaluation, analysis and modifying business processes in a way to
deliver quality services; thereby achieving customer satisfaction and
market share. An effective service strategy helps in designing, devel-
oping and implementing organisational capabilities for service man-
agement. For example, Reliance Jio Infocomm Ltd. recently launched
a free mobile usage package for all those who opted for its mobile con-
nections. All the people who took the connection were given free calls
and data services for about seven months. The free usage was allowed
to acquire new customers and make them accustomed to using the Jio
network. Therefore, allowing free usage is also a service strategy.
Let us consider another example of service strategy. Assume that you

operate four pathology labs in an area. Allare providing around 150
types of tests. However, it is not necessary that all tests are available
at all the path labs. You have been operating these labs for so many
years. The costs of tests in all labs are approximately the same. Now,
you are about to open the fifth laboratory in the same locality. What
kind of strategy will you adopt to attract customers? First, you should
keep the prices of your tests slightly lower than the prices offered by
your competitors. Second, you should also add service elements that
are notoffered by your competitors. Third, ifall your competitors take
a minimum of one day to give test reports, you may include a facility
of providing test reports a little earlier.

N O T E S
1. A strategy refers to a plan (or a set of actions) that is created to

fulfil the objectives of an organisation. (True/False)
2. An effective service strategy helps indesigning, developing and
implementing organisationalcapabilities for
ACTIVITY
Assume that youhaveopened a small sweets shop in front of a large
■
bakery. Write a note on the kind of strategy that you would develop
to establish your business and make good sales.
SERVICE FRAMEWORK AND ITS

ELEMENTS
A service framework refers to a collection of principles, standards, pol-
icies and constraints considered for designing, developing and deploy-
ing services provided by a service provider. Almost all services such
as maintenance and support services, consulting services, IT services,
etc. are designed using a service framework. The major elements of a
service framework are:
D Service descriptions
D Templates
D Delivery models
D Processes
D Cost drivers
D Roles and responsibilities
D System functionality of service elements

D List of deliverables
Ideally, service providers should retain allservice elements so that dif-

ferent services can be offered. However, the basic service (building)
elements remain the same. Aservice provider should ensure that the
service elements are technology agnostic, which means the service
provider is open to use different kinds of technology for solving dif-
ferent problems. For each service element in the service framework,
there are one or more associated deliverables. When a service organi-
sation designs a new service, it first chooses what service deliverables
should be there in the service. After fixing the required deliverables,
the organisation combines the relevant service elements to design a
service. In addition, a certain level of customisation is also added to
the service.

N O T E S
Figure 2.1 presents an example of how different services can be de-

signed using a service framework:
Professional Service X Services Framework Managed Service Y

• Service element A Service element A--+-t-._ Service element A
- Deliverable y - Deliverable x --+-+-_..- Deliverable x
- Deliverable y - Deliverable z
- Deliverable z Service element B
- Deliverable - Deliverable s
- Deliverable q Service element C
- Deliverable r - Deliverable m
- Deliverable s Deliverable n
• Service element D
- Deliverable e
Deliverable n - Deliverable f
- Deliverable o - Deliverable k
• Service element
- Deliverable e
- Deliverable f
Deliverable g
- Deliverable
Figure 2.1: Designing Services Using the Service Framework
From Figure 2.1, it can be noted that each service element has one or
more associated deliverables. A service deliverable is also a complex
entity that includes various attributes such as description, process,
delivery model, cost driver, templates, roles and responsibilities, skill
levels, etc. Most organisations prefer designing services using a ser-
vice framework because the elements of the service framework are
highly standardised which lead to cost savings for the organisation.
The service framework approach to design services is used extensive-
ly in the field of Information Technology (IT).
3. A refers toacollection of principles,standards,

policies and constraints considered for designing, developing
and deploying services provided by a service provider.
4. Elements of the service framework are highly standardised
which lead to -----
ACTIVITY
Develop a case study on the service framework used by any service

organisation of your choice.

N O T E S
Ill SYSTEMS VIEW OF SERVICES

A system refers to a combination of processes, mechanisms, partici-
pants and/or networks that work together to produce a desired out-
put/impact. The systems view of services suggests that the problems
and components ofservices must be made a part of the service frame-
work. It is believed that the components of a system can be best un-
derstood iftheir inter-relationships are shown explicitly rather than in
isolation. It should be noted that the systems view of services includes
customers as participants in the service process. The systems view of
services is presented in Figure 2.2:
Service Process Consumer

Consumer Participant Departures
Consumer Consumer-Provider Evaluation
Arrivals Interface Criteria
Measurement
(Input)
Control t
Service Operations Manager
Monitor
Service
Consumer Alter Production Function Personnel
Demand Demand Monitor and Control Process ; Empowerment
Perceived Sched- Training
Marketing Function
Needs ule Attitudes
Interaction with Consumers
Location Supply
Control Demand
ltModify as Necessary
Define Standard
Basis of
Communicate by Service Package
Supporting Facility Selection
Advertising
Facilitating Goods
Information
Explicit Services
Implicit Services
Figure 2.2: The Systems View of Services
Major components of a service system are as follows:

0 System: Any service that is to be provided to a customer must be
delivered through a proper system. The system usually consists of
inputs, processing of inputs and production of desired output(s).
Incorrect inputs often lead to outputs, which fall short ofcustomer
requirements. For example, if the patient fails to provide correct
information to the doctor or hides his previous diseases from the
doctor, the doctor may not be able to provide the correct treatment
to the patient.
0 People: In the service sector, it is the people who provide services
to customers. If the people are not well trained or are not able
to provide services demanded by the customer, this will affect the
business and sales of the service provider. For example, there is a

N O T E S
restaurant famous for its biryani, which is prepared by a worker.

However, the worker leaves the restaurant job. The restaurant has
hired a new worker but he is unable to prepare the biryani that is
similar to or better than the previous one. The restaurant realises
that its sales are decreasing and the demand for its biryani is de-
clining. Therefore, it can be concluded that human resources of a
service organisation are very critical element of the overall service
system.
0 Place: A service provider must havea designated place from where
it operates its business.
0 Process: Services are provided to a customer through a pre-de-
fined process. For example, consultancy services after receiving
a consultation request, studying project details, making a report
of what work has been done in the project and what work is still
pending, getting associated with the project, and studying and ex-
amining the areas in which the consultee requires expert help. Af-
ter a thorough research, the consultant provides its services that
may be in any form such as report, guidance at the actual work
site, etc.
0 Technology: Core service processes are integrated with technol-
ogy. Service processes that can be automated through the use of
technology are automated. This helps the service provider gain
competitive advantage in the market. For example, at a car ser-
vice centre, a front desk employee issues service slips and token
numbers at a counter. However, if the service centre installs a ma-
chine that generates service slips and token numbers, the need
for the front desk employee can be eliminated as customers can
themselves generate tokens by using the customer-friendly user
interface.
5. The systems view of the services suggests that the problems

and the components of services must be made a part of the
service framework. (True/False)
6. The systems view of services includes the as a
participant.
ACTIVITY
Randomly make a list of five services that you may have used at
least once in your life. For each service, list down various processes
involved in it. Now, make a report on howyou can integrate tech-
nology components into the given service processes.

N O T E S
Ill SERVICE PROCESS MATRIX

Roger Schmenner first developed the service process matrix in 1986.
He holds a PhD degree from Yale University and is a Professor of Op-
erations Management. The service process matrix is a classification of
service processes of a service organisation based on certain character-
istics of services provided by these organisations. Organisations use
the service process matrix to identify strategic changes and manage-
rial challenges associated with each quadrant of the matrix. By devel-
oping solutions for each challenge, service organisations may improve
their service performance and gain a competitive advantage.
The two dimensions of the service process matrix include the degree
of labour intensity and the degree ofcustomer interaction and custom-
isation required for providing services. For example, hospital services
require a high degree ofcontact with the patients and the availability of
the labour (workers) such as nurses and doctors on high priority. The
four quadrants of the service process matrix are shown in Table 2.1:
,e,
"rii Low Quadrant 1: Service Fae- Quadrant 2: Service Shop
=.. . .
Q , )
tory Auto Repair
=... Airlines Other Repair Services

i..
= 0
Trucking
Hotels
. . ; i
.0 . . .High Resorts and Recreation
Quadrant 3: Mass Service Quadrant 4: Professional Service
Q,)
t Retailing Doctors
Q,)
Q Whole selling Lawyers

Schools Accountants
Retail Banking Architects
The first quadrant corresponds to services that require low custom-

er interaction and customisation and a low degree of labour contact.
The second quadrant corresponds to services that require high cus-
tomer interaction and customisation but a low degree of labour. The
third quadrant corresponds to labour-intensive services that require
lowcustomer interaction. Lastly, the fourth quadrant corresponds to
those services that require high labour and high customer interaction.
7. isa classification of service organisations into

four types based on the characteristics of service processes.
8. List two examples of mass services.

N O T E S
ACTIVITY
Apart from services mentioned in the service process matrix, men-

tion at least two services that correspond to each quadrant of the
service process matrix.
STRATEGIC HIERARCHY AND

CONSISTENCY
You are already aware that a strategy refers to a plan of action used
during service processes and delivery. Strategic hierarchy refers to
the levels of strategies in an organisation. The basic objective of de-
veloping a strategy is to provide a direction for growth and prioritise
investments. Strategies also define the outcomes against which the
effectiveness of service management may be measured. Strategies are
developed after thoroughly analysing the organisationalstructure and
the nature and complexity of services.
There are three basic levels of strategies in organisations, which are

shown in Figure 2.3:
Corporate Level
Strategy
Business Level Strategy
Functional Level Strategy
Figure 2.3: Strategic Hierarchy
Thethree levels of strategy are applicable to both manufacturing and

service organisations. However, there is a stark difference between
the strategies adopted for products and services at each level. These
are explained as follows:
□ Corporate level strategy: It is known that products and services
offered by different organisations compete with each other. Dif-
ferent business units create and offer various products/services.
It is the responsibility of the highest authority of the organisation
to manage its business units and products/services. The different
business units of an organisation may represent its different ser-

N O T E S
vice lines. Therefore, the main aim of a corporate level strategy is

the selection of different businesses (service lines) that theorgani-
sation should develop and compete in.
The corporate level strategy also defines the goals of the organi-
sation, different business segments the organisation should enter
and howdifferent business units of the organisation should be in-
tegrated and managed. While preparing the corporate level strat-
egy, the organisation should thoroughly analyse the strategy and
actions of its competitors. Decisions related to mergers, acquisi-
tions, retrenchment, concentration, etc. are examples of corporate
level strategies. For example, Protection 1, a home security organ-
isation, acquired ADT, another security service organisation that
serves residential and small business customers. This is an exam-
ple of the acquisition of a service organisation by another service
organisation.
□ Business level strategy: A strategic business unit refers to any
division, service line or any other profit centre that can be consti-
tuted as a separate business unit of the organisation. The strate-
gies at the business unit level aim at developing and maintaining
a competitive advantage for services offered by the business unit.
A business level strategy involves positioning the organisation's
business in the market and against its competitors.
The people who make business level strategies should actively
anticipate changes in the demand for services and any possible
changes in the technology. In case of any such changes, strategies
to accommodate the changes should be implemented. Four basic
business level strategies include cost leadership, differentiation,
focused low cost and differentiation. For example, Virgin Airlines
is an airline that provides full-service flights and outstanding cus-
tomer service at inexpensive fares. The differentiation strategy
used by Virgin Airlines is based on two premises that are lowfare
prices and great facilities.
□ Functional level strategy: These strategies are used by an or-
ganisation at the organisation's functional level. These strategies
are related to various business processes and the value chain of
services. The organisation needs to develop strategies for various
functional departments such as human resources, marketing, fi-
nance, etc. For example, marketing strategies include pricing
strategy, promotion strategy, etc.; financial strategies include ac-
quisitions, mergers, capital acquisition, cost reduction, etc.
All the three levels of strategy should be coherent with each other
to produce a synergistic effect for the organisation. For example, the
Tata Group of Companies includes companies such as Tata Steel, Tata
Motors, Tata Power, Tata Communication, Tata Tea, etc. Tata acquired
Jaguar Land Rover business from the Ford Motor Company in 2008.
This was Tata's corporate level strategy. Tata Jaguar has adopted a

N O T E S
strategy of producing low-carbon vehicle solutions. This is a business

level strategy. The marketing function of the Tata Jaguar runs feed-
back sessions where customers express their views on organisation's
products. In addition, Tata Jaguar also holds regular high-level meet-
ings with importers and dealers to seek their feedback. This is the
functional level strategy of Tata Jaguar.
9. The basic objective of developing a strategy is to provide a

direction for growth and prioritise
1 0 D. ifferent business segments an organisation should enter into
1s a strategy.
ACTIVITY
List a few examples (at least three) of corporate level, business level
and functional level strategies adopted by different organisations.
IBSTRATEGIC POSITIONING
Strategic positioning refers to a strategy used to develop a distinct im-
age of a product or service in the market. The unique image of a prod-
uct or service helps an organisation in gaining and retaining more
customers. Strategic positioning involves the following steps:
1. Analysing the target audience: A service may be demanded
by a variety of people. All these people may have different
expectations from service providers. Therefore, it is necessary
for a service provider to make a detailed description of what
kind of customers would seek its services. Analysing the target
audience helps in setting the prices of services and determining
different elements of a service. For example, assume that youare
the owner of a spa and Ayurveda therapy centre. You may have a
set of customers who come there for different massage therapies
to maintain their health or simply because it makes them feel
good. You may also have a set of customers who are suffering
from certain ailments and seek massage therapy to relieve their
pain. In addition, there may be some customers who demand
customised services.
2. Identifying the unique features of a service: It is important
that the service provider carefully designs a service and includes
maximum possible features. This will differentiate the service
from other services offered by competitors and will give the
service provider an edge in its industry.
3. Identifying the Unique Selling Propositions (USPs): Each
service provided by the service provider must possess certain

N O T E S
unique features. These unique features or the USPs are often

used by service organisations in branding and marketing their
services. For example, assume that there are two coaching
centres. One advertises its services based on its record of
accomplishment. The second centre, which has been opened
recently, advertises its services based on its faculty members
who are highly talented and contain the right mixof experienced
and young professionals.
4. Analysing competitors: As stated earlier, a service provider
should differentiate its services and include certain USPs in its
service offerings. However, differentiation and inclusion of USPs
must be made based on an analysis of competitors' offerings.
Ideally, the service provider's offering should include all the basic
elements of services plus a number of differentiating elements.
5. Developing ways to differentiate and promote service
offerings: During this stage, a right theme for advertisements,
catchy taglines, etc. should be developed. The service provider
needs to develop an advertisement that would highlight the
benefits of its services.
6. Developing strategies to maintain the market position of the
service: After a positioning strategy has been developed and is
being followed, it is very important for the service provider to
maintain its position in the market. This can be done byensuring
the quality of services, maintaining price levels, etc.
11. Identifying the unique features of the strategy is the first step
in developing a positioning strategy. (True/False)
12. The of a service are often used by the service
organisations in branding and marketing the service.
13. Mention one method used by a service organisation to
maintain its position in the market.
ACTIVITY
Assume that youare the owner of a chain of multi-speciality hospi-

tals. You want to expand your business and set up more hospitals.
What will be your positioning strategy?
fj: ■ COMPETITIVE PRIORITIES

You are well aware of the terms operations, operations management
and operations strategy. An operations strategy refers to the methods
and processes that an organisation develops in order to achieve its

N O T E S
objectives. The process of development of an operations strategy is

shown in Figure 2.4:
Mission
Market ]
--L+ Business ,
strategy
, Organization
competencies
Strategies of
Competitive priorities, order other functions
qualifiers and winners
Operations
strategy
Operations strategy decisions I
1<111 ----------- Linked
Figure 2.4: Operations Strategy Process
You must have observed that there are certain organisations that pro-
duce various products and services under a single organisation name.
On the other hand, many organisations operate as a conglomerate
that is the parent organisation of various other organisations. For in-
stance, Reliance Anil Dhirubhai Ambani Group (R-ADAG) comprises
Reliance Power, Reliance Communications, Reliance Infrastructure,
and Reliance Capital. Each company under the conglomerate is con-
sidered a business unit (subsidiary). The conglomerate and its sub-
sidiaries have their specific vision and mission statements. The busi-
ness units create business level strategies. Asshown in Figure 2.4, a
business strategy is developed using inputs from the organisation's
internal and external environment that includes elements such as
competition and government regulations, market requirements (cus-
tomer needs and desires), and organisational capabilities (strengths
and weaknesses of the business unit).
After creating the business level strategy, the business unit needs to
develop its operational and functional strategies. The operations level
strategy for a business unit is developed based on competitive pri-
orities of the organisation. The operations strategy also depends on
order qualifiers and order winners that relate to the requirements for
success in the market. Apart from these, the operations strategy also
considers factors such as the level of available technology, required
skills of workers, and the degree of vertical integration.

N O T E S
I I
NOTE
Order qualifiers refer to a set of characteristics that a product/

service must possess in order to be considered by a customer for
the purchase. Organisations must provide order qualifiers in their
products/services in order to be considered by a customer.
Order winners refer to a set of characteristics (differentiating fac-
tors) that set apart the different product/services of an organisa-
tion. Customer's purchase is often based on these characteristics.
In other words, these characteristics play an important role in get-
ting the customer to purchase a product/service.
There are five types of competitive priorities that include low cost,
high quality, fast delivery, flexibility and service. These competitive
priorities can be broadly classified into four categories, namely cost,
time, flexibility and quality.
Table 2.2 presents the definition and process considerations for com-
petitive priorities:
TABLE 2.2: COMPETITIVE PRIORITIES
Competitive Definition Process Considera- Example
Priorities tions
Low cost Deliver a service (or Design processes to Lufthansa
operations product) at the lowest make them as effi-
possible cost cient as possible
Flexibility Ability to deploy/ Processes should be Roche
re-deploy resources in designed in a way so India
response to changes in as to process a given
contractual agreements. set ofcomponents
For example, adjust- with different opera-
ment to design/plan- tions, sequences, and
ning, volume changes materials
and product variety, etc.
High quality Deliver an excellent Adjust the degree Apple
service/product ofcustomer contact
and labourrequire-
ment accordingly
Fast delivery Deliver the services as Design the service Huawei
(flexibility) per schedule. Do not delivery processes to
keep customers waiting. ensure minimum lag
Service Best possible service Processes should be McDon-
(cost) should be provided to monitored regularly ald's
the customer at the to reduce errors and
given cost prevent defects
14. Five types of competitive priorities are low cost, high quality,
----and service.

N O T E S
ACTIVITY
Make a list of the top 10 service organisations oflndia and list down
their competitive priorities.
fjjsUMMARY
□ In the context of management, a strategy refers to a plan (or a set
of actions) that is created to fulfil the objectives of an organisation.
□ In the service sector, service organisations have to perform a large
number of operations in order to deliver quality services to cus-
tomers.
□ A service framework refers to the collection of service elements
or building blocks used to design various services offered by an
organisation.
□ The major components of a service framework are service descrip-
tions, templates, delivery models, processes, cost drivers, roles and
responsibilities, system functionality of service elements, and list
of deliverables. For each service element in the service framework,
there are one or more associated deliverables.
□ The systems view of services suggests that the problems and the
components of services must be made a part of the service frame-
work.
□ Major components of a service system are system, people, place,
processes and technology.
D The service process matrix is a classification of service processes
based on certain characteristics ofservices provided by the service
organisation.
□ The two dimensions of the service process matrix include the de-
gree of labour intensity and the degree of customer interaction
and customisation.
□ The basic objective of developing a strategy is to provide a direc-
tion for growth and prioritise investments.
□ There are three basic levels of strategies in organisations. They
are corporate level strategy, business level strategy and functional/
tactical level strategy.
□ Strategic positioning refers to a strategy used to develop a distinct
image of a product or service in the minds of consumers.
□ After creating the business level strategy, a business unit needs
to develop its operational and functional strategy. The operations
level strategy for a business unit is developed based on competi-
tive priorities of an organisation.

N O T E S
□ There are five types of competitive priorities that include lowcost,

high quality, fast delivery, flexibility and service.
II KEYWORDS
□ Branding: The practice of creating a name, symbol or design

for a product/service that helps in differentiating it from other
products/services available in the market.
□ Conglomerate: A large company or organisation that is the par-
ent company of various other companies.
□ Target audience: The customers for whom a particular product
or service has been developed and rolled out in the market.
□ Lag: The difference in the period between one event and an-
other.
□ Subsidiary: A company that is directly controlled by a large
corporation called the parent company.
fjlll DESCRIPTIVE QUESTIONS

1. Explain the concept of service strategy.
2. What is a service framework? Explain its elements.

3. List the components of the systems view of service.
4. What is the significance of the service process matrix?
5. Explain the steps involved in the strategic positioning of services.
6. What doyou understand bythe concept of competitive priorities?
fjI1ANSWERS AND HINTS

Concept of Service Strat-

egy
2. Service management
Service Framework and its 3. Service framework
Elements
4. Cost savings
Systems View of Services 5. True
6. Customer
Service Process Matrix 7. Service Process Matrix

N O T E S

8. Schools; Retail banking
Strategic Hierarchy and 9. Investments
Consistency
10. Corporate level
Strategic Positioning 11. False
12. Unique Selling Propositions
13. Ensuring the quality of services
Competitive Priorities 14. Fast delivery; Flexibility

l. A service strategy helps in designing, developing and imple-
menting organisational capabilities for service management. Re-
fer to Section 2.2 Concept of Service Strategy.
2. A service framework refers to the collection of all elements of
services offered by an organisation. Refer to Section 2.3 Service
Frameworks and its Elements.
3. Major components of a service system are system, people, place,
process and technology. Refer to Section 2.4 Systems View of
Services.
4. The service process matrix is a classification of service processes
based on certain characteristics of services provided by a service
organisation. Organisations use the service process matrix to
identify strategic changes and managerial challenges associated
with each quadrant of the matrix. Refer to Section 2.5 Service
Process Matrix.
5. The steps involved in the strategic positioning of services are
analysing the target audience; identifying the unique features
of the service; identifying the Unique Selling Propositions
(USPs); analysing competitors; developing ways to differentiate
and promoting service offerings; and developing strategies to
maintain the market position of the service. Refer to Section 2.7
Strategic Positioning.
6. The operations level strategy for a business unit is developed
based on competitive priorities of an organisation. There are five
types ofcompetitive priorities: lowcost, high quality, fast delivery,
flexibility and service. Refer to Section 2.8 Competitive Priorities.

N O T E S
fJtJ SUGGESTED READINGS & REFERENCES

SUGGESTED READINGS
D Johnston, R., Clark, G., & Shulver, M. (2012). Service Operations
D Fitzsimmons, J., Bordoloi, S., & Fitzsimmons, M. (2014). Service
Management Operations, Strategy, and Information Technology (7th
ed.). New Delhi: Mc Graw Hill Education (India) Private Limited.
E-REFERENCES
D (2017). Retrieved 21 April 2017, from http://www.dimensionda-
ta.com/Global/Downloadable%20Documents/Dimension%20
Data%27s%20Services%20Framework.pdf
D (2017). Retrieved 21April 2017, from https://ktwop.files.wordpress.
com/2013/03/jlr-strategyl.pdf

CONTENTS
3.1 Introduction
3.2 Concept of Service Design
Activity
3.3 Generic Approaches to Service System Design
Activity
3.4 Service Development Process
Activity
3.5 Identifying and Meeting Customer Requirements
Activity
3.6 Resources Management and Planning Capacity Management
Activity
3.7 Layout of Facilities
Activity
3.8 Service Blueprinting
Activity
3.9 Process Design and Improvement
3.9.1 Degree of Standardisation and Variety Reduction
3.9.2 Mass Customisation and Modular Design
3.9.3 Taguchi Method
3.9.4 Quality Function Deployment
Activity

•
CONTENTS
3.10 Summary

N O T E S
-
HOSPITAL LAYOUT DESIGN AND RATE OF C-SECTION
DELIVERIES
In a recent research conducted in earlier partof2017, published in

Birth: Issues in Perinatal care (aninternational journal written by
and for maternal and neonatal health professionals), it was found
that approximately 74% of expecting women in the UK chose a
hospital based on their choice of doctor. Only 17% of the women
gave importance to the hospital where they would give birth to
their young ones. The research data was based on the feedback
received in an online survey from 6141 women who were using a
pregnancy app Ovia.
More than 50% of the women said that they had no idea if the
design and the choice of their hospital can affect the chances of
them having to deliver their baby through a C-Section. About 35%
of the women also had no idea that they should consider the rate
of caesarean operations done by different hospitals as a criteria
for selecting a hospital.
Various recent studies have suggested that hospital policy, layout

and quality have a major effect on the type ofdelivery. These fac-
tors decide whether a woman in labour would end up getting an
unplanned C-section or would deliver naturally.
According to Neel Shah, a Boston-based obstetrician/gynaecol-

ogist, who works at Ariadne Labs and co-authored the survey
for Ovia, the rates of C-sections in U.S. hospitals vary from 7%
to 70%. He also added that hospital design could be the single
largest factor that would affect the chances of women going for
C-Sections. Despite this, women continue to choose their delivery
hospital based on their obstetrician/gynaecologist.
Shah and his team from Ariadne Labs recently assessed 12 child-
birth hospitals in the U.S. to explore the relation between the
number of C-Sections and the design and layout of hospitals. Ma-
jor findings of this study were:
□ Hospitals that had the shortest 'maximum distance between
delivery rooms' had lowest C-Section rates. Additionally, hos-
pitals that had longer 'maximum distance between delivery
rooms' had greater rates of C-Sections. Distances were in the
range of 9 to 242 feet.
□ Hospitals that had shorter distances between delivery rooms
and call rooms had lower C-Section rates. Call rooms are the
rooms where hospital staff can sleep, shower and take care of
other administrative responsibilities.

N O T E S
0 Hospitals that had more number of deliveries per year tend to

have more number of C-Sections. There are certain hospitals
that try to attain a particular number of deliveries per delivery
room per year.

N O T E S

>- Explain the concept of service design
>- Describe generic approaches to service system design
>- List steps in the service development process
>- Explain how customer requirements are identified
>- Describe how resources and capacity are managed
>- State the importance of facility layout
>- Explain the concept of service blueprinting
>- Discuss process design and improvement
Ill INTRODUCTION
In the previous chapter, you studied about service strategy and service
strategy framework. You were also introduced to the systems view of
services. In addition, you studied about service process matrix, stra-
tegic hierarchy and consistency, strategic positioning and competitive
priorities.
Service design refers to a plan or drawing showing a detailed layout of

how a service will be delivered to a customer. Agood service design is
generally constructed after examining the purpose of the service, its
intended use and the target group ofcustomers. Each service requires
preparation of a unique service design. However, there are certain
approaches that service organisations can follow in order to prepare
service design. These include production line approach, customer as
a co-producer approach, customer contact approach and information
empowerment approach.
It is quite evident that a service design is created only in case a new

service has been developed or an existing service is modified. There-
fore, it is necessary to understand how a service is developed. A ser-
vice is developed only after a need for a new service is felt. First step
in the service design process is the identification ofcustomer require-
ments. After a service is designed, it is important to clearly define the
layout of the service facility because a proper layout helps in effective
delivery of services whereas an improper layout may hinder the deliv-
ery process. Thereafter, the service provider has to manage resources
and capacity of the facility in order to prevent situations of under and
over utilisation of resources.
In this chapter, you will study various aspects of service design, gener-
ic approaches to service system design, service development process,
identifying and meeting customer requirements, resources manage-
ment and planning capacity management, layout of facilities, service
blueprinting, and process design and improvement.

. '
N O T E S
ifj CONCEPT OF SERVICE DESIGN

In literal terms, design is a plan or drawing used to indicate or show
how a particular object such as building, garment, machine, product
or service will look and/or will function. In case of services, service
design refers to a plan or drawing showing a detailed layout of how
a service will be delivered to customers. The term service design was
first used in early 1990s by Bill Hollins, who is a pioneer in the field of
service design. He started offering 'service design' service to organisa-
tions that were unable to do it themselves.
Over the years, continuous research in the field of service design led
to the establishment of organisations that offer service design ser-
vices. Generally, organisations that donot have an internal capacity to
design their own services hire service design consultancies/organisa-
tions. An example of such an organisation is Service Design Network
(SDN). According to SDN, service design refers to an activity of plan-
ning and organising people, infrastructure and material components
of a service in order to improve interaction between a service provider
and customers.
At a Service Design Seminar held in October 2004, a participant Jenny

Winhall defined service design as a process across the four D's -discov-
er,define, develop and deliver. Service design involves understanding
the customer, organisation and market, developing ideas, translating
them into feasible solutions and implementing them.
Service design constitutes a crucial part of the overall service devel-

opment life cycle. It is an on-going process that involves components,
workshops and projects to introduce newservice practices intoorgan-
isations and improve the overall quality of services. Eventually, ser-
vice design adapts to organisational needs, which is further translated
into business structures and processes.
Most organisations keep on innovating, developing and improving

services by continuously modifying its service design as per the re-
quirements an organisation's stakeholders. Modifications are gener-
ally made by collecting ideas through interactions with stakeholders
and by taking inputs from various disciplines such as ethnography,
consumer research, product design, industrial design, service market-
ing and corporate strategy.
Any service designed by an organisation needs inputs from various

people. For example, consider the services of the Delhi Metro. Archi-
tects and interior designers build stations; graphic designers develop
various boards and signage; metro rails are developed by specialised
engineering organisations; programmers and designers develop to-
ken generation and other software required by the AFC gates; and
security is provided by national security agencies such as CISF.

N O T E S
The following are some principles of service design that organisations

must adopt while designing a service:
0 Services are designed after taking into consideration various fac-
tors such as purpose of service, expected demand for the service
and the ability of the service to satisfy customers.
0 The needs and requirements ofcustomers are analysed before de-
signing a service. For example, OlaShare service was designed and
developed after the company observed that some people feel that
the usual charges of Ola Cabs are high and it could be manageable
ifcharges are shared between two or more people travelling on the
same route.
0 Services are designed so as to deliver maximum value to the cus-
tomer.
0 Feedback of customers and inputs from the employees are taken
into account before services are designed.
g SELF ASSESSMENT QUESTIONS
1. Service design constitutes a crucial part of the overall service

development life cycle. (True/False)
2. ofcustomers and fromthe employees
are taken into account before services are designed.
ACTIVITY
List the names of five Indian organisations/consultancies that pro-

vide 'service design' services.
GENERIC APPROACHES TO SERVICE

SYSTEM DESIGN
Each service has its own unique features. Thus, the approach applied
for each service differs as per the nature of service. However, it is pos-
sible to formulate a generic approach for service design. Let us dis-
cuss generic approaches to service system design.
PRODUCTION LINE APPROACH
Under the production line approach, most work processes are auto-
mated; however, there are certain areas that require human interven-
tion. Workers are trained and skilled for providing specific services
or performing specific tasks. This approach is usually followed in the
manufacturing sector. However, it can also be applied to services.
A service organisation that adopts this approach can have a competi-
tive advantage and cost leadership over its rivals as core processes of

N O T E S
services are integrated with technology and customers can avail ser-
vices without visiting the location of the service provider. This speeds
up the overall service delivery process. One such example ofa produc-
tion line approach to service is ATM where customers can withdraw
money or avail various other services without visiting the bank.
Under the production line approach, services are standardised.

For example, whether you are sitting in a McDonald's outlet at New
Delhi or at Bangalore, services provided by McDonalds will be the
same. Under the production line approach, emphasis is given on con-
trolling the process. A big task is broken down into smaller parts and
employees with specialised skills deal with each part individually.
The employees are skilled and trained to do a particular function only.
The employees have to perform their function in a pre-defined man-
ner. They are not empowered or allowed to customise their function.
This facilitates consistent and uniform service delivery.
CUSTOMER AS A CO-PRODUCER APPROACH
Under this approach, customers can customise the required service(s)

as per their convenience. Usually, customers and the service provider
both prefer self-service activities as it leads to savings of money and
time. Using this approach, the degree of customisation can be adjust-
ed as per customers' requirements. For example, food outlets such as
McDonald's have a policy of self-service wherein customers have to
give an order and make payment at a counter where they get a printed
slip. An LED board displays the order number that has been prepared
and the customer can collect his order from the counter after produc-
ing the slip. In this way, this approach helps in reducing operating
costs.
The main advantage of this customer as a co-producer approach is

that customers generate content that indirectly serves as an adver-
tisement for the service provider. For example, a spa owner builds an
exclusive and unique entrance and waiting area. The customers are
likely to take pictures at such places. These pictures are put up on
social media and it may likely attract new customers.
CUSTOMER CONTACT APPROACH
A service delivery system is usually made up of various operations.

Under the customer contact approach, operations are categorised as
high-contact and low-contact operations. The operations that require
low or no customer contact are performed at the back end. High-con-
tact operations are performed at the front end with the involvement
of customers. For example, an event management company holds
conversation with customers in the beginning to understand their re-
quirements so that it can render services accordingly. These require-
ments may include the design of entrance gate, location selection, the
type of food to be served, etc. These requirements are fixed after the

N O T E S
consent of customer; however, when it comes to the implementation

of the service, it is done entirely by the service provider. For example,
a customer directs the service provider that there should be a special
cheese and mac dish. In such a case, the customer has given instruc-
tions but will not help the service provider in preparing the same.
INFORMATION EMPOWERMENT APPROACH
Technology touches our lives on a daily basis. Most services require

the use of IT; however, the degree of use may vary. Availability of tech-
nology empowers both employees and customers by providing accu-
rate information. Employees can maintain a record of customers and
their needs with the help of record keeping software and database and
can render services accordingly. Similarly, IT also helps customers.
For example, courier companies provide the status of shipments on
their websites, which helps customers to track their shipments and
have a fair idea when their products will be delivered to them.
3. Under the approach, most work processes are

automated.
4. Operations that require low customer contact are performed
at the back end. (True/False)
ACTIVITY
Give an example each of the organisations that use the production
line approach, customer as a co-producer, customer contact and in-
formation empowerment approach.
Ill SERVICE DEVELOPMENT PROCESS

A new service is developed through a staged process involving vari-
ous steps. This process is called service development process or ser-
vice development life cycle. The steps involved in the process are dis-
cussed as follows:
1. Determine the requirement of a new service: In this step, the
service provider assesses whether there is a need to provide a
new kind of service to customers or not. A new service can be
developed in the following conditions:
♦ Environmental changes: The market and the environment
keep changing. Therefore, under such circumstances, it may
become essential to offer new services. For example, a few
years ago the people were happily using the 2G Internet
services; however, after the advent of 3G Internet services,

N O T E S
customers started demanding 3G services from their respec-

tive operators. Now, we also have 4G services in place. This
was a case where providing new services became essential.
However, there may be instances where the environment and
changing circumstances bring up the possibility of develop-
ing and offering altogether new services. For example, with
the rise in the income of most people, spas and grooming cen-
tres are also developed for pet animals.
♦ Changes in the business model of the service provider: At
times, it becomes necessary for a service organisation to make
revisions or entirely change its services because of changes
in its business model. For example, when multinational cab
aggregators such as Olaand Uber entered the Indian market
(in 2011 and 2012 respectively); they focussed more on tying
up with cab drivers in order to develop a huge fleet of cabs.
For this, they offered very lucrative incentives to cab drivers.
Recently, Ola changed its business model and became cus-
tomer-centric which led to high penalties and lower income
for cab drivers. This also led to nation-wide protests from cab
owners.
2. Understand and analyse service specifications:After the service
provider identifies the need for a new service, it is essential to
gather information regarding the expected characteristics and
functionalities of the new service. The information is collected
by holding discussions with existing and prospective customers
and employees of the service organisation. For example, the
owner of a beauty salon gets to know about the requirement of a
new hairstyle through the employees working at the salon. This
is because the employees are in direct contact with customers.
In such a case, the owner will himself/herself get the training of
that particular hairstyle and train his/her employees further. The
service characteristics should be recorded in a clear, specific and
unambiguous manner. The value addition that the service would
provide to the customer is defined clearly.
3. Conduct feasibility study for the service: Under this stage, it is
determined whether it is feasible to offer a prospective service.
The feasibility needs to be checked on various grounds such
as financial feasibility, technical feasibility, political feasibility,
operational feasibility, etc. For example, assume that a person
wants to open a centre for teaching Italian cooking in a rural
village of India. This service idea should be dropped immediately
because the rural population of India still abides by Indian
cooking and the rural people are yet to develop a taste for other
countries' dishes. Secondly, ingredients required for Italian
cooking are not so readily available in rural areas.

N O T E S
4. Develop service design: After a feasibility study is conducted,

the service system design is developed and rules are set as to how
the entire service operation will be broken into manageable sub-
operations and other minute details. You have already studied
about service system design in the previous section.
5. Service testing: After the service design is decided, the service
provider prepares for a trial run of services. In this stage, a
platform is created in order to simulate the service as if they
are performed under real-life conditions. The main advantage
of simulating a service is that all possible defects and other
deficiencies in service design can be identified and worked upon
(removed or reduced) before a service is actually provided to
customers.
6. Service rollout: After successfully testing the service, it is offered
to customers. Before rolling out, the service provider needs to
decide about the timings, pricing and other aspects ofthe service.
7. Post rollout monitoring: Once the service provider starts
offering the service, he/she needs to continuously monitor the
service and keep taking feedback from customers and employees
on service response. This ensures that the service provider stays
competent in the market.
5. What is the first step in the service development process?

6. After a service provider identifies the need ofa new service, it
is essential to gather information regarding the
and of the new service.
7. Service testing is usually conducted by using _
8. The service development process is also called
ACTIVITY
Prepare a case study on the service development process of any

service of your choice.
IDENTIFYING AND MEETING

CUSTOMER REQUIREMENTS
Identifying the requirement of a new service and analysing service
specification is crucial in the service development process. This is be-
cause without determining the requirement of a new service and its
specifications the service cannot be designed and customers' needs
cannot be fulfilled. Requirements gathering begins with customer in-

.'
N O T E S
terviews and feedback analysis. A service provider who is already of-

fering certain services and wants to expand his/her business can do so
by seeking feedback ofthe existing customers. In addition, the service
provider may also conduct interviews of prospective customers by us-
ing the questionnaire method, conducting surveys, performing brain-
storming sessions, etc. After gathering data from interviews, feedback
and questionnaires, the data is analysed in order to derive useful in-
formation on customer requirements. Since services are intangible in
nature, it is difficult to define exactly what kind of service customers
require.
Once the customer requirements are identified, they are segregated

and classified based on parameters such as geographical distribu-
tion, income distribution, etc. For example, a telecom service provid-
er conducted a survey regarding the usage of a value-added services
offered by it to two different user segments Groups A and Group B.
Data analysis revealed that the mean value of value-added services
used by Group A was 1543.78 whereas the mean value of the same ser-
vice being used by Group B was 1532.67. However, services provided
to Group A had some additional features which were quite popular
among this group. The telecom operator wanted to test the response
of Group B if it was offered the same service as Group A. For testing, a
pilot project was initiated and the results were evaluated. The service
provider found that the results of the pilot project were favourable
and therefore, it was implemented across the country.
9. Requirements gathering begins with customer interviews and
ACTIVITY
Assume that youwork at Alpha Beauty Skin Clinic. This clinic cur-
rently offers five services for acne, pigmentation, lightening, detan
and chemical peeling. You have to take a feedback from all your
existing customers whether they would like to opt for two new ser-
vices targeted at unwanted hair and aging. You have to make a de-
tailed list of customer requirements for these two new services.
RESOURCES MANAGEMENT AND

PLANNING CAPACITY MANAGEMENT
Managing resources and capacity are complementary to each other
and are of utmost importance in a service organisation. Resources are
required for delivering services so that customers' demands are met
on time. It is important to maintain resources at an optimal level be-

N O T E S
cause under and over-utilised resources can lead to high operating

costs for the organisation. This can be possible if capacity is well man-
aged by the service organisation. Capacity management is all about
developing a plan stating how to make the best use of resources in
accordance with the expected or the forecasted demand for services.
Under-utilisation of resources may lead to following problems:

□ Not using expensive and critical service resources may lead to
poor financial results.
□ Customers may view services that appear to be easily available or
free with suspicion. For example, most people would not like to
enter a shop if it appears to have no or few customers even during
peak hours.
□ Underutilisation of resources may also lead to employee and cus-
tomer dissatisfaction. This may further lead to employee attrition
and loss of customers leading to losses.
On the other hand, over-utilisation of resources may lead to the fol-

lowing problems:
□ Most important resource for a service organisation is its human
resource. If people who actually deliver services are over-utilised;
then, it will lead to excess fatigue and tardiness, which will further
affect the quality of services.
□ Over-utilisation may also lead to large number of errors while de-
livery of services.
Therefore, we can observe that both over utilisation and underutilisa-

tion of resources is harmful for the service organisation. For achiev-
ing a correct balance of the resource utilisation, capacity is managed.
Under capacity management, the service provider strives to achieve
a balance between over and underutilisation of resources while tak-
ing care of the network and facilities of the operation. According to
Slack et al. 2004, service capacity is defined as the maximum level
of value-added activity over a period of time that the service process
can consistently achieve under normal operating conditions. Service
capacity can be measured and defined most conveniently at the pro-
cess level. For example, a television repair centre employs 10 people.
The service capacity of repairing TVs can be measured as the average
number of repair done by all these 10 people in a day.
A service provider must manage its resources and capacity in order

to provide quality and consistent services to customers. However, re-
source and capacity planning depends on various factors. Some of
these factors are explained as follows:
□ Service trends and patterns: A service organisation can collect
data on services from purchasing patterns ofcustomers and derive
important conclusions. For example, in India, the analysis of flight

.:
N O T E S
and railway bookings generally reveals that the demand for flight
services increases steeply before and after festivals such as Holi,
Deepawali and Christmas. Therefore, the airlines prepare well in
advance and deploy sufficient resources (such as number of air-
craft, pilots, flight attendants, etc.).
□ Return on investment: Resource and capacity planning is done
keeping in mind the expected return on investment. For example,
airlines deploy different types of aircrafts based on the numbers of
customers that are flying. For a small number of passengers, small
aircraft are scheduled and for large number of passengers large
aircraft are scheduled. This is important because aircraft usually
incur operational costs according to the size of the carrier. There-
fore, large operational costs must be balanced by a large number
of passengers.
□ Supply and demand of resources: The service provider should
maintain an adequate supply of resources in case they maintain
inventory. However, in case resources are bought on a Just-in-
Time (JIT) basis, the service provider should order the inventory
as and when a service request is received. For example, assume
that a factory produces various products such as burgers, hotdogs,
pizzas, puffs, pastries, etc. The factory has opened various outlets
where they appoint their salespersons. Alloutlets keep an invento-
ry of food items. 25 pieces of each food item are kept. However, in
case any outlet receives a large order, it a requirement can be sent
directly to the factory.
D Service capacity: Service capacity depends on various factors.
For example, a bakery outlet manager should ensure that all freez-
ers and refrigerators are working fine to protect the decay of prod-
ucts and avoid any hindrance in the service delivery process.
10. Under-utilisationofresources can lead toincrease in operating

costs. (True/False)
11. What can possibly go wrong if the human resource are over-
utilised for a long period?
ACTIVITY
List any three services. For each service, explain the criteria for
defining service capacity.

N O T E S
IDLAYOUT OF FACILITIES
After a service is designed, a service provider needs to work on the
layout of service facility. Facility layout refers to the way in which dif-
ferent components of a service facility are arranged. This is done to
maximise efficiency of processes, which leads to the achievement of
organisational goals. Services often require participation of custom-
ers in the service delivery system. In such cases, it becomes necessary
to carefully design and implement the facility layout. Facility design
involves taking into consideration various factors such as physical
environment, space consideration, aesthetic factors, flexibility, etc.
For example, consider the case ofa health and fitness service provider.
The service provider runs a chain of gyms in a city. While designing
gyms, he has to ensure that standardised services are provided and
the interior of all his gyms remains consistent.
I I
NOTE
The physical environment under which the service is performed is
called servicescape.
While designing the layout of a service facility, the following points

have to be taken into consideration:
□ Various aspects such as service organisation's policies, security is-
sues, number of resources available and service capacity should
be taken into account.
□ A location should be easily accessible to customers and connected
through various modes of transportation so that resources can be
replenished without any delay.
□ Service elements and complementary services that are to be pro-
vided should also be considered while designing the layout of the
service facility. For example, assume that an electronics store of-
fers free games to customers who make a purchase of 3000 or
more. For this, the store has specially installed gaming machines
and dedicated a large area designated as the free gaming zone.
□ Expected demand for services must also be considered. For exam-
ple, a bank opens up a new branch in locality A of city B. The bank
analyses that the locality is a busy one and it is surrounded by
mostly business organisations. Therefore, the bank forecasted that
the new branch should have a large capacity and should be able
to service 100 persons per hour. The layout designers, therefore,
need to keep this requirement in mind before designing the layout.
□ A method of service delivery should be well defined. For example,
services may be provided using batch processing, assembly line
processes, first-in, first-out services, etc.

N O T E S
(;f SELF ASSESSMENT QUESTIONS

12. refers to the wayin which different components of
a service facility are arranged.
ACTIVITY
Assume that you want to open up a pet creche cum boutique. De-
scribe in detail what kind of layout would you require for the con-
cerned facility?
IJ:■SERVICE BLUEPRINTING
Consumers and markets demand both products and services. More-
over, services are more crucial and generate major part of the Gross
Domestic Product (GDP) of India. In 2016-17, the service sector ac-
counted for 53.66% of total Gross Value Added (GVA) of India. Ser-
vices dominate national and global economies. Therefore, it becomes
imperative to bring innovation into the field of services. This can be
achieved with the help of innovative methods, techniques and R&D.
One such technique of bringing innovation in services is service blue-
printing.
A service blueprint refers to a diagram or pictorial representation of

all aspects related to the service and its delivery from the viewpoint
of the organisation and customers. It represents howdifferent compo-
nents ofa service are related to each other along with different contact
points. The contact points are the persons/areas from where a custom-
er gets in touch with the organisation. For this, a number of activities
are to be performed such as establishing clear objectives, generating
ideas, developing the concept, making a service design, prototyping,
taking customer feedback and so on.
A service blueprint maps all interactions happened between an or-

ganisation and its customers in a chronological manner. A service
blueprint helps in the design and redesign of the service development
process. Using a blueprint, a service can be broken intological compo-
nents. It is important to understand logical components in isolation as
well as their role and value-addition in the entire chain. The blueprint
also depicts steps in service processes, the means by which processes
are executed and the evidence of service as consumer experiences it.
There are five components of a service blueprint, which are explained

as follows:
1. Customer actions: This component includes a description of all
actions taken by a customer in a chronological order from start
to finish. For example, a customer visits a restaurant and places
an order. This is a customer action.

N O T E S
2. Onstage actions taken by employees: This component includes

actions taken by front-end employees during the course of
service delivery. In the above example, when service employee
responds to the order placed by the customer, it is an on-stage
action taken bythe employee. Each time an interaction between
the customer and the employee occurs; it leads to a positive or
negative experience for the customer. While getting the desired
service, if the customer collects a majority of positive experiences,
he/she will develop a positive image of the service organisation
whereas if he/she collects the majority of negative experiences,
he/she will develop a negative image of the service organisation.
3. Backstage actions taken by employees: This component
includes those actions of employees that are not observed
directly by customers. Backstage employees usually provide
services, which are delivered to the customer or are required for
delivering the final service to the customer. In the given example,
chefs preparing the dish for which the order is placed by the
customers are performing backstage actions.
4. Support processes: For delivering services to a customer,
employees need help of certain support processes in the absence
of which service delivery and quality suffer. Usually, employees
who do not come in contact of customers directly provide
support services. For example, in hospitals, patients are served
food according to their prescribed diet. The food is prepared
by chefs in the canteen staff and is served by the delivery staff.
In such a case, chefs are not in direct contact with customers.
5. Physical evidence: It refers to the seventh P of the service
marketing mix. According to Booms and Bitner, "physical
evidence refers to the environment in which the services are
delivered and where the firm and customer interact, and any
tangible components that facilitate performance or communication
of the service." For example, retail shop, bank branch, hotel
premises, etc.
Let us understand the concept of service blueprint with help of an

example. Assume that a service provider wants to offer a new coach-
ing service. The service provider offers three types of services namely
grade A coaching, grade B coaching and grade C coaching. Each ser-
vice has a different price. Before going live and offering services to
customers, the service provider develops a blueprint ofthese services.
The elements contained in the blueprint include customer actions,
onstage actions, backstage actions, support processes and the phys-
ical evidence. Customer actions in the given services include coming
into the centre and seeking registration for admission by paying the
required amount. After taking the admission, students (customers)
are given a timetable. Coaching is provided to students every day as
per the plan. In the classroom, they meet teachers. The interactions
of students with the reception staff and the teaching staff constitute

N O T E S
the onstage interactions. Many faculty members actually prepare the

study material and arrange for various facilities such as projectors.
These staff members do the backstage work and are responsible for
providing support processes.
13. List one method using which innovation can be included in

services.
ACTIVITY
Consider previous activity and create a service blueprint for the pet
creche cum boutique.
11/j PROCESS DESIGN AND IMPROVEMENT

Service process design forms an important part of the service devel-
opment process. It refers to an activity under which a service provid-
er determines the workflow, equipment and materials required along
with the implementation requirements for a particular process. To
design a service process, various tools are used such as flowcharts,
process simulation software, service blueprint, etc. However, in spite
of taking all precautions, a service provider may face certain glitches
in the service process. To resolve those glitches, service process de-
sign improvement is put into place. There are various methods that
can be used to improve service process design such as standardisation
and variety reduction, mass customisation and modular design, Tagu-
chi method, and quality function deployment. These methods are ex-
plained in detail in the next sections.
3.9.1 DEGREE OF STANDARDISATION AND VARIETY

REDUCTION
Standardisation refers to the absence of variety in a service. The

greater the degree of standardisation, the lower will be the variety.
Standardised processes deliver standardised services. In case of ser-
vices, it means that each customer or the item will get exactly the same
treatment. For example, assume that there is a therapeutic centre that
provides two types of therapies. Trained therapists deliver one type
of therapy and the other type of service is delivered using a thera-
py machine. Now, you may easily imagine that customers receiving
therapies from two different human therapists may perceive services
differently. However, the therapy machine delivers the same kind of
service every time.
In the preceding example, you saw how standardisation could be ap-

plied to core service processes. However, you must note that it can be

N O T E S
applied to other aspects related to the service. For example, you may
visit various outlets of McDonalds or other popular food chains. You
will observe that interiors and colour combinations of all the outlets is
consistent and follows one theme. By doing this, the service provider
tries to create its unique selling proposition.
The main advantages ofstandardisation is that despite the complexity

of the service process and irrespective of the service centre a custom-
er is visiting, the components and methods of service delivery remain
the same. In addition, standardisation increases the productivity of
service employees, as each employee knows his/her role and respon-
sibility fully well. Lastly, the chances of errors and omissions reduce
drastically.
The only disadvantage that comes with standardisation is a reduc-

tion in variety. At times, customers are not satisfied with the functions
offered with different service options. Moreover, in such cases, they
want to opt for a hybrid or new type of service that has few functions
from first, second and third type of services respectively.
3.9.2 MASS CUSTOMISATION AND MODULAR DESIGN

Most organisations prefer standardisation because it enables them to
produce a high volume of products at lowcost. However, most custom-
ers desire a certain level of customisation. Producing a large variety
of products or offering highly customised products to the customer
may have several repercussions for the organisation such as having
to maintain high level of inventory for increased number of services,
decrease in productivity of the staff and profits, increase in operating
costs, etc.
For example, if a skin clinic offers two types of laser treatments and
each treatment requires a different technology, thereby requires buy-
ing different treatment machines. Now, assume that customers start
demanding another type of treatment that requires buying another
machine, which is quite expensive. In such a scenario, the service pro-
vider will have to estimate whether or not it will be a correct decision
to buy the new machine. In addition, the service provider must also
estimate if he/she will be able to generate sufficient profits from it.
The problem of standardisation vs. customisation can be resolved
largely by using methods such as mass customisation and modular
design. In the context of products, mass customisation means that
the organisation produces a large number of standardised products
and some degree of customisation incorporated into it. However, to
achieve mass customisation in services, there arises a need for direct
involvement of customers and service employees. Toeffectively deliv-
er the required service, service employees need to have a thorough
understanding of configuration rules.
The modular design approach has been applied in products. In this
approach, a final product is made by a combination of different stan-

N O T E S
dardised components. Different components are assembled together

to form a product. In such a design, if there occurs a problem in the
product, the component that is affected can be easily replaced without
affecting other components.
The concept of modular design can also be applied in case of services.

For example, two customers enter the same hotel at the same time.
One customer has opted for a deluxe suite whose rent is5000 per
day whereas the second customer has opted for a silver suite whose
rent is 3000 per day. Both the customers will ideally receive the same
kind of treatment at thereception area where they are welcomed by
the staff. However, after their luggage has been shifted to their rooms
and they have checked-in, they are offered services as applicable. For
instance, the silver room may not have a Jacuzzi whereas it is present
in the deluxe room.
3.9.3 TAGUCHI METHOD
In practice, various methods are used to design services for quality.

Some of these methods include Quality Function Deployment (QFD,
House of Quality), Poka-Yoke (Fail Safing) and Taguchi Methods (Ro-
bustness). In this section, you will study the Taguchi method in detail.
Before defining the Taguchi method, you should be aware of the con-
cept of robust design. Aproduct or service is said to possess robust de-
sign if it can work under a broad range of conditions without affecting
its performance.
Genichi Taguchi was a Japanese engineer who developed Taguchi

methods in 1950s-60s. Taguchi methods are a set of statistical methods
used to improve product/service quality. According to this approach, it
is much easier to design products and services that are insensitive to
environmental factors rather than controlling environmental factors.
Taguchi methods make use of parameter design that involves specifi-
cation settings for the service and the service process. They use con-
ventional statistical methods of experimental design. Using Taguchi
methods, major advancement in service design can be achieved quite
quickly using a small number of experiments. Major characteristics of
the Taguchi's approach are as follows:
□ Quality is designed into the product
□ Quality standard can be achieved by minimising deviation from
the target
□ Cost of poor quality varies as the square of the deviation of the
quality standard from its target
□ It is based on the robust design concept
For example, telecommunication companies are now building robust

communication systems for Expedited Forwarding (EF) of voice traf-
fic in a differentiated service network using Taguchi robust design
methodology.

N O T E S
3.9.4 QUALITY FUNCTION DEPLOYMENT
Quality Function Deployment (QFD) is a method that translates the

voice of a customer into quality characteristics of products/services
in order to reach customer satisfaction. It is a planning and quality
tool that is used to implement quality considerations of the customer
into the design of service. Major aspects of QFD are cost, quality and
opportunity.
QFD is based on the analysis of hidden customer requirements such as

comfort, safety, luxury, etc. These requirements are first seized which
are then translated into service design requirements that are further
translated into service process requirements. Services are developed
by integrating various components. Different components provide dif-
ferent functionalities in order to satisfy customers.
The QFD methodology is based on the development of a matrix known

as the House of Quality. This matrix contains a roof-like structure at its
top. The rest of the matrix (house) is divided into various cells (rooms).
Figure 3.1 shows a sample house of quality:
Correlation
matrix
Design requirements
(HOW?)
VOC(WHAT?) Relations matrix Benchmarking
Importance
Benchmarking
Figure 3.1: A Sample House of Quality
Note that in Figure 3.1, VOC refers to the Voice of Customers from
which service designers derive the objectives of service design. It de-
fines the 'What' of service quality. The VOC should be analysed spe-
cifically for three factors namely performance requirements, basic re-
quirements and emotional requirements.
After the 'what' of service quality has been demarcated, service de-
velopers need to answer the 'how' of it, i.e., how design requirements

N O T E S
would be implemented. The relations matrix is a matrix that rep-

resents the kind ofrelation that exists between a client's requirements
(what) and design requirements (how). A sample relationship matrix
is shown in Table 3.1:
3.1 : A SAMP.LE
Design Requirements
DRl DR2 DRn
Client's Requirements
CRl w M s
CR2 M w w
CRn s s w M
In Table 3.1, W, Mand S refer to weak, medium and strong relation-

ships. Empty cell indicates no relation between the respective custom-
er and design requirements. Also note that benchmarking is used for
assessing and comparing current services with that of competitors.
14. VOC defines the 'Why' of service quality. (True/False)
ACTIVITY
Choose a service of your choice and develop a house ofquality for it.
iju1SUMMARY
0 Service design refers to the plan or drawing that shows a detailed
layout of how a service will be delivered to the customer.
0 Service design is developed using inputs from various disciplines
such as ethnography, consumer research, interaction design,
product design, industrial design, service marketing and corpo-
rate strategy.
0 Any service delivered by an organisation needs inputs from vari-
ous people and technology.
0 Four approaches to the service system design are: production line
approach, customer as a co-producer approach, customer contact
approach, and information empowerment approach.
0 Steps involved in the service development process include:
♦ Determine the requirement of new service
♦ Requirements gathering and analysis

N O T E S
♦ Conduct feasibility study for the service

♦ Develop service design
♦ Service testing
♦ Service rollout
♦ Post rollout monitoring
0 Resources are required for delivering services. Every service or-
ganisation wants to operate in such a manner that the customers'
service demands are met. Under and over utilisation of resources
both have their disadvantages.
0 Resource and capacity planning depends on various factors such
as return on investment, supply and demand of resources, etc.
0 It is necessary to carefully design and implement facility layout.
Facility design involves taking into consideration various factors
such as physical environment, space consideration, etc.
D Service blueprinting is a technique of bringing innovation in ser-
vices.
0 Process design usually refers to an activity under which a service
provider determines the workflow, equipment and materials re-
quired along with the implementation requirements for a partic-
ular process. Service process design involves the use of a number
of tools such as flowcharts, process simulation software, service
blueprint, etc.
0 There are a few methods that can be used to improve service de-
sign such as standardisation and variety reduction, mass customi-
sation and modular design, Taguchi method, etc.
a KEYWORDS
D House of quality: An analytical tool for analysing the voice of

customers. It is used to translate what customers want into ser-
vice.
D Modular approach: A system design approach under which an
entire system is divided into various smaller parts called mod-
ules or skids.
0 Prospective customer: A customer who is currently not using
the service offered by a service provider but may become a cus-
tomer in future.
D Return on investment: The amount of benefit that an investor
realises after making certain investments.
0 Robust design: An approach to product and service design
wherein a product/service is made insensitive to variation.

N O T E S
Iii• DESCRIPTIVE QUESTIONS

1. Explain the concept and principles of service design.
2. Describe in detail any two approaches to the service system
design.
3. Explain steps involved in the service development process.
4. What are the important points that must be considered during
the design of a facility layout?
5. What is service blueprinting? Explain its five components.
6. List and explain methods used to improve service design.
lltJ ANSWERS AND HINTS


Concept of Service Design 1. True
2. Feedback; inputs
Generic Approaches to 3. Production line
Service System Design
4. True
Service Development 5. To determine the requirement of a
Process new service
6. Expected characteristics; function-
alities
7. Simulation
8. Service development life cycle
Identifying and Meeting 9. Feedback analysis

Customer Requirements
Resources Management False
and Planning Capacity
Management
11. Attrition
Layout of Facilities 12. Facility layout
Service Blueprinting 13. Service blueprinting
Process Design and Im- 14. False
provement

1. Service design is a method of improving the quality of services.
Services are designed after understanding the service. Factors

N O T E S
that are taken into consideration before designing the service

include purpose of service, expected demand of service and
the ability of the service to satisfy customers. Refer to Section
3.2 Concept of Service Design.
2. There are four approaches to the service system design:
production line approach, customer as a co-producer approach,
customer contact approach and information empowerment
approach. Refer to Section 3.3 Generic Approaches to Service
System Design.
3. Steps involved in the service development process include
determining the requirement of new service; understanding and
analysing service specifications; conducting a feasibility study
for the service; developing service design; service testing; service
rollout; and post rollout monitoring. Refer to Section 3.4 Service
Development Process.
4. While designing the layout of a service facility, the designer
and the service provider needs to take care of management
considerations such as service organisation's policies, security
aspects, number of resources available and service capacity.
Refer to Section 3.7 Layout of Facilities.
5. A service blueprint helps in the design and redesign ofthe service
development process. Using a blueprint, a service can be broken
into logical components. There are five components of a service
blueprint: customer actions, on-stage actions taken by contact
employees, backstage actions taken by contact employees,
support processes and physical evidence. Refer to Section 3.8
Service Blueprinting.
6. Methods that can be used to improve service design are
standardisation and variety reduction, mass customisation and
modulardesign,Taguchimethod andqualityfunctiondeployment.
Refer to Section 3.9 Process Design and Improvement.
IIEI SUGGESTED READINGS & REFERENCES

SUGGESTED READINGS
□ Johnston, R., Clark, G., & Shulver, M. (2012). Service Operations
E-REFERENCES
□ Cauterucci, C. (2017). How a Hospital's Design Could Affect Your
Chances of Getting a C-Section. Slate Magazine. Retrieved 15
April 2017, from http://www.slate.com/blogs/xx_factor/2017/04/12/
how _a_hospital_s_design_could_affect_your _chances_of_get-
ting_a_c_section.html

''
N O T E S
□ Yoon, H., & Yum, B. (2017). Robust design of communication sys-

tems: The case of expedited forwarding of voice traffic in differen-
tiated services networks. Retrieved 15 April 2017, from http://on-
linelibrary.wiley.com/doi/10.1002/dac.866/full

CONTENTS
4.1 Introduction
4.2 Service Processes and their Importance
4.2.1 Nature of Service Processes
Activity
4.3 How can Managers 'Engineer' Service Processes?
4.3.1 Process Mapping
4.3.2 Walk-through Audits
4.3.3 Service Transaction Analysis
Activity
4.4 Customer Orientation in Process Design
Activity
4.5 Controlling Service Processes
Activity
4.6 Use of Simulation to Improve Process Design
Activity
4.7 Repositioning Service Processes
Activity
4.8 Summary

N O T E S
INTEGRATING SIX SIGMA PHASES (DMAIC) WITH PROCESS

MODELING
Many companies nowadays practice lean Six Sigma but do not

practice process modelling and simulation. Companies do not use
simulation because it involves cost, timing, safety concerns, lack
of simulation experience and simulation tools.
Most of the managers complain that despite completing projects
on time, within the given budget, they are not able to see any sig-
nificant improvement in the bottom line. This is because during
the process definition stage (of DMAIC model), the lean Six Sig-
ma experts do not have any information to quantify benefits. The
experts may also be predicting the bottom line gains based on
hunch without actually understanding the working of the process.
There is a better wayto understand the business/service process;
i.e., by use of process modelling. Process modelling lets business-
es and service providers create simulated models of their process-
es which can be used to visualise the impact of changes in the
process on the service outputs or deliverables.
Process modelling and simulation can help in risk analysis and
decision making by modelling the probabilistic behaviour of a
process/service/system.
Process modelling also helps in answering 'what if' questions and
scenario analysis. The model can also reveal the advantages and
disadvantages of new design processes as a result of operational
changes.
Various advantages of integrating lean Six Sigma (DMAIC) with
process modelling are as follows:
□ Interdependencies among process activities can be visualised
and known with certainty.
□ Real time experiments are costly and may produce negative
results for the system. However, the cost of simulating differ-
ent processes requires much less cost than real experiments.
You may set up one simulator for different scenarios endless
number of times whereas you may not be able to conduct a lot
of real time experiments.
□ Time to conduct each experiment reduces drastically as many
processes have a life cycle of days or weeks. It is infeasible to
complete a lot of real-time experiments and this is the time
when process modelling and simulation help.
□ Processes that are able to achieve the goal of highquality may not
work properly if the volumes change. Using a simulated model,
the effects of volume changes can on the deliverables of the pro-
cess. Therefore, changes can be planned for the processes.

N O T E S

>- Define service processes
>- Describe how managers engineer service processes
>- Explain the concept of service process flow diagram
>- State the importance of customer orientation in process de-
sign
>- Explain how service processes are controlled
>- Describe the use of simulation in process design improve-
ment
>- Discuss the repositioning of service processes
II ■ INTRODUCTION
In the previous chapter, you studied about the concept of service de-
sign. You also studied the service development process in detail. De-
signing or developing a process through which a service is delivered
is called process design. In this chapter, you will study about service
process design in detail.
A service cannot be delivered effectively unless a thorough and ef-

fective service process has been defined and followed. Service design
describes procedures and activities that must be followed in service
delivery. It also describes howvarious activities will interact with each
other.
Each service needs to be designed and managed uniquely because

processes vary from one organisation to the other. Some service pro-
cesses are quite flexible whereas others are fairly standardised. The
most important part of the service process design is the construction
of a service process flow diagram.
In this chapter, you will study about service processes; engineering

of service processes; importance of customer orientation in process
design; controlling service processes; importance ofsimulation in pro-
cess design, and repositioning of service processes.
SERVICE PROCESSES AND THEIR

IMPORTANCE
A service is not a single or standalone item that is delivered to a cus-
tomer rather it is a set of interrelated processes, activities and deci-
sions. Aservice can be provided to customers effectively only if service
processes are designed accurately. A service process is not necessar-
ily the one that is visible to customers when the customer meets the

' .
N O T E S
touch points of a service organisation. This is because a service pro-

cess is directly related to service experience received by customers af-
ter receiving a service. Therefore, it can be said that service processes
are central to the service design process.
Service design process refers to an activity of planning and organising

people, infrastructure, communication and material components of a
service. The main aim of service process design is to improve the qual-
ity of a service and facilitate interaction between the service provider
and its customers. As mentioned earlier, a service is a set of inter-relat-
ed processes. Each process further involves a set of tasks or activities.
It must be noted that these tasks or activities may be performed in
the forefront or in the backend. Front end processes are those where
customers have personal experience with service employees whereas
backend processes are those that are completed without being visible
to the customer. The process of service is presented in Figure 4.1:
Operation
SERVICE OPERATION
INPUT
Value
Emotions
Customers --Hl..., --- tl a+-.. Judgements
Intentions
The customer also

has a role in front
office processes
SERVICE PRODUCT
Customer
Figure 4.1: Service Design Process
Different elements of service design process are as follows:

□ Customer: A customer may fulfil two types of roles. One role is that
of being a customer or the purchaser of services. He/she receives
a service from the service organisation without himself/herself be-
coming a part of the service delivery process. The second role is
that of a 'customer employee'. At times, a customer also forms an
important part of the service delivery process by providing mate-
rials and information for the service staff. In a way, the customer
becomes an integral part of the service process. An example of this
type of service is consultancy services.

N O T E S
□ Front end and backend processes: Front end and backend pro-
cesses both have their advantages and disadvantages. Front end
activities may involve intervention by a customer, which may neg-
atively affect the service delivered. In contrast, backend activities
remain invisible for the customer and the outcome of backend ac-
tivities remains unaffected by it. Therefore, nowadays most ser-
vice organisations prefer to have backend processes in place.
□ Customer experience: Customer experience is affected by the way
front-end service employees deal with customers. Interactions can
be done in various forms such as face-to-face interactions, tele-
phone, remote interactions through networks such as internet,
etc. The service experience of the customer in turn depends on
factors such as customer mind set and customer mood.
For delivering services successfully, it is required that the service pro-

vider manages the entire chain of service processes. This is because
most services fail to deliver as promised due to a lack of co-ordination
among different service processes.
For example, Jindal Naturecure institute located in Bangalore is a na-

turopathy centre that offers various naturopathic treatments such as
hydrotherapy, mud therapy, diet therapy, yoga therapy, acupuncture,
massage therapy, physical therapy, etc. The customer or the patient
needs to get enrolled in one of the programs offered by the centre by
paying the requisite fee amount. Thereafter, the dates for therapy are
scheduled and the patient has to shift his/her base to the centre. Here,
the patient is provided accommodation out of the four options name-
ly deluxe, suite, executive and economy classes. The centre also pro-
vides food to the patients. All this is possible because all departments
and processes of the hospital are well-coordinated and integrated.
A good service design implies a seamless integration of all processes.

Seamless integration can be achieved if:
□ Customers flow smoothly through the process
□ Customers do not experience any discontinuation of the service
process
□ Staff members own respective processes
□ Managers view their activities as a small part ofan overall process
□ Managers are able to work in cross-functional teams that assess
and improve the design.
4.2.1 NATURE OF SERVICE PROCESSES
The nature of service processes can be described using the following

points:
□ Product variety: A set of processes that are included in the service
may be standardised or customised. For example, a laptop service

''
N O T E S
centre receives requests for the regular maintenance of laptops.

Maintenance services include opening up of the laptop, blow dust-
ing and cleaning of all components, reassembling the laptop, test-
ing batteries and finally checking if the system is working fine or
not. These services are fairly standardised as same processes are
performed for maintenance and charges are also the same for all
laptops.
However, the same service centre also receives requests for the
repair of laptops in case they are damaged or if any part of the
laptop has been affected. In such a case, the replacement or repair
ofa particular part is required. Allrepair requests received by the
centre are unique and each must be customised.
Designing and managing services include understanding the mix
of process activities. Process activities are of three types: runners,
repeaters and strangers. Runners are those standard activities
that are quite predictable and are repeated in high-volumes. For
example, requests received by the laptop service centre for regu-
lar maintenance involve runner activities. Repeaters are standard
activities that are more complex than runners but occur less fre-
quently in the service process than runners. For example, chang-
ing or repairing the motherboard of a laptop is a repeater activity.
Lastly, strangers are the non-standardised activities that are asso-
ciated with one-off activities. For example, when a service centre
receives a request for repair of a laptop whose screen has been
damaged and all the USB and charging ports have been damaged
in addition to motherboard failure; it is an example of stranger ac-
tivity. The larger the number of strangers, the smaller will be the
service process variety.
0 Volume and variety of process: There exists a relationship be-
tween the volume of production and the variety offered in ser-
vice processes as depicted in the volume-variety matrix shown in
Figure 4.2:
Decreasing unit costs
Increasing
PROCESS
process
VARIETY
definition
Simplicity
Low
LowV OL U M E PER UNIT High
Figure 4.2: Volume-Variety Matrix

N O T E S
Processes that lie on the bottom left corner of the matrix are fo-
cussed on providing standard services. Processes that lie on the
top left corner of the matrix are called capability processes and
are designed to provide high variety and capability to customers.
These processes are often used to manage strangers and runners.
High-volume and low-variety processes are called as commodity
processes and are ideal for runners.
0 Customer Value: A service provider should carefully define where
a value should be added for the customer. Adding value along
wrong processes will not help in creating a positive consumer ex-
perience.
1. process refers to an activity of planning

and orgamsmg people, infrastructure, communication and
material components of a service.
2. List an example of a service where the customer becomes an
integral part of the service process.
3. are
designed to provide high variety and capability
to the customers.
ACTIVITY
At random, write down the name of any five service processes and
the activities involved in it. Now determine which service processes
are commodity processes and which are capability processes.
HOW CAN MANAGERS 'ENGINEER'

SERVICE PROCESSES?
Most manufacturing organisations have a department or team that
is dedicated to managing production processes so that products can
be produced in conformance with product standards. However, these
days, service organisations also hire service engineers and have ser-
vice laboratories in place in order to design, test and evaluate their
service processes.
Creating service processes through a well-defined research is called

service process engineering. This process is started by understand-
ing the customer's perspectives and designing services accordingly.
For this, service engineers use a number of tools and techniques.

'.
N O T E S
Figure 4.3 lists tools and techniques used by service engineers to de-
sign new services or improve existing ones:
Tools and
Techniques Used by
Service Engineers
I
I I I
Process Walk-through Service Transaction
Mapping Audits Analysis
Figure 4.3: Tools and Techniques Used in Service Process

Engineering
Anexplanation of these tools and techniques is given in the next sec-

tions.
4.3.1 PROCESS MAPPING
Process mapping is an activity that involves creating a service process

chart or diagram. It is a time-consuming process but its usefulness is
worth the effort. A service process flow chart depicts various process-
es, activities and their interrelationships in a paper or electronic form.
It helps a service provider and other staff in understanding the overall
service process from start to finish. In this way, they are able to gain a
better understanding of their roles.
Process mapping involves two processes: mapping through mapping

tools and using the map as an analytical tool. Process maps can be
drawn in a number of ways, and each map differs in the level of detail.
Different types of symbols used in mapping processes are shown in
Figure 4.4:
0 An operation,
task or activity
¢ A movement of information,
□
people or materials
A check, examination
or inspection
D A delay in the
process
V A queue of people or
inventory of materials
Figure 4.4: Process Mapping Symbols

N O T E S
Figure 4.5presents an order procurement service flow chart.
Article
Financial
Check --Yes---l Ship settlement
availability article
I±] Payment
Received received
NO
Inform
------------ t►I customer
O Customer
informed
Remove article
from catalogue
removed
Figure 4.5: A Sample Order Procurement Service Flow Chart

Source: http://esspa.corn.au/blog/bpmn-tutorial-with-examples/
Service providers who are developing the service process map may
also use other symbols if they have a common, understandable and
unique meaning. Coloured lines may be used for depicting the flow
of different activities/information/examination, etc. Forexample, blue
colour can be used for customers and green for information. After the
service process map has been readied, it must be analysed. It is nec-
essary because developing a process map is a descriptive work but
it will prove to be useful only if it helps individuals in realising and
understanding the nature and complexity of processes. Aprocess flow
chart can be used as an analytical tool if the following questions are
answered with the help of a process flow chart:
□ Are processes and activities designed appropriately to support
strategic intentions of the operation?
□ Does each activity provide value addition in the process and wheth-
er there are anyactivities that can be eliminated or reduced?
□ Is the process executed in a controlled manner?
□ Who are individual activity owners and who is the owner of the
overall process?
□ What is the level of detail of the process map and what is the level
of visibility?
□ How efficient is the process?
□ Are there any ways in which the process can be improved?
4.3.2 WALK-THROUGH AUDITS
A walk-through audit is basically an enactment of customers seeking

services from a service organisation. In this type of audit, the staff,
managers and independent advisors act as dummy customers. This

N O T E S
activity helps in evaluating and improving services. The audit is con-

ducted with the help of a checklist of questions. The answers to the
questions may reveal customer's assessment of the service.
The checklist should contain questions relating to critical elements of

service experience from a customer's entry till exit. The audit should
actively involve internal staff as well as external advisors because the
internal staff may not be able to point out minute details that may be
relevant to customers. Using the audit approach, service managers
may be able to carry out regular checks regarding service delivery at
different times of the day.
4.3.3 SERVICE TRANSACTION ANALYSIS
Service Transaction Analysis (STA) refers to a tool of service engi-

neering that helps in the development of walk-through audit. This
tool combines service concept, service process, transaction quality as-
sessment and service 'messages' and emotions felt by the customer.
Using this tool, the customer's experience of a service process can be
assessed and improved.
The following activities are involved in conducting STA:

□ A service organisation must gain agreement among employees re-
garding the nature of the service offering.
□ The service organisation hires professional research organisa-
tions which send their mystery customers to experience the actual
service process which comprises various service transactions. An
STAis done by creating a visual depiction/STA diagram.
0 An STA diagram contains three columns. The first column con-
tains a list of all service transactions. The second column contains
the assessment of each transaction. The assessment has to be giv-
en out of three options viz. delighting (+), satisfactory (0)and un-
satisfactory (-). Thethird column contains a description of mes-
sage/emotions that are conveyed by the service organisation and
perceived by the customer.
□ Assessment of+, 0and- are joined and a pictorial representation
ofthe overall evaluation of the service process is done. The overall
evaluation is also entered at the bottom of the STAdiagram.
□ Analysis of the STA diagram helps service designers, managers
and the staff of the service organisation in determining what all
aspects of the service process need to be mended in order to im-
provise the process. Improvement in service process leads to in-
creased customer satisfaction level.
Figure 4.6 shows a sample format of STA:

N O T E S
SERVICE TRANSACTION ANALYSIS SHEET
Organisation: Service concept:

Process:
Customer type:
Score:
Transaction Message
+ 0 -
Overall evaluation
Figure 4.6: A Sample Format of STA

Source: http://www.ida.liu.se/-steho87/und/htdd0l/1080090205.pdf
An example of STA is shown in Figure 4.7:

...
)
SERVICE TRANSACTION ANALYSIS SHEET
Organisation: lawyer Service concept:

Process: reception
Customer type: personal client
Score:
Transaction Message
+ 0 -
Imposing oak "trustworthy, professional but a little formidable"

entrance door,
firmly shut
"-
Second door with
advert for building
society > "they like constructing barriers"
"they maynot be impartial"
<
Carpeted corridor "homely but is this the right place?"
but no sign of "unhelpful"
reception
Receptionist
behind desk "they don't seem to care about me"
ignores customer "they don't think I am important"
and continues
typing
"not very welcoming"
She says "Yes?" "I feel like I am intruding on her work"
Phone rings "I am not in1portant"

which receptionist "other people have priority on her time"
answers
Overall evaluation
Poor service design. Little thought or concern for clients. Unfriendly and intimidating
service.
- -
Figure 4.7: An Example of STA

Source: http://www.ida.liu.se/-steho87/und/htdd01/1080090205.pdf

N O T E S
4. Name any two tools/techniques used by service engineers to

design new services or to improvise the existing services.
5. In Service Transaction Analysis, the assessment of+, 0,and-
arejoined and provide a pictorial representation of the overall
evaluation of the service process. (True/False)
6. A isbasically an enactment ofcustomers seeking
services from a service organisation.
ACTIVITY
Select any service of your choice and prepare a service transaction
analysis sheet for it.
CUSTOMER ORIENTATION IN PROCESS

DESIGN
The ultimate users of any kind of service are customers. Therefore,
the service process should be customer oriented, which implies that
the process should be customer friendly and customers should be able
to adopt the service quickly. For example, a service provider must as-
sess various types of payment methods that can be used by the cus-
tomer such as debit cards, credit cards, Paytm, cash, Sodexo coupons,
etc. while developing its payment systems.
It is important to design service processes that are customer centric

because if customers do not perceive any valuable service being de-
livered to them, they may not go in for repeat purchases. This can
negatively impact the business.
7. Customer orientation is equally important m both

manufacturing and services. (True/False)
ACTIVITY
List two examples of processes each having high and lowcustomer

orientation.
Ill CONTROLLING SERVICE PROCESSES

It is necessary that service processes must be controlled appropriately
so that every time a customer experiences a service, his experience is

N O T E S
similar. There should not be any variability in the service in order to

ensure consistent outcomes. Many studies have concluded that reli-
ability of service operations is a key element that affects customer sat-
isfaction levels. Service process control involves two aspects: process
capability and quality systems. Let us discuss each of these in detail.
PROCESS CAPABILITY
Quality management stresses that while designing processes, capabil-

ity must be built into them. Service operations utilise Statistical Pro-
cess Control (SPC) methods to assess the capability of service process-
es. Capable processes are those that perform their function exactly in
a manner for which they have been developed. Processes that deviate
from their intended functionality are called out-of-control processes.
For example, as per policy, the opening and closing times of two ser-
vice centres A and B are 10 a.m. and 7 p.m., respectively. Figure 4.8
shows the capable and out-of-control processes:
10 a.m. 7 p.m. 10 a.m. 7 p.m.

Service Centre A- Capable Service Centre B - Out-of-Control
Process Process
Figure 4.8: Capable and Out-of-Control Processes
Notice that service centre B never opens and closes as per scheduled
timings; therefore, the service process of service centre B is out-of-
control. In such a case, the service provider B has two options. One, it
may work out strategies so that the service process becomes capable
and controlled and works as per design. Second option is to revise the
design and policy specifications as per the current capability level. For
example, if the service centre B usually opens at 11 am and closes at
6 pm; the service centre should revise its timings and make it 11 am
to 6 pm.
It is a common practice to take a series of measurements and then

plot the mean of the sample readings in the form of Statistical Process
Control (SPC) charts. According to the central limit theorem, the dis-
tribution formed by sample means is normally distributed. The pro-
cesses can be plotted on control charts which represents the overall
health of the service process.

N O T E S
Anexample of a process control chart is shown in Figure 4.9:
Action limit
3o •··········································································
2o ·····················································
Warning limit
Warning limit
2cr
3o ·················································---··---···---·----··----·
Action limit
Time
Figure 4.9: A Sample Process Control Chart
Note that processes are plotted on a control chart. x

represents the
average of processes. The warning limit is set at ±2cr and the action
limit is set at ±3cr. It means that a process is said to be under control
x
if its value is ± 2cr. If the process value touches x
± 3cr; the process
is out-of-control and a suitable action must be taken by the service
provider. Note that x
+ 2cr is called as Upper Control Limit (UCL) and
x - 2cr is called Lower Control Limit (LCL).
QUALITY SYSTEMS
Most manufacturing and service processes are required to comply

with quality requirements as laid down by the government or an in-
dustry body. For this, they need to produce evidence of quality plans,
schedules of inspection and records of quality. However, operations
managers view this activity as not adding value to the service process
and they generally have a view that such checks deter innovation and
change.
Most operations managers perceive quality checks and other quality

assurance tools and practices aimed at preventing poor quality and
not fostering good quality. Quality systems approach involves process-
es that can be mapped, are clear and consistent, can be standardised
and can be continuously monitored. For example, skin clinics and oth-
er service centres use Standard Operating Procedures (SOPs) for ser-
vice delivery. For example, each treatment offered at the clinic is done
by trained therapists who follow all guidelines and standard practices.
The most unique feature of SOPs is that they can be easily converted
into processes that can be audited for quality purpose.

N O T E S
8. Consistent service quality can be achieved by decreasing

variability in services. (True/False)
9. What are the two aspects of service process control?
10. isused to assess the capability of the service
processes.
ACTIVITY
Visit your nearby market and make a list of ten service providers.
Try out the service offered by each and for each service, suggest
what kind of process the service provider has. Categorise as capa-
ble or out-of-control.
USE OF SIMULATION TO IMPROVE

PROCESS DESIGN
Simulation refers to an activity of imitating a situation by using com-
puter programming. In simulation, a computer model of a particular
activity or system or a real world process is created. Simulation can
also be done for service processes.
Using simulation and design tools, a user can design a service process.
A good and workable design can be achieved by constructing various
alternative configurations, different design options within a virtual
environment. From all different design options, the most effective de-
sign can be chosen. Simulation helps service engineers in foreseeing
the implications of design changes along with different constraints
such as regulatory compliance, profitability, safety, etc.
Aservice engineer may also input his design practices and judgement
into the design. After a design has been simulated, the process can be
run in a virtual environment which helps in evaluating and improving
process efficiency, effectiveness and flexibility. This also helps in re-
ducing the overall risk related to the design.
Certain benefits associated with the use of simulation are cost savings
as a result of time and labour savings and increased accuracy of pro-
cess design.
11. Activity of imitating a situation by using computer

programming is called as _

N O T E S
12. A service engineer may also input his design practices and
judgement into the design. (True/False)
13. List any one benefit related to the use of simulation in services.
ACTIVITY
Find information on how simulation helps in airline services.
Ill REPOSITIONING SERVICE PROCESSES

A service provider may require changing the existing service process
due to various reasons. For instance, high variety lowvolume process-
es that involve stranger activities may require increasing volumes and
decreasing high operational costs. Similarly, low-variety, high volume
processes that involve runner activities may require some degree of
flexibility and customisation.
When such pressure is felt to change service processes, it is known as

repositioning requirement. When actual changes are made to service
processes, it is called repositioning. Figure 4.10 presents a pictorial
representation of pressures to change processes:
Decreasing unit costs
High
Capability
Drive for increase
in volume and cost
reduction
Increasing
PROCESS process
VARIETY definition
Drive>
flexibilitt;
customisation
Commodity
Low
Low VOLUME PER UNIT High
Figure 4.10: Pressure to Change Service Processes
[f SELF ASSESSMENT QUESTIONS
14. Low variety-high volume processes involve stranger activities.

(True/False)

N O T E S
ACTIVITY
Make a list of ten service providers. Try the service offered by each
of them and suggest which services require repositioning and the
reasons for the same.
II:
□
■ SUMMARY
A service is a set of interrelated processes. The processes done in
the forefront and backend are called as frontend processes and
backend processes etc.
□ At times, a customer forms an important part of the service deliv-
ery process by providing materials and information to the service
staff.
□ For delivering services successfully, it is required that the service
provider manages the entire chain of service processes.
□ A good service design implies a seamless integration of all process-
es.
□ The nature of service processes can be described using the fol-
lowing points: product variety; volume and variety of process; and
adding value for customer.
□ Nowadays service organisations hire service engineers and em-
ploy service laboratories in order to design, test and evaluate their
service processes.
□ Creating service processes through a well-defined research is
called service process engineering.
□ Tools and techniques used by service engineers include: process
mapping and service process flow diagrams; walk-through audits;
and service transaction analysis.
□ Process mapping is an activity that involves creating a service pro-
cess chart or diagram. This diagram helps service engineers in de-
signing and developing new service processes.
□ After the service process map has been readied, it must be ana-
lysed. It is necessary because developing a process map is a de-
scriptive work but it will prove to be useful only if it helps individ-
uals in realising and understanding the nature and complexity of
the process.
□ A walk-through audit is basically an enactment ofcustomers seek-
ing services from a service organisation. In this type of audit, the
staff, managers, and independent advisors act as dummy custom-
ers. This activity helps in evaluating and improving services.
□ Service Transaction Analysis (STA) refers to a tool of service en-
gineering that combines service concept, service process, transac-

N O T E S
tion quality assessment, and service 'messages' and emotions felt

by the customer. Using this tool, the customer's experience of a
service process can be assessed and improved.
□ A customer-oriented process design means that the design of the
service process must be made keeping in mind customer require-
ments.
□ It is necessary that service processes must be controlled appro-
priately so that every time a customer experiences a service, his
experience is similar.
□ Service process control involves two aspects: process capability
and quality systems.
□ Using simulation and design tools, a user can design the service
process. A good and workable design can be achieved by con-
structing various alternative configurations.
□ When a pressure is felt to change service processes, it is known
as repositioning requirement. When actual changes are made to
service processes, it is called repositioning.
a KEYWORDS
□ Customer employee: A customer who actively takes part in the

service design and delivery process.
0 Customer orientation: A management and business strategy
which lays that the service provider should attach maximum
importance to customers' needs.
0 Process capability: The ability of a process to produce given
outputs within the given constraints or conditions.
□ Repositioning: The act of changing the position of a thing/sys-
tem/process.
□ Service engineer: An employee who designs and develops a
service process after a thorough research.
IMIDESCRIPTIVE QUESTIONS
1. Describe the nature of service processes.
2. Explain how can managers 'engineer' service processes.

3. Describe the concept and use of service process flow diagrams.
4. Write a short note on Service Transaction Analysis.
5. Explain the importance ofprocess capability and quality systems
in controlling service processes.
6. Explain how simulation helps in improving process design.

N O T E S
11u• ANSWERS AND HINTS

Service Processes and 1. Service design

their Importance
2. Consultancy services
3. Capability processes
How can Managers 'Engi- 4. Process mapping; walk-through
neer' service processes? audits
5. True
6. Walk-through audit
Customer Orientation in 7. False

Process Design
Controlling Service Pro- 8. True
cesses
9. Process capability; quality systems
10. Statistical Process Control (SPC)
methods
Use of Simulation to Im- 11. Simulation
prove Process Design
12. True
13. Cost savings
Repositioning Service 14. False

Processes

1. The nature of service processes can be described on the basis
of product variety, volume-variety matrix and customer value.
Refer to Section 4.2 Service Processes and their Importance.
2. Creating service processes through a well-defined research is
called service process engineering. Managers who create these
processes are called service engineers. Refer to Section 4.3 How
can Managers 'Engineer' Service Processes?
3. A service process flow chart depicts various processes, activities
and their interrelationships in a paper or electronic form. Refer
to Section 4.3 How can Managers 'Engineer' Service Processes?
4. Service Transaction Analysis (STA) refers to a tool of service
engineering that helps in the development of walk-through audit.
Refer to Section 4.3 How can Managers 'Engineer' Service
Processes?

: '
N O T E S
5. Service process control involves two aspects: process capability

and quality systems. Refer to Section 4.5 Controlling Service
Processes.
6. Using simulation and design tools, a user can design the service
process. A good and workable design can be achieved by
constructing various alternative configurations, different design
options within a virtual environment. Refer to Section 4.6Use of
Simulation to Improve Process Design.
Iii• SUGGESTED READINGS & REFERENCES

SUGGESTED READINGS
0 Johnston, R., Clark, G., & Shulver, M. (2012). Service Operations
E-REFERENCES
0 (2017). Retrieved 11 April 2017, from https://www.palisade.com/
downloads/pd[/A_Case_for_Simulation.pdf
□ Customer oriented service design - the case for field research by Ti-
eto. (2017). tieto.com. Retrieved 11 April 2017, from https://www.tie-
to.com/customer-cases/do-you-have-inner-field-researcher

CONTENTS
5.1 Introduction
5.2 Factors Affecting Service Delivery
Activity
5.3 Making Location Decisions
Activity
5.4 Service Transportation and Delivery Systems - Concepts and Models
Activity
5.5 Managing Service Operations
Activity
5.6 Managing and Motivating Service Providers
Activity
5.7 Summary

N O T E S
SERVICE DELIVERY BY A CLOUD COMPUTING SERVICE

PROVIDER
A popular cloud computing service delivery provider is in the

business of providing cloud services to customers. The types of
services provided by the service provider include IAAS i.e. Infra-
structure as a Service; DAAS i.e. Data as a Service; SAAS i.e.Soft-
ware as a Service and FAAS i.e. Platform as a Service. All these
services are chargeable on the basis of pay per use policy of the
service provider. However, the service provider offers some exclu-
sive services for certain customer groups such as senior citizens,
customers who bring in bulk business, etc.
For delivering services effectively, a service provider formulated a

detailed plan. Some important parts ofthe service plan are:
□ Preparing a service contract or agreement. This agreement
contains all detailed terms and conditions of the service de-
livery contract. These terms and conditions contained in the
agreement are reviewed by both the parties. If any of the
points are not acceptable to the service provider or the cus-
tomer, those conditions are discussed among them and they
finalise a contract term that is acceptable and legally binding
on both the parties. After this, the final agreement is signed by
both the parties.
□ Once the agreement is signed, the service provider is required
to deliver services to the customer. These services include ser-
vices such as IAAS, DAAS, SAAS and FAAS. In addition, the
service provider is required to handle the transportation cost
of the infrastructure to and fro from the customer premises in
case of IAAS.
□ A customer must not install any software on the infrastructure
without prior permission of the service provider. Installing un-
reliable software may damage the concerned infrastructure.
□ The service provider is responsible for providing connectivity.

N O T E S

>- Explain various factors that affect service delivery
>- Describe how service organisations make location decisions
>- List various concepts and models used in service delivery
systems
>- Discuss various issues and challenges in managing service
operations
>- Explain how service managers can manage and motivate
service providers
Iii INTRODUCTION
In the previous chapter, you studied how service processes are de-
signed or engineered. You also studied howservice processes can be
controlled and repositioned. An effective service process design leads
to efficient and timely delivery of services. Apart from this, there are
several factors that affect service delivery. These include organisation-
al structure, employee job fit, employee motivation, training, manage-
rial approach, etc.
Finding an appropriate location for opening up a service facility is

a crucial and important decision. It affects marketing efforts, brand-
ing and the bottom-line of the organisation. Service delivery systems
make use of various mathematical and statistical models in order to
determine their effectiveness.
Managing service operations comes along with its own challenges

such as managing customer expectations, waiting lines and the oper-
ations of local facilities of huge multinational companies, etc. Lastly, it
is very critical to keep the service providers motivated so that service
delivery remains smooth.
In this chapter, you will study about factors affecting service delivery,
■
how service facility locations are finalised, various models used in the
service delivery process, management ofservice operations and moti-
vating service providers.
FACTORS AFFECTING SERVICE

DELIVERY
Service delivery, a part of service management, is the most important
part of interaction between a customer and a service provider. A ser-
vice may be in the form of information or action. After consuming a
service, a customer can say whether he found the service beneficial
and value adding or not. However, there are a lotof factors that affect

.
:
N O T E S
service delivery and help in value-addition for the customer. These

factors are:
0 Management focus: The employees of service providers are given
clear instructions from their management regarding the value on
which they have to focus while interacting with customers. While
some service providers focus on providing quality services, others
focus on upselling their other products without providing any val-
ue-adding service. Excess focus on upselling may lead to poor ser-
vice quality. Therefore, management focus helps in deciding the
quality of service delivery.
0 Quality assurance and sales targets: Employees have to fulfil
their sales targets along with providing quality services to clients.
At times, employees sacrifice quality to fulfil their targets. So,
there is a trade-off between the quality and target achievement.
This also affects service delivery.
0 Work and time pressure: Employees need to fulfil their targets
within the stipulated time period which leads to increase in stress
levels and exhaustion of employees. This further affects service
quality negatively.
0 Organisational structure and support processes: An organisa-
tion having a good culture supports its employees through various
means such as timely training and appraisals, well-defined com-
pany policies, etc. Such organisations are able to maintain good
service quality.
0 Employee job fit: If employees deployed by the service provider
are fit for a particular service job, they will perform effectively.
In contrast, if employees lack the required skills and competen-
cies; it will negatively affect service delivery. Therefore, it is im-
portant that organisations train employees from time to time so
that the employees can actively get involved in service delivery.
0 Customer orientation: Service organisations can survive only if
they are highly customer oriented or when thereare noor very few
competitors in the respective segment. In real world, it is observed
that when a customer does not receive appropriate services, he/
she may quickly switch to other service providers.
0 Human resource practices: Service organisations that provide
timely recognition, rewards and incentives; follow convenient shift
timings and provide timely training to its employees are said to
be following a humane approach. The employees of such organ-
isations provide the best possible services to their clients. In this
way, human resource practices followed by organisation also affect
service delivery.
0 Team members and leaders: Teams that are closely knit and
where members maintain amicable relations with each other tend
to serve customers in a better manner.

N O T E S
□ Service encounter: When employees interact with customers,

the encounter may be pleasant or unpleasant. At times, employ-
ees also have to face hostile, unfriendly and irate customers.
For this, management should devise a policy that should clearly
state the rights of service employees in case of difficult situations
which may occur while handling customers.
□ Managerial approach and ease of communication: There should
be a clear command of information within a service organisation.
Moreover, managers in the organisation should be approachable
and friendly so that employees can contact their managers in case
of pressing needs.
□ Level of motivation: It is an established fact that happy and moti-
vated employees are more productive. Therefore, an organisation
must endeavour to keep its employees happy and motivated as it
would ultimately affect service delivery.
□ Technology: Now, with the expanse and ever-growing extent of
technology, it has become imperative to use technology in provid-
ing services. For example, earlier fax machines were used to send
certain documents using the fixed line telephone networks. How-
ever, nowadays many fast modes ofcommunication such as e-mail,
MMS, WhatsApp, Messengers, etc. are available.
1. A good service generally adds for the customer.

2. Excess focus on upselling may lead to poor service quality.
(True/False)
3. Work and time pressure on service employees can lead to
increased levels of ---
4. Service employees must be provided proper so that
they can perform their jobs effectively.
ACTIVITY
Visit your nearest physiotherapy clinic and observe different ser-
vices provided by them. Avail a service of your choice. After you
have availed the service, make a list of factors that must have affect-
ed the service delivery process.
Ill MAKING LOCATION DECISIONS

After a prospective service provider decides to open up a service cen-
tre, he/she has to make an important decision regarding the location
of his/her service facility. Deciding the location of a service facility is
crucial as it helps in attracting customers as a result ofconvenience or
owing to its physical attributes.

.'
N O T E S
There are various types of service organisations. Each organisation

has its own location requirements. For example, a super speciality
hospital should ideally be located at a busy and easily approachable
residential location so that patients can be admitted on time and giv-
en proper treatment. What if this hospital is built in the middle of a
national highway? It would certainly not be good because it would be
quite difficult for the hospital staff and patients to commute to.
While considering or making location decisions, a number of factors

are considered. Some important factors to be considered are:
0 Flexibility: The location or the site ofservice outlet should ideally
be situated at a place that would be responsive to future econom-
ic, demographic, cultural and competitive changes. The location
should be such that the demand for service remains inelastic or
not affected by any changes.
0 Competitive positioning: A location should also be selected keep-
ing in mind prospective competitors. A service provider should
seize every opportunity and build a facility at every prime location
so that it also creates an artificial entry barrier for competitors.
0 Demand management: A service provider should choose a loca-
tion where he/she can directly manage and control the quanti-
ty and timing of demand. The service provider must ensure the
presence of market generators which help in maintaining a steady
stream ofdemand.
0 Competitive clustering: Service businesses that are of a similar
nature should be located nearby to each other. For example, when
a person wants to buy some furniture, he/she will visit a furniture
market because such markets have the presence of a number of
shops at a stretch. The customers have an advantage of choosing a
product or service from among a wide array of products/services.
0 Saturation marketing: A service provider should open up as
many outlets as possible in close proximity to each other. Using
this method, service organisations realise a little cannibalisation
effect. However, its advantages outweigh minor risks. Concentrat-
ing an area with a large number ofoutlets leads to greater custom-
er awareness, reduced advertising costs and easier supervision of
outlets.
0 Substitution of communication for travel: There are certain ser-
vices that can be provided over the telephone or through e-mail
thus helping reducing the travelling time for customers. For ex-
ample, a customer no longer needs to visit his financial consul-
tant every time he/she wants to make an investment. A customer
can consult over a call or a video call and discuss whatever he/she
wants. It will save the customer's time and money.

N O T E S
□ Separation of front and back offices: The nature of certain ser-

vices is such that their front and back offices need not be located
at the same place. For example, a beauty salon chain could receive
service orders from mobile applications or through telephone calls
sitting at a remote location. The salon can have certain dedicat-
ed service centres or it may also offer home visits for customers.
Therefore, here front and back office functions are separated.
5. Location of a service facility is important because it helps in

attracting customers. (True/False)
6. List any two factors that are considered while making location
decisions.
7. lays that a service provider should open up as many
outlets as possible in close proximity to each other.
8. The strategy in which a service provider sets up various
facilities at multiple sites that provide standardised services is
called ---
ACTIVITY
Make a list of five services each wherein you can and you cannot
separate front and back office functions.
SERVICE TRANSPORTATION AND

DELIVERY SYSTEMS - CONCEPTS AND
MODELS
A service delivery system is the one through which the service con-
cept, and the associated value is provided to target customers. Ac-
cording to Frei and Harker, (1999); Johnston and Clark, (2005); and
Verma et al., (2002), "the competitiveness of service businesses is con-
tingent, at least in part, on the design and configuration of the service
delivery system."
A service delivery system has three major components namely tar-

get market, service concept and service delivery system design.
A service provider needs to ascertain 'who' the right customer is.
Service concept defines the mix of tangible and intangible compo-
nents of the ('what') service to be delivered. This mix is also known as
service package, service offering and service bundle. Lastly, the ser-
vice delivery system design defines 'how' the service bundle is provid-
ed or delivered to the customer.

N O T E S
These three concepts form the service strategy triad, which is shown
in Figure 5.1:
Target Market
Who are the
, customers?
,
,, . ' '
J
,
, ,, '
,
,, ,
,
Service Delivery
Service Concept
System Design
What is the service
How is the service
package offered?
concept delivered?
Figure 5.1: Service Strategy Triad
Researchers have suggested that for achieving effective service deliv-

ery, there must be a perfect alignment between the service concept
and the service delivery system. In other words, a service provider
must clearly define what service is to be offered and how it would be
delivered. While making location decisions, the organisation may take
the help of various tools and models. Let us study these briefly.
REGRESSION MODEL
A service organisation that already has a certain number of service

facilities and wants to expand by setting up other facilities can use
regression analysis for determining a suitable location for the new
facility. Regression analysis is a statistical modelling technique that
helps in estimating the relationship among variables. These variables
include dependent and independent variables.
The regression model can be constructed to estimate the performance

of different candidate locations. This model may include various vari-
ables such as size of facility, number of competitors in nearby areas,
traffic conditions, modes of commutation available, visibility of signs,
local airport traffic, etc.
For example, a hotel may conduct regression analysis to find a suitable

location for its next hotel facility. Assume that the hotel shortlists 20
important independent variables. In addition, the operating margin
is fixed as the dependent variable Y. Operating margin is obtained by
adding profit, depreciation and interest expenses. The independent
variables were grouped into five categories namely: competitive fac-
tors, demand generators, area demographics, market awareness and
physical attributes.

N O T E S
Competitive factors included variables such as hotel prices, average

price charged by competitors, etc. Demand generators included vari-
ables such as number of hospitals and colleges in nearby locations,
annual number of tourists, traffic conditions, presence of airport, etc.
Area demographics included variables such as average population of
the area, average family income, etc. Market awareness included vari-
ables such as the number of years the hotel has been in operation,
distance from the nearest hotel, etc. Physical attributes included vari-
ables such as accessibility, presence of service lanes, parking facility,
etc.
A statistical investigation of all variables can reveal variables which

have the maximum impact on the location decision. For example,
price, income and airport may be three important variables that sig-
nificantly affect the location decision. The operating profit Y is depen-
dent on these three independent variables.
GEOGRAPHIC INFORMATION SYSTEM (GIS)
An Information System (IS) refers toa digital or computerised system

for collecting, organising, storing and communicating information.
A Geographic Information System (GIS) is a special type of IS. A GIS
helps in capturing, storing, checking and displaying data related to po-
sition on Earth's surface. GIS basically maps the geographic and spa-
tial data. Nowadays, GIS is being used increasingly by organisations
in making location decisions, mapping customer databases, analysing
demand, improving service delivery, etc. Various organisations that
deal in different segments such as banking, health care, real estate,
etc. use GIS for various reasons.
For example, you have collected a database on average income of one

lakh households in a particular city. Now, how will you analyse the
data if you want to open up a speciality store in an area that has a
concentration of high income households. In such cases, GIS can help
significantly. The GIS may map households having incomes in dif-
ferent ranges onto a map using different colours. For example, there
are three ranges of incomes viz. A( 0 - 1,00,000 p.a.), B ( 1,00,001 -
5,00,000 p.a.), and C 5,00,000 and above p.a.).
Now, each household's income can be mapped onto a city map with
the respective colours. The service provider can view the map and de-
termine the area in which he should open the speciality store.
MODELLING CONSIDERATIONS
While making service location decisions, a service organisation needs

to consider various factors. Three most important factors being geo-
graphic representation, number of facilities and the optimisation cri-
teria.

.'
N O T E S
Factors affecting service location decisions are shown in Figure 5.2:
Geographic
Representation
ti[ Network
l
ti l
Q.)
()
Plane
-="'
Q.) 0
(iJ -
,. -"' ()
Q.)
One Service Capacity
A Number of
Q. ) = Facilities
] [
s. ....:lg
"' ej
Many
l Level of Service
ti
()
Optimisation
Criteria
Public Sector
l [ Area Served
Private Sector
Figure 5.2: Factors Affecting Service Location Decisions
Let us study these factors in detail.

0 Graphic representation:Location and travel distances can be rep-
resented graphically in two ways viz. plane and network represen-
tation. Facility on a plane can be identified using xy coordinates.
0 Number of facilities: Models that are created and applied for lo-
cating a single facility are very easy to use. However, it is very dif-
ficult to modify and apply such a model for multiple locations. The
problem becomes all the more complicated when demand vari-
ables are associated with each site and when the capacity of each
site or the prospective facility is different. In addition, the type of
service that the service provider wants to offer also becomes a ma-
jor variable in multiple location decisions. For example, a service
organisation (say ABC) has a chain of five star hotels in a metro
city X. Now, it observes that a non-metro city, city Y is also growing
rapidly and it wants to expand in city Y. However, research and
study reveals that five star hotels would not be successful in city
Y. Therefore, ABC decides that it would open a chain of three star
budget hotels in city Y.
0 Optimisation criteria: Location decisions for public and private
service organisations are based on different variables. Private sec-
tor location decisions are primarily dependent on the principles
of cost minimisation or profit maximisation. On the contrary, the
public sector location decision is based on a mix of factors such as
cost minimisation, societal benefit and optimum profits. It is quite
difficult to quantify societal benefit.

N O T E S
9. What are the three major components of the service delivery

system?
10. A helps in capturing, storing, checking and displaying
data related to positions on Earth's surface.
ACTIVITY
Study any case that illustrates the use of GIS in selecting a service
facility location. Prepare a synopsis for the same.
IJJ MANAGING SERVICE OPERATIONS

An organisation has to perform various operations to deliver a ser-
vice. It is always quite challenging for an organisation to manage ser-
vice operations along with fulfilling customers' needs. Challenges in-
volved in managing service operations include capacity and demand
management, waiting line management, maintaining service supply
relationships, expansion and globalisation of services and managing
service projects.
It is almost impossible to exactly match the demand and supply levels

of services required. This aspect explains why marketing and opera-
tions in service management are interrelated and inseparable. This is
because when service operations are conducted in an effective man-
ner, the marketing and advertising of service is done there and then
itself. A customer who receives services would have a satisfactory ser-
vice experience and may also do word-of-mouth publicity for the ser-
vice provider. On the other hand, assume that there is a customer who
has to wait for long hours before getting a service will naturally feel
disappointed and enraged even if he receives appropriate and friendly
service.
When the service demand exceeds the service capacity, it results in

creation of waiting lines or queues. Customers always feel satisfied
if waiting lines are managed properly and the waiting time is not too
long. Managing waiting lines is extremely important because long
waiting times can create a perception of poor service quality.
Maintaining service supply relations is also an important part of ser-

vice operations management. In the manufacturing sector, it is very
easy to delineate, present and understand the supply chain. Each
member of the supply chain receives certain inputs from a supplier;
the inputs are then processed by him/her and delivered to the next
member of the supply chain who may be the end customer. Howev-
er, in case of services, customers themselves act as primary suppliers
of inputs which are processed by service providers and finally deliv-

N O T E S
ered to end customers. The inputs provided by customers include the

knowledge, skills or information. The concept that presents custom-
ers as suppliers is called the customer-supplier duality. Managing the
service supply chain and customer/supplier relationships becomes
difficult as a result of customer-supplier duality.
Another challenge related to the management ofoperations is the glo-

balisation of services. Most big business houses tend to move out of
their countries either in search of better opportunities or when the
home market gets saturated. Moving to unknown and new countries
comes with their unique difficulties and complications. When compa-
nies move to new regions, they have to design and implement their
operations as per the social, political, and general environment of the
host country. You must have also noted that when a successful busi-
ness operating in one country moves to another country in order to
expand, it modifies certain features of the service package.
For example, various multinational organisations choose India for out-

sourcing some of its processes. Processes are outsourced because of
various associated benefits. Some benefits include: lesser pay-outs to
employees, very limited or no government intervention, etc. However,
service providers need to design their policies such as work hours,
meals, transportation, etc. in accordance with the general environ-
ment of India. There are certain countries that allow a maximum of
9 hours of work per day whereas some countries have fixed that no
person shall work for more than 6 hours a day. In addition, managing
various operations involved in a service project is also critical for over-
all effective management of service operations.
11. List any two challenges involved in the management ofservice

operations.
12. When the service demand exceeds service capacity, it results
in the creation of
ACTIVITY
Prepare a report on howMcDonald's manages its operations in dif-

ferent countries of the world. Make a list of basic differences in the
operations.
MANAGING AND MOTIVATING SERVICE

PROVIDERS
Service managers are entrusted with an arduous task of managing
and motivating service providers or employees who actually deliver

N O T E S
services to customers. Service providers need to be motivated be-

cause they face pressure from two sides' viz. customers and the or-
ganisation. The various organisational pressures experienced by the
service providers include:
□ Expected performance levels and the target to be achieved
□ Service design, processes and resources
□ Appraisal and performance management systems
In addition, various customer pressures experienced by service pro-

viders include:
□ Expectations of the customer regarding service quality, time of
service delivery and friendly treatment
□ Mood and anxiety of the customer
□ Ability of the customer to understand the service concept and
make full use of it.
Some methods used to motivate and manage service providers in-

clude:
□ Presenting exemplary leadership qualities
□ Motivating and extracting maximum work from work teams
□ Defining the roles and responsibility of work teams and service
providers
□ Defining the areas of decision in which employees can use their
discretion and the extent to which they can use it
□ Keeping all the channels of communication open for service pro-
viders
□ Involving employees in the process of performance measurement,
appraisal and improvement
□ Increasing employee engagement
□ Creating a feeling of ownership and responsibility in the employ-
ees
□ Gaining the commitment and loyalty of employees thus helping in
employee retention
□ Creating a work environment that is conducive for work
13. Service providers need to be motivated because they are faced

with pressures from two sides' viz. and .
14. Motivating employees helps in retaining them. (True/False)

..
N O T E S
ACTIVITY
Visit any three service facilities. Take a quick interview of two ser-
vice providers each. List major obstacles or bottlenecks that are
faced by them from the side of customers and from their organi-
sation. Combine the information from all interviews and make a
report on the same. Also, for each problem listed in your report,
suggest a possible solution.
lfisuMMARY
0 Service delivery, a part ofservice management, is the most import-
ant part of interaction between a customer and a service provider.
0 There are a lot of factors that affect service delivery such as man-
agement focus; quality assurance processes; targets and feedback;
employee-job fit; customer-orientation; human resource practices;
etc.
0 Location of a service facility is important because it helps in at-
tracting customers. In addition, the location of service facility also
affects service design.
0 While considering or making location decisions, a number of fac-
tors are considered. They are flexibility, competitive positioning,
demand management, etc.
0 A service delivery system has three major components namely tar-
get market, service concept and service delivery system design.
0 A service provider must clearly define what service is to be offered
and how it would be delivered.
0 While making location decisions, an organisation may take the
help of various tools and models such as Geographic Information
System (GIS), regression model, etc.
0 Aservice organisation that already has a certain number ofservice
facilities and wants to expand by setting up other facilities can use
regression analysis for determining a suitable location for the new
facility.
0 Factors affecting service location decisions are graphic represen-
tation; number of facilities; and optimisation criteria.
0 Challenges involved in managing service operations include: ca-
pacity and demand management, waiting line management, main-
taining service supply relationships, expansion and globalisation
of services and managing service projects.
0 Some methods used to motivate service providers include:
♦ Defining the areas of decision in which employees can use their
discretion and the extent to which they can use it

N O T E S
♦ Keeping all the channels of communication open for service

providers
♦ Involving employees in the process of performance measure-
ment, appraisal and improvement
II KEYWORDS
□ Cannibalisation:The reduction in the sales, profits and market

share of one product of a company as a result of introduction of
a similar product by the same company.
□ Clustering: The activity of grouping together certain objects
under a group based on similarities between the objects of the
group. The group so formed is called a cluster.
□ Competitive positioning: A marketing strategy under which
the product owner/service provider defines how their product
or service has been differentiated from competitors and how a
niche can be created for their products/services.
□ Demand management: A methodology used to forecast, plan
and manage the demand for products/services.
□ Service concept: The concept, used to define what an organisa-
tion does, what marketing has to sell and what operations need
to be delivered.
□ Target marketing: A type of marketing strategy under which
an organisation breaks up the entire market into different seg-
ments based on different criteria such as demographics, geog-
raphy etc. in order to be able to concentrate on a particular
market segment only.
► J:i DESCRIPTIVE QUESTIONS

1. List and explain various factors that affect service delivery.
2. Explain how service providers make service facility location

decisions.
3. Describe the service delivery system and its three components.
4. Explain how a regression model is used by service organisations
in determining a service facility location.
5. Describe various challenges faced by service organisations in
managing service operations.
6. What are the methods that can be used by service organisations
to motivate and manage service employees or service providers?

••
N O T E S
ijj ANSWERS AND HINTS
Factors Affecting Service 1. Value

Delivery
2. True
3. Stress
4. Training
Making Location Deci- 5. True
s1ons
6. Competitive positioning; competi-
tive clustering
7. Saturation marketing
8. Focus
Service Transportation 9. Target market; service concept;
and Delivery Systems - service delivery system design
Concepts and Models
10. Geographic Information System
Managing Service Opera- 11. Capacity and demand manage-
tions ment; waiting line management
12. Waiting lines
Managing and Motivating 13. Organisation; customers
Service Providers
14. True

l. Factors affecting service delivery include management focus;
quality assurance processes, targets and feedback; work and
time pressure; etc. Refer to Section 5.2 Factors Affecting Service
Delivery.
2. While considering or making location decisions, a number of
factors such as flexibility, competition management, demand
management, etc. are considered. Refer to Section 5.3 Making
Location Decisions.
3. A service delivery system is the one through which the service
concept, and the associated value is provided to target customers.
The three concepts target market, service concept and service
delivery system design together form a service strategy triad.
Refer to Section 5.3 Making Location Decisions.

N O T E S
4. The regression model can be constructed to estimate the

performance of different candidate locations. This model
may include various variables such as size of facility, number
of competitors in nearby areas, traffic conditions, modes of
commutation available, visibility of signs, local airport traffic,
etc. Refer to Section 5.4 Service Transportation and Delivery
Systems - Concepts and Models.
5. Challenges involved in managing service operations include:
capacity and demand management, waiting line management,
maintaining service supply relationships, expansion and
globalisation of services and managing service projects. Refer to
Section 5.5 Managing Service Operations.
6. Some methods to motivate service providers include: presenting
exemplary leadership qualities, motivating and extracting
maximum work from the work teams, etc. Refer to Section 5.6
Managing and Motivating Service Providers.
1,ju1SUGGESTED READINGS & REFERENCES

SUGGESTED READINGS
D Johnston, R., Clark, G., & Shulver, M. (2012). Service Operations
D Fitzsimmons, J., Bordoloi, S., & Fitzsimmons, M. (2014). Service
management operations, strategy, and information technology (7th
E-REFERENCES
D (2017). Retrieved from https://www.talkdesk.com/blog/9-organiza-
tional-factors-that-affect-service-delivery-in-call-centers/

CONTENTS
6.1 Introduction
6.2 Concept of Service Quality
6.2.1 Service Specifications
Activity
6.3 Dimensions of Service Quality
Activity
6.4 Defining Service Quality Factors
Activity
6.5 Delivering and Measuring Service Quality
Activity
6.6 Gap Models and Role of Expectations in Service Quality
6.6.1 Prescription for Closing Service Gaps
Activity
6.7 SERVQUAL
Activity
6.8 Quality of Design and Design Process
Activity
6.9 Summary

.. •
N O T E S
QUALITY OF SERVICE AT AMAZON.COM
Amazon.com sells books, movies, music and games along with

electronics, toys, apparel, sports, tools, groceries and general
home and garden items. Amazon is a good example of an online
business that tries to close service gaps in order to meet consumer
expectations.
UNDERSTANDING CUSTOMER NEEDS
From the time, the consumer starts to shop at Amazon's online

store, Amazon attempts to understand their expectations. This
process begins right at the start when a customer first makes a
product selection. At this point, Amazon creates a consumer pro-
file and attempts to offer alternative goods and services that may
delight the consumer. Following that, throughout the customer
experience, Amazon continues to try and identify customer pref-
erences and needs.
CUSTOMER DEFINED STANDARDS
When consumers buy a product from Amazon, they select the

mode of delivery and the company tells them the expected num-
ber of days it will take to receive their merchandise.
DETAILS
Standard shipping is 3-5 days but shipping in one or two days is

also available. The company has set standards for how quickly
customers are informed when a product is unavailable (immedi-
ately), how quickly customers are notified whether an out of print
book can be located (three weeks), how long customers have to re-
turn items (30days) and whether they pay return shipping costs.
These standards exist for many activities at Amazon from deliv-

ery to communication to service recovery.
SERVICE PERFORMANCE
Amazon believes in achieving service performance excellence. Or-

ders often arrive ahead of the promised dates; orders are accurate
and in excellent condition because of careful shipping practice.
Customers can track packages and review previous orders at any
time. Amazon also makes sure that all its partners, who sell used
and new books and other related items, meet Amazon's high stan-
dards. Thecompany verifies the performance of each purchase by
surveying the customer and posting scores and reviews that are

N O T E S
visible to other customers. Managing promises is handled byclear

and careful communication on the website. Every page is easy to
understand and to navigate.
For example, the page dealing with returns eliminates customer

misunderstanding by clearly spelling out what can be returned.
The page describes how to repack items and when refunds are
given. The customer account page shows all previous purchases
and exactly where every ordered item is in the shipping process.
CONCLUSION
Amazon's strategy has been well received by its customers and

the Amazon brand is known worldwide. Effective product man-
agement is a complex undertaking that includes many different
strategies, skills and tasks. Product managers plan for creating
the best products and operational excellence to maximise cus-
tomer satisfaction, loyalty and retention. Recognising and clos-
ing gaps offer high quality customer service to the consumer and
helps them achieve their goal whilst maximising market position,
market share and financial results through customer satisfaction.
It also helps managers to identify areas of weakness and make
improvements to the company's service delivery.

•
N O T E S

>- Explain the concept of service quality
>- Describe various dimensions of service quality
>- Discuss various service quality factors
>- Explain methods of measuring service quality
>- Explain the gap model of service quality and the role of cus-
tomer expectations in service quality
>- Explain SERVQUAL method of measuring service quality
>- Describe the concept and importance of quality of design
and design process
■II■ INTRODUCTION
In the previous chapter, you studied various concepts related to ser-
vice delivery such as factors affecting service delivery, making loca-
tion decisions, managing service operations, etc. This chapter deals
with the concept of service quality.
Markets are full of products and services. In fact, markets are over-
crowded and provide customers a large number of options to choose
from. However, only a few services of all actually become popular and
gain a considerable market share. This happens due to differences
in the quality of services offered by different organisations. To state
simply, service quality refers to the assessment of how services are
delivered to the client and whether or not they conform to the custom-
ers' demand. A difference between customers' service quality expec-
tations and service quality that is actually received by the customer is
called a service quality gap which leads to quality issues.
There are various dimensions or parameters on the basis of which the

quality of the service can be determined. These include parameters
such as security, access, communication, knowing the customer, etc.
In contrast to product quality, it is quite difficult to measure service
quality. However, SERVQUAL is the most commonly used method to
measure service quality.
The service quality gap model defines a set of five gaps which include
one customer gap and four provider gaps that occur due to various
reasons. These quality gaps must be addressed and closed in the ab-
sence of which quality issues will become more complicated.
In this chapter, you will study service quality concepts in detail. These
include dimensions of service quality, service quality factors, methods
of measuring service quality, gap model of service quality, SERVQUAL,
and quality of design and design process.

N O T E S
Ill CONCEPT OF SERVICE QUALITY

A customer made a purchase at XYZdepartmental store and headed
to his car. Of the three packages he had purchased, he forgot one at
the store and left. The customer returned in a short while to claim the
package, but it was gone. He checked with security to see if someone
had found the package, but no one had. As a gesture of goodwill, the
store head replaced the products the customer had lost free ofcharge.
Can you imagine how pleasantly surprised the customer must have
been? He must be extremely delighted with the service experience
that he received at the store.
From the example given above, you may conclude that service quality
relates to providing a total experience rather than only basic services.
You know that service is characterised as intangible and perishable.
However, the effects of experiences generated by high quality service
encounters are recollected by customers for a long time. This not only
helps in retaining customers by increasing their loyalty, but also cre-
ates a positive word of mouth that can bring in more customers.
The following are some standard definitions of quality:

0 According to ISO 9000, Quality is a degree to which a set of inher-
ent characteristics fulfils requirements.
0 Quality is a key requirement in every field. According to quality
guru Joseph Juran, the term 'quality' implies fitness foruse, which
depends on providing products or services to customers as per
their expectations.
D According to Philip B. Crosby, quality is conformance to require-
ment.
0 According to Paraguayan and Berry, quality is exceeding what
customers expect from the service.
D According to Garvin, quality can be defined from different per-
spectives: user-based, product-based, and manufacturing-based,
value-based and transcendent view.
Service quality refers to the assessment of how services are delivered

to the client and whether or not they conform to the customers' de-
mand. Quality services have a significant impact on business perfor-
mance, customer satisfaction and profitability. For example, a restau-
rant providing good quality food and services attracts more customers
than one that provides good food, but poor quality of service.
Services are usually provided directly to customers - for example,

in healthcare and education. For this reason, they require customer
participation during performance. For example, service providers in-
teract with customers when styling their hair, serving meal, deliver-
ing a lecture or opening a bank account. Therefore, service providers
should be friendly, competent and responsive.

'. •
N O T E S
Recognising that customer participation is required during the deliv-

ery of services and ensuring high service quality is a key differentia-
tor in the market place, as customers take into account reliable and
responsive services while making a purchase decision. In order to
satisfy customers, organisations are required to measure the existing
and desired quality of services. Service quality can be measured by
determining the difference between service expectations and services
actually experienced by customers. Customers have certain expecta-
tions from services. If customers experience the same service as they
expect, the difference will be zero and the service quality is said to be
good. The higher the difference, lower will be service quality.
6.2.1 SERVICE SPECIFICATIONS
Services are designed to deliver maximum customer satisfaction

so that a customer feels delighted and makes repeat purchases.
However, an excellent service can be delivered only if a service or-
ganisation understands what the customer actually wants or expects
from a service package. For this, it is of utmost importance to translate
customer needs, wants and expectations into a detailed service design
and process description. Such detailed list is called a service specifica-
tion document, which includes details such as customer expectations,
technical specifications, quality specifications, infrastructure specifi-
cations, etc.
[J SELF ASSESSMENT QUESTIONS
1. Service quality relates to providing a total experience rather

than only basic services to a customer. (True/False)
2. Service quality can be measured bydetermining the difference
between and services actually experienced by customers.
3. It is important to translate customer needs, wants and
expectations intoa detailed and process description.
ACTIVITY
Using the Internet, find out a general set of service specifications

that are given to the ground staff of airlines.
Iii DIMENSIONS OF SERVICE QUALITY

Customers' expectations from a service largely depend on their past
experience, their requirements and word-of-mouth publicity. When
customer expectations are different from the actual service provided,
it may create a gap or difference that may affect the overall quality of
service. A service gap refers to the difference in the expected level of
service and the actual level of service delivered.

N O T E S
In the present competitive scenario, customers have a large number

of options to switch to. If a service gap remains for a long period of
time, there are high chances that an organisation may lose its cus-
tomers. Therefore, it is crucial for an organisation to keep check on
service gapsand maintain consistent quality. This can be possible if an
organisation takes into account 10 dimensions of quality while deliv-
ering services. These dimensions are shown in Figure 6.1:
Competence
Courtesy
Credibility
Security
Access
Communication
Knowing the Customer
Tangible/ Physical Evidence
Reliability
Responsiveness
Figure 6.1: Dimensions of Service Quality
Let us discuss these dimensions of service quality in detail.

□ Competence: In literal terms, competence refers to the possession
of essential skills and knowledge required to perform something
successfully. In the context of services, competence refers to the
efficiency of a service to attain maximum customer satisfaction.
It is one aspect that creates a large difference between two similar
services. For example, competence of employees in handling cus-
tomers at retail stores, especially in adverse situations like custom-
er grievance, may help the store to maintain its image and retain
the customer.
Lack of competence may not only affect a business negatively, but
also harm the organisation's market position and image. An organ-
isation may develop competence in several areas, including knowl-
edge and skills of employees, operational support system and re-
search abilities of the organisation.
□ Courtesy: Courtesy refers to the politeness, consideration and
friendliness of service personnel towards a customer. If service
personnel are humble, it creates an impression of high service

'' •
N O T E S
quality in the minds of customers. For example, when a customer

visits a retail store while selecting products, a service personnel
can help the customer in making the selection by asking for his/
her requirements. Similarly, a polite greeting ('good morning sir'
or 'good evening ma'am') by store employees also instils a positive
image of the store in the minds of customers.
0 Credibility: It includes factors such as reliability, trust and hones-
ty. In other words, customers consider a service provider credible
if it attaches a high priority to customers' interests. Customers
usually associate the credibility factor with the name of the organ-
isation or brand, reputation of the organisation and characteristics
of employees. For example, Microsoft Corporation is an American
multinational software corporation that develops, manufactures,
licenses and supports a variety of products and services related to
computing. It is considered to be one of the world's most credible
organisations.
0 Security:It refers to the customers' feeling of being free from dan-
ger, risk or doubt. In other words, it includes physical safety, finan-
cial security and confidentiality that a service provider provides to
a customer; thereby building the trust ofcustomers. For example,
no customer would like to deal with an insurance company that
cannot guarantee the safety and security of the monetary posses-
sion ofits customers.
0 Access: It is customers' approachability and ease of contact with
service personnel. In other words, access includes suitable office
operation hours and locations. There are various situations when
a customer needs to get assistance from service providers. For ex-
ample, suppose youbuya newsmartphone bycompany A.Howev-
er, you find it difficult to operate the handset. In such a situation,
you may try to find a service centre of company A that can help in
solving your problem. Now, if you do not get access to such a ser-
vice centre, it would create a poor impression in your mind about
service quality. Today, most organisations provide 24/7 services
through their call centres in order to increase customer accessi-
bility.
0 Communication: Communication as a dimension of service quali-
ty refers to informing customers in a language they are able to un-
derstand, listening to them carefully and providing them required
solutions. For example, various Business Process Outsourcing
(BPO) units adjust their languages to the varying needs of their
customers. Service organisations may need to communicate with
customers on various points, including explanation of the service,
its cost and assurance to manage any problem that may arise.
0 Knowing the customer: It means paying heed to customer needs
and providing them with undivided attention. This is a part of ex-
ceeding customer expectations and delighting them. Today, most

N O T E S
service organisations ask their customers to fill the 'Know Your

Customer (KYC)' form which helps in identifying and verifying the
identity of its customers. Apart from this, it helps organisations to
send promotional messages to customers and take their feedback,
thereby improving service quality.
□ Tangible/physical evidence: It encompasses all tangibles involved
in the process of service delivery. It is mainly provided at the lo-
cation where service is delivered to customers. Physical evidence
allows customers to make judgments about the organisation.
There are certain expectations regarding the physical evidence.
For example, customers want a clean, friendly environment in a
restaurant. In the business class section on an airplane, customers
expect a room to lie down.
□ Reliability: It is earned when service performance is as per the
promises made to customers. While determining the reliability of
any service organisation, performance accuracy, updated records
and properly followed schedules are taken into account. There-
fore, you can say that reliability is the ability to perform the prom-
ised service in a precise manner. For example, Domino's Pizza, an
international franchise pizza delivery corporation, is associated
with the credibility of delivering pizzas in 30 minutes. In case a
delivery is late, the product is provided free-of-charge.
□ Responsiveness: It refers to the eagerness and enthusiasm of ser-
vice personnel, which result in customers getting prompt and time-
ly services. For example, McDonald's, the fast food retail chain, is
not only known for its speed of service, but the employees at Mc-
Donald's are also trained to deal with customers in a friendly and
professional manner.
4. Name any three determinants that may have a considerable

impact on determining a service gap or difference.
5. Credibility refers to the possession of essential skills and
understanding required to perform any service. (True/False)
6. isearned when the service performance is as per the
promises made and in a responsible manner.
ACTIVITY
Give an example for each of the dimensions (competence, courtesy,

credibility, security, access, communication, knowing the customer,
tangible/physical evidence, reliability, and responsiveness) of ser-
vice quality. You should preferably list examples from different in-
dustries.

': •
N O T E S
Mill DEFINING SERVICE QUALITY FACTORS

There are many factors that affect the quality of services provided by
different organisations. However, these factors differ across organisa-
tions based on the nature and size of business, target audience, etc.
Therefore, an organisation attempting to enhance its customer ser-
vice should understand factors influencing service delivery. There are
two major factors that influence the quality of any service organisa-
tion, which are shown in Figure 6.2:
Factors Influencing Quality

in the Service Industry
Level of Service Level of Customer

Provider's Skill Interaction
Figure 6.2: Factors Influencing Quality in the Service Industry
These factors are explained as follows:

0 Level of service provider's skill: Quality in a service organisation
largely depends on the skill level of the service provider. In some
service industries such as insurance, travel and tourism, etc., me-
diators/middlemen/agents play a major role in providing service to
customers. Such industries have a wider reach and depend largely
on intermediaries as they help in providing services to customers.
For this reason, many organisations outsource the customer con-
tact function to professional organisations. This ultimately influ-
ences the quality standard ofservices.
0 Level of customer interaction: In services such as railways, tele-
communications, mail delivery, etc., the interaction of the service
provider with the customer is limited. On the other hand, in ser-
vices such as banking, hospitality, airlines, etc., the service person-
nel regularly come in direct contact with customers. In this case,
as the service personnel deliver service in the presence of the cus-
tomer, it becomes difficult for them to rectify a mistake without
it being noticed by the customer. Therefore, recruiting the right
people, training them and constantly enforcing the organisation's
values and commitment to customer service are the basic steps
that a service provider needs to take to develop and enhance ser-
vice quality.

N O T E S
7. There are two major factors that influence the quality of any
service organisation namely: level of service provider's skill
and
8N
. a m e any one service industry that requires use of agents or
middlemen for providing services to the end customer.
ACTIVITY
Make a list of 10 services that are highly dependent on the skills of

a service employee/provider.
DELIVERING AND MEASURING SERVICE

QUALITY
Marketing efforts and high advertising expenditure can help a service
organisation in attracting first-time customers. However, these new
customers will not become repeat purchasers if they do not receive
adequate services and are unhappy. Therefore, it is essential that ser-
vices are customer oriented. For this, it is also important that the qual-
ity of services and the adjoining infrastructure is maintained at an
optimum level.
A service is said to be effective if it continuously exceeds customer

expectations in terms ofpositive attitudes and skills of employees, ap-
proachability for service requests and so on. To provide quality ser-
vices consistently, a service provider may define various standards of
service quality. However, it is difficult to conclude whether a service
meets the required quality standards or not. For this reason, organisa-
tions use different methods for measuring service quality. Such meth-
ods used for measuring service quality are discussed as follows:
0 SERVQUAL: This is the most common and important method for
measuring the critical parameters of service quality which include
reliability, assurance, tangibles, empathy and responsiveness.This
model is also called the RATER model or framework. A detailed
explanation of this model is given later in the chapter.
0 Mystery shopping: It refers toan activity wherein the management
of a service organisation hires certain people who act as under-
cover customers and receive the service from their service facility.
In such cases, the employees at the service facility and managers
do not have any idea that the customer they are dealing with is a
proxy customer sent by the service provider. After receiving the
service, the proxy customer provides his/her detailed feedback to
the organisation which is used to evaluate service quality.

•
N O T E S
□ Post service rating: In this method, a customer is asked to fill up a

feedback form that contains questions pertaining to the quality of
service availed by the customer. The form may contain either ob-
jective or subjective questions. At times, combinations of objective
and subjective questions are also asked. The analysis of the feed-
back forms helps the service provider to evaluate service quality.
□ Objective service metrics: There are certain metrics that can be
calculated quantitatively and help a service organisation in evalu-
ating the quality of services. These metrics, however, should not be
used in isolation. Some examples of service metrics include:
♦ Volume per channel: This metric measures the number of in-
quiries per channel.
♦ First response time: This metric measures the time in which a
customer receives his/her first response from the service pro-
vider.
♦ Response time: This metric is calculated as the average of all
response times from the time a customer enquires till his/her
inquiry is resolved.
♦ Inflow-outflow ratio: This ratio is calculated by dividing the
number of enquiries pouring in (received) per unit of time by
the number of enquiries resolved per unit of time.
□ App-based surveys: Most organisations today are expanding their
reach using all possible ways. One such way is mobile-based ap-
plications. Nowadays, it is quite simple to download mobile-based
applications of different products and service providers. For ex-
ample, most banks have their own apps, which makes it easier for
customers to avail different services provided by a bank. On the
other hand, it becomes convenient for the service provider to take
customers' feedback.
□ Customer Effort Score (CES): This concept suggests that custom-
ers hardly reward organisations that exceed their expectations but
tend to punish organisations in case they provided bad services.
The cost of delighting customers by exceeding their expectations
is quite high with negligible increase in payoffs. Therefore, it is
suggested that service organisations should concentrate on pro-
viding effective processes for solving customers' problems and
grievances.
This approach also makes use of feedback forms. However, the
types of questions used in forms differ. For example, a service pro-
vider should not ask "How satisfied are you with this service?"; in-
stead they should ask "How much effort did it take youto get the
solutions for your queries". The level of effort could vary on a scale
from 1 to 10 where 1 means a little effort and 10 mean a lot of ef-
forts. The customer effort scores are then summed up and a high
effort score suggests that the customer was probably displeased
with the experience.

N O T E S
EXHIBIT
A Sample Post Service Rating Form and Sample Question

ARf PYmtm
Cuslomer S.:1ustad1on Sune
Pleasecircl,thenumber thatcon'l!Sponds withyourlev,lofagre,ment. QHto w doyou rate thefollowing ?
StronglyDcsagre, = I Disagree= 5 Strongly Agree = 10
Overall,I amsatisfiedasa customerofABCprint 12345613910
Ifool ABCprintingvaluesmeasacustomer 12345673910 Very Very
TheproductsI purcliasearedeliven,dwhen promised 12345673910 poor Poo r OK Good good
The products I pur,hase,,. rr.. lromdefects. 12345678910
Theemplo}'«sof ABCprintingarecourieous. 12345678910
Theemploy,es of ABCprinting<areabout mybusinass. 12345673910
Speed of service 0 0 0 0 0
TheABC printingfacilitiesar, mealando aniz.ed. 12345673910
ABCprintingfacilities,,. clean. 12345678910
Cleanliness 0 0 0 0 0
I havea good unders!andingoftheorder',ogprocess. 12345613910
ABCprinting's websiteishelpfulandinformati,e. 12345678910
Parking 0 0 0 0 0
ABCprintinginfonnsmeof newandimproved product. 12345678910
I would n,commend ABCpnintmgtoolhers. 12345678910 Qualiiy of produci 0 0 0 0 0
Comment ------------- Choice of produci 0 0 0 0 0
9. Marketing efforts and can h elp a service

organisation in attracting first time customers.
10. An activity in which the management ofa service organisation
hires certain people who act as undercover customers is called
11. The gap between what a customer expects from the service
and what they think they have got is called a _
ACTIVITY
Consider the following items: customer research, customer com-
plaints policy, market research, benchmarking, customer review
sites and social media sites. Explain how these can be used to mea-
sure service quality.
GAP MODELS AND ROLE OF

EXPECTATIONS IN SERVICE QUALITY
At every customer service encounter, the service quality of an organ-
isation is tested. Customers compare the actual service they receive
with the expected service. They are dissatisfied when the actual ser-
vice falls below the expected service level and are delighted when
actual service exceeds their expectations. In contrast, as mentioned
earlier, a perception gap is created in case a service does not meet
the customer's expectations. This gap adversely affects the image and
revenues of the organisation. To identify and bridge perceptions gaps,

•
N O T E S
organisations use service quality models that capture and define ser-
vice quality. Therefore, these models are also called gap models.
The primary reason for an organisation to implement gap analysis is

to understand what leads to customer dissatisfaction. Measuring the
existing the level of service quality is the first step towards improving
customer satisfaction. Gap analysis helps to determine whether an or-
ganisation exceeds or falls below customer expectations. It is applica-
ble to any aspect of the industry where organisations want to improve
the performance of a product or service.
A gap model offers an integrated view of a customer-organisation re-

lationship. It is based on substantial research carried out by a large
number of service providers. It shows the perception gap and outlines
factors that affect service quality. Figure 6.3shows the gap model:
Word-of-mouth Personal needs IPast experienceI

Customer
,........................►
... Expected service
GapS f
Perceived service
Service Supplier ! External

Gap 4
Service delivery ◄......... communication
Gap1 to consumers
Gap3 f
.---:::T:-r_a_n--,sl,....a-ti_o_n_o_,,f,......,
perceptions into
Service quality
specifications
Gap2
Managements'
perceptions of
customer's
expectations
Figure 6.3: Gap Model

Source: Parasuraman et al.(1985)
Let us now study the five types of gaps as defined by Parasuraman et

al.
The first four gaps are caused due to knowledge, standard/policy, de-
livery and communication gaps at the service provider's level. These
gaps occur due to differences between the organisation and the cus-
tomer perception of service quality. The last gap occurs due to dif-
ferences between the customer expectation and customer perception;

N O T E S
therefore it is called customer gap. Any gap whether it is at a service

provider's level or customer's level, bridging it is of utmost importance
for an organisation to improve service quality and facilitate synchro-
nisation between perception, expectation and satisfaction levels. Let
us discuss these five gaps in detail.
GAP1: KNOWLEDGE GAP
A knowledge gap refers to the difference between the management's

perception of customer expectations of a service and the expected
service (service expected by customer) that includes quality specifica-
tions. It is the result of a lack of understanding of customer expecta-
tions by the management team. Figure 6.4 represents the knowledge
gap:
( Expected Service j
Management's Perception
of Customer Expectations
Figure 6.4: Knowledge Gap
Knowing what a customer wants is the most critical step inproviding a

good service. Many service providers often lack accurate information
about what customers need and expect. This can result in poor deci-
sions. For example, a supermarket might hire extra people to make
sure the shelves are stocked so consumers will always find what they
want, but it may fail to realise that consumers are most concerned
about waiting at the checkout line. From the customer's perspective,
the supermarket's service would improve if the extra employees were
used to open more checkout lines rather than to stock shelves.
The key reasons for the existence of a knowledge gap are:

□ Inadequate marketing research orientation: It includes insuffi-
cient marketing research, inadequate use of marketing research
and research not focused on service quality.
□ Lack of upward communication:It includes a lack of communica-
tion between employees and managers, various levels of manage-
ment and lack ofinteraction between management and customers.

•
N O T E S
□ Insufficient relationship focus: It includes a lack of market seg-

mentation and focus on transactions and new customers rather
than building relationship with customers.
□ Inadequate service recovery: It refers to a lack of encouragement
to listen to customer complaints and provide appropriate services.
Service providers can reduce the knowledge gap and develop a better
understanding of customer expectations by undertaking customer re-
search, increasing interaction between managers and customers and
improving communication between managers and employees who
provide customer services. For example, Sears' employees who deliv-
er and assemble furniture in homes ask customers to give feedback re-
garding services, which helps the organisation to understand custom-
ers' requirements and reward employees who provide good services.
GAP 2: POLICY GAP
A policy gap refers to the gap between the management's perception

of customer expectations and the service quality specifications (cus-
tomer driven). This gap is created as a result of incorrect translation
of service policy into rules and guidelines for employees. Policy gap
may lead to poor service design, failure to maintain and improve the
current level of service, etc.
GAP3: DELIVERY GAP
Another type of provider gap is the delivery gap. This refers to the
difference between service quality specifications for a service and de-
livery of those specifications by the service provider. In this situation,
managers are aware of customers' desired level of service, but may
not be able to deliver it due to factors such as poor employee perfor-
mance, failure to match demand and supply and insufficient training.
Figure 6.5shows the delivery gap:
( Service Standard j
( Service Delivery j
Figure 6.5: Delivery Gap

N O T E S
To reduce the delivery gap and provide services that meet standards,
the service provider must give employees the necessary knowledge
and skills, reduce conflict and empower employees to act in the cus-
tomer's and organisation's best interests. For example, Walt Disney
World provides its maintenance workers four days of training, even
though they can learn howto pick up trash and sweep streets in much
less time. Disney has found that its customers are more likely to direct
questions towards maintenance staff than to the various clean cut as-
sistants wearing nice outfits. Thus, Disney trains maintenance people
to confidently handle the numerous questions they may be asked.
Toys "R" Us, a leading kids store for toys such as video games, dolls,
action figures, learning toys, building toys and baby and toddler toys,
assesses customer satisfaction by counting a number of abandoned
shopping carts, carts with merchandise left in the store because cus-
tomers became impatient with the time required to make a purchase.
After the organisation noticed an alarming increase in abandoned
carts, it developed a unique program to reduce customers' waiting
time in line to pay for a purchase.
Cashiers' motions while ringing up and bagging merchandise were

studied. Based on this research, a training program was developed
to show cashiers how to use their right hand to record purchases at
the POS terminals and their left hand to push merchandise along the
counter. Counters were redesigned to have a slot line with shopping
bags in the middle of the counter. As a cashier pushes the merchan-
dise along the counter, it drops into a bag. After the customer pays
for the merchandise, the cashier simply lifts the bag from the slot and
hands it to the customer and a new bag pops into place.
The key reasons for a delivery gap include:

□ Shortcomings in human resource policy: This could mean a lack
of effective recruitment policy, employee role ambiguity, inappro-
priate compensation systems and lack of empowerment.
□ Problem with service intermediaries: It refers to channel con-
flict, difficulty in controlling quality and inability to strike a bal-
ance between empowerment and control.
□ Failure to match supply and demand: This includes lack of team-
work and inappropriate supervisory control due to which service
providers fail to meet the demand of customers.
There are various strategies that can be used for closing a delivery
gap. These include:
□ Attracting the best employees
□ Recruiting, selecting and training right employees
□ Developing and supporting employees
□ Retaining good employees
□ Linking compensation and recognition to the delivery of quality
service

•
N O T E S
□ Encouraging teamwork
□ Empowering employees with decision making along with account-
ability
□ Motivating and rewarding employees
GAP4: COMMUNICATION GAP
A communication gap refers to the difference between a service that

is delivered and the external communication of the organisation. It
occurs due to unrealistic service level promotion that cannot be de-
livered. It can also stem from service personnel being poorly briefed
about the service resulting in over promise and under delivery. Figure
6.6 depicts the communication gap:
Service Delivery
External Communication
to Customer
Figure 6.6: Communication Gap
It is challenging to develop a communication program that creates

a positive service image for a service organisations but that does not
over promise. For example, Domino's Pizza addresses the communi-
cation gap by delivering on the promise made in its external commu-
nication to customers about delivering a pizza within 30 minutes. The
goal has to be achieved or it will result in creating a bad impression
on customers. Similarly, an ad campaign by American Airlines', "why
it seems every Airlines Flight is late?", is an example of a communica-
tion program that addresses the communication gap issue. In print
ads, American Airlines recognised its customers' frustration and told
customers about some uncontrollable factors causing the problem:
overloaded airports, scheduling problems and intense price competi-
tion. Then the ads described how American Airlines was working to
improve the situation.
The key reasons for a communication gap include:

□ Lack of integrated service marketing communication:It includes
interactive marketing, strong internal marketing program and a
tendency to view each external communication as dependent.

N O T E S
□ Ineffective management of customer expectations: This implies

the absence of customer expectation management through all
forms of communication and lack of adequate information for cus-
tomers.
□ Overpromising: This includes overstatement in advertisement,
personal selling and physical evidence cues.
There are various strategies for closing a communication gap. These

include:
□ Seeking information from operations personnel on what can be
done.
□ Advertising real service.
□ Seeking input from employees on advertising.
□ Gaining communication between sales, operations and customers.
□ Focusing on characteristics that are important to customers.
□ Formulating internal marketing programs.
□ Ensuring consistent standards in multi-sites.
□ Managing customer's expectation.
□ Offering different levels of services.
GAP 5:CUSTOMER GAP
Customer gap refers to the difference between what customers expect

from a service and the perceived service (service actually delivered
to the customer). For example, if customers visit an expensive restau-
rant, then they expect better services than offered by a regular fast
food retail chain. In any case, if the service delivered is not as per cus-
tomer expectations, a service gap is created. This gap forms the basis
of the gap model. Figure 6.7shows the customer gap:
Customer Expectations
( Customer Perception j
Figure 6.7: Customer Gap
Organisations try to bridge differences between customer expecta-

tions and perceptions. For example, some retailers like JC Penney

•
N O T E S
have established programs for assessing customers' expectations and

service perception. Every year the sales associates at JC Penney pre-
pare questionnaires for shoppers at each of their stores. Shoppers are
asked about the service and merchandise offered at JC Penney and at
competing departmental stores.
Over 50,000 completed questionnaires are collected and analysed. The

same questionnaire is used each year, allowing JC Penney to track ser-
vice performance, determine whether it is improving or declining, and
identifying opportunities for improving service quality. JC Penney at-
taches a lot of importance to customer service. This statement can
be verified from JC Penny's annual customer profile used to evaluate
performance of its store managers. The key reasons for the existence
of customer gaps include:
0 Not knowing what customers expect.
0 Not selecting appropriate service designs and standards.
0 Not delivering services as per the required service standards.
0 Not matching performance to what has been promised.
The strategies for closing customer gaps include:

0 Conducting a research to understand customer expectations
0 Involving service personnel in designing services
0 Making reasonable promises to customers
0 Delivering maximum performance
6.6.1 PRESCRIPTION FOR CLOSING SERVICE GAPS
The relationship between customer service and customer loyalty is

often complex. A competitive environment may further complicate
issues. Therefore, organisations should align themselves with their
customers. There are a few techniques that they can follow to do so.
Figure 6.8shows a few prescription that an organisation should follow
to bridge service gaps:
Gap 1 >
Learn what customers ex pect
Establish the right service

Gap2
quality standards
Ensure that service

Gap3 performance meets standards
Ensure that communication

Gap4
promises are realistic
Figure 6.8: Prescriptions for Closing Service Gaps

N O T E S
□ Gap1 Prescription: Learn what customers expect

♦ Understand customer expectations through research, com-
plaint analysis or customer panels.
♦ Increase direct interaction between managers and customers
to improve understanding.
♦ Improve upward communication from contact personnel to
management.
♦ Turn information and insights into action.
□ Gap 2 Prescription: Establish appropriate service quality stan-
dards
♦ Ensure that top management displays on-going commitment
to quality, as defined by customers.
♦ Set, communicate and reinforce customer-oriented service
standards for all work units.
♦ Train managers in skills needed to lead employees to deliver-
ing quality service standards for all work units.
♦ Become receptive to new ways of doing business so as to over-
come barriers in delivering quality service.
♦ Standardise repetitive work tasks to ensure consistency and
reliability by substituting hard technology for human contact
and improving work methods.
♦ Establish clear service quality goals that are challenging, re-
alistic and explicitly designed to meet customer expectations.
♦ Clarify which job tasks have the biggest impact on the quality
and should receive the highest priority.
♦ Ensure that employees understand and accept goals and priori-
ties.
♦ Measure performance and provide regular feedback.
♦ Reward managers and employees for attaining quality goals.
□ Gap 3 Prescription: Ensure that service performance meets stan-
dards
♦ Clarify employee roles.
♦ Ensure that all the employees understand how their jobs con-
tribute to customer satisfaction.
♦ Match employees to jobs by selecting for the abilities and skills
needed to perform each job well.
♦ Provide employees with the technical training needed to per-
form their assigned tasks effectively.
♦ Develop innovative recruitment and retention methods to at-
tract the best people and build loyalty.

•
N O T E S
♦ Enhance performance by selecting the most appropriate and

reliable technology and equipment.
♦ Teach employees about customer expectations, perceptions
and problems.
♦ Train employees in interpersonal skills, especially for dealing
with customers under stressful conditions.
♦ Eliminate role conflict among employees by involving them in
the process of setting standards.
♦ Train employees in priority setting and time management.
♦ Measure employee performance and associate compensation
and recognition to delivery of quality service. Develop reward
systems that are meaningful, timely, simple, accurate and fair.
♦ Empower managers and employees in the field by pushing de-
cision-making power down the organisation; allow them great-
er discretion in the methods they use to reach goals.
♦ Ensure that employees working at internal support jobs pro-
vide efficient service to customer-contact personnel.
♦ Encourage teamwork so that employees work well together,
and use team rewards as incentives.
♦ Treat customers as partial employees; clarify their roles in the
process of service delivery, and motivate them to perform well
in their roles as co-producers.
0 Gap 4 Prescription: Ensure that communication promises are re-
alistic
♦ Seek inputs from operations personnel when new advertising
programs are being created.
♦ Develop advertising that features real employees performing
their jobs. Allow service providers to preview advertisements
before customers are exposed to them.
♦ Get sales staff to involve operations staff in face-to-face meet-
ing with customers.
♦ Develop internal educational, motivational and advertising
campaigns to strengthen links among marketing, operations
and human resource departments.
♦ Ensure that consistent standards of service are delivered
across multiple locations.
♦ Ensure that advertising content accurately reflects those ser-
vice characteristics that are most important to customers in
their encounter with the organisation.
♦ Manage customers' expectations by letting them know what is
and is not possible, and the reason why.

N O T E S
♦ Identify and explain the reasons for shortcoming in service

performance that can't be controlled.
♦ Offer customers different levels of service at different prices,
explaining the distinctions.
12. Satisfaction motivates customers to repeat purchase and

become loyal customers. (True/False)
13. The gap model introduced by Parasuraman et al. in 1985
defines five types of gaps including one customer gap and four
provider gaps namely ,and _
14.Filling up the can improve service quality and
help attain a perfect synchronisation between perception,
expectation and satisfaction levels.
15. A knowledge gap refers to the difference between the
management's perception of customer expectations of a
service and the -----
1Se6
rvice.
quality specifications should be customer-driven.
(True/False)
17. This gap occurs due to unrealistic service level promotion that
cannot be delivered. Which gap is being talked about here?
ACTIVITY
Study the research paper presented by Dr.Arash Shahin, Universi-

ty of Isfahan titled "SERVQUAL and Model of Service Quality Gaps:
A Framework for Determining and Prioritizing Critical Factors in
Delivering Quality Services". This research paper is an extension
of the research work done by Parasuraman et. al. and the author
has defined seven gaps instead of just five. Study this paper and
suggest on the usefulness of the seven gaps.
■ riSERVQUAL
The quality of services provided by service organisations to their
customers can be measured by a frequently used framework called
SERVQUAL. This framework was introduced by Zeithaml, Parasur-
aman and Berry in the 1980s. SERVQUAL is a diagnostic tool that
uncovers a service organisation's weaknesses and strengths in the
area of service quality. The SERVQUAL instrument is based on five
service quality dimensions obtained through extensive focus groupin-
terviews with consumers. The five dimensions - together known as the
RATER framework - form the basic skeleton of service quality.

•
N O T E S
Figure 6.9 presents the RATER framework:
d ----------- R_: _R_e_li_a_b_il_it_y
d ------------ A_:A_ss_u_i_·a_n_c_e
[! T_:_T_a_n_g_ib_I_es
[! E_:_E_m_p_a_th_y
[! R_:R_e_sp_o_n_s_iv_e_n_e_s_s
Figure 6.9: RATER Framework
Let us now discuss these criteria:

0 Reliability: A service is said to be reliable if it meets the expecta-
tions of customers consistently. A service organisation can provide
reliable services if it tests the services for consistency before they
are launched. Services should be monitored closely after their
launch and the management should take immediate steps if any
unexpected service failures are observed. In addition, the organi-
sation should have a suitable infrastructure in place for error-free
services. For example, if Domino's Pizza fails to deliver pizzas to
customers within 30minutes, as promised bythe company, it would
be a case of unreliable service delivery. Similarly, IndiGo Airlines,
a domestic and international Indian airline, offers reliability to its
customers by being on time and providing affordable, on-time and
hassle-free operations excluding exceptional cases.
0 Assurance: Service personnel should have a thorough knowledge
of the service they are providing to customers. For example, sales
executives selling mutual funds should have complete informa-
tion regarding the expected returns and the tax implications of
the investment they are offering. They should be able to provide
useful and timely advice to customers. Their knowledge and confi-
dence should also assure customers that the company's service is
dependable and trustworthy. Thus, assurance specifies the knowl-
edge and friendliness of employees and how they convey compe-
tence, courtesy, credibility and security to customers. For example,
1,423 cities covered by Maruti Suzuki service centres assure a has-
sle-free service anywhere in India.
0 Tangibles: While the nature of services is intangible, there are
certain tangible aspects of services that customers can measure.
For example, customers may assess a service by the equipment
used to provide the service, the premises within which the service
is offered and the employees who provide the service. Therefore,
service providers need to ensure a pleasant ambience and appro-

N O T E S
priate infrastructure for customers. Moreover, employees should

be polite and humble while dealing with customers, which not
only make a positive impression on existing customers, but also
on prospective and first-time customers. For example, Barista La-
vazza, a coffee cafe chain and restaurant, manages its tangibles by
maintaining a clean and hygienic floor, having an attractive decor,
premium quality cutlery, soothing music, comfortable seating ar-
rangements and friendly staff.
0 Empathy: The service personnel of an organisation should be
accessible and open to communication. They should empathise
with customers who report problems and work quickly to resolve
them. For example, when a customer calls up a bank complaining
that he has a problem with the balance amount and needs to get
it resolved immediately, the customer care executive on the phone
should understand the problem, ask relevant questions and assure
the customer of immediate action. He/she should also ensure that
the problem is resolved at the earliest. Service personnel should
consider customer complaints as an opportunity to interact with
the customers, understand their needs and improve the service
offering.
Empathy includes criteria like access, communication and know-
ing customers. For example, Jabong.com, an Indian fashion and
lifestyle e-commerce portal, has a well-structured 24/7 customer
care department that customers can contact regarding their or-
der status or if they have any queries related to a product, lodge
a complaint or provide feedback to the company. Today, in terms
of customer satisfaction, Jabong is among top three e-commerce
companies in India.
0 Responsiveness: Service personnel should be prompt in attend-
ing customers and serving them as per their requirements. Cus-
tomers should perceive them as enthusiastic and responsive while
serving them. The personnel should be especially attentive during
problem situations where the customer has complaints with the
service. Employees should be empowered by the management
to do all that they can to help a customer in trouble. Employees
who work with commitment and customer orientation should be
rewarded to encourage similar behaviour among all employees.
The claim that a service personnel of LG will attend to a complaint
within 24 hours of the complaint lodged by a customer is a good
example of responsiveness of the LG customer care department.
The SERVQUAL instrument consists of two sections, which are:

1. A 22-item section that records customers' expectations of
excellent organisations in the specific service industry.
2. Another 22-item section that measures consumer perceptions of
a particular organisation in that service industry.

•
N O T E S
Results from the two sections are then compared, to arrive at "gap
scores" for each of the five dimensions. The larger the gap, the far-
ther consumer perceptions are from expectations, and the lower the
service quality evaluation. The smaller is the gap, the higher is the
service quality evaluation.
Customer expectations are measured on a 7-point scale with anchor

labels ranging from 'not at all essential' to 'absolutely essential.' Sim-
ilarly, customer perceptions are measured on another 7-point scale
with anchor labels ranging from 'strongly agree' to 'strongly disagree.'
Hence, SERVQUAL is a 44-item scale that measures customer ex-
pectations and perceptions based on five service quality dimensions,
which are discussed as follows:
1. Reliability dimension: Reliability reflects the consistency and
dependability of an organisation's performance. Does the firm
provide the same level of service time after time, or does quality
dramatically vary with each encounter? Does the organisation
keep its promises, bill its customers accurately, keep accurate
records, and perform a service correctly the first time? Nothing
can be more frustrating for customers than unreliable service
providers.
A constantly amazing observation is the number of businesses
that fail to keep their promises. In many instances, the customer
is ready to spend money if only the service provider would
show up and conduct the transaction as promised. Consumers
perceive the reliability dimension to be the most important of the
five SERVQUAL dimensions.
Consequently, failure to provide reliable service generally
translates into an unsuccessful organisation. The questions used
to assess the reliability gap are as follows:
♦ Reliability expectations
El. When excellent companies promise to do something by
a certain time, they will do so.
E2. When customers have an issue, excellent companies
will show a sincere interest in resolving it.
E3. Excellent companies will perform the service right the
first time.
E4. Excellent companies will provide their service at the
time they promise to do so.
E5. Excellent companies will insist on error-free records.
♦ Reliability perceptions
Pl. When XYZpromises to do something by a certain time,
it does so.
P2. When you have a problem, XYZshows a sincere inter-
est in solving it.

N O T E S
P3. XYZperforms the service right from the first time.

P4. XYZprovides its services at the time it promises to do
so.
P5. XYZinsists on error-free records.
I I
NOTE
Expectation questions apply to excellent organisations within
a particular industry, while the perception questions apply to
the specific organisation under investigation.
2. Assurance dimension: Assurance reflects the competence

of the organisation, the courtesy it extends to its customers
and the security of its operations. Competence pertains to the
organisation's knowledge and skill in performing a service.
Courtesy reflects whether personnel exhibit politeness,
friendliness and consideration while dealing with customers.
Security reflects a customer's feeling that he or she is free from
danger, risk and doubt. The SERVQUAL items utilised to address
the assurance gap are as follows:
♦ Assurance expectations
E6. The behaviour of employees of excellent organisations
will instil confidence in customers.
E7. Customers of excellent organisations will feel safe in
their transactions.
ES.Employees ofexcellent organisations will be consistent-
ly courteous with customers.
E9. Employees of excellent organisations will have knowl-
edge to answer customer questions.
♦ Assurance perceptions
P6. The behaviour of employees of XYZ instils confidence
in customers.
P7. Customers feel safe in transactions with XYZ.
PS. Employees of XYZare consistently courteous with cus-
tomers.
P9. Employees of XYZhave knowledge to answer customer
questions.
3. Tangibles dimension: Due to the absence of a physical product,
consumers often rely on the tangible evidence that surrounds a
service to evaluate it. The tangibles dimensions of SERVQUAL
compare consumers' expectations and the organisation's
performance regarding the organisation's ability to manage its
tangibles. A firm's tangibles consist of a wide variety of objects,
such as carpeting, desks, lighting, wall colours, brochures,

•
N O T E S
daily correspondence and the appearance of the organisation's

personnel. Consequently, the tangible component in SERVQUAL
is two dimensional - one focusing on equipment and facilities,
the other focusing on personnel and communicational material.
The tangible components of SERVQUAL are obtained through
four expectation questions (E10-E13) and four perception
questions (P10-P13). Comparing the perception scores to the
expectation scores provides a numerical variable that indicates
the tangibles gap. The smaller the number, the smaller the gap,
and the closer consumer perceptions are to their expectations.
The questions that pertain to the tangibles are as follows:
♦ Tangibles expectations
ElO. Excellent organisations will have modern equipment.
Ell. Thephysical facilities at excellent companies will be
visually appealing.
E12. Employees of excellent organisations will be neat in
appearance.
E13. Materials associated with the service (such as pam-
phlets or statements) will be visually appealing in an excel-
lent organisation.
♦ Tangibles perceptions
PlO. XYZ has modern equipment.
Pll. XYZ's physical facilities are visually appealing.
Pl2. XYZ's employees are neat in appearance.
P13. Materials associated with the service (such as pam-
phlets or statements) are visually appealing at XYZ.
4. Empathy dimension: Empathy is the ability to experience
another's feeling as one's own. Empathetic organisations have
not lost touch with what it is like to be a customer of their own
organisation. As such, empathetic organisations understand
their customers' needs and make their services accessible to their
customers. In contrast, organisations that do not provide their
customers individualised attention when requested and those
that offer operating hours convenient to the organisation and not
its customers, fail to demonstrate empathetic behaviours.
♦ Empathy expectations
E14. Excellent organisations will give customers individual
attention.
E15. Excellent organisations will have operating hours con-
venient to all their customers.
E16. The employees ofexcellent organisations give custom-
ers personal attention.

N O T E S
El 7. Excellent organisations will have the customer's best

interest at heart.
El8. The employees of excellent organisations will under-
stand the specific needs of their customers.
♦ Empathy perceptions
Pl4. XYZgives you individual attention.
Pl5. XYZ has operating hours convenient to all its customers.
Pl 6.XYZ employees givepersonal attention to all its customers.
Pl 7. XYZ has customer's best interests at heart.
Pl 8. Employees of XYZ understand customer's specific needs.
5. Responsiveness dimension: Responsiveness reflects a service
organisation's commitment to provide its services in a timely
manner. As such, the responsiveness dimension of SERVQUAL
is concerned with the willingness and/or readiness of employees
to provide a service. Occasionally, customers may encounter
a situation in which employees are engaged in their own
conversations with one another while ignoring the needs of the
customers. Obviously, this is an example of unresponsiveness.
Responsiveness also reflects the preparedness ofan organisation
to provide a service. Typically, new restaurants do not advertise
their 'opening night', so that the service delivery system can
be fine-tuned and prepared to handle larger crowds, thereby
minimising service failures and subsequent customer complaints.
The SERVQUAL expectation and perception items that address
the responsiveness gap are as follows:
♦ Responsiveness expectations
E19. Employees of excellent organisations will tell custom-
ers exactly when services will be performed.
E20. Employees of excellent organisations will give prompt
service to customers.
E21. Employees of excellent organisations will always be
willing to help customers.
E22. Employees of excellent organisations will never be too
busy to respond to customer requests.
♦ Responsiveness perceptions
Pl9. Employees of XYZ tell the customers when services
will be performed exactly.
P20. Employees of XYZgive a prompt service to customers.
P21. Employees of XYZ are always willing to help custom-
ers.
P22. Employees of XYZ are never too busy to respond to
customer requests.

•
N O T E S
To summarise, SERVQUAL is a framework that measures the ser-

vice quality provided by a service organisation to its customers.
SERVQUAL measures customer expectations and perceptions re-
garding five service quality dimensions, which are reliability, assur-
ance, tangible, empathy and responsiveness. These five dimensions
are together known as the RATER framework and design the basic
structure for maintaining high service quality.
18. 'E' in the RATER framework stands for ----

19. The SERVQUAL instrument is based on five service quality
dimensions which include: Reliability, -- Tangibles,
Empathy and Responsiveness.
20. The SERVQUAL instrument consists of two sections. Results
from the two sections are then compared to arrive at 'gap
scores' for each of the five dimensions. The larger the gap
score, the lower will be the ---
ACTIVITY
Make a list of expectations and perceptions related to five dimen-

sions of the SERVQUAL method in the BPO industry.
II I •
QUALITY OF DESIGN AND DESIGN
PROCESS
Quality of design refers to the quality that a service provider intends
to offer to customers. The concept of Quality of Design or Quality by
Design (QbD) was first introduced by Joseph M. Juran who was a
quality expert. He described a concept called Juran trilogy, which is
an improvement cycle used to reduce the instances of poor quality by
incorporating quality into a process/product. In case of services, qual-
ity needs to be planned into the service design process. Juran trilogy
is depicted in Figure 6.10:
Figure 6.10: Juran Trilogy

N O T E S
Let us discuss basic quality processes in these three components of

Juran trilogy:
1. Quality planning: It involves:
♦ identifying external and internal customers and determining
their needs.
♦ developing service features that are responsive to customer
needs.
♦ constructing a set of quality goals that are able to meet the
needs of customers and suppliers at the minimum possible
cost.
♦ establishing the required service process.
♦ establishing the process capability and proving that the ser-
vice process can meet the quality goals.
2. Quality control: It involves:
♦ selecting what is to be controlled (i.e. control subjects) along
with units of measurement.
♦ establishing the standards of performance
♦ measuring the actual performance
♦ calculating the difference between actual and standard per-
formance
♦ addressing issues due to which differences crop up.
3. Quality improvement: It involves:
♦ establishing the ground for improvement by clearly defining
why improvement is required.
♦ identifying the areas of improvement.
♦ identifying all the causes that lead to quality issues
♦ establishing various remedies that can be provided.
♦ verifying whether the remedies are effective under operating
conditions.
According to Juran, quality can be planned and most of the quality

issues arise as a result of poor quality planning. While developing
quality standards for a service, a service provider must take into con-
sideration customers' requirements. Analysing customers' require-
ments helps in testing the 'fitness of the service' for use as described
by Juran. It is important that the final design translates into a service
(and service quality) that reflects customers' requirements. Quality of
design can be evaluated by the completeness and correctness of spec-
ifications, drawings, catalogues, etc.
The end product of service design is a concept, idea or description of

a process for the performance of the concept. It must be noted that
the outcome of each service design trials may not be uniform as each

•
N O T E S
service trial may result in different experiences. Scrutinising a prod-

uct after it has been produced or examining a service after it has been
delivered does not help in improving product/service quality. For this
reason, quality improvement needs to be implemented at the service
design stage itself. Afew techniques that are used byservice designers
in order to incorporate quality into the service design are as follows:
0 Creating a simple design with few components
0 Implementing customer requirements, needs and expectations
into the service design
0 Reducing the cost of customer losses
Service designers frequently use various tools for designing quality

into services. These include quality function deployment, Poka-Yoke
and Taguchi methods. These methods have been explained in detail
in a previous chapter of this book.
- - -
21. Most quality issues arise as a result of
ACTIVITY
List two examples of services that failed as a result of poor quality

planning.
■@jsuMMARY
□ Service quality relates to providing a total experience rather than
only basic services.
□ Effects of experiences generated by high quality service encoun-
ters are recollected by customers for a long time.
0 Service quality refers to the assessment of how services are deliv-
ered tothe customers and whether or not they conform to custom-
ers' demand.
0 In order to provide consistent quality services to customers, or-
ganisations are required to measure the existing and desired qual-
ity of services.
0 Customers have certain expectations about services. If customers
experience the same service as they expect, this difference will be
zero and the service quality is said to be good.
0 It is of utmost importance to translate customer needs, wants and
expectations into a detailed service design and process descrip-
tion.

N O T E S
□ There are ten determinants that may have a considerable impact

on determining the service gap: competence, courtesy, credibility,
security, access, communication, knowing the customer, tangible/
physical evidence, reliability, and responsiveness.
□ There are two major factors that influence the quality of any ser-
vice organisation: level of service provider's skill and level of cus-
tomer interaction.
□ It is essential that the services are customer oriented. For this, it is
also important that the quality of services and the adjoining infra-
structure is maintained at an optimum level.
□ Organisations use different methods for measuring service qual-
ity such as: SERVQUAL, mystery shopping, post service rating,
objective service metrics, app-based surveys and Customer Effort
Score (CES).
□ The gap between what a customer expects from the service and
what they think they have got is called a perception gap.
□ Service quality models help in identifying service gaps in organi-
sations. They are also called gap models.
□ The differences between the delivered quality level and expected
quality level can be measured by the gap model.
□ A gap model offers an integrated view of the customer-organisa-
tion relationship. It is based on substantial research carried out by
a large number of service providers.
□ The five types of gaps as defined by Parasuraman et al. are: knowl-
edge gap, standard/policy gap, delivery gap, communication gap,
and customer gap. Filling these gaps improves service quality.
□ The quality of services provided by service organisations to their
customers can be measured bya frequently used framework called
SERVQUAL. This framework was introduced by Zeithaml, Para-
suraman and Berry in the 1980s.
□ The SERVQUAL instrument is based on five service quality di-
mensions obtained through extensive focus group interviews with
consumers. The five dimensions together known as the RATER
(reliability, assurance, tangibles, empathy, and responsiveness)
framework.
□ The concept of Quality of Design or Quality by Design (QbD) was
first introduced by Joseph M.Juran.
□ In case of services, quality needs to be planned into the service
design process.

•
N O T E S
II KEYWORDS
0 E-commerce portal: A website that serves as an entry point
over the Internet to an e-commerce business.
0 Empathy: A human quality or feeling wherein one person can
understand and share another person's feeling.
0 Expected service: A combination of word-of-mouth communi-
cation, personal need and past experience.
0 Perceived service: A result of service delivery and external
communication done with customers.
0 Service industry: An industry, involving organisations that
primarily earn revenue through providing intangible products
and services.
1l9u1 DESCRIPTIVE QUESTIONS

1. What do you mean by the term 'service quality'? Explain with
examples.
2. List various dimensions of service quality.
3. What are the factors that influence the quality of a service
organisation?
4. Explain at least four methods of measuring service quality in
detail.
5. Write a short note on 'Customer Effort Score (CES)'.
6. Briefly discuss five types of gaps as defined in the gap model of
service quality.
7. Explain major reasons for the existence of customer gaps and
strategies for closing these gaps.
8. Explain the SERVQUAL method of measuring service quality in
detail.
9. Explain the concept of quality by design and design process.
CM•• ANSWERS AND HINTS

Concept of Service Quality 1. True

2. Service expectations
3. Service design
Dimensions of Service Quality 4. Communication; Reliability;
Responsiveness
5. False

N O T E S

6. Reliability
Defining Service Quality Fac- 7. Level of customer interaction
tors
8. Insurance
Delivering and Measuring Ser- 9. High advertising expenditure
vice Quality
10. Mystery shopping
11. Perception gap
12. True
Gap Models and Role of Expec- 13. Knowledge gap; standard/poli-
tations in Service Quality cygap; delivery gap; communi-
cation gap
14. Service gaps
15. Expected service
16. True
17. Communication gap
SERVQUAL 18. Empathy
19. Assurance
20. Service quality evaluation
Quality of Design and Design 21. Poor quality planning
Process

1. Service quality refers to the assessment of how services are
delivered to the client and whether or not they conform to the
customers' demand. Refer to Section 6.2 Concept of Service
Quality.
2. According to Parasuraman, Zeithaml and Berry, there are 10
determinants that may have a considerable impact on service
quality. They are competence, courtesy, credibility, security,
access, communication, knowing the customer, tangible/ physical
evidence, reliability, and responsiveness. Refer to Section
6.3Dimensions of Service Quality.
3. Thereare twomajor factors that influence the quality of a service
organisation. They are level of service provider's skill; and level
of customer interaction. Refer to Section 6.4 Defining Service
Quality Factors.
4. Methods used formeasuring servicequalityinclude:SERVQUAL,
mystery shopping, post service rating, and objective service
metrics. Refer to Section 6.5 Delivering and Measuring Service
Quality.
5. This concept suggests that customers hardly reward
organisations that exceed their expectations but tend to punish

•
N O T E S
the organisations in case they provided bad services. Refer to

Section 6.5 Delivering and Measuring Service Quality.
6. The first four gaps are caused by provider gaps which include:
knowledge, standard/policy, delivery and communication gaps.
The last gap occurs due to the differences between customer
expectation and customer perception and is called customer
gap. Refer to Section 6.6 Gap Models and Role of Expectations
in Service Quality.
7. The key reasons for existence of customer gaps include not
knowing what customers expect; not selecting appropriate
service designs and standards, etc. The strategies for closing
customer gaps include: conducting research to understand
customer expectations. Refer to Section 6.6 Gap Models and
Role of Expectations in Service Quality.
8. The SERVQUAL instrument consists of two sections. One a 22-
item section that records customers' expectations of excellent
organisations in the specific service industry; and the other 22-
item section that measures consumer perceptions of a particular
organisation in that service industry. Results from the two
sections are then compared, to arrive at "gap scores" for each
of the five dimensions. The larger the gap, the lower will be the
service quality evaluation. Refer to Section 6.7 SERVQUAL.
9. Quality of design refers to the quality that a service provider
intends to offer to his customers. Refer to Section 6.8 Quality of
Design and Design Process.
CiltJ SUGGESTED READINGS & REFERENCES

SUGGESTED READINGS
0 Fitzsimmons, J., Bordoloi, S., & Fitzsimmons, M. (2014). Service
Management Operations, Strategy, and Information Technology (7th
E-REFERENCES
□ The Customer Service Gap Model. (2017). Brainmates - Boosting Peo-
ple and Product Performance. Retrieved 20 April 2017, from https://
brainmates.com.au/brainrants/the-customer-service-gap-model/
0 (2017) (1st ed.). Retrieved from http://shodhganga.inflibnet.ac.in/
bitstream/10603/19077/9/09_chapter%202.pdf

CONTENTS
7.1 Introduction
7.2 Service Performance Measurement
7.2.1 Difficulties in Service Performance Measurement
7.2.2 Setting up Measurement Systems
7.2.3 Ways to Measure Productivity
Activity
7.3 Service Productivity Measurement
7.3.1 Service Productivity Measurement Tools
Activity
7.4 Service Measurement Methods
Activity
7.5 Role of Work Study in Service Productivity Measurement
Activity
7.6 Service Yield Management
7.6.1 Challenges and Risks in using Yield Management
Activity
7.7 Service Implementation Issues
Activity
7.8 Summary

•
N O T E S
YIELD MANAGEMENT SOLUTION AT A RESTAURANT

CHAIN TO BOOST PROFITABILITY
il IVI!!»
REVENUE l"-'1A..NA..GEl"-'1ENT
SC>LUTIC>NS
Source: https://globalrlc.com/sponsor/revenue-management-solutions-rms/
Revenue Management Solutions (RMS) is a data driven solution

provider that offers customised consulting and data solutions for
restaurants and retail chains. RMS focuses on providing service
yield management solutions that would help their customers to
better price their services. Several organisations tend to increase
their prices across the board believing it to be the best method to
boost total sales. This decision however leads companies to adopt
a strategy wherein the price outstrips the rate ofinflation, result-
ing in reduced consumer frequency and traffic. This is where
RMSsteps in to provide its clients with customised solutions that
would help boost the clients' profit margins and price their items
profitably.
CLIENT
The client is a major restaurant chain which had raised menu

prices by more than 12% over the last 2 years that resulted in an
11% decline in customer traffic. Moreover, there was a negligible
change in check averages since consumers started to purchase
lower priced items on the menu. The restaurant chain's senior
management sought the help of RMS for identifying the best re-
covery strategy that would help them classify the prices of food
items based on the restaurant location and an estimate of the ex-
pected profits for this newstrategy.
APPROACH
RMS performed an exhaustive analysis of the restaurant chain's

unit sales and financial performance of the previous two years. It
employed its proprietary statistical methodology, through which
it identified that the majority of price sensitive restaurants could
improve their profitability. This could be achieved by utilising
price reduction or offering promotion on price sensitive items in
order to generate more traffic at that particular restaurant. RMS
also identified those items whose prices should be increased or
decreased to maximise potential profit. For example, if RMS iden-
tified that a lowprofit margin but highly price sensitive pizza trad-
ed with a more lucrative but also price sensitive chicken sand-

SERVICE P.RODUCTIVITYi MEASUREMENT AND MANAGEMENT 137
N O T E S
wich, then RMS would recommend that the pizza's price should
be increased and the price of the chicken sandwich should be re-
duced. This step would result in shifting the demand towards the
more profitable chicken sandwich.
RESULTS
RMS employed the strategy of slightly lowering actual menu

board prices for the highly sensitive restaurants that led to a large
increase in profits as a result of having a higher margin per trans-
action and an increase in customer traffic. RMS also formulated
pricing recommendations that resulted in a net improvement in
gross profit to a little over 1 per cent.

•
N O T E S

>- Describe service performance measurement
>- Discuss service productivity measurement
>- Describe service measurement methods
>- Explain the role of work study in service productivity mea-
surement
>- Discuss the concept of service yield management
>- Describe service implementation issues
ill INTRODUCTION
In the previous chapter, you studied the concept of service quality, its
different dimensions and how service quality is measured and deliv-
ered. To measure service performance, various issues such as stiffen-
ing competition, highly demanding customers and high labour costs
have to be taken into consideration that would have a direct impact on
service productivity.
Service productivity means the amount of output produced or gener-

ated in relation to the amount of inputs utilised. Service organisations
like other businesses also wish to improve productivity while at the
same time try to minimise their costs. This is a trickier prospect in
the service business as customers, activities and transactions vary too
widely.
In order to improve service productivity levels, organisations engage

in yield management systems which focus on the management of de-
mand and capacity so that no business unit is left un-utilised. For ex-
ample, airlines make use of yield management systems so that no or
minimal number of seats are left vacant on a flight. A yield manage-
ment system helps to maximise revenue for the organisation.
This chapter begins by explaining service performance measurement.

This chapter also explains service productivity measurement and ser-
vice measurement methods. In addition, the chapter also explains the
■
role of work study in service productivity measurement and service
yield management. Lastly, service implementation issues are also dis-
cussed.
SERVICE PERFORMANCE
MEASUREMENT
In the present business scenario, service organisations across the
world encounter various issues such as stiffening competition, highly

N O T E S
demanding customers, high labour costs, saturation of markets, etc.

while trying to improve their productivity. Manufacturing business-
es can increase their productivity by simply monitoring and reducing
wastage and variance in their production and distribution processes.
However, the situation is quite complex for service businesses as their
customers, activities and transactions vary too widely.
Due to seemingly uncontrollable factors pertaining to service busi-

nesses, a high level of variance, wastage and inefficiency is generally
tolerated in service costs. Moreover, service businesses may tend to
hire more staff than needed to support the extensive degree of vari-
ance, cede opportunities to draw up more effective service contracts
and deliver services more productively. However, increased service
costs in the long run can adversely affect the revenues and perfor-
mance of service businesses. Therefore, it is important for service
businesses to take timely measures to reduce variance, wastage and
inefficiency so as to improve their productivity.
However, top management may be likely to face resistance from mid-

dle and lower level personnel while taking measures to improve pro-
ductivity as it may create a feeling of work pressure or job insecurity
among them. Thus, it is the responsibility of top management to clear-
ly communicate the purpose of improving productivity to middle and
lower levels and encourage them to work towards the goal of improv-
ing productivity. The first step towards improving productivity is to
measure service performance, which further helps in recognising the
best practices so that they can be instilled and adopted throughout
the organisation. For this, it is important to identify the instances of
variance, wastage and inefficiency in service processes.
Although variance, wastage and inefficiency in services cannot be en-

tirely eliminated, it can be controlled to a certain extent. This can be
done by following the principles of service measurement given below:
D Service organisations need to compare themselves against their
ownperformance benchmarks instead of ill-defined external mea-
sures. External benchmarks tend to add to the difficulties encoun-
tered byservice organisations in acquiring comparable measure-
ments from different parts of the organisation.
D Service organisations should conduct an in-depth analysis of their
financial costs to discover the underlying causes of their extrane-
ous expenses.
D Lastly, service organisations must establish cost measurement
systems that would report and compare all expenses incurred to
service delivery organisations. This step would help in improving
the understanding of cross-functional trade-offs that service com-
panies need to make to control their total costs.

• • •
N O T E S
7.2.1 DIFFICULTIES IN SERVICE PERFORMANCE

MEASUREMENT
Service organisations may face a number ofchallenges while measur-

ing service performance due to highly intangible nature of services.
Some of these difficulties are as follows:
□ Services are different: Services differ based on regional dispar-
ities in labour costs, local geographies and use of capital. In or-
der to make relevant comparisons between services, organisations
have to ascertain sources of difference in their businesses.
□ Service-level agreements: The degree of variability exponential-
ly increases in service agreements when an organisation provides
multiple services. The service-level agreement for customer sup-
port is quite different from that of helpdesk based on costs, shift
times, time of service delivery and many more.
□ Differences in infrastructure: Each service provider's infrastruc-
ture is characterised by unique aspects that may prove difficult
to measure. For example, a logistics provider will face significant
differences between managing a huge, automated warehouse and
a small, simple one.
□ Volume of work: The business size of a service organisation caus-
es a major variance among business units. Large businesses are
more complex having multitude cost trees resulting in higher
costs, thereby off-setting the economies of scale.
□ Data problem: Achieving data accuracy proves to be troublesome
since data is rarely defined or collected in a uniform manner across
an organisation's service environment. For example, a service call
pertaining to installation of two elevators, can be quantified either
as a single installation in one part of a company or as two in an-
other.
□ External benchmarks: An organisation should refrain from mea-
suring its performance against competition as external bench-
marks are just samples of data with little to no explanation behind
them. The drawback of external benchmarks is that it aggravates
internal difficulties faced by service organisations while trying to
normalise their activities. On the other hand, internal benchmarks
offer more detailed metrics that enables an organisation to discov-
er its best practices and how to achieve them. For example, a com-
pany can determine which costs to include or how to allocate asset
costs by defining internal benchmarks which may not be possible
if the organisation uses external benchmarks.
□ Cost drivers:Service organisations need to discover the root cause
of each expense. For example, measuring only the cost of repair
calls most likely would not disclose whether repair calls are due
to poorly built products or from other factors such as variability in
the performance of repair teams. If the reason is the former, then

N O T E S
the products can be improved or sourced from different vendors

which would be less expensive than the cost of repairs. Organisa-
tions take into account different kinds of cost drivers such as cost
per employee (resource metric), incidents per employee per day
(productivity metric) and number of incidents per product (vol-
ume metric).
EXHIBIT
Cost trees
A cost tree refers to a structure that depicts various cost drivers

of a service organisation. Any change in one cost driver leads to a
change in other cost drivers too. Let us take the case of an Inter-
net service provider that was trying to reduce the time of resolving
customer queries on help desk and service calls. For this, the man-
agement set certain goals, which helped reduce resolution time;
however, the total service cost rose up. It was discovered that help
desk representatives, in order to meet their targets, spent less time
trying to resolve problems telephonically and simply referred the
cases to field service representatives. On the other hand, the field
representatives were happy to have a series of fast and easy calls
which enhanced their own metrics. This rapidly spiked the number
of field service calls which are far more expensive than help desk
calls.
To reduce the total service cost, the management took the step of
combining call centres and field services into a single cost tree.
It monitored the percentage of calls which were transferred from
the help desk to field representatives, as well as the time spent on
each typeofcall. The help desk representatives were encouraged to
spend more time trying to resolve service calls before transferring
them to field representatives. Though, this step had the effect of
increasing the average call time but overall it helped to reduce total
costs. Thus, an essential purpose of any cost tree is to determine
how performance in one area of the tree might affect another for
better or worse.
7.2.2 SETTING UP MEASUREMENT SYSTEMS
The next step taken up by the top management of a service organi-

sation is to set up effective service measurement systems. This can
be done by defining metrics, collecting data and implementing pro-
cesses. The following are the steps taken for setting up measurement
systems:
1. Build the cost tree and choose metrics: Cost trees need to be
comprehensive and extensive so as to detect efficiency problems
and make comparisons across operating units. A service

•
N O T E S
organisation can begin building the cost tree after identifying

allocated costs and cost drivers. In order to identify the most
important cost drivers from the cost tree, the top management
of the organisation has to take inputs from line managers,
engineers and field and service representatives working at
middle and lower levels of management. This step would enable
the service organisation to focus on total costs needed to deliver
a service to customers. Moreover, the cost tree should be built in
a manner that can compare key metrics across several diverse
environments be it for 24/7 operations or for organisations
operating eight hours a day.
2. Collect relevant data: Organisations face the issue ofwasting too
much time on organising data toextract meaningful information.
This can be averted by having clearly defined metrics and
knowledgeable people to support the data collection process.
Data collection methods should be reviewed by managers in
collaboration with people who are responsible for developing
such methods.
New procedures; however, would still leave much room for
interpretation. Therefore, it would be beneficial to show how
processes can be misinterpreted apart from collecting data.
For example, a service company, whose teams handled 2 to 5
service calls on an average per day, wondered why one of its
teams averaging only a single call per day. It was discovered that
particular team's account belonged to a prison system, where
security measures made eachvisit a daylong affair. By conducting
a review of data collection in the initial stages of implementation,
managers can ensure that procedures are accurately followed.
3. Institutionalise measurement: Managers have to familiarise
themselves with new metrics and enforce them throughout all
levels of a service organisation. Individuals and work groups
present in the organisation would require periodic reviews based
on the availability and shelf life of data. The organisation can
show a strong stance with respect to identification of variance
and improvement of service performance by performing regional
metrics review from time to time.
7.2.3 WAYS TO MEASURE PRODUCTIVITY

After the measurement systems have been set up, the top manage-
ment employs efforts to control wastage and variance in the service
delivery process. This can be achieved through the following ways:
□ Management of demand: Managing demand is one area that has
the largest potential for making improvement. By using cost trees,
managers can identify the sources of demand for services. General-
ly, demand originates from sources such as online advertisements,
one-on-one interaction with customers, word-of-mouth, etc. Once

N O T E S
a service is demanded bya customer, it is of utmost importance for

the service organisation to timely respond to the customer. Howev-
er, the demand for a service is affected in case of negative experi-
ence ofcustomers, delay in addressing customer queries, low per-
formance of employees, etc. These issues can be resolved through
better training, effective services, automated response systems.
D Standardisation: Service organisations strive to standardise their
service lines and tasks to deliver services with an aim to eliminate
errors and improve employee performance. It helps to make the
workforce more flexible since people can be deployed with less
retraining. Moreover, standardisation also prevents over-customi-
sation, which may lead to differences in service quality.
D Appropriate allocation of resources: By identifying cost varianc-
es, a service organisation can allocate its human resource in an ef-
fective manner. If experts have to be deployed or field technicians
need to be sent to resolve an issue, it increases costs and slows
response times. This causes customers to be dissatisfied.
1. Although variance, wastage and inefficiency in services cannot

be entirely eliminated, it can be controlled to a certain extent.
(True/False)
2. Service organisations need to compare themselves against
their own instead of ill-defined external
measures.
3. need to be comprehensive and extensive so as
to detect efficiency problems and make comparisons across
operating units.
ACTIVITY
Using the Internet, analyse the service level agreement of a BPO.
■
Prepare a report on the positive points and shortcomings of that
agreement.
SERVICE PRODUCTIVITY
MEASUREMENT
With the advent of advanced technology and stiff competition in the
market, there is an increasing trend of demanding more in services
for less time. In other words, to be competitive in present times, there
has been a shift towards focusing on improvement of productivity in
the service sector. Service productivity serves as a link between the
amount of output generated with the given amount of input. In other

•
N O T E S
words, service productivity refers to the numeric amount represented

in the form of ratio that serves as the standard for measuring output
generated with respect to input in the service delivery process. A ser-
vice organisation has to measure service productivity on a continuous
basis in order to assess efficiency of service delivery.
Productivity measures relate real physical output to real input which

vary from single factor measures, such as yield per unit of labour input
or yield per unit ofcapital input, to measures ofyield per unit of multi-
factor input. Productivity measures also take into account changes in
technology, scale of production, educational levels of workers, as well
as managerial techniques while assessing the contribution of particu-
lar inputs.
However, measuring service productivity is not easy for a service or-

ganisation as there are a number of problems that the organisation
may face. Some of these problems are explained as follows:
□ It is easy to measure the final output; however, it is difficult to as-
sess transitional activities in the service flow. For example, in the
trucking industry, the final output would be measured more suit-
ably by the count of the ton-miles of freight moved which would
indicate the result of all the activities of the industry. The inter-
mediary steps, such as billing, platform work, pickup and delivery
and collecting, are incorporated in the final output.
□ It is cumbersome to identify requirements of resources especially
labour needed at each intermediate stage of service flow.
7.3.1 SERVICE PRODUCTIVITY MEASUREMENT TOOLS
Service organisations use various tools to measure service productiv-

ity. Figure 7.1 lists some commonly used tools of service productivity
measurement:
d Customer Retention
d Conversion Rate
d Customer Satisfaction
d Quality of Competitors' Services
d Grievance Redressal
d Increased Revenues
Figure 7.1: Tools for Measuring Service Productivity

N O T E S
These productivity measurement tools are explained as follows:

0 Customer retention: If a service provider is able to retain custom-
ers by providing improved and better services to them, it serves as
an indication of high service productivity.
D Conversion rate: Service productivity can be measured by the
amount of prospective customers that are converted into regular
customers. Service productivity is said to be low, if prospects are
not converted into regular customers.
0 Customer satisfaction: Service organisations regularly conduct
surveys to assess the satisfaction level of their customers. This is
done to gauge the company's standing and take necessary steps
to assuage their customers based on the responses filled by them.
0 Quality of competitors' services: Customers tend to compare
services received by them with that of other service providers to
assess whether they are receiving value for money or not. There-
fore, it is of utmost importance for a service organisation to keep
modifying its services in order to retain customers and maintain a
competitive edge in the market.
0 Grievance redressal: Quick and effective query resolution is an ef-
fective measurement tool of service productivity. Customers tend
to feel satisfied and remain associated with one service provider if
their queries are readily addressed and resolved.
0 Increased revenues: Service productivity has a direct bearing on
the organisation's revenues as efficient and quality services helps
the organisation in attracting new customers and retaining the
new ones.
4. serves as the link between the amount of

output generated with the given amount of input.
5. If a service provider is able to retain customers by providing
improved and better services to them, it serves as an indication
of low service productivity. (True/False)
6. Service organisations regularly conduct ---------------- to assess
th satise
faction levels of their customers.
ACTIVITY
Conduct research on how tech giants such as Apple and Google

measure service productivity.

.' •
N O T E S
HI SERVICE MEASUREMENT METHODS

A service organisation cannot simply hope and expect that customers
are having a positive interaction every single time they interact with
the sales staff and customer service executives. It has to undertake
certain steps in order to assess the service experience of its custom-
ers. Figure 7.2 depicts service measurement methods employed by a
service organisation:
Mystery Social Media Customer Post Service Documentation

Shopping Monitoring Effort Score Rating Analysis
Figure 7.2: Service Measurement Methods
Let us discuss these methods in detail:

0 Mystery shopping: Sometimes the employees of the service or-
ganisation act as customers, visitors, patients or patrons in order
to report on their experience with the service staff of their organ-
isation. This method is generally used by retail stores, hotels and
restaurants; however, it can work for any service business. Mystery
shop interactions take place on a scheduled basis. They are useful
for delivering consistent results and gathering both quantitative
and qualitative data, which can be used for assessing service qual-
ity, ensuring compliance with regulations, developing workforce
development, etc. Mystery shopping is advantageous since the
data is collected by experienced evaluators who provide unbiased
and objective factual results.
0 Social media monitoring: Social media channels such as Face-
book, Twitter and Instagram are monitored by organisations for
references, positive and negative comments with respect to their
business, products or services. This data is accumulated in order
to better understand customers' experience. The advantage of so-
cial media monitoring is that it helps to collect qualitative data and
quantify the number of positive responses from customers within
a specific period of time frame. It is also useful for gaining insight
into public opinion with respect to the organisation's brand.
0 Customer effort score: In this metric, it is proposed that it is more
likely for a customer to punish an organisation for an ineffective
service than it is for them to reward the organisation for an ineffec-
tive service. Generally, customers perceive a service to be ineffec-
tive if they put a lot of efforts in availing that service. To measure

N O T E S
customer efforts, service organisations generally follow the ques-

tionnaire method wherein customers are asked questions such as
howmuch effort it took for them to avail a service or get their que-
ry answered or resolved. CEB, a US-based best practice insight
and technology company, discovered that 96%ofcustomers with a
high effort score were less loyal in the future, compared to only 9%
of those with loweffort scores.
0 Post-service rating: In this method, customers are asked to rate a
service right after they have received it. For example, in Dominos,
an employee comes by and asks to leave a review about the service
right after customers have finished their meal. Post- service rating
can use different scales for rating such as a number rating wherein
the service is given a score ranging from 1 to 10.
0 Documentation analysis: In this method, a service organisation
goes through its written or archived service records. This helps the
organisation in identifying and distinguishing between low-rated
and high-ranked service delivery instances. This analysis helps in
identifying corrective actions that a service organisation can take
to improve customer satisfaction levels and provide better service
delivery.
7. In , the employees of the service organisation

act as customers, visitors, patients or patrons in order toreport
on their experience with the service staff of their organisation.
8. In which service measurement method, customers are asked
to rate the service right after they have received it?
a. Mystery shopping b. Customer effort score
c. Post service rating d. Documentation analysis
ACTIVITY
Visit any restaurant ofyour choice and find out which service mea-
surement method it uses for measuring customer service.
ROLE OF WORK STUDY IN SERVICE

PRODUCTIVITY MEASUREMENT
In the previous section, you have studied about productivity mea-
surement tools used by service organisations. With the growth of the
service industry, new innovative ways are being created in order to
improve work methods. In addition to improving work productivity,
focus should be on augmenting efficiency, efficacy and reducing the
number of defects in the work environment mechanism. This can be

.: •
N O T E S
possible if a service organisation makes time to time assessment of its

existing work methods.
In simple terms, work study is an approach to assess working methods

in order to achieve the maximum output and efficiency. It helps in en-
hancing work productivity, augmenting the existing method of work,
eliminating wasteful elements, setting standards of performance and
saving time and costs. According to International Labour Organ-
isation (ILO), work study is "a term used to embrace the techniques
of method study and work measurement which is employed to ensure
the best possibfo use of human and material resources in carrying out a
specified activity." In service productivity measurement, work study
helps to:
□ standardise activities used for completing a job through stan-
dardised processes
□ ensure that the cost of production of doing a unit job is minimised
□ ascertain the amount of time needed to do a particular job
□ minimise the amount of time used for the movement of materials
and manpower performing the job
□ reduce or lower wastage
□ ensure effective and efficient utilisation of materials
[f SELF ASSESSMENT QUESTIONS
9. Work study is an approach to assess inorder to

achieve the maximum output and efficiency.
10. Ascertaining the amount of time needed to do a particular job
comes under the purview of the role of work study in service
productivity process. (True/False)
ACTIVITY
Provide areal-world example where organisations engage m a
work study for measuring service productivity.
RI SERVICE YIELD MANAGEMENT

Yield management refers to a technique designed for managing de-
mand and capacity by examining consumer behaviour. The behaviour
of consumers is examined to determine the correct price level of a
service with an aim to entice consumers. It is a "provision of the right
service to the right customer at the right time for the right price." Yield
management is presently not suitable for all service organisations as
it can result in unfair pricing for consumers. It can only be used for
services having the following features:

N O T E S
□ Services having a relatively fixed capacity: Service organisations

that have a relatively fixed capacity such as hotels or restaurants
can utilise yield management. For example, once rooms have been
rented out, it is difficult to satisfy demand without further increas-
ing the number of rooms or restaurant space.
□ Services having perishable inventory: Time serves as a major
constraint for services. For example, an un-booked hotel room
would cause a loss of revenue which could have been gained if it
had been booked for a particular date.
□ Services having segmented markets: Markets that can be seg-
mented based on certain criteria such as price sensitivity can em-
ploy yield management.
□ Services having fluctuating demand: Services having variable
demand due to fluctuations in the market can be controlled by
adopting pricing strategies. This in turn enables more efficient
utilisation of the capacity available to service organisations.
D Services that can be sold through reservation systems in ad-
vance: Services such as booking of airline, rail or bus tickets can
better use yield management as the available capacity of organi-
sations can be efficiently utilised in advance. For example, flight
seats can be booked beforehand so that there is no vacant seat.
□ Services having a low variable to fixed cost ratio: Pricing of ser-
vices does involve the fixed cost of some nature such as the furni-
ture installed in a room. Moreover, the variable cost of getting the
room cleaned is low. This in turn helps in selling the room as the
revenue generated by selling the room is much greater than the
cost involved in its upkeep.
There are three different kinds of users of yield management. These

are:
□ Sophisticated: Airlines and big hotel chains are generally consid-
ered to be the ones who utilise complex data models and informa-
tion systems that enable them to predict and analyse consumer
demand patterns.
□ Moderate: Small/mid-size hotels, theatres and trains employ less
sophisticated and advanced yield management techniques for an-
alysing consumer demand patterns.
□ Potential: Golf courses along with restaurants have the potential
for yield management as in these businesses, a set amount of fixed
time within which the service is consumed by customers.
7.6.1 CHALLENGES AND RISKS IN USING YIELD

MANAGEMENT
Revenues can be significantly boosted with the help of yield manage-
ment programs. Although yield management may seem like an apt

•
N O T E S
solution for matching supply with demand, it is still a risky proposi-

tion. A service organisation may encounter problems while trying to
maximise its financial returns through differential capacity allocation
and pricing. Some of these challenges are:
□ Loss of competitive focus: By focusing primarily on the maximis-
ation of profits, a service organisation may neglect other aspects of
a service business which contributes towards the long-term com-
petitive success of the organisation.
□ Alienation of customers: If customers learn that they are paying
a higher price than their counterparts, they may perceive it as un-
fair, particularly more so, if they do not comprehend the reasons
for the same. Therefore, informing and educating customers is es-
sential for the success of the yield management system.
□ Problems with employee morale: Employee morale may be af-
fected as setting prices through yield management systems may
undermine the people who set prices. Even though some execu-
tives may appreciate guidance, others may not be so receptive to-
wards it.
D Incompatibility between incentive and reward systems: Em-
ployees may harbour resentment towards yield management sys-
tems that do not match earlier practiced incentive structures. For
instance, several managers are rewarded on the basis of the aver-
age rate charged or capacity utilisation while both these factors
are taken into consideration by yield management systems when
calculating incentives.
□ Inadequate employee training: In order to make the yield man-
agement system successful, employees need to undergo training.
The employees need to comprehend the purpose of the system,
its functions, how they should make their decisions and how the
system would affect their jobs and responsibilities.
□ Unsuitable organisation of the yield management function: A
service company requires a centralised reservation for its yield
management system to be successful. Although airlines, big hotel
chains and shipping organisations do have centralised reservation
systems; smaller service organisations may have decentralised
reservation systems in place which may not prove effective for im-
plementing the yield management system.
11. In yield management, the behaviour of consumers is examined

to determine the correct with an aim to entice
consumers.
12. Airlines, big hotel chains and shipping organisations do not
have centralised reservation systems which are needed for
yield management system to be successful. (True/False)

N O T E S
ACTIVITY
Using the Internet, prepare a report on the yield management sys-

tem used by Air India.
ID SERVICE IMPLEMENTATION ISSUES

Service implementation is plagued by several challenges and issues
which have their roots in the service delivery business model. This
is due to services being intangible in nature. Some of the challenges
faced by service providers in the service implementation process are
as follows:
0 Management commitment: In most of the instances it is observed
that once a service is launched, the management commitment di-
minishes. This generally happens when the management rides on
initial success. Consequently, lower level employees also lose their
commitment towards service delivery, which ultimately leads to
the loss of customers. Top management must actively participate
in the service delivery system.
D Human resource management: Sometimes, it occurs that top
management is unwilling to induct new staff members into deliv-
ery processes. Lack of skilled people for service delivery may over-
burden the existing staff, which can affect their productivity to a
large extent. Thus, to overcome this challenge, the management
must ensure that there is an adequate number of people to han-
dle customer demands. For example, there is an acute shortage of
safety staff (trackmen, point men, patrolmen, technicians and sta-
tion masters) at Indian Railways leading to several train accidents
in the country.
D Design of service processes: Complex design of service processes
may lead to a difficulty in the execution of services. If a service
process cannot be executed in a smooth fashion, it can lead to de-
lays in delivery of the services which can cause customer dissatis-
faction. For example, India's first low cost carrier, Air Deccan had
complex service processes, which led to flights perpetually being
late.
0 Benchmarking: Service organisations engaged in benchmarking
compare their key metrics with that of other businesses in the in-
dustry. Benchmarking helps in understanding processes that oth-
er organisations use so that they can be applied to improve perfor-
mance.
D Continuous improvement: Service quality can be maintained
only if the management provides support and resources for quality
assurance activities. Improvement to service quality must be made
in terms of modifying the processes of the service delivery system.
Furthermore, there must be a continuous improvement in service
processes in order to maintain their position in the market.

•
N O T E S
□ Information gathering and data management issues: Often, cus-

tomers are unwilling to provide accurate and complete data for the
analysis of trends with respect to future modifications. The data is
an integral part of service processes as it enables organisations to
design and execute their processes. Therefore, it is of utmost im-
portance for a service organisation to collect data from authentic
sources and manage that data effectively.
□ Customer focus: Often due to overwork and lack of management
commitment, a service organisation loses customers which have
an adverse impact upon the business. The company does not focus
on providing exemplary services to its customers leading them to
switch to other alternatives. For example, Delhi Transport Corpo-
ration lost its customers to the Delhi Metro due to the decreasing
number of buses plying on roads, their poor frequency and long
waiting times at bus stops.
□ Service culture: Service culture ensures that an organisation re-
tains its existing customers and procures new ones. For example,
Burger King maintains its service culture due to which it receives
positive word of mouth publicity from its existing customers. This
helps bring in new customers for the organisation.
13. Service organisations engaged in compare their

key metrics with that of other businesses in the industry.
14. ensures that an organisation retains its existing
customers and procures new ones.
ACTIVITY
Using the Internet, prepare a report on service implementation is-

sues persisting with Air India.
@:
□
■ SUMMARY
Service productivity means the amount of output produced or
generated in relation to the amount of inputs utilised.
□ The first step towards improving productivity is to measure ser-
vice performance, which further helps in recognising the best
practices so that they can be instilled and adopted throughout the
organisation.
□ The difficulties in measuring service performance are:services are
different; service-level agreements; differences in infrastructure;
volume of work; data problem; external benchmarks and cost driv-
ers.

N O T E S
□ A cost tree refers to a structure that depicts various cost drivers of

a service organisation. Cost trees need to be comprehensive and
extensive so as to detect efficiency problems and make compari-
sons across operating units.
□ After the measurement systems have been set up, the top manage-
ment employs efforts to control wastage and variance in the ser-
vice delivery process. This can be achieved through management
of demand, standardisation and appropriate allocation of resourc-
es.
□ Service productivity refers to the numeric amount represented in
the form of ratio that serves as the standard for measuring output
generated with respect to input in the service delivery process.
□ The various service productivity measurement tools are customer
retention, conversion rate, customer satisfaction, quality of com-
petitors' services, grievance redressal and increased revenues.
□ The various service measurement methods are mystery shopping,
social media monitoring, customer effort score, post service rating
and documentation analysis.
□ In simple terms, work study is an approach to assess working
methods in order to achieve the maximum output and efficiency.
□ Yield management refers to a technique designed for managing
demand and capacity by examining consumer behaviour. The be-
haviour of consumers is examined to determine the correct price
level of a service with an aim to entice consumers.
□ There are three different kinds of users of yield management
namely; sophisticated users, moderate users and potential users.
□ The challenges and risks in using yield management are loss of
competitive focus, alienation ofcustomers, problems with employ-
ee morale, incompatibility between incentive and reward systems,
inadequate employee training and unsuitable organisation of the
yield management function.
□ The challenges faced by service providers in the service imple-
mentation process management commitment, human resource
management, design of the service processes, benchmarking, con-
tinuous improvement, information gathering and data manage-
ment issues, customer focus, and service culture.
a
□
KEYWORDS
Benchmarking: A measure of efficiency of business processes

and performance metrics of an organisation such as policies,
products, programs, strategies, etc. to other businesses in the
industry.

•
N O T E S
D Customer satisfaction survey: A method of gauging the satis-

faction level of customers with an organisation's product or ser-
vice.
D Service-level agreement: A contract between a service provid-
er and the customer stating the level of service expected by the
customer.
0 Variance: A difference between an expected and actual result,
for example between a budget and actual expenditure.
0 Yield management: A technique designed for managing de-
mand and capacity in order to understand, anticipate and in-
fluence consumer behaviour with the purpose of maximising
revenue.
Bl DESCRIPTIVE QUESTIONS
1. What is variance? Why is it difficult to measure variance?
2. What is meant by service productivity? Explain some service

productivity measurement tools.
3. Describe various service measurement methods.
4. Define work study. What role does work study play in service
productivity measurement?
5. Discuss challenges and risks in using yield management.
6. List various issues faced by an organisation in the service
implementation process.
Qu1ANSWERS AND HINTS


Service Perforn1ance Measure- 1. True
ment
2. Performance benchmarks
3. Cost
Service Productivity Measure- 4. Productivity
ment
5. False
6. Surveys
Service Measurement Methods 7. Mystery shopping
8. c. Post service rating
Role of Work Study in Service 9. Working methods
Productivity Measurement

N O T E S

10. True
Service Yield Management 11. Price level of a service
12. False
Service Implementation Issues 13. Benchmarking
14. Service culture

1. Variance refers to the difference between an expected and actual
result. Refer to Section 7.2 Service Performance Measurement.
2. Service productivity refers to the numeric amount represented in
the form of ratio that serves as the standard for measuring output
generated with respect to input in the service delivery process.
Refer to Section 7.3Service Productivity Measurement.
3. Various service measurement methods are mystery shopping,
social media monitoring, customer effort score, post service
rating and documentation analysis. Refer to Section 7.4 Service
Measurement Methods.
4. Work study refers to determination of factors through which
service productivity of a service organisation can be enhanced.
Refer to Section 7.5 Role of Work Study in Service Productivity
Measurement.
5. Challenges and risks in using yield management are loss of
competitive focus, alienation of customers, problems with
employee morale, incompatibility between incentive and
reward systems, inadequate employee training and unsuitable
organisation of the yield management function. Refer to Section
7.6 Service Yield Management.
6. Issues faced in the service implementation process are
management commitment, human resource management,
design of service processes, benchmarking, continuous
improvement, information gathering and data management
issues, customer focus and service culture. Refer to Section
7.7 Service Implementation Issues.
Iii• SUGGESTED READINGS & REFERENCES

SUGGESTED READINGS
□ Sherman, H. D. &Zhu, J. (2006). Service Productivity Management.
Springer.
□ Mudie, P. & Pirrie, A. (2006). Services Marketing Management
(3rd ed.). New York: Routledge.
□ Johnston, R., Clark, G. & Shulver, M. (2012) Service Operations
Management: Improving Service Delivery. Pearson Education.

•
N O T E S
E-REFERENCES
0 Donnelly, J. (2017). The Top 3 Methods to Measure Your Custom-
er Experience. Customerserviceexperts.com. Retrieved 18 April
2017, from http://www.customerserviceexperts.com/knowledge/
archive/cse-articles/bid/322770/The-Top-3-Methods-to-Measure-
Your-Customer-Experience
0 7 Ways to Improve Productivity of Services - Explained!. (2017).
YourArticleLibrary.com: The Next Generation Library. Retrieved
18 April 2017, from http://www.yourarticlelibrary.com/company/
service-management/7-ways-to-improve-productivity-of-servic-
es-explained/34337/
0 (2017). Cthrc.ca. Retrieved 18 April 2017, from http://cthrc.ca/~/
media/Files/CTHRC/Home/research _pu blications/prod uctivity/
Measuring_Productivity_Service_SectorSept_EN.ashx
0 5 Important Reasons for low productivity in service industries.
(2017). Money Matters I All Management Articles. Retrieved 18
April 2017, from http://accountlearning.com/5-important-rea-
sons-for-low-productivity-in-service-industries/

CONTENTS
8.1 Introduction
8.2 Concept of Service Decoupling
8.2.1 Decoupling and Cost
8.2.2 Decoupling and Quality
8.2.3 Decoupling and Delivery Speed
8.2.4 Decoupling and Flexibility
8.2.5 Decoupling and Strategy
Activity
8.3 Front-office and Back-office Interface
8.3.1 Role of Customer Contact in Front-office and Back-office Interface
Activity
8.4 Summary

•
N O T E S
SERVICE DECOUPLING AT FIRST UNION
Source: www.banksigns.com
First Union Corporation (now known as Wachovia Corporation

after its merger with Wachovia National Bank) was founded as
Union National Bank on June 2,1908, in Charlotte, North Caroli-
na, by H.M. Victor.
First Union saw a huge fundamental change in 1985, with the Su-
preme Court's decision on changing interstate banking legisla-
tion. Before that, banks were required to operate in just one state
of the United States. However, with the change in the law, the
First Union purchased 70 banks in the forthcoming years. Apart
from this, the bank made its biggest acquisition in 1997 by pur-
chasing the Philadelphia-based CoreStates for $16.5 billion. This
helped the bank to become the sixth largest bank in the United
States (from the third largest bank in Charlotte, North Carolina)
by 1998.
In 1998, the bank decided to transform traditional banking meth-

ods by redefining processes and workflow in its branches. The
bank wanted to get its bankers to come out of the branch and sell
the bank's products. The concept was to develop an aggressive,
sales-oriented culture at First Union. The role of bankers was
changed from decision-makers, sitting behind a desk, to a com-
mission-only sales force that pulls customers by cold calls. Not
only this, but First Union also modified its product line byinclud-
ing non-traditional banking products, such as mutual funds and
insurance.
The bank focused on introducing several new methods to reach to

customers. Rather than including large, monolithic marble-haled
bank-branches in its infrastructure, the bank focused on Internet
banking, mini-branches and a massive call centre. The bank was
going through huge changes, which was reflected in its stock pric-
es also, which increased 151% from January 1995 to March 1998.

N O T E S
The First Union integrated back-office functions into the branch,

which altered job duties significantly. At the entrance, customers
were now met by 'greeters' rather than figuring out where to go
to find help. The greeters were not only responsible for providing
warm services to customers, but also integrating back-office oper-
ations bydirecting customers towards Automatic Teller Machines
(ATMs) or connecting them by phone to the call centre.
First Union changed the traditional culture of the branch where

the staff, in order to sell a product, used to wait for customers
until they walk in and enquire about the product. The bank made
the entire system more proactive where branches used to receive
several hundred names of prospective buyers everyday with sug-
gestions on what products to sell them exclusively. In addition,
the bank changed its compensation system from fixed salary to
sales based commission system. These changes made old job de-
scriptions become obsolete and created newones. The employees
were invited to apply for new jobs they felt best fit for their tal-
ents. In addition, the bank recruited people, who did not belong
to the banking industry but knew how to sell a product. These
people used to bring prospective customers to the bank and earn
commission based on the actual sale.

'. •
N O T E S

>- Explain the concept of service decoupling
>- Discuss how decoupling affects cost
>- Discuss the relationship between decoupling and quality
>- Explain how decoupling can help in improving speed of de-
livery
>- Describe strategies of implementing decoupling
>- Discuss the front-office and back-office interface
■:I■ INTRODUCTION
In the previous chapter, you studied about service performance mea-
surement and howservice productivity is measured. Now, let us move
forward and study how the concept of decoupling can be used in ser-
vice operations to increase efficiency, reduce cost, improve quality,
gain flexibility and achieve strategic objectives of a service organisa-
tion.
In simple words, decoupling refers to segregating different activities

of a process as independent activities and then performing those ac-
tivities separately. For example, the loan approval process in a bank
is generally broken down into different activities, such as collection of
documents, verification of documents, determination ofcreditworthi-
ness, approval of loan, etc. When these activities are performed sepa-
rately by different individuals or in different geographic locations, it
is called decoupling. In service organisations, decoupling takes place
mainly on the basis of classification of activities as back-office activi-
ties and front-office activities. The front-office activities are decoupled
from back-office activities to gain the benefits of specialisation and
efficiency.
This chapter begins with a detailed explanation of the concept of ser-

vice decoupling. Next, it exemplifies the relationship of service de-
coupling with cost, quality, flexibility and delivery speed. Moreover,
the chapter discusses strategies of carrying out decoupling in a ser-
vice organisation. Lastly, the chapter discusses the front-office and
back-office interface, which is an essential concept related to service
■:fj
decoupling.
CONCEPT OF SERVICE DECOUPLING

Service decoupling refers to breaking up activities in the service de-
livery process and performing these activities separately and inde-
pendently. For example, a restaurant can completely separate the food
preparation activity from the serving activity. These two activities can

N O T E S
be executed bydifferent individuals. In service organisations, front-of-

fice activities are generally decoupled from back-office activities. The
'front-office' and 'back-office categorisation' depends on the level of
customer contactrequired in an activity. If an activity has 'very low'
or 'no' customer contact, it is considered to be a back-office activity.
On the other hand, if an activity requires high-level customer contact,
it is considered to be a front-office activity. For example, in a hotel,
activities like receiving guests, providing them room service, etc. are
considered front-office services whereas cooking, maintenance of res-
ervation records, or accounting activities are considered back-office
activities as these activities involve no or very little customer contact.
Figure 8.1 shows how the imagined 'line of customer visibility' sep-
arating front-office activities (solicitation of applications, document
signing, etc.) from back-office activities (application processing, credit
decision, payment processing, etc.) in a bank:
Solicit Document
Application Signing
Line of Customer
Visibility
Application Processing
Payment Processing
Credit Decision
Figure 8.1: Service Decoupling in a Bank

Source: Journal of Operations Management, Vol. 18, No. 6, R. Metters and V. Vargas, "A Typolo-
gy of De-Coupling Strategies in Mixed Services," pp. 663-682,
When front-office activities are decoupled from back-office activities,

different individuals can perform different activities rather than a
common set of staff performing all activities. Therefore, decoupling
provides the benefits of specialisation to service organisations in
terms of improved expertise of staff members in their assigned work.
Such specialisation help in improving efficiency, reducing variability
in service performance and increasing service conformity (as when
the same person repeatedly carries out a task, the service level shows
less fluctuation).
8.2.1 DECOUPLING AND COST
Decoupling can provide a cost advantage to service organisations as

specialisation leads to increased efficiency of the organisation. For ex-
ample, when a same set of staff performs different activities, they need
to frequently switch between tasks. In decoupling, different activities

•
N O T E S
are performed by a different set of people. As a result, there is a min-

imal movement of workers between different activities. Reduction of
staff movement results in lower cycle time, which, in turn, reduces
costs. In addition, when different activities are decoupled, they are ex-
ecuted in a more specialised way. Such specialisation results in great-
er productivity, which further reduces per unit cost. Moreover, decou-
pling reduces services variability which in turn reduces the chance of
a service getting rejected by customers. Therefore, decoupling results
in cost reduction by eliminating waste.
It should be noted that decoupling is not always associated with cost

reduction. In many instances, it can result in increased cost as well.
Implementation of service decoupling requires organisational restruc-
turing, redefining work processes and flows and hiring specialised
people for executing each individual activity. Such changes require a
significant amount of initial investment. In addition, decoupling can
result in increased idle time for workers involved in front-office activ-
ities. This is because earlier front-office workers used to be involved
in back-office activities as well. However, because of decoupling they
will have idle time as the arrival of customers can be very irregular.
Moreover, decoupling can result in duty over-lapping i.e. some tasks
being conducted multiple times by different workers. For example,
when a process is divided and segregated among multiple workers,
each one tends to repeat a small part of the previous worker's activity.
This results in duty overlap, which in turn results in wastage of man-
hours and increased cost.
8.2.2 DECOUPLING AND QUALITY
Decoupling leads to improvement in quality by increasing service

conformance. Service conformance refers to the maintenance of the
same service level repeatedly over a period of time. When a worker is
responsible for a single activity or task, he/she gains expertise in the
task in a short period of time. Such expertise reduces variation in the
activity and decreased variation increases service conformity. Howev-
er, conformity is not the only component of service quality.
Service quality also includes dependability and accuracy. Breaking a

process or activity into smaller activities or tasks and assigning those
to different individuals can result in more errors and less dependabil-
ity. For example, in the late 1980s, the Bank of America decoupled its
process of automobile loans and the process of repossession of auto-
mobiles in case of default. This resulted in confusion in the organisa-
tion as ineffective communication among the staff involved in these
two processes resulted in erroneous repossession of automobiles of
lenders who did not default on the loans. Had the process not been de-
coupled and the same staff were involved in both the processes, such
errors would not have occurred.

N O T E S
Source: businessinsider.com; complex.com
Moreover, decoupling can reduce the autonomy and dilute the role
of front-office staff in dealing with nonstandard customer requests.
Because of role dilution, the front-office staff may not be able to cre-
ate the best customer experience as creating such experience might
require seamless coordination with the back-office staff. Such coordi-
nation is not always present in real-life organisations.
8.2.3 DECOUPLING AND DELIVERY SPEED

Decoupling focuses on identifying and categorising services based
on front-office and back-office activities. The distinction of activities
helps in standardising tasks and building expert task forces that help
in delivering quality services. Decoupling can transform the delivery
speed of a service provider. Let us take an example of a hospital where
different people are assigned different tasks to deliver health care ser-
vices competently. In a health care facility, you may find a medical
office receptionist, greeting patients, answering their inquiries and
scheduling appointments with relevant physicians. Then, there are
doctors/physicians who examine, diagnose and treat patients. Apart
from this, there are medical laboratory technicians who perform tests
on tissue, blood and other body fluids to assist physicians in the di-
agnosis and treatment of diseases. In addition, there are nurses who
provide hands-on care to patients by observing and monitoring their
health conditions, maintaining records and communicating with doc-
tors.
Now, each job role in a hospital is performed by a person who is spe-

cialised in delivering their own task efficiently. The receptionist does
not treat patients and the doctor does not perform a lab technician's
task. Therefore, decoupling helps in dividing activities based on their
nature of specialisation. When each person is specialised in his/her
task, the chances for error also reduce, which ultimately reduces the
service delivery time.
Here, you must understand that there is a difference between task

speed and process speed. Decoupling divides a process into different
tasks, performed by different people. It also includes waiting times

' . •
N O T E S
and hands-off between tasks. However, a customer sees a service de-

livery process as a whole and not in tasks. If there is delay in a task,
it may hamper the speed of the entire service delivery process. In-
creased decoupling waiting times and hand-offs between tasks may
negatively affect the entire service delivery speed.
In order to obtain quick delivery speed, it is important to reduce wait-

ing times and hand-offs between tasks. This can be done by central-
ising buffers between tasks or between front-office and back-office
activities. Take an example of McDonald's outlet. You will find sep-
arate front-office and back-office sections, performing their special-
ised tasks. Front-office people, greeting customers, taking their orders
and giving bills; and back-office people preparing the food order by
customers. Now, if there is delay between tasks of these two sections,
it would result in delay in service delivery and increase in custom-
er waiting time. In order to deal with such situations, the back office
needs to prepare food items in advance and keep it in a buffer so that
they could be delivered to the customers as soon as the order comes
to the front office.
Source: en.paperblog.com, themoscowtimes.com
Thus, keeping buffers helps in dealing with disruptions, allows smooth

work flow and increases service delivery speed. It helps in dealing
with bottleneck situations by holding inventory ahead of time to max-
imise production. Here you must note that if the decoupled service is
not creating a bottleneck situation, it is not serving its purpose of cost
optimisation.
8.2.4 DECOUPLING AND FLEXIBILITY
Decoupling results in the standardisation of activities as workers are

supposed to follow standard procedures to carry out specific tasks as-
signed to them. Such standardisation results in the loss of flexibility
to workers. For example, in a coupled environment, the same staff
members are responsible for the entire process rather than a part of
it. So staff members have more autonomy and discretion in carrying
out the entire process. However, in a decoupled environment, each
staff member is assigned with a specific job and he/she does not have
control over other activities in the same process.

N O T E S
Reduction in flexibility has negative effects on the level of satisfac-

tion of customers of a service organisation. For example, suppose a
customer approaches a front-office worker, say a receptionist in a
hotel, and requests certain customised services for which the recep-
tionist will have to sidestep his/her standard operating procedures. In
a coupled environment, the receptionist would have such discretion
to tweak certain rules as he/she is responsible for the entire process.
However, in a decoupled environment, he/she will have to coordinate
with back-office for such discretions. Such coordination may not be
possible due to physical distance between front-office and back-office
or for other reasons. Therefore, it becomes difficult for front-office
workers to provide customised services in a decoupled environment.
8.2.5 DECOUPLING AND STRATEGY
From the discussion so far, it can be concluded that service organisa-

tions mainly conduct decoupling for two important reasons - decreas-
ing cost and improving the focus on service. However, decoupling often
results in trade-offs, i.e. increasing costs and reducing service quality.
Therefore, service organisations need to decide on the level of decou-
pling (high or low level) and the level of focus on cost or service quality.
On the basis of the decoupling goals service organisations can follow
any of the four types of decoupling strategies, as shown in figure 8.2:
Service High Service / FocusedProfessionals

Cost Cheap Convenience Cost Leader
Low Level of Decoupling High Level of Coupling
Figure 8.2: Decoupling Strategies
Thestrategies are discussed as follows:

0 High service: Under this strategy, a service organisation provides
a highly flexible and customised service to customers at a premi-
um price. This strategy combines high focus on service with a
low level of decoupling. Organisations that are looking for high op-
erational flexibility and responsiveness can go for the decoupling
strategy. American Express follows the high service strategy.
Source: http://wwv,.creditcardshelplines.com/american-express-prepaid-cards/

'' •
N O T E S
□ Focused professionals: In this strategy, the main goal of decou-

pling is to support and enable the front office to provide seam-
less services to customers. This strategy combines high focus on
service with a high level of decoupling. Reduction of cost is not a
primary objective under this strategy. Afinancial service provider
Merrill Lynch follows this strategy.
□ Cheap convenience: Under this strategy, a lowlevel of decoupling
is followed to reduce cost and provide the highest level of conve-
nience to customers. This strategy combines high focus on cost
reduction with a low level of decoupling. An American law firm
Jacoby & Myers follows this strategy.
□ Cost leader: In this type of decoupling strategy, the primary focus
is to reduce the cost to such an extent that the service provider
can provide services at the lowest possible cost to customers. This
strategy combines high focus on cost reduction with a high level of
decoupling. Retail giant Walmart follows this strategy.
Source: http://couponsinthenews.com
f;f SELF ASSESSMENT QUESTIONS
1. Checking the credit history ofa customer usingagency records

is an example of front-office activity. (True/False)
2. Providing take-away services at a pizza shop is an example of
front-office activity. (True/False)
3. refers to the maintenance of the same service level
repeatedly over a period of time.
4. Decoupling always results in cost reduction. (True/False)
5. refers to breaking up activities in a service
delivery process and performing the activities separately and
independently.
6. Name the four types of decoupling strategies.
7. As a result of decoupling waiting times and hand-offs between
tasks may decrease, which may positively affect the entire
service delivery speed. (True/False)

N O T E S
8. If the decoupled service is not creating a bottleneck situation,

it is not serving its purpose of
9. Which of the following decoupling strategies is followed by
Merrill Lynch?
a. High service b. Focused professionals
c. Cheap convenience d. Cost leader
10. Walmart follows the cheap convenience strategy. (True/False)
ACTIVITY
Find a service process flow diagram of a bank ofor anyother finan-

cial institution using the Internet. Separate front-office activities
from back-office activities.
FRONT-OFFICE AND BACK-OFFICE

INTERFACE
Service decoupling separates activities (involved in delivering ser-
vices) into high-customer-contact/low-customer-contact jobs. In oth-
er words, it influences the design of the service delivery system by
creating a distinction between contact and non-contact activities. De-
coupling of activities determines the grouping of employees based on
the degree of customer contact in the process. This further helps in
structuring front-office and back-office activities.
The terms front-office and back-office are normally used to describe

the parts/departments ofan organisation that deal with the customer/
client and management of the organisation, respectively. The front of-
fice, also called front line, is the part, visible to customers and remains
in a direct contact with them. It takes care ofactivities, which help the
organisation to be in direct relationship with customers. Front office
involves marketing, user support or after-sales service teams.
Source:TutorialsPoint

'. •
N O T E S
On the other hand, back office refers to the part of the organisation
that covers all internal processes within the organisation. These inter-
nal processes include production, logistics, warehousing, accounting,
human resource management and so on. The back office usually deals
with the information system to which end customers do not have ac-
cess.
Source: iTravel Software
According to G. Lynn Shostack, (1982), "The front office is the part

where activities that require customer contact take piace and as such is
directiy experienced by customers, whereas the back office contains pro-
cesses that are carried out remoteiy from customers and hence cannot
be seen or experienced by customers. The front office -back office modei
is based on the generai notion that front office activities are carried out
by front office empfoyees in front office departments and vice versa for
back office activities."
8.3.1 ROLE OF CUSTOMER CONTACT IN FRONT-OFFICE

AND BACK-OFFICE INTERFACE
A customer contact refers to the physical presence of the customer in

the service delivery system. The level of customer contact is one of the
most distinguishing features involved in the service delivery system
as compared to delivering goods. Many services cannot be delivered
without the customer being present, interacting or participating in
the delivery of services. The varying degrees of customer contact re-
quirements make it compulsory for service organisations to decouple
high customer contact activities from non-contact activities. Usually,
the decoupling of front-office and back-office jobs is based on three
service design decision phases, which are:
1. Deciding where customer contact should occur in a service
delivery process: The design decision at this phase considers
how much customer contact is required in a particular service
delivery process and which activities can or cannot be carried
out with customer contact. Here, you must understand that all
services are not equal as different services require different
extent ofcustomer contact for their creation.

N O T E S
The basic notion behind a customer contact approach is that

high-contact activities are more diffcult to control rather than
low-contact activities. For example, in service organisations like
banks, hotels and airlines, service personnel regularly come
in direct contact with customers. In this case, as the service
personnel deliver service in the presence of the customer, it
becomes difficult for them to rectify a mistake without it being
noticed by the customer.
On the other hand, low-contact service processes require
technical skills and do not need to be located close to customers.
These service processes are often located near resources and
therefore, help in maximising the efficiency of the system.
2. Deciding which activities in the process should be decoupled
from each other: Decoupling decisions are taken for separating
activities by allocating them to different employees. In other
words, at this phase, decisions are taken for decoupling the
activities on the basis of high or low customer contact. Activities
are decoupled from each other and are placed under separate
supervision, resulting in front office and back office.
3. Deciding how the employees involved in the process should be
grouped together: Decoupling of high-contact and non-contact
activities leads to the establishment of separate front-office and
back-office departments. Employees can be grouped on the basis
of different criteria, such as grouping by knowledge or skill, by
function and work process, by time, by output, by customers
or by place. The composition of the group directly affects the
performance of the team and outcome. For example, intra-
group coordination often results in further specialisation and
uniformity of tasks, carried out bygroup members. These service
design decision phases help in structuring front-office and back-
office tasks in a service delivery system. In addition, they form
the basic shape of the service delivery system and indicate the
expected performance level of the front and back office.
11. refers to the part of an organisation that covers all

internal processes within the organisation.
12. refers to the physical presence of the customer in
the service delivery system.
13. High-contact activities are more diffcult to control rather than
low-contact activities. (True/False)
14. Warehousing is part of operation of a service
organisation.

•
N O T E S
ACTIVITY
Using the Internet, find how front-office and back-office activities
are structured in a retail store. Prepare a brief report based on your
findings.
■:II
□
SUMMARY
Service decoupling refers to breaking up activities in a service
delivery process and performing activities separately and inde-
pendently.
□ When front-office activities are decoupled from back-office activ-
ities, different individuals can perform different activities rather
than a common set of staff performing all activities.
□ Decoupling can provide a cost advantage to service organisations
as specialisation leads to increased efficiency of the organisation.
□ Decoupling improves quality by increasing service conformance.
□ Service conformance refers to the maintenance of the same ser-
vice level repeatedly over a period of time.
□ Decoupling can transform the delivery speed of a service provider.
□ Decoupling results in the standardisation of activities as workers
are supposed to follow standard procedures to carry out specific
tasks assigned to them. Such standardisation results in a loss of
flexibility to workers.
□ Four decoupling strategies are high service, focused professionals,
cheap convenience and cost leader.
□ The terms front-office and back-office are normally used to de-
scribe the parts/departments of an organisation that deal with the
customer/client and management of the organisation, respectively.
□ The front-office, also called front line is the part, visible to the cus-
tomers and remains in direct contact with them.
□ Back office refers to the part of the organisation that covers all
in ternal processes within the organisation.
a
□
KEYWORDS
Bottleneck: A constraint in achieving the maximum output rate

ofa process or a system.
□ Customisation: An approach that encourages an organisation
to change its methods and strategies according to the needs,
taste and preferences of the market where it is operating.
□ Non-standard customers: Customers having customised ser-
vice needs.

N O T E S
□ Standardisation: An approach through which an organisation

makes its methods and strategies uniform globally.
□ Variability: The range of variance of output from the accepted
norm.
■:IJ DESCRIPTIVE QUESTIONS

1. Define 'service decoupling'. Explain with the help of an example.
2. How is service decoupling related to cost? Explain.

3. Describe the relation between service quality and decoupling.
4. 'Service decoupling results in a loss of flexibility.' Describe.
5. List different service decoupling strategies.
6. What is the role of the level of customer-contact m deciding
■ :ii ANSWERS
front-office AND HINTS
and back-office interface?

Concept of Service Decou- 1. False
piing
2. True
3. Service conformance
4. False
5. Service decoupling
6. High service, focused profession-
als, cheap convenience, cost leader
7. False
8. Cost optimisation
9. b. Focused professionals
10. False
Front-office and Back-of- 11. Back-office
fice Interface
12. Customer contact
13. True
14. Back-office

•
N O T E S

1. Service decoupling refers to breaking up activities in a service
delivery process and performing the activities separately
and independently. Refer to Section 8.2 Concept of Service
Decoupling.
2. Decoupling can provide a cost advantage toservice organisations
as specialisation leads to increased efficiency of the organisation.
Refer to Section 8.2 Concept of Service Decoupling.
3. Decoupling improves quality by increasing service conformance.
Refer to Section 8.2 Concept of Service Decoupling.
4. Service design increases standardisation, which reduces
flexibility. Refer to Section 8.2 Concept of Service Decoupling.
5. Four decouplingstrategiesare high service,focused professionals,
cheap convenience and cost leader. Refer to Section 8.2 Concept
of Service Decoupling.
6. The terms front-office and back-office are normally used to
describe parts/departments of an organisation that deal with
the customer/client and management of the organisation,
respectively. Refer to Section 8.3 Front-office and Back-office
■:Q
Interface.
SUGGESTED READINGS & REFERENCES
SUGGESTED READINGS
0 Fitzsimmons, J., & Fitzsimmons, M. (2008). Service Management
(1st ed.). Boston, MA:McGraw-Hill.
□ Parker, D. (2012). Service Operations Management (1st ed.). Chel-
□ Schmenner, R. (1995). Service Operations Management (1st ed.).
Englewood Cliffs, N.J.: Prentice Hall.
E-REFERENCES
□ (2017). Marketing Science Institute. Retrieved 28 April 2017, from
http://www.msi.org/reports/transaction-decoupling-the-effects-of-
price-bundling-on-the-decision-to-con/
□ Erl, T., Balasubramanian, R., Chou, D., Plunkett, T., Roy, S., Thom-
as, P., & Tost, A. (2017). 7.3 Service Loose Coupling I Service-Ori-
entation Principles with Java Web-Based Services I InformIT.Infor-
mit.com. Retrieved 28 April 2017, from http://www.informit.com/
articles/article.aspx?p=2231780&seqNum=3
□ Staff, I. (2017). Decoupling. Investopedia. Retrieved 28 April 2017,
from http://www.investopedia.com/terms/d/decoupling.asp

CONTENTS
9.1 Introduction
9.2 Competitive Role of Information Technology in Services
9.2.1 Limitations of Using Information Technology
Activity
9.3 Internet as a Service Enabler
Activity
9.4 Challenges in Adopting a New Technology in Services
Activity
9.5 Role of SMAC (Social, Mobility, Analytics and Cloud) in Service Delivery
Activity
9.6 Role of Internet ofThings (IoT) in Services
Activity
9.7 Summary

•
N O T E S
TRANSFORMING THE AVIATION INDUSTRY WITH

INTERNET OF THINGS
'-0-
Source: www.mercator.com
Airline operations are becoming more efficient because of the In-

ternet ofThings (loT)-the latest IT phenomenon that is revamp-
ing operational efficiency in the airline sector. In simple words,
loT refers to a network of physical things connected together via
the Internet so that they can be run smarter, safer and more in-
telligently. These things could be anything, such as physical ob-
ject or device, domestic appliances, vehicles or baggage handling
equipment. There is almost no limit to how many physical things
can be connected. That is whyGartner, an information technology
research and advisory company, estimates that by 2020 around 25
billion things or devices will be interconnected across the world.
loT has a great potential to transform the aviation industry by

providing a unified experience of travelling. Considering the
ground-breaking potential of technology, one can predict that loT
will continue to play a more central role in airline operations. In
fact, technology is already in function and is used by several air-
lines for everything from baggage tracking to cabin climate control.
Byeffective utilisation of loT, airlines can effectively reduce or even
eliminate the causes of some of the most common problems in the
industry, such as lost bags, flight delays and customer service issues.
This is the reason why most airlines believe that loT may prove
immensely beneficial for their customers as well as business. Take
a look at world's leading airlines and how they are using loT in
their service operations.
VIRGIN ATLANTIC'S CONNECTED 787S
Virgin Atlantic is producing a fleet of Boeing 787planes and cargo

equipment connected via loT devices. The question arises why
to connect everything from engines to landing gear? The answer
is, with the help of loT, it will be possible to collect all data in
real time. This data will enable Virgin Atlantic to have informa-
tion, needed to identify and solve a mechanical issue, before it
even happens. This will result into safer flights, less delays and an

N O T E S
overall better customer experience. Apart from Virgin Atlantic,

Etihad Airways is also using IoT to take similar advantage of the
technology.
DELTA'S BAGGAGE TRACKING
Baggage tracking is one of the major issues that almost every air
traveller has faced at some point or another. There could be an is-
sue of misplaced bag, lost item or excessive wait time in collecting
the baggage. Delta Airlines took a firm step towards solving this
problem by using the Radio Frequency Identification (RFID) bag-
gage tracking technology. Now, passengers can see their baggage
location on Delta's mobile app on the way to the aircraft, on the
plane or on the way to baggage claim. Thus, IoT has enabled Del-
ta Airlines to provide transparency and control to its customers
when it comes to track their baggage.
AIRASIA'S ADOPTION OF GE'S FLIGHT EFFICIENCY

SERVICES
AirAsia is taking an advantage of IoT to maintain ecological bal-

ance and boost its savings. The airline partnered with GE Flight
Efficiency Services to reduce fuel use. With the help of this tech-
nology, the airline follows precise navigation routes and analyses
flight data to optimise aircraft utilisation and fuel use.
JETBLUE AUTOMATES CHECK-IN
JetBlue Airways is using IoT to automate the check-in process ef-

ficiently. After booking, customers are automatically issued a tick-
et and given a seat, 24 hours before take-off. The customer does
not even require to log onto the app or website. The seat is given
on the basis of past preferences data ofpassengers.
QANTAS LAUNCHES VIRTUAL REALITY ENTERTAINMENT
In early 2015, Qantas Airways partnered with Samsung Elec-

tronics to provide the industry's first virtual reality experience
to its passengers. The VR headsets, provided by the airline not
only meant to give passengers a unique experience, but also aim
to collect and transmit data about passengers. This data can be
further analysed to draw insight into passenger's behaviour and
preferences. With the help of IoT, the data, generated by the pre-
vious use of the VR headset, is used by the airline to predict what
offerings will be most attractive to a particular passenger.
Thus, IoT can help in making airline travel a pleasant experience.

With endless capabilities, IoT can transform the airline industry
by benefiting both airlines and passengers.

•
N O T E S

>- Explain the role of information technology in services
>- Discuss the Internet as a service enabler
>- List challenges in adopting a new technology in services
>- Explain the role of SMAC (Social, Mobility, Analytics and
Cloud) in delivering services
>- Explain the role of Internet of Things (IoT) in services
II ■ INTRODUCTION
In the previous chapter, you studied the concept of service decoupling
that refers to a decrease in correlation between two different service
classes. In this chapter, let us discuss the role of Information Technol-
ogy (IT) in service operations.
Service operations involve activities and processes required to man-

age and deliver services to business users and customers. Advance-
ment in technology, such as improved automated equipment, voice
recognition systems and high-speed data transmission lines have put
a significant impact on service operations and made service processes
more effective. The role of technology in services can be explored in
various forms, such as emergence of technology-enabled self-service
or Internet enabled commercial transactions.
Advancement in technology shows a profound impact on the ways cus-

tomers interface with service providers. For example, automated air-
port kiosks have changed the expectations of airline passengers. They
no longer need to wait in lines at airline counters to receive a boarding
pass. Instead, they can generate it from kiosks by themselves. In this
way, technology has replaced trivial face-to-face interactions. The in-
troduction of technology in services has empowered customers to uti-
lise services unassisted. For example, a credit card reader at the petrol
pump facilitates the purchase of petrol without help and the Internet
allows customers to book a hotel for stay on their own.
In addition, technology brings flexibility to the service concept by

leveraging and multiplying employee's knowledge about customers.
This helps in presenting more professional image of the organisation
and ensures that the core transaction takes place in a more efficient
manner. Technology is also used by service organisations to identify
and eliminate unproductive steps involved in the service delivery pro-
cess. This further helps in lowering costs. Apart from this, technology
plays a major role in automating routine processes to minimise errors
and increase reliability. All these help in increasing the efficiency of
service operations.

N O T E S
This chapter begins by explaining the role of information technology

in services. The chapter also discusses the Internet as a service en-
abler. In addition, the chapter describes challenges in adopting new
technologies in services. Next, the chapter explains the role of SMAC
(Social, Mobility, Analytics and Cloud) and Internet of Things (IoT) in
service delivery.
COMPETITIVE ROLE OF INFORMATION

TECHNOLOGY IN SERVICES
Customers nowadays are more aware and up-to-date than they were
in the past. Therefore, they have become more demanding now. They
expect high quality service enriched with supplementary services.
They desire convenience and speed of delivery and that too at com-
petitive prices. In these days ofglobalisation, a customer moves across
a country or the globe on official or personal work, but still expects
his service provider to deliver the same quality service. For exam-
ple, he wants to use the same credit card for all his purchase and the
same mobile phone service for all his communication needs across
the world. However, it is not so easy for the service provider to main-
tain the same level and quality of service offered once the customer is
physically away from the location of service providers.
Information Technology (IT) has helped service providers to offer con-

sistently high quality service to customers by keeping real-time track
of customer data. The term 'IT' refers to the application of technolo-
gy, such as computers and telecommunications equipment that store,
recover, transmit and operate data or information. This data is often
used in the context of business. Apart from computers and computer
networks, IT also consists of other information distribution technol-
ogies such as television and telephone networks. The Information
Technology Association of America has defined IT as "the study,
design, development, application, implementation, support or manage-
ment of computer-based information systems."
In the service sector, IT helps organisations to formulate their compet-

itive strategy by creating a market entry barrier for new competitors.
A market entry barrier refers to obstacles that prevent new competi-
tors toenter easily in an industry or business area. Such entry barriers
lead existing service organisations to sustain in the market. An effec-
tive entry barrier not only helps an organisation to appeal customers
with a new service but also holds the customer's interest for an endur-
ing period. The harder the service is to imitate, the higher the barrier
for competitors to enter the market. For example, a financial service
organisation may develop a complex software package to launch a
unique and highly attractive financial product. The organisation can
use IT to add value to its products. The complexity of sophisticated
software may leave competitors behind, giving the organisation valu-
able time to capture a premium market share.

•
N O T E S
IT has shifted the nature ofservices dramatically in recent years, and

brought forth the concept of service innovation to help organisations
in seizing opportunities and remaining in the competition. Service in-
novation involves methods that alter the way of serving customers to
provide greater value to them. Today, customers demand greater in-
volvement, customisation, personalisation and flexibility from service
with immediate results. As a result, organisations are becoming more
customer-oriented and doing everything to satisfy the needs of cus-
tomers. IT has helped organisations in meeting with such higher cus-
tomer expectations by keeping track ofdata related to customer needs
and expectations. For example, IT has changed the way of contacting
customers with the help of cutting-edge technologies, like self-service
kiosks that can be seen easily at airline check-ins to the retailing and
hospitality industries.
However, the competitiveness of these organisations depends on their

skills to adapt to new IT measures and maximise their customer ex-
perience and resource performance. As service innovation is closely
related to service design and new service development, technological
elements help in the application of better solutions that meet the new
requirements, unarticulated needs or existing market needs. Thus, IT
has transformed the way of delivering greater value to customers and
generating more revenue to the organisation. The following points
explain how IT has transformed the scenario of service delivery in
different areas:
D Mobile Internet has also transformed the way of service delivery.
Entry of Uber and Ola in the taxi business is one prominent exam-
ple that shows how IT is altering the ways of service delivery to
customers and offering a competitive advantage to these service
organisations. In addition, advancement in digital payments is en-
couraging mobile commerce, with extensive inferences in finan-
cial services and retailing. IT, by increasing connectivity, acts like
game changer to provide remote access and monitoring capability
to service providers.
D With the advent of Big Data and advanced analytics, organisa-
tions, such as Amazon and Harrah's are using customer data to
personalise and tailor their services. Continued advancement in
analytic capabilities helps these organisations to draw insight
from enormous, but previously untapped market, leading to iden-
tify new service possibilities. For example SATMAP is IT software
that uses advanced analytics to improve services in call centres by
matching callers to service agents with appropriate personalities.
This results in higher rates of customer satisfaction and service-
to-sales conversion. Organisations are using these advanced ana-
lytic tools to get ahead of their competitors.
D In addition, IT has also enabled service organisations in providing
real-time service delivery with the help of the Internet of Things
(IoT). IoT refers to a network of physical objects connected over

N O T E S
the Internet using software, sensors, network connections, etc.

IoT facilitates the collection and exchange of data among these
connected objects. For example, Nest (recently acquired by Goo-
gle) uses Machine-to-Machine (M2M) connectivity to link its smart
thermostats to other home devices, such as washing machines and
fitness bands. This helps in positioning the organisation as a net-
work hub in a digitally connected home. You will study about IoT
in detail in the later section of this chapter.
Here, it should be noted that services, like products, have a shelf life.
With ever-changing demand and service expectations, IT constantly
brings new possibilities to service organisations. Service providers,
therefore, should periodically examine and refresh services they pro-
duce. ITcan help these organisations to develop and refine their ser-
vice offerings systematically to get a competitive edge.
9.2.1 LIMITATIONS OF USING INFORMATION

TECHNOLOGY
You studied how IT is playing a competitive role in the service sector

by changing the ways of doing business. Though IT offers a number of
benefits, it also brings certain disadvantages, which are:
0 High implementation cost: Implementation of IT system is not a
low-cost affair. This is because, in addition to the cost of hardware
and software, some technology vendors require businesses to pur-
chase a user license to operate the system. This increases the cost
of operating a business. Every business, while implementing any
kind of IT system, must consider start-up expenses, such as cost
of training employees with unfamiliar technology. In addition to
the start-up expenses, IT systems are expensive to maintain. For
example, businesses need to hire skilled technicians to handle sys-
tems malfunction. These expenses present major limitations in the
use of ITin business.
0 Job elimination: Implementation of IT into business operations
helps in saving a great deal of time. Though businesses view this
convenience as a boon, there are certain untoward effects also.
Technology eliminates the need for human employees to a large
extent. For example, automated telephone answering machines
have replaced live receptionists in many organisations.
0 Security breaches: This is another major limitation of using IT in
businesses. Through IT, information can be stored in an electronic
database to facilitate quicker and more efficient communication.
Thus, with the touch of a button, information can be easily recov-
ered in notime. This may sometimes presents issues, vulnerable to
security breaches, mainly when they are accessible via the Inter-
net. If appropriate measures are not taken, unauthorised individ-
uals may misuse confidential data.

.
: •
N O T E S
1. The study, design, development, application, implementation,

support or management of computer-based information
systems is called
2. IT helps a service organisation in creating a market entry
barrier, which leads the organisation to sustain in the market.
(True/False)
3. Organisations, such as Amazon and Harrah's use customer
data to personalise and tailor their services. They do so with
the help of
4. Which of the following is not a disadvantage of using IT?
a. Security breaches 6. Job elimination
c. Real-time service delivery cl. Implementation expenses
ACTIVITY
Using the Internet, find various unethical IT practices faced by

organisations and why it is necessary for organisations to protect
their data from unauthorised access.
Ill INTERNET AS A SERVICE ENABLER

The Internet is the worldwide, publicly accessible system of intercon-
nected computer networks that use the Internet Protocol Suite (TCP/
IP) to link devices globally. It is a 'network of networks' that involves
millions of private, public, academic, business and government net-
works. These networks are linked by a broad array of electronic, wire-
less and optical networking technologies. They carry a huge amount
of data, such as online chat, electronic mails, streaming media, file
transfer, voice-over-IP (VoIP) and provide an access to the World Wide
Web (www). Thus, you can define the Internet as a world-wide com-
munication network of computers.
I I
NOTE
The Internet and the World Wide Web are not synonymous. The In-
ternet is a collective system of interconnected computer networks,
linked by electronic, wireless and optical networking technologies.
On the other hand, the Webis a collection of interconnected doc-
uments that are linked by hyperlinks and Uniform Resource Lo-
cators (URLs). The Web uses Hypertext Transfer Protocol (HTTP)
to link and provide access to the files and documents of the World
Wide Web.

N O T E S
The Internet works as a connecting tool that links a service provider

to its customers in the most cost-efficient manner. It enables a service
provider to connect with its customers through a desktop computer/
laptop/tablet with Internet access using phone, cable or satellite. In
addition, the advent of modern wireless communications and Web2.0
social networking (Facebook, Twitter, Linkedin and YouTube, etc.)
are presenting new opportunities for service providers to connect
with their existing customers and find new ones in an effective way.
In today's competitive environment, service providers, instead of

waiting for a customer to make an enquiry, are trying to push infor-
mation to customers with the help of the Internet. There are certain
communication-based technologies like General Packet Radio Service
(GPRS) (packet oriented mobile data service on the 2Gand 3Gcellu-
lar communication system) that helps in delivering data directly to
handsets. Modern handsets like iPhone get instant messages or alerts,
such as 'a KFC store is just around the corner', 'your flight has been
delayed', etc. through GPRS. Many organisations use the Internet to
convey information about the organisation. For example, kbb.com
provides information for people interested in buying cars.
There are various service organisations that are using the Internet
for solving different purposes of their business. They use the Inter-
net to communicate not only with customers, but also with employees
and suppliers. Organisations like Amazon.com and Newegg.com do
not have physical stores and rely completely on the Internet to sell
their products. Thus, for such organisations, the Internet works as a
channel to sell a product or service. There are certain service organ-
isations, like chegg.com and Barnes & Noble that use the Internet to
provide online textbooks (on rent), homework help, online tutoring,
scholarships and internship to students. The Internet is also used by
organisations to provide technical support and offer after-sales ser-
vices to customers to solve their common problems. For example, a
customer can find the answer of how to set up a new computer on the
Dell Computer Website www.dell.com.
The Internet also helps in embellishing existing services. For example,

Harvard Business School Press uses the Internet to distribute business
cases that faculty can review prior to adoption. In addition, the Internet
is used byorganisations to process customer's orders conveniently. For
example, airlines use the Internet to allow customers to order electron-
ic tickets. This service removes the role of travel agents from the air-
line's distribution channel and thus, saves the total cost of the airline.
5. -------- is a "network of networks" that involves millions of

private, public, academic, business and government networks.
6. The Internet and the World Wide Webare synonymous. (True/
False)

•
N O T E S
ACTIVITY
Trivago is a multinational technology company, specialising in In-

ternet-related services and products in the hotel, lodging and meta
search fields. Find howthe Internet acts as a service enabler for the
company. Prepare a note based on your findings.
CHALLENGES IN ADOPTING A NEW

TECHNOLOGY IN SERVICES
Technologies help an organisation in capturing and gaining access
to new markets and customers. However, the capability of adopting
new technologies in itself is one of the biggest challenges that organ-
isations face. In order to achieve organisational goals, service provid-
ers often carry out complex integration of new technologies that can
consume valuable time and resources. Thus, organisations need to
increase their capabilities before embracing new technologies. Apart
from the challenge of increasing the technological capability, an or-
ganisation faces various other challenges while adopting new technol-
ogies. These challenges are discussed as follows:
□ Customer's readiness to embrace new technology: For any ser-
vice organisation, the 'process' of delivering services is vital as it
involves direct participation of customers. Thus, the success of
technological innovation in any process depends largely on cus-
tomer's acceptance. For a service organisation, adoption of new
technology is not enough as customers directly participate in the
service delivery process. If the customer does not accept the tech-
nology or find the technology difficult enough to understand, the
whole process of delivering service would fail. Thus, the biggest
challenge of adopting new technology in the service sector is cus-
tomer's readiness to adapt to new technology or learn new skills.
□ Employee's enthusiasm to learn new technology: Apart from
customers, employees are also affected by new technology and of-
ten require training. A poorly trained employee would fail to use
new technology appropriately, which would negatively affect the
service delivery process.
□ Service innovation that does not directly affect customers:
Sometimes organisations waver in adopting technologies that do
not directly affect customers. There are certain back-office pro-
cesses, like use of magnetic-ink-character recognition equipment
in banking that donotaffect the customer at all. However, they can
make the end process more reliable. For example, the use of mag-
netic-ink-character recognition equipment in banking can make
the check-clearing process more productive. Many a time, service
organisations ignore the need of applying such technologies as
they consider them as a cost-increasing factor. This limits the ef-
fectiveness of the entire service delivery process.

N O T E S
□ Quick imitation by competitors: Imitation of technology also pres-

ents a bigchallenge in front ofservice providers. This hampers the
implementation of innovative technologies in services. As innova-
tion and technology can be imitated freely and quickly by compet-
itors, the prospective rewards for innovation are diminished.
□ Lack of budget: It is another factor that affects the adoption of
technology, especially in smaller organisations. Budget limitations
acts as a constraint to small business technology adoption. Howev-
er, unavailability of funds is not the only issue; organisations some-
times find it difficult to bear the cost of new technology when the
return on that investment depends profoundly on user adoption.
Usually, low adoption results in the elimination of many technolo-
gy projects.
□ Lack of leadership support: It is another common obstacle when
it comes to the adoption of a new technology. Usually, the adop-
tion of a new technology involves the implementation of new pro-
cesses. It is therefore, the responsibility of leaders to support and
motivate employees to adapt to new processes. When a leader en-
dorses technological innovation, motivates flexible behaviour and
encourages process changes by providing appropriate training, it
becomes easier for employees to adapt to the new technology.
7. For any service organisation, the 'process' of delivering

services is vital as it involves direct participation of
8. Th e success of technological innovation in any process
depends largely on employee's ability to learn that technology.
(True/False)
ACTIVITY
Suppose you are opening a technologically equipped self-service

style restaurant. What are the likely challenges that youmayface in
adopting a new technology for your business? Prepare a short note
based on your findings.
ROLE OF SMAC (SOCIAL, MOBILITY,

ANALYTICS AND CLOUD) IN SERVICE
DELIVERY
SMAC (Social, Mobility, Analytics and Cloud) is a concept that unites
four technologies social media, mobility, analytics and cloud to de-
velop an ecosystem where businesses can increase their operational
performance and maximise their customer reach with minimal cost.
Social media has provided organisations with new ways to reach

.
:
•
N O T E S
and interact with customers. Mobile technologies have transformed

the way people communicate, buy and work. Analytics helps organ-
isations in understanding the consumption pattern of customers for
certain products/services. On the other hand, cloud computing pro-
vides an innovative way to organisations to access technology and
data required for responding swiftly to changing markets and com-
plex business problems. Though, these four technologies can impact
an organisation individually, their convergence is creating an entirely
new business model for service providers.
Netflix, a media company, is often cited as an example for successfully

harnessing the power of SMAC. For example, when a member of Net-
flix streams a TVshow from the Netflix cloud to their mobile phones,
laptop or tablet, they require sign-in into Netflix with Facebook's social
login. After watching the show, the viewer is given multiple options to
provide feedback on the social media. The viewer can rate the show
with stars, write reviews or just share their experience on Facebook
or Twitter. The customer data is stored in the cloud and Netflix can
use it to analyse customer's preferences for different shows. Based on
data, Netflix's recommendation engine can generate customised sug-
gestions for individual family members who share the same account.
Thus, the convergence of social, mobile, analytics and cloud technolo-

gies presents the scope for generating new ideas regarding workflows,
methodologies, services and products. In other words, SMAC works
as a comprehensive tool to provide a holistic solution for business in-
novation. This will further provide an opportunity to increase organi-
sational productivity.
Industry experts envisage that the convergence of SMAC will help in

driving customer, businesses and technology organisations together
and will become the leading disruptor to the business-technology eco-
system over the next few years. According to Nasscom's Strategic Re-
view report, 2014, "The Indian software industry's exports may grow by
about 13% in fiscal year 2014 to $87 billion (around 5.4trillion today),
driven by its ability to offer solutions that integrate new business mod-
els such as analytics and cloud-based services, which are part of SMAC
(cloud, mobile, analytics, bigdata and social media services) with tradi-
tional ones."
Implementation of SMAC in any organisation focuses on three funda-

mental changes, which are:
□ Focusing on to create more digitalised business ecosystem. Digi-
talisation helps in combining digital and physical resources within
and outside of an organisation. This integrates technologies and
human talent in innovative ways to achieve operational excellence.
□ Developing a digital operating model that could integrate with
expanding digital ecosystems. Such a model will enable organi-
sations to gain a competitive advantage in terms of scale, pace,
agility and closeness to their customers.

N O T E S
□ Adjusting business architecture to allow easy digital connection

with customers and stakeholders. This helps in deriving business
value.
SMAC is the future enterprise technology as it redefines the existing

technological solutions by delivering a holistic service supported by
the fusion of multiple technology enablers and entrepreneurial ap-
proaches. Let us discuss about these four technologies in detail:
□ Social media: Usage ofsocial media is no more than just a fashion.
It has turned out to be one of the most important tools for enhanc-
ing business performance. Organisations are using social media
in shaping customers' behaviour as well as decisions. The accessi-
bility of social media has grown tremendously as people now take
help of social media to get advice on what products/services to buy,
where to shop, etc. Therefore, social media is offering vast scope
for customer engagement and brand building. There are several
organisations that use social media for sales, marketing and cus-
tomer service. This enables them to use the data generated by
customers to further serve the bigger clusters of customers. Also,
social media encourages a rapid exchange of collaborative infor-
mation which can further increase business marketing results.
□ Mobility: Today, mobile devices have transformed the way people
used to access digital content. The enormous upsurge in the adop-
tion of smart mobile devices has been so promising that it resulted
in the inception of a new stream of business, called m-commerce
(mobile commerce). With the use of smartphones and tablets, dig-
ital content has got an easy accessibility by consumers. Today, us-
ers can get any digital data at any point of time without having to
be stationed at a fixed location. Mobile banking has been proved
an immensely beneficial and innovative product in the financial
services industry. Customers, with the help of these devices, not
only buy products/services but also carry out pre-buying activi-
ties like browsing and product/service comparisons. Thus, youcan
say that mobile devices are becoming an efficient channel between
sellers and customers.
□ Analytics: Every year, organisations generate billions of gigabytes
of data, which if effectively analysed and utilised, can prove to be
an extremely valuable asset for an organisation. This data can be
later used by the organisation as a competitive tool by predicting
accurate buying patterns of customers. An organisation usually
collects various types of data from different sources. These data
types and their sources are explained as follows:
♦ Internet data collected from social media, social networking
links
♦ Primary research data collected from surveys, experiments,
observations, etc.

.' •
N O T E S
♦ Secondary research data collected basically from industry re-

ports, consumer data and other business data
♦ Location data composed from mobile devices
♦ Image data collected from video, satellites, surveillance, etc.
♦ Supply chain data, such as vendor catalogues and pricing,
quality information, etc. collected from vendor, distributers,
suppliers, etc.
Analytics is used by organisations to drive growth, reduce cost,
improve operational excellence and transform business strategies.
0 Cloud: Cloud computing has emerged as one of the most effective
techniques of storing, collaborating and sharing data. It is vastly
adopted by organisations for fostering innovation and improvis-
ing productivity. Cloud computing enables multiple users to par-
ticipate in the process at the same time, thereby ensuring trans-
parency and speed. Further, this technique is cost effective, swift
and less capital intensive. After Amazon WebServices launched a
suite of cloud-based services in 2002, there has been a noticeable
increase in the number of cloud service providers, who are offer-
ing various solutions for different layers of technology ecosystem.
Usually, three major channels namely: public cloud, private cloud
and hybrid cloud are used to provide cloud computing services.
Among these channels, public cloud services own the largest space
in the total market due to their easy accessibility and low adoption
cost.
Thus, you can say that Social Media, Mobility, Analytics and Cloud
(SMAC) are the four pillars that support business innovation across
an organisation. Social media allows businesses to reach their cus-
tomers at any place and at any time as most customers use mobile
technologies to communicate, search and buy products/services. Be-
hind all this social media communication, there is a careful strategy by
organisations to understand customer's experience and preferences
with the help of data analytics and cloud computing software. This
ultimately enables an organisation to:
0 customise content as per the needs of its customers
0 nurture and facilitate innovation
0 increase velocity of processes
0 involve in faster and informed decision making
0 adapt to business environment changes
0 simplify business conducting processes
0 take less time to deliver (concept to market)

N O T E S
9. SMAC unites four technologies- todevelop an

ecosystem, where businesses can increase their operational
performance and maximise their customer reach with minimal
cost.
a. Social media, Mass consumption, Analytics and Cloud
b. Social media, Movement, Analytics and Cloud
c. Social media, Motion, Analytics and Cloud
cl. Social media, Mobility, Analytics and Cloud
10. SMAC helps an organisation in adjusting its business
architecture to allow easy digital connections with customers
and stakeholders. (True/False)
11. haesmerged as oneofthe most effective techniques
of storing, collaborating and sharing data.
ACTIVITY
Using the Internet, find how online retail players like Amazon or
Flipkart utilise social media platforms, such as Twitter, Facebook
and Instagram for brand awareness, relationship building and cus-
tomer service. Prepare a presentation based on your findings.
ROLE OF INTERNET OF THINGS (IOT) IN

SERVICES
The Internet of Things (IoT) refers to a system of connected com-
puting devices, mechanical and digital machines or objects that are
embedded with electronics, software, sensors, actuators and network
connectivity to enable these objects collect and exchange data. In oth-
er words, IoT uses sensors, actuators and communication technolo-
gy embedded into physical objects to keep track and control of these
objects over networks like the Internet. The usage of these devices
involves three main steps, which are:
1. Capturing data using sensors
2. Collecting data over the network
3. Making a decision based on analysis of the data. This decision
making can further help in improving productivity of current
processes.
A thing, in the IoT, can be a person with a heart monitor implant, an

animal with a biochip transponder, an automobile with built-in sen-
sors or anyother natural or man-made object that can be assigned an

•
N O T E S
IP address and embedded with software, sensors, etc. to transfer data

over the Internet.
The concept of IoT has been given by Kevin Ashton, cofounder and
executive director of the Auto-ID Center at MIT. Ashton introduced
the term in a presentation, made to Procter & Gamble in 1999. He ex-
plained the potential of the IoT as:
□ Today computers - and, therefore, the Internet - are almost
wholly dependent on human beings for information. Nearly all
of the roughly 50 petabytes (a petabyte is 1,024 terabytes) of data
available on the Internet were first captured and created by hu-
man beings by typing, pressing a record button, taking a digital
picture or scanning a bar code.
□ The problem is, people have limited time, attention and accura-
cy - all of which means they are not very good at capturing data
about things in the real world. If we had computers that knew
everything there was to know about things - using data they
gathered without any help from us - we would be able to track
and count everything and greatly reduce waste, loss and cost. We
would know when things needed replacing, repairing or recalling
and whether they were fresh or past their best.
IoT has evolved from the merging of wireless technologies, Micro-elec-

tromechanical Systems (MEMS), micro services and the Internet. The
basic architecture of an IoT system consists of smart devices, an em-
bedded system such as a microcontroller with network connectivity
capability, and a gateway/local network, all connected through the In-
ternet.
IoT considers that objects of everyday life, such as roadways, cars,

pacemakers, fitness bands, smart billboards, refrigerators, air-con-
ditioners or even pets can be equipped with sensors that can track
useful information about these objects or things. If these objects have
a unique IP address and are connected with the Internet, the informa-
tion can be shared with equipment, powered by analytics to generate
automated and personalised responses that do not require human in-
tervention. Thus, IoT presents a concept where all smart things in the
world are connected to each other and communicate with each other
with no or minimum human intervention. The goal of IoT is to create
a better connected world with the help of smart objects, providing ser-
vices which are real-time, inexpensive and non-intrusive.
IoT tends to revolutionise the approach to service management as ev-

erything connected to the Internet requires process and technology
support, which ultimately brings the need of service management.
IoT can help service organisations to innovate and improve their
business model, reduce costs and risks and improve the overall val-

N O T E S
ue of services they deliver and support. Also, IoT can speed up and
increase the capabilities of service providers in creating and main-
taining valuable automated processes that could eventually enhance
and transform the overall service delivery system. Take an example of
an organisation where one of their computer devices is not working
appropriately. In such a case, IoT would use sensors embedded within
the device to flag the problem automatically. The service desk would
get the notification and solve the problem even before the user logon
the computer.
Today, a number ofservice organisations, dealing in healthcare, retail,

sports and fitness, safety and security markets, are investing in sen-
sor-enabled devices that connect to the Internet. The IoT with its nu-
merous sensors embedded in devices collects and analyses data that
can beused to understand human behaviour and improve technology,
health services, products, customer service and service management.
IoT is changing traditional behaviour and business models all around
the world.
Service providers are embracing new ways to improve service man-

agement capabilities by increasing focus on delivering valuable design
services with customer value and business outcomes in mind. IoT by
offering support in better service delivery manages user experience
and overall user engagement. Thus, it helps service providers in keep-
ing their promise of delivering the best services to customers.
12. refers to a network of physical objects connected

over the Internet using software, sensors, network connection,
etc.
13. IoT has evolved from the merging of wireless technologies,
Micro-electromechanical Systems (MEMS), micro-services
and the Internet. (True/False)
14. Who gave the concept of IoT?
a. Martin Keynes b. Kevin Ashton
c. Judie Ashton cl. Adam Smith
ACTIVITY
Do you agree that increased interconnectivity of devices and data
could result in better management of service processes? Prepare a
report based on your thoughts.

•• •
N O T E S
IQsuMMARY
0 The term 'IT' refers to the application of technology, such as com-
puters and telecommunications equipment that store, recover,
transmit and operate data or information.
0 Advancement in technology, such as improved automated equip-
ment, voice recognition systems and high-speed data transmission
lines have put a significant impact on service operations and made
service processes more effective.
0 Advancement in technology shows profound impact on the ways
customers interface with service providers.
0 In the service sector, IT helps organisations to formulate their
competitive strategy by creating a market entry barrier for new
competitors.
0 IT also supports organisationsin generating service innovation
and thereby managing a competitive advantage.
0 IT brings certain disadvantages, which are:
♦ High implementation cost
♦ Job elimination
♦ Security breaches
0 The Internet is a worldwide, publicly accessible system of inter-
connected computer networks that usethe Internet Protocol Suite
(TCP/IP) to link devices globally.
0 The Internet enables a service provider to connect with its cus-
tomers through a desktop computer/laptop/tablet with Internet
access using phone, cable or satellite.
0 Adoption of new technologies may bring various challenges to an
organisation. These challenges may relate to:
♦ Customer's readiness to embrace new technology
♦ Employee's enthusiasm to learn new technology
♦ Service innovations that do not directly affect the customers
♦ Quick imitation by the competitors
♦ Lack of budget
♦ Lack of leadership support
0 SMAC is a concept that unites four technologies-social media,
mobility, analytics and cloud to develop an ecosystem, where busi-
nesses can increase their operational performance and maximise
their customer reach with minimal cost.
0 SMAC is the future enterprise technology as it redefines the ex-
isting technological solutions by delivering a holistic service sup-
ported by the fusion of multiple technology enablers and entrepre-
neurial approaches.

N O T E S
□ The accessibility of social media has grown tremendously as peo-

ple now take help ofsocial media for advice on what products/ser-
vices to buy, where to shop etc.
□ Cloud computing has emerged as one of the most effective tech-
niques of storing, collaborating and sharing data.
□ The Internet of Things (IoT) refers to a system of connected com-
puting devices, mechanical and digital machines or objects that
are embedded with electronics, software, sensors, actuators and
network connectivity to enable these objects collect and exchange
data.
□ IoT can help service organisations to innovate and improve their
business model, reduce costs and risks and improve the overall
va lue of services they deliver and support.
a
□
KEYWORDS
Cloud computing: A technique that depends on shared com-

puting resources to run a program on many connected comput-
ers at the same time.
□ Information technology (IT): The application of computers
and telecommunication equipment that storer, ecover, transmit
and operate data.
□ Kiosk: A small stand-alone structure, with either a computer or
display screen used to disseminate information to customers.
□ Machine-to-Machine (M2M): Any technology that enables net-
working devices to exchange information and execute actions
without the manual support of humans.
□ Retailing: A distribution channel function where one organisa-
tion buys products from suppliers or manufactures to sell them
directly to consumers.
□ Voice-over-IP (VoIP): A method and group of technologies,
used for delivering voice communication and multimedia ses-
sions over Internet Protocol (IP) networks like the Internet.
l!:I DESCRIPTIVE QUESTIONS

1. Discuss the role of Information Technology (IT) in services.
2. What are the major limitations in the use of information
technology?
3. Write a short note on the Internet as a service enabler.
4. Discuss major challenges in adopting new technologies m
services.
5. Explain the concept of SMAC.
6. Discuss the role of Internet of Things (IoT) in services.

•
N O T E S
l!il ANSWERS AND HINTS

Competitive Role of In- 1. Information Technology (IT)

formation Technology in
Services
2. True
3. Big data and advanced analytics
4. c. Real-time service delivery
Internet as a Service En- 5. Internet

abler
6. False
7. Customers
Challenges in Adopting a
New Technology in Ser-
vices
8. True
Role of SMAC (Social, Mo- 9. d. Social media, Mobility, Analyt-
bility, Analytics and Cloud) ics and Cloud
in Service Delivery
10. True
11. Cloud computing
Role of Internet of Things 12. Internet of Things (IoT)
(IoT) in Services
13. True
14. b. Kevin Ashton

l. The role of technology in services can be explored in various
forms, such as emergence of technology-enabled self-service or
Internet-enabled commercial transactions. Today, IT shows a
profound impact on the ways customers interface with service
providers. Refer to Section 9.2 Competitive Role oflnformation
Technology in Services.
2. High implementation cost, job elimination and security breaches
are among the few limitations that may come in the use of
information technology. Refer to Section 9.2 Competitive Role
of Information Technology in Services.
3. The Internet works as a connecting tool that links a service
provider to its customers in the most cost-efficient manner. Refer
to Section 9.3Internet as a Service Enabler.

N O T E S
4. Capability of adopting a new technology is one of the biggest

challenges that organisations face. Apart from this, customer's
readiness to embrace new technology, employee's enthusiasm
to learn new technology, quick imitation by competitors, lack of
budget, etc.are fewother majorchallenges that a service provider
may face while adopting new technologies. Refer to Section
9.4 Challenges in Adopting New Technologies in Services.
5. SMAC is a concept that unites four technologies namely social
media, mobility, analytics and cloud to develop an ecosystem,
where businesses can increase their operational performance
and maximise their customer reach with minimal cost. Refer
to Section 9.5 Role of SMAC (Social, Mobility, Analytics and
Cloud) in Service Delivery.
6. loT uses sensors, actuators and communication technology
embedded into physical objects to keep track and control of
these objects over networks like the Internet. Refer to Section
9.6 Role of Internet of Things (IoT) in Services.
mau• suGGESTED READINGS & REFERENCES

SUGGESTED READINGS
□ Fitzsimmons, J., & Fitzsimmons, M. (2008). Service Manage-
ment (1st ed.). Boston, MA: McGraw-Hill.
E-REFERENCES
□ Author, G.(2017). The Top Ten Challenges of Implementing New Tech-
nology - Getting Smart by Guest Author - digital learning, edreform,
EdTech, teacher PD, technology. Getting Smart. Retrieved 6 April
2017, from http://www.gettingsmart.com/2013/08/the-top-ten-chal-
lenges-of-implementing-new-technology/
o Choudhury, V., & Choudhury, V. (2017). SMAC: What, Why and
More. iamwire. Retrieved 6 April 2017, from http://www.iamwire.
com/2015/04/smac-what/113358
□ It's all about SMAC (Social, Mobile, Analytics and Cloud) - Netmagic.
(2017). Netmagicsolutions.com. Retrieved 6 April 2017, from http://
www.netmagicsolutions.com/blog/its-all-about-smac
□ SMAC Overview. (2017). Cahead.com. Retrieved 6 April 2017, from
http://www.cahead.com/ourservices/smac/l 49
□ What is Internet of Things (IoT)? - Definition from Whatls.com.
(2017). IoT Agenda. Retrieved 6 April 2017, from http://interne-
tofthingsagenda.techtarget.com/definition/Internet-of-Things-IoT

CONTENTS
10.1 Introduction
10.2 Service Operations Management in IT and BPO Sectors
Activity
10.3 Service Operations Management in the Banking and Finance Sector
Activity
10.4 Service Operations Management in Healthcare and Hospitality Sectors
Activity
10.5 Service Operations Management in the Telecommunications Sector
Activity
10.6 Service Operations Management in the Education Sector
Activity
10.7 Service Operations Management in the Media and Entertainment Sector
Activity
10.8 Summary

•• •
N O T E S
STARBUCKS- MANAGING SERVICE OPERATIONS WITH

TOTAL SERVICE COMMITMENT BY EMPLOYEES
Source: www.starbucks.com
Based in Seattle, Starbucks Corporation is the most popular chain

ofcoffeeshops inthe world. Starbucks deals in drip-brewed coffee,
espresso-based hot drinks, other hot and cold drinks, snacks and
products such as mugs and coffee beans. As of November 2016, it
operates 23,768 locations worldwide, including about 13,107 in the
United States itself.
The reasons of Starbucks global popularity are its world-class ser-

vice operations management. Starbucks creates comfortable sur-
roundings for consumers to socialise besides offering fair-priced
products. It is also known for the satisfaction of its employees. The
annual turnover rates of employees and managers at Starbucks
are 65%and 25%, respectively. The lower employee turnover rate
implies that Starbucks is an employee-friendly organisation. This
helps Starbucks not only in retaining its employees but also in
maintaining total service commitment.
STRONG COMMITMENT FROM EMPLOYEES
Strong commitment from employees is only possible when they

themselves are well-motivated. Motivation is the most essential
part of employees' work life, as it inspires them to put in their
best efforts to attain organisational goals. Therefore, motivation
is needed to encourage employees to work efficiently.
Organisations have been looking out for ways to motivate their

employees and increase their productivity for a long time. They
use various techniques, such as monetary and non-monetary ben-
efits, to motivate their employees.
Chief Executive Officer (CEO) of Starbucks, Howard Schultz, ac-

knowledged that the main reason of the organisation's success

SERVICE OP.ERATIONS MANAGEMENT IN DIFFERENT SECTORS 197
N O T E S
was its employees. Starbucks adopted various methods to gen-

erate strong employee commitment for the organisation. The
methods that Starbucks uses to attain strong commitment from
employees are:
□ Equal treatment: Managers at Starbucks treat each employ-
ee equally and consider every employee a partner irrespective
of his/her designation. In addition, they try to reduce the gap
between supervisors and entry-level employees. This helps in
maintaining a friendly working environment, which in turn
motivates employees.
□ Listen to employees: Starbucks has an efficient communi-
cation network for its employees, which maintains effective
communication flow at all levels of the organisation. The or-
ganisation also pays great attention to the needs of employ-
ees. For example, the working hours for each employee are
planned by the managers as per the employees' individual
requirements. Weekly interviews are conducted to know the
employees' needs and feedback. A special survey, Partner
View Survey, is also conducted in every two years to seek the
opinion and suggestions from the employees. Starbucks in-
volves every employee in creating and developing plans and
in accomplishing goals. In this way, it gets innovative, new and
fresh ideas from its employees.
D Good welfare measures: Starbucks offers its employees wel-
fare policies such as commodity discounts and medical insur-
ance. The employees or partners who work for more than 20
hours a week are entitled to these benefits. Starbucks also al-
locates stock dividend to its employees for good performance.
This policy motivates the employees to increase sales to earn
more profits. Starbucks believes that its employees are its
most significant asset. The respect shown to the employees
and the well-established work environment enable Starbucks
to provide the best services to customers and enhance organ-
isational profits.
STRATEGIES TO MAINTAIN GOOD RELATIONSHIP
Starbucks uses a well-developed system to maintain a strong re-

lationship between its managers and employees. The managers
of their retail outlets use the title partner to minimise the gap be-
tween them and entry-level employees. Next, the suggestions and
opinions ofemployees are always considered important. Likewise,
the employees have a right to participate in the process of mod-
ifying organisational policies. Thus, Starbucks develops a sense
of participation in its employees and makes them feel respected.

•
N O T E S
In addition, Starbucks sets difficult and specific goals and asks all
employees to achieve the goals. The employees select their tasks
and get feedback on the results. This concept helps in increasing
the importance of teamwork and enthusiasm among employees,
which in turn helps in enhancing the profit of Starbucks.
CONCLUSION
Starbucks' attempt to change the behaviour and perspective of

global consumers towards coffee helped it grab global attention.
Starbucks, which started its business journey with a small retail
coffee shop in North America, has now become one of the fast-
est growing organisations in the world. It is characterised by its
strong commitment to and from employees. Starbucks shows how
strong service operations management serves as a key factor in
getting total service commitment from employees in an organisa-
tion.

N O T E S

>- Explain the role of service operations management in IT and
BPO sectors
>- Discuss the importance of service operations management
in the banking and finance sector
>- Explain the role of service operations management in health-
care and hospitality sectors
>- Discuss how service operations management plays an im-
portant role in the telecommunications sector
>- Describe the role of service operations management in the
education sector
>- Explain the role of service operations management in media
and entertainment sectors
■ua■INTRODUCTION
In the previous chapter, you studied the role of information technolo-
gy(IT) in service operations. In this chapter, let us discuss how service
operations are managed in different service sectors such as IT sector,
hospitality sector, healthcare sector, education sector and entertain-
ment sector.
Service operations management is all about organising the designed

processes with an aim to deliver a service. In other words, it is the
management of business processes that are used to design, manufac-
ture and deliver services. Service organisations design their service
operations to satisfy the needs of customers. For example, organisa-
tions that provide transportation, such as airlines, design their opera-
tions in a manner that could help customers reach their destinations
as quickly and safely as possible.
Similarly, organisations that provide courier delivery services, such as

FedEx, organise their operations to pick up, sort and deliver packages
in a timely manner. Educational institutes focus on providing quali-
ty education. Food chains, like Domino's Pizza, provide both services
and products, focus on producing a quality product and deliver it sat-
isfactorily. Thus, you can say that organisations, irrespective of their
sectors, organise and manage their operations to serve a common goal
of delivering quality services to their customers. However, the way of
managing service operations in an organisation may differ from one
sector to the other.
Service operations management is needed for various reasons, such

as for streamlining service availability, eliminating waste, meeting
customer demand and dealing with expanding global competition

.. •
N O T E S
and uncertain economic times. Service operations management re-

quires organisations to critically evaluate the performance and agility
of their service operations. They should focus on managing their op-
erations to build good relations with both customers and suppliers.
Managing operations in the service sector is not as easy as in the man-

ufacturing sector, where it is part of the business and limited to the
production of goods from raw material, and distribution of finished
goods to customers. In the service sector, operations are managed
with the help of diverse front line tele-sales, call centres, branch op-
erations, service centres and back offices, etc. It often involves a high
volume of complex tasks that are performed on behalf of customers.
This chapter begins by explaining the role of service operations man-

agement in IT and BPO sectors. Next, it discusses the implication of
service operations management in the banking and finance sector.
The chapter also explains the role of service operations management
in the healthcare and hospitality sectors. The chapter further explains
how service operations management plays an important role in the
telecommunication and education sectors. In addition, the chapter
discusses the importance of service operations management in the
media and entertainment sector.

IN IT AND BPO SECTORS
The Information Technology (IT) and Information Technology En-
abled Services (ITES) sectors form an important part of the service
industry. Today, many industries dealing in computer hardware, soft-
ware, the Internet, semiconductors, electronics, e-commerce, telecom
equipment and computer services are linked with IT. The IT sector is
mainly concerned with the identification, collection, storage, process-
ing and retrieval of data, which can be further processed to generate
meaningful information. The ITES sector covers the widespread ap-
plication of information technology in day-to-day tasks, ranging from
business applications, which address an organisation's needs, to indi-
vidual needs. The ITES sector includes IT services, engineering de-
sign, R&D services and Business Process Outsourcing (BPO).
Service operations management in any IT organisation is concerned

with network administration, software development and installation,
and planning and management of the organisation's technology life
cycle. In general, service operations management in any ITorganisa-
tion deals with three major areas: network infrastructure, server and
device management and computer operations and help desk. Let us
discuss how service operations are performed in these areas:
0 Network infrastructure:It covers service operations related to:
♦ Infrastructure: It includes all networking functions used for
internal and external IT communication [router, hubs, fire-

N O T E S
walls, Domain Name System (DNS) servers, file servers, load

balancing, etc.].
♦ Telecommunication: It involves the configuration and man-
agement of all internal and external communication lines so
that customers, employees, vendors, etc. can access applica-
tions.
♦ Port management: It involves the management of opening and
closing ports on the firewall to allow the network to communi-
cate with outside servers.
♦ Security: It involves all major operations that ensure the secu-
rity of the network and prevent/counter attacks from outside
sources.
♦ Remote access to the network for users: It involves allowing
access from outside the network, using techniques like virtual
private network (VPN), two-factor authentication, etc.
♦ Internal telephone system management: It involves the man-
agement of internal or organisational phone systems.
♦ Monitoring network: It involves monitoring and alerting net-
work personnel in case of any problem with network resources
(including storage, services such as email or file servers, appli-
cation servers, communication, etc.).
□ Server and device management: It covers service operations re-
lated with server management for applications and infrastructure
(including configuration, maintenance, upgrades, patching, repair,
etc.). In addition, server and device management involves the fol-
lowing operations:
♦ Network and individual storage management: It ensures that
all applications have access to the storage that maybe needed
for disk, memory, backup and archiving.
♦ PC and mobile provisioning: It involves the acquisition, con-
figuration, management, break/fix, application installation and
configuration of desktop and laptop devices. In addition, the
area covers operations related to the assignment and manage-
ment of mobile phone contracts and phone numbers. Apart
from this, desktop, laptop and mobile device software applica-
tion licensing and management also come under this area.
□ Computer operations and help desk: It covers service operations
related with:
♦ Data centre management: This involves operations associat-
ed with the management of physical locations including floor
space where the equipment are kept. In addition, maintenance
of electricity, cooling, battery backups, etc. also come under
this area.

•
N O T E S
♦ Help desk management: Help desk works as a point of contact

for users to gain assistance in solving issues. It provides sup-
port to various IT operations with a responsibility to provide
assistance in troubleshooting and resolving regular problems.
A help desk generally manages its requests through software
such as an issue tracking system.
♦ User provisioning: It involves activities that help in the cre-
ation, modification and authorisation of user profiles on all sys-
tems.
♦ Auditing: It involves activities used to conduct an official in-
spection of the network in front of outside entities, such as
corporate auditors, government regulatory agencies, business
partners, etc.
♦ Communicating with network users: It refers to contacting
network users or clients in case of any inconsistency occurring
in network services.
♦ Backup management: It involves operations used to establish
and run daily, weekly, monthly and yearly backup to assure
that data can be recovered at any time.
♦ Computer operations:It involves activities performed to print
and distribute reports, invoices, cheques and other output
from a production system.
The sub-areas of service operations in IT present the way of organis-

ing and managing service operations in an IT organisation. However,
it should be noted that different IT organisations organise and man-
age their service operations in different ways, depending on their own
needs and resources.
SERVICE OPERATIONS MANAGEMENT IN THE BPO SECTOR
BPO is a division of outsourcing that involves contracting specific

business process operations and responsibilities to a third-party ser-
vice provider (BPO organisation). In other words, a BPO organisation
performs a process of another business organisation on certain terms
and conditions and gets paid for it. Usually, a BPO organisation deals
with the application of software for carrying out many tasks that make
the functioning of the client organisation easier. Service operations
in such an organisation focus on managing relationships with clients
through a formal agreement, called service-level agreement (SLA).
An SLA refers to a negotiated agreement between the customer and
the service provider. It establishes performance expectations and op-
erating parameters between the parties of the agreement for each lev-
el of services. The SLA includes several negotiation points such as
services, priorities, responsibilities, guarantees and warranties. Each
point defines service level requirements. In simple words, an SLA can
be defined as "If you provide this level of services, I will be able to do
this and that will cost this much."

N O T E S
SLA is a two-way process that requires both the parties to negotiate

on the required service level and get agreed on certain points. The
SLA can be in the form of a legal contract that is formal in nature or
an informal contract that is usually made to maintain internal depart-
mentarlelationships. In the BPO sector, where more than 50 per cent
of outsourcing contracts involve disputes, a clearly defined SLA is of
much significance. Therefore, while preparing an SLA, the involved
parties should think ahead of all possible dispute situations and clear-
ly define all aspects of services and service levels.
Service operations in any BPO organisation focus on regular and sys-

tematic review of the organisation's performance against the SLA.
Apart from this, service operations also aim at organising the follow-
ing services at the BPO organisation:
D Back-office service: The term back-office is used to refer the area
of a business organisation which generally remains hidden from
the eyes of customers. Depending on the profile and requirements
of various organisations, back-office tasks differ across organisa-
tions. For example, back-office tasks in the banking sector include
keeping records of account details and transactions of customers
by IT professionals, whereas in investment firms, back-office tasks
include the handling of various administrative functions such as
record keeping, trade settlement and regulatory compliance sales.
Most back-office processes of an organisation, such as those relat-
ed to human resources, finance and accounting, are not directly
related to customers. However, these processes play a significant
role in the overall functioning of an organisation. Therefore, it is
necessary for every organisation to have efficient back-office sup-
port in place.
D Front-office service: Front office refers to an area of a business
organisation where customers arrive and encounter the staff. Usu-
ally, front-office staff deals with customers; thereby, affecting the
organisation's revenues directly. The front-office receives custom-
er's information and passes it to the relevant department within
the organisation. It works as a face of the organisation. There-
fore, the organisation requires to train and develop the skills of its
front-office staff so that they can better deal with customers. The
outsourced services of the front-office include customer-related
services such as advertising and sales support.
l. Which of the following service operations are covered under

the head of computer operations and help desk?
a. Telecommunications
b. Port management
c. Remote access to the network for users
d. Data centre management

'. •
N O T E S
2. isadivision of outsourcing that involves contracting

specific business process operations and responsibilities to a
third-party service provider.
3. An SLA denotes a negotiated agreement between the customer
and the service provider. (True/False)
ACTIVITY
Select a BPO organisation of your choice. Using the Internet, iden-
tify how front-office service operations are performed in that or-
ganisation. Prepare a short note based on your findings.

IN THE BANKING AND FINANCE SECTOR
The financial and banking sector involves institutions such as banks,
mutual funds, insurance companies and credit unions that are in the
business of money management either by investing money to earn
profit or maintaining the security of customer's money. Service oper-
ations management in any financial institution aims at attracting and
retaining customers by providing them new and innovative schemes
and services. With an increase in the financial and banking services
and number ofcustomers, it has become difficult for any organisation
to manage its service operations manually. Therefore, organisations
have adopted various technologies in order to smoothly perform their
financial and banking activities. Such technology-based financial and
banking services are also called hi-tech services. Some hi-tech ser-
vices are: Electronic Fund Transfer (EFT), Electronic Clearing Ser-
vices (ECS) and Real Time Gross System (RTGS).
Service operations management in financial and banking organisa-

tions focuses more on electronic-based operations such as E-banking.
E-banking refers to electronic banking or Internet banking in which
customers can perform most essential banking functions through
their bank accounts by connecting to the website of their banks. In
E-banking, the bank maintains a Web-enabled centralised database
that holds records of all its customers. Customers can access any of the
facilities provided by the bankon the website by selecting appropriate
menu items. Electronic transactions have changed the way both cus-
tomers and service organisations perform their roles and functions.
For example, today we have a new system to deliver cash instantly to
customers by using Automated Teller Machine (ATM).
Basically, in any financial and banking organisation, service opera-

tions are performed at three levels, depending on access levels provid-
ed to customers. These three levels are:

N O T E S
□ General information system: It provides a general purpose infor-

mation, such as branch locations, interest rates provided by the
bank, information regarding loans and fixed deposits and infor-
mation about various products and services provided by the fi-
nancial institution to its customers. The communication between
the financial institution and the customer is normally carried out
through e-mail, as there is no direct interaction between custom-
ers and the application system of the bank. The general informa-
tion system also provides information about recruitment process-
es within the financial institution. A user can download various
application forms, such as recruitment forms, depositing forms
and withdrawal forms, from the institution's website. Moreover,
the information-only system does not require any type of authen-
tication or authorisation of customers to provide the required in-
formation to them.
□ Electronic information transfer system: The electronic informa-
tion transfer system enables customers to access account-related
information such as their balance, fund transfer details, transac-
tion details and bank statements. The retrieved information or
data is in the read-only format. To obtain the required information,
customers have to log into their user accounts with their custom-
er ID and passwords on the Website of their financial institution.
After the customers have been authenticated, the requested in-
formation is retrieved from the application system in either batch
mode or offline mode.
□ Fully electronic transactional system: It provides a bi-directional
connectivity between customers and financial institutions, where
customers cannot only retrieve the required information but can
also do fund transactions. In addition, customers can update their
personal information, such as e-mail address and mobile number,
online on the financial institution's website. The fully electronic
transactional system is based on various technologies such as in-
terbank payment gateways and legal infrastructures. Some of the
fully electronic transactional systems are:
♦ ATM: ATM machines are one of the fully electronic transac-
tional systems introduced bybanks forfacilitating easy and fast
cash withdrawal by their customers from their bank accounts.
To operate an ATMmachine, a customer merely needs to car-
ry an ATMcard, which is a specialised plastic card. The ATM
card is issued to the customer along with a specific combina-
tion of digits that act as an authentication ID. The card when
used with this combination of digits allows a customer to with-
draw money from his/her bank account anytime and anywhere
in the world. ATMcards have minimised the requirement for
cheque books, banking hour restrictions and paper-based ver-
ification to carry out a money withdrawal process. Apart from
withdrawing money, customers can also obtain information re-
garding their account details from an ATMmachine. In other

'' •
N O T E S
words, the ATM machine acts as a fund transfer terminal that

can also handle cash deposit information, manage cash with-
drawals, account transfers, pay bills and balance queries.
♦ Credit cards/debit cards: The evolution of the credit card is
also an important development in the banking/financial sector.
The person who owns a credit card can spend money, whenev-
er or wherever required, within the fixed limits. A credit card
is similar to a post-paid card in which, after reaching the given
limit or completion of the due duration, the customer has to
pay the credited amount. Debit cards, on the other hand, are
similar to prepaid cards that allow the holder to transfer money
electronically from their bank account while buying anything.
Whenever the customer uses the debit card to purchase some-
thing; the exact bill amount is deducted from the customer's
bank account through Internet banking. When a customer ap-
plies for a debit card, a Personal Identification Number (PIN) is
issued to him along with the debit card. The customer is identi-
fied through the PIN whenever he or she makes a purchase. In
this mode, customers can never overspend as the amount they
can spend is equal to the amount they have in their account.
♦ Smart card: A smart card isa standard credit card-sized plastic
card with an embedded microchip containing integrated cir-
cuits. Often called electronic wallet, it provides not only mem-
ory capacity but also computational capability for processing
data. Smart cards can hold a large amount of information,
ranging from personal to professional, such as medical health
information and information regarding any transactions made
by the card owner. The magnetic stripe of a smart card can
store several hundred times more data than a conventional
card. In addition, it is more reliable and secure than a credit or
debit card. It can perform tasks such as authentication, identi-
fication, data storage and application processing.
4. The system provides general purpose information,

such as branch locations, interest rates provided by the bank
to its customers.
5. ATM, credit cards and smart cards are examples of electronic
information transfer system. (True/False)
ACTIVITY
Visit a bank, where you have an account. Observe how banking

operations are managed to execute transactions correctly. Write a
short note on howthis further helps in minimising risk and maxim-
ising quality of service.

N O T E S

IN HEALTHCARE AND HOSPITALITY
SECTORS
The healthcare sector (medical sector) refers to the industry that of-
fers goods and services for the treatment of patients with preventive,
curative, rehabilitative and palliative care. Today, the healthcare sec-
tor is one of the world's largest growing sectors, consuming over 10
per cent ofgross domestic product (GDP) of most developed nations.
Service operations management in the healthcare sector aims at de-

signing, planning, executing and improving healthcare systems within
a facility to create and deliver healthcare services efficiently. It trans-
forms inputs such as personnel, information, technology, equipment,
and capital into healthcare services (output). It also helps in improv-
ing the quality of services provided by the hospital.
Hospitals are facilities used for providing curative and preventive care
to the patient irrespective of race, religion, economic and social status.
They also provide educational programmes to medical students and
professionals. Various operations at healthcare facilities can be broad-
ly categorised into twogroups, which are shown in Figure 10.1:
c --I_n_tr_am_u_r_a_lO_p_er_a_t_io_n_s_F_u_n_c_ti_on s
c----E_x_tr_a_m_u_r_a_l_O_p_e_ra_t_io_n_s_F_u_n_c_ti_o_n_s _,
Figure 10.1: Different Operations at a Healthcare Facility
Let us discuss these operations indetail.

□ Intramural operations: These operations are performed by a
healthcare facility within its premises or territory. Intramural op-
erations include:
♦ Therapeutic services: These include:
Diagnostic functions that aim to find and diagnose a dis-
ease or the cause of the disease with the help of invasive or
non-invasive procedures.
Curative functions that encompass any care provided to pa-
tients bythe hospital staff, such as doctors, nurses, physical
therapists, dieticians and technicians, on an outpatient or
inpatient basis. Health education to patients as well as the
general public is also included in curative functions.
Rehabilitative functions such as physical therapy, counsel-
ling, occupational therapy, which involve supportive care
given to patients after a major injury or operation.

': •
N O T E S
Emergency services are one of the most important service

operations of a hospital. A patient coming to a healthcare
facility in a medical emergency, such as major or minor
trauma, injury, illness, accident, burn, poisoning, cardiac
arrest, etc. receives lifesaving medical help from the de-
partment performing these services.
♦ Preventive services: These include:
Child clinics and vaccination centres
Antenatal and postnatal services
Family planning and welfare centres
Health education
Control of communicable diseases
Diabetic clinics
♦ Educational services: These include:
Undergraduate, postgraduate and postdoctoral medical ed-
ucation services
Undergraduate, postgraduate and doctoral nursing educa-
tion
Specialty education
Paramedical college
Community healthcare seminars
♦ Research services: These include:
Clinical medicine related research
Hospital administration related research projects
0 Extramural operations: These service operations are performed
by a healthcare facility in the community or surrounding areas
outside its territory. Extramural operations include:
♦ Homecare services for patients who require medical care at
home by providing nursing services.
♦ Health camps in schools, colleges, shopping malls and rural ar-
eas.
♦ Day care centres for performing minor medical procedures
and operations such as eye care camps, dental camps, ortho-
paedic camps, etc.
Service operations management at a healthcare facility identifies the

most efficient and optimal steps to improve and support patient care
services. It aims at performing all the functions in a systematic man-
ner. For example, assigning the right task to the right person is an
important aspect of service operations management at any hospital.

N O T E S
Besides, service operations management helps in:

D Producing the right kind of healthcare services: The quality
of healthcare services depends on the needs of patients. This is
because different patients require different levels of treatment.
Therefore, services provided by health care centres should be re-
sponsive to individual patient preferences, needs and values.
0 Maintaining timeliness: Timeliness refers to the timely delivery
of services to patients. It is one of the most important parameters
in the healthcare industry to judge the effectiveness of a health-
care facility. Timely delivery is possible only when medical staff
ensures the optimal utilisation of available resources. Therefore,
services provided by the healthcare facility should help in reduc-
ing waiting time and delays in treatment.
D Ensuring efficient performance: Service operations management
is also needed for ensuring efficient operations at any healthcare
facility. Healthcare facilities should avoid waste in equipment, sup-
plies, ideas and energy. In other words, healthcare facilities should
be efficient enough to provide quality services to their patients.
D Minimising risk: Accepting risks and the extent to which efforts
are taken for minimising risks affect the reliability of an organisa-
tion. Service operations management also aims to minimise risks
involved in various functions.
0 Achieving steadily high quality: The process of achieving steadily
high quality in the healthcare sector involves "doing the right thing
correctly." This requires physicians, nurses and all practitioners to
make right decisions regarding healthcare services with the right
amount of skills, judgment and timeliness of execution. Service
operations management is also needed to ensure sustained high
quality in all functions across a healthcare facility.
SERVICE OPERATIONS MANAGEMENT IN THE HOSPITALITY

SECTOR
The hospitality sector is another major sector within the service in-
dustry. It includes lodging, restaurants, event planning, theme parks,
transportation, cruise lines and additional fields within the service in-
dustry. Today, the hospitality sector is a multi-billion dollar industry.
However, the growth of the hospitality sector depends largely on the
availability of leisure time and disposable income of people in general.
Service operations management in the hospitality sector is vital in en-

suring the long-term sustainability of food and lodging facilities. This
can be achieved through maximising revenue, providing high quali-
ty products and services and integrating technology. In other words,
service operations management in the hospitality sector involves con-
sistent delivery of products and services according to expected stan-
dards.

•
N O T E S
As the hospitality sector is a people-oriented sector, service opera-

tions management in this sector aims at providing better services to
customers to foster a long-term relationship with them. With ever-in-
creasing competition, the need for managing customer expectations
is also increasing. Service operations management, therefore, focuses
on quality dimensions to help the hospitality sector understand the
needs and preferences of customers and maintain profitable relation-
ships with them.
Service operations management in the hospitality sector typically

consists of the following steps:
1. Developing service policies and procedures: Service operations
management in any hospitality organisation begins with the
development of service policies and procedures. These policies
and procedures should be in line with the desired image of the
organisation and target customers. For this, managers should
have a clear idea about the service quality image they want
to project in the market. In addition, they should have clear
knowledge ofwhat services are needed bytheir target market and
at what price. For example, The Oberoi Group operates 28hotels
across five countries, under the 'Oberoi' and 'Trident' brands.
The Group also provides flight catering, airport restaurants,
travel and tour services, car rentals, project management and
corporate air charters. A distinctive feature of service policies
and procedures of the Oberoi Group's hotels is their highly
motivated and well-trained staff members who are competent
enough to provide exceptionally attentive, customised and high
quality services.
Heymann (1992) explained that customer-driven policies and
procedures should be developed within the organisation by
taking inputs from customers and from employees who have
direct contact with customers. The views and opinions of
customers and employees should be incorporated in the policy-
making process for generating strong and realistic policies
and procedures. However, the organisation should ensure
that in order to achieve total service commitment, all policies
and procedures should be consistent, effective and efficient
throughout organisational operations and must address all the
significant dimensions of service quality.
2. Attaining strong commitment from service employees: In
addition to strong policies and procedures, a quality service
requires commitment on several levels. Service quality should
be designed holistically. In other words, the only way to achieve
total service commitment is when an organisation adopts a team
approach, where allemployees in each department makean effort
to provide quality services. For this, employees should not only
fully comprehend the significance of providing quality services
to customers but also understand and respect the roles that

N O T E S
other departments play in delivering quality services. According

to Kirwin (1992), "A commitment to service means everyone in the
organisation must have the power to serve the needs and problems
of the guests."
Top management also plays an important role in managing
service operations as it guides the organisation to achieve quality
services. The role of management depends on the development
of efficient employees. Managers hire, train, motivate and reward
employees who, in turn, influence the organisation's ability to
produce quality work.
For example, KFC, a member of the Yum! Brands, is one of the
most standard organisations in the world. At KFC, they follow an
approach where all employees at various levels make their best
effort to provide quality services. Lets' see employees at various
levels in KFC and their roles in providing quality services:
♦ Restaurant team members: These are the basic level em-
ployees, who are considered the face of KFC as they deal with
customers directly and are responsible for providing quality
experience to their customers.
♦ Shift supervisors: They lead the restaurant team and meet
customers' expectations with competent management skills.
♦ Assistant managers: These are management level employ-
ees, who are usually second-in-command and have a key re-
sponsibility of training and developing the restaurant team
to provide excellent services to customers.
♦ Restaurant General Managers (RGM): These are top lev-
el management employees who are responsible for building
their team, serving customers and growing business.
3. Measuring the effectiveness of the on-going service plan:
Successful management of service operations at any hospitality
organisation needs constant and regular assessment and
measurement of on-going service plans and procedures. An
effective performance measurement system should be developed
to check service standards and ensure quality services.
Customer feedback is one important method of measuring
service performance, yet only 2-3% of customers respond with
genuine feedback. According to Heymann (1992), "Systems of
assessment must be devised with intent to improve performance."
Therefore, to ensure service performance improvement, the
service measurement should focus on multiple dimensions of
service quality.
Factors such as customers' expectations and service standards influ-

ence customers' perception of service quality and determine the sig-
nificance of on-going performance measurement and service plans.
For example, Qantas Airways is the Australia's largest domestic and
international airline that is regarded as the world's foremost long dis-

•
N O T E S
tance airline. Qantas is considered to be one of the world's most inno-

vative airlines that keep improving its services. Qantas relies heavily
on measuring the effectiveness ofon-going services and improving the
same by assessing customer feedback. For instance, after receiving
huge positive feedback from customers, Qantas offers their customers
ground in-flight WiFi entertainment technology that is the first of its
kind by any airline.
6. Functions that are performed by a healthcare facility within

its premises or territory are called
7. Restaurants, event planning, theme parks, cruise lines, etc.
come under the hospitality sector. (True/False)
ACTIVITY
Visit a healthcare centre and identify various service operations

performed by the facility. Prepare a list of those operations.

IN THE TELECOMMUNICATIONS
SECTOR
The telecommunications sector encompasses organisations that pro-
vide communication services through phone or the Internet. Telecom
organisations create infrastructure that allows data to be sent any-
where in the world. The largest players in the sector are wireless op-
erators, satellite companies, cable companies and Internet service
providers.
Technically, telecommunications includes any communication over a

distance, which could take place through telephone, television, radio,
wireless network, computer network, telemetry or other means. How-
ever, traditionally, the term 'telecommunication' is used for telephone
service.
Today, telecommunication is considered as a way of life. It affects ev-

erything that youdo - work, play, socialise, entertain, exercise, study,
serve, teach, rest or protect. It has changed the way you use your
money and time. With technological advancement you can access the
Internet, play videos or track your movements via the global position-
ing system (GPS) technology on your cell phones. This is merging the
boundaries of telecommunications and other industries, such as com-
puter hardware and consumer electronics. Telecommunication is not
only shaping culture and society but also transforming business and
economics. It plays an important role in addressing the business needs

N O T E S
of numerous sectors, including entertainment, healthcare, education

and advertising by reducing operational costs, enhancing operational
performance and speeding business processes.
A telecom organisation manages its service operations through an as-

sortment of communication channels, which are:
□ Wired: When the electronic means of communication was first
introduced, the only way to communicate was through the trans-
mission of a signal over a wire. Telegraph and landline telephone
communication are the two basic types of wired communication,
used in the wired telecommunications sector.
□ Wireless: With technological advancement, it has become possible
to communicate via wireless communication channels. It involves
communication through cell phones or over the Internet. Today,
people need not plug in a cord to share their communication with
others. Telecom organisations are working to enhance wireless
telecommunication tools, including cell phones and computers,
with wireless Internet capabilities. This branch ofthe telecommu-
nications sector is becoming highly popular as with new advance-
ment it is facilitating speedy services to customers.
□ Satellite: Satellite services are integral to contemporary telecom-
munications, as they facilitate everything from navigation systems
to video broadcast and data transmission. Satelliteservices include
fixed satellite services such as Intelsat; low earth orbit companies
(LEOs), such as Globalstar and mega-LEO Teledesic; direct broad-
cast satellite companies; and the global positioning system (GPS).
Apart from these channels, telecom organisations perform several

research work for constant development of new systems that could
revolutionise the way people communicate with each other. Service
operations, involved in research work at any telecom organisation, fo-
cus on developing new communication ideas and bringing these ideas
to fruition. With the help of these operations, telecom organisations
are today able to deliver high standards ofservices to their customers.
They are continuously investing and adopting new technologies, such
as cloud and analytics, to increase and manage their service opera-
tions' agility and efficiencies.
Today, telecom organisations are focusing more on connecting with

customers to provide them better service experience and ensuring
their loyalty towards the organisation and its products/services. To-
day, customers are ardent data users and Internet surfers. This has
resulted in making mobile services and communication service pro-
viders an integral part of the consumer's life. In a market flooded with
multiple players, 'service experience' is becoming an important deter-
minant of brand loyalty.
Customers nowadays are becoming very particular about products/

services they opt for. They select a service provider having a proven

•
N O T E S
track record of consistently delivering superior customer service. In

addition, they want their concerns addressed promptly through their
preferred interaction mode or touch-points, be it a phone call or a so-
cial media platform. Managing service quality through various touch-
points is vital for creating a good brand image. It is constantly becom-
ing a challenging factor for the telecom service provider to manage
the quality of services provided through these touch-points. With mul-
tiple telecom players offering almost similar products/services, creat-
ing a unified, linked and customised service experience could be an
effective differentiating factor.
To deal with such challenges, telecom service providers are focusing

their service operations on developing a comprehensive information
management system powered by Big Data and advanced analytics.
This requires businesses to acquire or upgrade necessary skills, pro-
cesses and technologies to ensure that customer information is easily
accessible from all touch-points in real time. This has led the telecom
service providers to use Computer Telephony Integration (CTI), In-
teractive Voice Response (IVR), intelligent call routing and knowledge
management systems to provide continuous service delivery as per
the customer's expectations. The comprehensive use of information
management system helps telecom service providers in managing
their operations by:
0 Capturing and managing touch-point data effectively
0 Integrating with a comprehensive customer database to identify
the customer's requirements
0 Distributing necessary customer data across service channels
0 Functioning efficiently in real time
0 Customising service experience to the most possible extent
Let us now understand with the help of an example how telecom ser-
vice providers manage such service operations. Consider a scenario
where a complaint or service request is registered through a service
touch-point, which could be phone, online portal, in-store request, etc.
Now, with the help of advanced analytics, the service provider would:
1. Gather all specifications of the request
2. Map the user identity with details present m the customer

relationship management (CRM) system
3. Route the request to the most appropriate service channel for
response
4. Update the commencing service channel with relevant
information about the complaint/request, as it progresses
The abovementioned steps would ensure that the customer receives

customised resolution to his/her complaint/request through the
steadiest resolution point. The generated data can be further used to

N O T E S
notify the customer regarding upcoming offers and probable solutions

to related issues that might arise in the future. This helps the telecom
service provider to not only address the present issue but also ensure
that the customer feels special by getting customised services. All this
further strengthens the business-to-customer (B2C) relationship in
the highly competitive and mature telecom market.
8. The sector encompasses organisations that

provide communication services through phone or the
Internet.
9. The comprehensive use of information management system
helps telecom service providers in managing their operations
by which of the following ways?
a. Capturing and managing touch-point data effectively
b. Distributing necessary customer data across service chan-
nels
c. Functioning efficiently in real-time
d. All of these
ACTIVITY
Visit the website of a telecommunications company, such as Bharti

Airtel or Vodafone. Identify how these companies ensure that cus-
tomers receive customised resolution to their complaint/request
through the steadiest resolution point.

IN THE EDUCATION SECTOR
The education sector in India is poised to witness major growth in the
coming years. By the end of 2020, India will have the world's largest
tertiary-age population and the second largest graduate talent. The
education market is expected to reach US$116.4 billion in FY 2016-17.
At present, higher education contributes 59.7 per cent of the market
size, school education 38.1 per cent, pre-school segment 1.6 per cent
and technology and multi-media the remaining 0.6 per cent.
Education is basically a process of receiving or giving systematic in-

struction, especially at an educational institution like school or uni-
versity. It helps an individual generalise their experience that can be
used in different contexts. It also provides a shared knowledge that
helps in generating innovative ideas.

•
N O T E S
Educational institutions perform different service operations to offer

high-quality education to students. Service operations management
at these institutions focuses on developing a framework and support
for the successful management of day-to-day operations. It helps edu-
cational institutions achieve their primary goal of creating a learning
environment for the complete growth of a child. Though every insti-
tution has its own individual strategic plan to achieve its operational
efficiencies, the focus of general service operations management lays
in handling a few common operational aspects. These aspects include
facilities identification and renovation, financial consideration, board
governance, marketing and public relations (PR), human resource,
curriculum development, enrolment, assessment and personal and
professional development. Overall, the main aim of service operations
management at any educational institute is to achieve educational ex-
cellence.
Let us now discuss major service operations areas, which are typically
managed by any educational institution:
□ Financial services: Service operations management at an educa-
tional institution focuses on managing all financial systems to sup-
port short- and long-term objectives of the institute. It involves:
♦ Developing and managing operating capital budgets
♦ Establishing accounting system at the institution
♦ Coordinating financial statements and recordkeeping
♦ Handling purchase needs
♦ Providing logistics support for financial audits
♦ Managing financial and governmental reporting
♦ Planning fund-raising efforts
♦ Administrating financing, such as grant and loan applications
♦ Managing risk and insurance
□ Marketing, PR and communications: Service operations man-
agement at any educational institution focuses on developing and
executing marketing, PR and communication plans to manage the
institution efficiently. Service operations involved in these activ-
ities are designed to target customers through high-quality mes-
sages with widespread appeal. Service operations involved in mar-
keting, PR and communication focus on:
♦ Enrolment plan development and implementation
♦ Community outreach
♦ Specialised branding
♦ Marketing training modules and resources
♦ Institute website

N O T E S
♦ Special events and programmes

♦ Templates for collateral materials such as parent letters, sur-
veys, brochures and flyers
♦ School communication support
D Human resources: Service operations management at any edu-
cational institution aims at constructing a comprehensive human
resource strategy. It is required to manage all aspects of human
resources, such as recruitment, certification compliance, payroll
and benefits, school board services and regulatory issues. Human
resource services include:
♦ School staffing plans
♦ Faculty and staff recruitment
♦ Employee recordkeeping
♦ State retirement reporting
♦ School board and administrator services
♦ School policies and handbooks
♦ Government compliance and reporting
♦ Payroll and benefits administration
♦ Employment policies and manuals
D Facilities: Facilities development and management can be a com-
plex aspect of any educational institute's operations. Usually, ser-
vice operations for this component involve:
♦ Selecting site and its acquisition
♦ Getting land-use approvals
♦ Developing institute design
♦ Managing the construction process
♦ Managing capital project planning with bond financing
♦ Supervising both routine and major maintenance services
♦ Building security
♦ Managing custodial contracts
D Technology: With increasing competition, educational institutes
need technological support in various areas ranging from infra-
structure and network management to technical assistance to
student systems administration. Service operations that help in
managing technical aspects of any educational institute involve
the following tasks:
♦ Installing classroom and office equipment, including hardware
and software

•
N O T E S
♦ Installing LAN/WAN and network connectivity

♦ Ensuring site-level tech support and remote troubleshooting
♦ Ensuring technology maintenance and security
♦ Managing student information system
0 Educational programming and staff development: Apart from
financial considerations, human resources, facility management
and technology, student achievement is another core component
that affects the overall success of an educational institution. Thus,
in order to achieve the goal of creating a learning environment,
various service operations at any educational institution also focus
on managing educational programmes and staff development. It
helps an institution fulfil its vision of strong faculties, strong stu-
dents and strong future. Service operations management helps in
achieving this goal by:
♦ Implementing curriculum planning and development
♦ Administrating the learning management system
♦ Managing accreditation oversight
♦ Setting performance benchmarks
♦ Making customised improvement plans
♦ Implementing innovative professional development methodol-
ogy
f;f SELF ASSESSMENT QUESTIONS
10. The primary goal of any educational institution is to create

a learning environment for the complete growth of a child.
(True/False)
11. Which of the following service operations is covered under
marketing, PR and communication managed by any
educational institution?
a. Developing and managing operating capital budgets
b. Faculty and staff recruitment
c. Specialised branding
d. Developing the institute design
ACTIVITY
Using the Internet, find how schools use education-related adver-
tising and marketing campaigns to craft a compelling description of
their brand. Prepare a report based on your findings.

N O T E S

IN THE MEDIA AND ENTERTAINMENT
SECTOR
The media and entertainment industry is vast. It encompasses ac-
tivities and services as diverse as hip-hop to opera, theme parks to
tall towers, and ballet to bird hides. With continuous invention and
innovation in external social, technological, economic, environmen-
tal, political, legal and ethical (STEEPLE) environment, the sector is
transforming at a faster pace than ever before. However, the primary
goal of the sector remains unchanged, i.e. to captivate audience and to
be rewarded for doing so.
The media and entertainment sector involves a plethora of sub-sec-

tors, such as music, bars and clubs, films, broadcast media, audio-vi-
sual media, the Internet, gaming, print media, commercial gambling,
spectator sports, edutainment, and cultural and spiritual entertain-
ment, which provide thousands of entertainment products and ser-
vices. In other words, the media and entertainment sector comprises
a group of organisations and businesses that works towards the com-
mon purpose of providing entertainment. Broadly, the media and en-
tertainment sector can be divided into various sub-sectors, as shown
in Table 10.1:
TABLE 10.1: MEDIA AND ENTERTAINMENT SUB-SECTORS
Art and Lei- Mass Media Recreation Interactive Communica-
sure Enter- Entertain- Entertain- Entertain- tion Enter-
tainment ment ment ment tainment
• Theatres • Film • Sports • Casino and • Publishing

• Music • Broadcast- • Travel and gambling and event
• Exhibitions ing (Televi- tourism • Video planning
• Fairs sion, radio)
• Shopping games
• Museums
• Theme parks
You can see that unlike other sectors, the media and entertainment
sector is not limited to a defined number of segments. It has a number
of sub-sectors and service operations. In each sub-sector, operations
are performed and managed differently. For example, service opera-
tions performed in travel and tourism would be entirely different from
service operations performed in films and music.
Let us discuss how service operations are performed in different en-

tertainment sub-sectors:
□ Art and leisure entertainment: This sub-sector includes a wide
range oforganisations that provide services to meet varied cultur-
al, entertainment and recreational interests of the audience. This
sector comprises organisations that are involved in producing or
promoting live performance, events or exhibitions for public view-

•
N O T E S
ing. Service operations of such organisations focus on controlling

the distribution and manufacturing of mass media entertainment
services. Organisations involved in art and leisure entertainment
aim at preserving and exhibiting objects and sites of historical,
cultural or educational importance. In addition, they focus on in-
volving the audience to participate in recreational activities, hob-
bies and leisure-time interests. Service operations involved in this
sub-sector are designed and managed as per the skill-sets required
for the work involved. Operations are designed to provide amuse-
ment and recreation services to customers.
□ Mass media entertainment: Suppose you want to hear your fa-
vourite song or watch your favourite show. Where do you go? Most
likely you will turn onyour television, radio or computer. These are
the sources that the majority of the general public uses to get en-
tertained. Therefore, these are called mass media entertainment.
Mass media entertainment involves media technology, intended to
reach mass audience. It basically involves film and broadcasting
media that transmits information electronically through cinema,
radio, recorded music or television. Let us discuss how the film
and broadcasting media manages its service operations through
major communication mediums, which are used to transmit ser-
vices to the audience:
♦ Films: Films are motion pictures produced by recording, in-
dividuals and objects with cameras, or by making them via
animation techniques and/or special effects. Film-making in-
volves several operational functions starting from theme con-
ception, planning, execution, revision to distribution. There
are five major stages of film production, which are discussed
as follows:
1. Development: Basic operations at this stage focus on
idea creation and concept development. Apart from this,
the financing solution for the proposed film is also sought
out at this stage. The development stage also focuses
on purchasing rights to books/plays and scripting the
screenplay for the film.
2. Pre-production: Operations involved at this stage focus
on making preparations for the shoot. At this stage, cast
and film crew are hired, locations are selected, and sets are
built.
3. Production: This stage involves shooting and recording the
raw elements for the film.
4. Post-production: This stage focuses on inserting images,
sound and visual effects to the recorded film. Editing of the
film is also done at this stage.
5. Distribution: Service operations involved at this stage
focus on the distribution and screening of the finished film
1n cinemas.

N O T E S
Asone of the most widely recognised mediums ofentertainment,

films use these stages to produce the art (service), capable of
simulating experiences in audience by communicating ideas,
stories, perceptions, feelings, beauty or atmosphere. Thus, a
film, by the means of recorded or programmed moving images
along with other sensory stimulations performs and manages
its service operations.
Films are produced within the film industry or motion picture
industry that comprises technological and commercial
institutions of filmmaking. The film industry basically
consists of large, multinational corporations, major studios
and independent studios to produce films. The major film
companies include 21st Century Fox, Comcast Corporation,
The Walt Disney Company, Warner Bros. and Viacom Inc.
The industry includes writers and authors, editors,
photographers, graphic designers, translators, film and
video editors and camera operators, broadcast and sound
engineering technicians, announcers, producers and directors,
and performers like actors, musicians and composers. These
people work on-screen and behind the screen to provide
entertainment services to the audience. Apart from this, there
are public relations people, talent agents and representatives,
marketing managers, entertainment lawyers and distribution
workers, who help the industry in managing its service
operations efficiently.
♦ Broadcasting: Broadcasting has been the centre of the enter-
tainment sector for a century and is still growing and changing
beyond recognition. Broadcasting is a method of communica-
tion that provides various types of information to audience in
the form of entertainment services. Television and radio are
two major broadcasting tools that use a television or radio sta-
tion for transmitting programmes to home receivers. Radio
broadcasting uses audio signals that are sent through the air
as radio waves from a transmitter. These waves are received
by an antenna and sent to a receiver. Television broadcasting is
another telecommunication medium that performs its service
operations by transmitting moving images in monochrome or
in colour and in two or three dimensions and sound. Television
is used as a mass medium for transmitting entertainment,edu-
cation, news, politics and advertising services to the audience.
Radio and television broadcasters produce and/or obtain
content for broadcasting, such as entertainment programmes,
news, talk and other shows to provide services to the
audience. Many television broadcasters are now using digital
broadcasting to transmit pictures with higher resolution,
known as high-definition television (HDTV). This enables them
to transmit a programme, such as music concert, from several
different camera angles on the same channel. The audience

•
N O T E S
then selects the view they like to see on their television set.
Such technological advents have refined the wayof performing
service operations for broadcasters.
□ Recreation entertainment: Recreation entertainment involves
fun activities performed for enjoyment, amusement or pleasure.
Recreation is an essential element of human life and the services
provided under this category are planned by taking into consider-
ation of individual interests and surrounding social construction.
These activities can be communal or solitary, active or passive, out-
door or indoor, healthy or harmful and useful for society or det-
rimental. A list of typical recreational activities could be almost
endless. A few examples of such activities are reading, listening to
music, watching TV,gardening, hunting, sports, studies, travel, etc.
Public places like parks and beaches are essential venues for many
recreational activities. Similarly tourism services are used to pro-
vide recreational offerings to visitors. Today, recreation-related
business is a major component of any economy. There are several
public institutions, voluntary group-work agencies, private groups
and commercial enterprises that organise various recreational ac-
tivities for their patrons. For example, the National Park Service,
the Young Men's Christian Association (YMCA), the Kiwanis and
Disney World.
Service operations at recreation-related business focus primarily
on meeting recreational needs of a community or an assigned in-
terest group. Recreational service professionals plan and organise
activities, explain the rules and regulations of games or play ar-
eas to the patrons, enforce safety regulations to prevent injuries,
provide first aid in case of minor injuries, modify activities or rec-
reation plans to suit the needs of the patrons and maintain equip-
ment used for recreational activities.
□ Interactive entertainment: Interactive entertainment refers to
any type of video games or other multimedia entertainment activ-
ities which require direct intervention of the user. In other words,
in interactive entertainment the user's actions directly affect the
game. Today, many video game experts see interactive entertain-
ment as the future of the gaming industry.
I I
NOTE
Interactive entertainment is different from non-interactive enter-

tainment, which involves leisure activities, such as reading books
or watching movies. In these activities, the user is passively in-
volved in the process, where he/she can turn pages or hit 'play' and
'stop' buttons. These actions do not change the behaviour, environ-
ment or outcome of the book or movie. However, interactive enter-
tainment allows players to use skill and decision making to control
characters, actions and storyline of video games.

N O T E S
Service operations in interactive entertainment focus more on

user involvement in the computer world. Businesses involved in
the interactive entertainment industry use software that record
user movement, facial expression and actions through sensors to
direct the motions and behaviour of a character on screen. The fo-
cus remains on using the user's physical abilities to direct actions.
Thus, such games allow the user to rely more on his/her own per-
sonality and skills to direct the actions of the game.
0 Communication entertainment: This type of entertainment ba-
sically involves a publishing activity, which is dissemination of lit-
erature, music or information. In other words, communication en-
tertainment involves services of making information available to
the general public through printed works, such as books, newspa-
pers, magazines, periodicals, etc. With the advent of digital infor-
mation systems and the Internet, the scope of making information
available to readers has expanded from print media to electronic
media, such as the electronic versions of books and periodicals, as
well as micropublishing, websites, blogs, video game publishers,
etc.
The service operations of any entertainment providing organisation

are designed to provoke desired emotional response in the audience.
The emotional response of the audience is one major parameter to
judge the success or failure of an entertainment service. In other
words, the degree to which the audience is emotionally affected by
the entertainment service typically determines how good or bad the
entertainment service is.
For example, after watching a movie that is 'labelled' a comedy, the

audience is expected to show positive emotions, including happiness,
joy and amusement. These emotions are then physically transformed
into laughter and applause. If the movie fails to invoke such emotional
responses among the audience, the movie would be considered as a
low-quality entertainment bythe audience. Therefore, the service op-
erations of any entertainment providing organisation focuses on pro-
voking a desired emotional response from the audience.
The service operations of an entertainment organisation also depend

on the needs ofan audience. Without an audience, entertainment can-
not exist. For example, a football match could be an exciting experi-
ence and therefore quite entertaining. However, if nobody is watching
the match, no entertainment takes place as no audience is entertained.
Service operations in the entertainment sector also focus on 'novelty'.

Novelty is the quality of being new, original and unusual. It is some-
thing that is not experienced commonly. Thus, when a novel thing
occurs, it instantly attracts attention and completely engrosses its au-
dience. The service operations of the entertainment sector focus to
present something to the audience that they find novel and get enter-
tained by it.

•
N O T E S
12. Video games and casino come under which of the following
sub-sectors of the media and entertainment sector?
a. Art and leisure entertainment
b. Interactive entertainment
c. Recreation entertainment
d. Communication entertainment
13. Mass media entertainment involves media that
transmits information electronically via cinemas, radio,
recorded music or television.
14. The service operations of any entertainment providing
organisation are designed to provoke a desired emotional
response in the audience. (True/False)
ACTIVITY
Take an example of a film and write a short note on how it built

cinematic experiences for you.
■uj:1SUMMARY
□ Service operations management is all about organising business
processes that are used to design, manufacture and deliver ser-
vices.
□ Service operations management in any IT organisation is related
to network administration, software development and installation,
and planning and management of the organisation's technology
life cycle.
□ Service operations in a BPO organisation focus on managing re-
lationships with clients through a formal agreement, called ser-
vice-level agreement (SLA).
□ Service operations management in any financial institution aims
at attracting and retaining customers by providing them new and
innovative schemes and services.
□ In any financial and banking organisation, service operations are
performed at three levels, depending on access levels provided to
customers. These three levels are:
♦ Information-only system
♦ Electronic information transfer system
♦ Fully electronic transactional system

N O T E S
□ The healthcare sector offers medical services for the treatment

of patients with preventive, curative, rehabilitative and palliative
care.
□ Various service operations at the healthcare facilities can be broad-
ly categorised into two groups, which are:
♦ Intramural operations functions
♦ Extramural operations functions
□ The hospitality sector is another major sector within the service
industry. It includes lodging, restaurants, event planning, theme
parks, transportation, cruise lines and additional fields within the
service industry.
□ As the hospitality sector is a people-oriented sector, service opera-
tions management in this sector aims at providing better services
to customers to foster long-term relationships with them.
□ Service operations management in the hospitality sector typically
consists of the following steps:
1. Developing service policies and procedures
2. Attaining strong commitment from service employees
3. Measuring the effectiveness of the on-going service plan
□ The telecommunications sector encompasses organisations that
provide communication services through phone or the Internet.
□ A telecom organisation manages its service operations through an
assortment of communication channels, which are:
♦ Wired
♦ Wireless
♦ Satellite
□ Educational institutions perform different service operations to
offer high-quality education to students. Service operations man-
agement at these institutions focuses on developing a framework
and support for the successful management of day-to-day opera-
tions.
□ Major service operations areas, which are typically managed by
any educational institution, are:
♦ Financial services
♦ Marketing, PR and communications
♦ Human resources
♦ Facilities
♦ Technology
♦ Educational programming and staff development

•
N O T E S
□ The media and entertainment sector comprises a group of organi-

sations and businesses that work towards the common purpose of
providing entertainment.
□ As one of the most widely recognised medium of entertainment,
films produce the art (service), which is capable of simulating ex-
periences in audience by communicating ideas, stories, percep-
tions, feelings, beauty or atmosphere.
□ Radio broadcasting uses audio signals that are sent through the
air as radio waves from a transmitter. These waves are received by
an antenna and sent to a receiver.
□ Television broadcasting is another telecommunication medium
that performs its service operations by transmitting moving im-
ages in monochrome or in colour and in two or three dimensions
and sound.
□ Service operations in the recreation business focus primarily on
meeting the recreational needs of a community or an assigned in-
terest group.
□ Interactive entertainment refers to any type ofvideo games or oth-
er multimedia entertainment activities which require direct inter-
vention of the user.
□ Communication entertainment basically involves publishing ac-
ti vity, which is dissemination of literature, music or information.
a KEYWORDS
□ Computer telephony integration (CTI): Any technology that

integrates computers with telephones to manage telephone
calls.
Customer Relationship Management (CRM): A business strat-
egy that focuses on customer satisfaction and retention.
□ Interactive Voice Response (IVR): An automated telephony
system that interacts with callers, collects information and di-
rects calls to the appropriate recipient.
□ Knowledge management systems: Any type of IT system that
locates knowledge sources, stores and retrieves knowledge, im-
proves collaboration and captures and uses knowledge to en-
hance the knowledge management process.
□ Touch-point: Any contact point between an organisation and
its customers that allows exchanging information, providing/re-
ceiving service or handling transactions.

N O T E S
■11$1DESCRIPTIVE QUESTIONS
1. Discuss how service operations are managed at any IT
organisation?
2. Explain howE-banking helpsfinancial and bankingorganisations
manage their service operations?
3. Write a short note on service operations management in the
healthcare sector.
4. Discuss steps involved in service operations management in the
hospitality sector.
5. Discuss major service operations areas, which are typically
managed by any educational institution.
6. Discuss how service operations are performed m different
entertainment sub-sectors?
■ ujuj ANSWERS AND HINTS


Service Operations Man- 1. d. Data centre management
agement in IT and BPO
Sectors
2. BPO
3. True
Service Operations Man- 4. Information-only
agement in the Banking
and Finance Sector
5. False
Service Operations Man- 6. Intramural functions
agement in Healthcare
and Hospitality Sectors
7. True
Service Operations Man- 8. Telecommunications
agement in the Telecom-
munications Sector
9. d. All of these
Service Operations Man- 10. True
agement in the Education
Sector
11. c. Specialised branding

•
N O T E S

Service Operations Man- 12. b. Interactive entertainment
agement in the Media and
Entertainment Sector
13. Film and broadcasting
14. True

1. Service operations management in any IT organisation deals
with three major areas: network infrastructure,server and device
management; and computer operations and help desk. Refer to
Section 10.2 Service Operations Management in IT and BPO
Sectors.
2. E-banking refers to electronic banking or Internet banking
in which customers can perform any of the banking functions
through their bank accounts by connecting to the website of
the respective bank. Refer to Section 10.3 Service Operations
Management in the Banking and Finance Sector.
3. Service operations management in the healthcare sector aims
at designing, planning, executing and improving healthcare
systems within a facility to create and deliver healthcare
services efficiently. Refer to Section 10.4 Service Operations
Management in Healthcare and Hospitality Sectors.
4. Service operations management in the hospitality sector typically
consistsofthreesteps:developingservicepolicies and procedures,
attaining strong commitment from service employees, and
measuring the effectiveness of the on-going service plan. Refer
to Section 10.4 Service Operations Management in Healthcare
and Hospitality Sectors.
5. Major service operations areas, which are typically managed by
any educational institution, include financial services, marketing,
PR and communications,human resources, facilities, technology,
and educational programming and staff development. Refer to
Section 10.6 Service Operations Management in the Education
Sector.
6. The media and entertainment sector has a number of sub-
sectors, and service operations in each sub-sector are performed
and managed differently. For example, the service operations
performed in the travel and tourism would be entirely different
from the service operations performed in films and music. Refer
to Section 10.7 Service Operations Management in the Media
and Entertainment Sector.

N O T E S
Ill SUGGESTED READINGS &

REFERENCES
SUGGESTED READINGS
□ Fitzsimmons, J., & Fitzsimmons, M. (2008). Service management
(1st ed.). Boston, MA:McGraw-Hill.
E-REFERENCES
□ Hospitality and leisure. (2017). PwC. Retrieved 20 April 2017, from
http://www.pwc.com/ca/en/industries/entertainment-media/sub-
sectors/hospitality-and-leisure.html
□ India, & Industry, M. (2017). Media and Entertainment Industry in
India, IndianMedialndustry.Ibeforg.Retrieved 20April 2017, from
https://www.ibef.org/industry/media-entertainment-india.aspx
□ Industries :: Arts, Entertainment & Recreation :: Industry Subsec-
tors. (2017). Myplan.com. Retrieved 20April 2017, from http://www.
myplan.com/careers/industries/arts-entertainment-and-recre-
ation/subsectors-07.01.html
□ JOBS, S., Jha, M.,JOBS, S., & JOBS, S. (2017). What are the Dif-
ferent Sectors of the Hospitality Industry?. Global Hospitality Portal.
Retrieved 20 April 2017, from https://soegjobs.com/2016/09/07/dif-
ferent-sectors-hospitality-industry/#globalhportal
□ Media and Entertainment IVault.com. (2017). Vault. Retrieved 20
April 2017, from http://www.vault.com/industries-professions/in-
dustries/media-and-entertainment.aspx
□ Ray. (2017). Operation management in BPO. Slideshare.net. Re-
trieved 20 April 2017, from https://www.slideshare.net/sayantan-
iray1987/operation-management-in-bpo
□ User, S. (2017). TechnoFunc - Sectors of Healthcare Industry. Tech-
nofunc.com. Retrieved 20 April 2017, from http://www.technofunc.
com/index.php/domain-knowledge/healthcare-industry/item/sec-
tors-of-healthcare-industry

CONTENTS
Case Study 1 Integreon Develops a Build-Operate-Transfer Research Center in

Manila
Case Study 2 Micro MNC Achieves the ability to Transfer and Access Data through
the Virtualization Strategy
Case Study 3 Development of Service Design of Railway Workshop Program for
Netherlands Railways
Case Study 4 Development of Automation Solution and Service Process Design of
a Frozen Food Plant
Case Study 5 Innovative Service Delivery of Healthcare Services at the University
of Virginia
Case Study 6 Quality Customer Service at the British Council
Case Study 7 Reigning in Rising Labour Costs by Employing a Yield Management
System
Case Study 8 FASTCO Employs New Pricing Strategy to Increase its Profit
Margins
Case Study 9 Decoupling of Services in the UK Construction Industry
Case Study 10 Vodafone Becomes the First Global IOT Provider to Register Over 50
Million Connections
Case Study 11 Infosys Solution Boosts Profit Margins of British Telecom Operator
Case Study 12 Infosys Develops PHR Solution for a US-Based Health Management
Company
NMIMS Global Access - School for Conhnumg Education

•
CASESTUDYl
N O T E S
INTEGREON DEVELOPS A BUILD-OPERATE-TRANSFER

RESEARCH CENTER IN MANILA
This Case Study discusses the development of a research delivery

centre for achieving aggressive growth targets. It is with respect to
Chapter 1 of the book.
CLIENT
SNL Financial, a US-based market research firm, provides cor-

porate and financial data for making comparisons of performance
metrics and financial statements. The company needed a new
centre to meet its aggressive growth targets in Manila, Philip-
pines. SNL Financial approached Integreon, which provides legal
support, market research, document management and business
process outsourcing services to its clients.
!!!Integreon
Insightful Outsourcing. Remarkable Results.
Source: https://staticl.squarespace.com/static/560d6393e4b0c565778b5feb/t/56403bl5e4b-
06c325c7790ec/1447050006739/
CHALLENGE
SNL Financial had large operations in Pakistan and India; how-
ever, its presence in both the countries was limited to small mar-
kets. The company had set aggressive growth targets. In order
to achieve those targets, a new research centre had to be quickly
built. SNL decided that Manila would suit their needs; however,
the company had no prior experience in the Philippines and need-
ed to quickly start operations at the newly built centre. Moreover,
the company did not want to experience the growing pain that
comes with entering a new market.
SOLUTION
lntegreon developed a Build-Operate-Transfer (BOT) research
centre for SNL by focusing on the following:
□ Transparency: lntegreon maintained complete transparency
in all aspects of the program so that the client is up-to-date
about the level of progress on the research centre at all times.
□ Association with Ayala brand: lntegreon has relations with
Ayala Corporation, which is one of the largest and oldest cor-

CASESTUDYl
N O T E S
porations in the Philippines. Since, Ayala is a leading investor

in Integreon; the latter has ties with the Philippines' largest
real estate development firm, largest bank and second larg-
est telecom operator in the country. Such connections helped
Integreon to accelerate the development of the new Manila
centre.
□ Client customisation and localisation: Integreon combined
some of the client's existing policies and processes with those
instilled in Integreon's Manila delivery centre.
RESULTS
Integreon acquired, designed and constructed a 14,000 sq. ft. floor

in three months comprising 175 workstations and employed and
trained 40 associates. After a period of four months, the produc-
tivity and accuracy levels of associates working in Manila were as
good as or better than client teams operating in India or the US
who had been working on the program for 2-3 years already.
Integreon's proficiency and experience of operating in Manila

made it possible to establish the client's research delivery centre
more quickly than the client could have managed on its own. Inte-
greon also shared its best practices related to sourcing, employing
and retaining of talent with the client.
Integreon provided the client with access top-rated and cost-ef-

fective vendors during the whole process of designing, creation
and building of the centre. Moreover, Integreon also helped the
client in the analysis and management of employee profiles and
reduction in attrition.
Integreon helped the client to assimilate its Philippines opera-

tions with global business continuity plans after the centre be-
came operational. The centre has 206associates in August 2012
when Integreon transferred the operation to SNL Financial.
Integreon also helped the client to make savings of US$ 500,000

annually by building the centre on time and within the specified
budget.
Afterwards, Integreon built, operated and transferred another

Manila delivery centre to the client. This centre was9,700 sq. ft. in
size and had 133 workstations. This particular centre was deliv-
ered to the client in September 2014.

•
CASESTUDYl
N O T E S
QUESTIONS
1. What was the challenge faced by the client?
(Hint: To achieve its aggressive growth targets, SNL

needed a new research centre to be built quickly.)
2. What were the results achieved by Integreon?
(Hint: Acquired, designed and constructed a 14,000 sq.
ft. floor in three months comprising 175 workstations,
helped the client make savings of US$ 500,000 annually
by building the centre on time and within the specified
budget, provided the client with access to top-rated and
cost-effective vendors, etc.)

CASESTUDY2
N O T E S
MICRO MNC ACHIEVES THE ABILITY TO TRANSFER AND

ACCESS DATA THROUGH THE VIRTUALIZATION STRATEGY
This Case Study discusses how an organisation can achieve its op-
erational strategy by having an access of business data from any-
where in the world. It is with respect to Chapter 2 of the book.
Source: http://photos.prnewswire.com/prnfull/2015031O/l80786LOGO
BACKGROUND
Service Strategies is a US-based micro MNC, which is headquar-

tered in San Diego, California. It provides consulting, training
and certification programs to technology companies across the
world, which enables companies to deliver consistent, high-qual-
ity service and support.
The company provides a multitude of services to clients across

of the world. Due to this, the company decided to move all key
operational systems to the cloud in order to increase efficiency.
Service Strategies acknowledged that having a cloud-based file
server was essential for the virtualisation strategy since it would
allow its team to easily access and share large files and programs
from anywhere in the world.
CHALLENGE
Service Strategies started pursuing ways to become more cost

efficient with a change in the economy. Virtualisation would en-
able the company to lower its IT costs and maintenance expenses
while also improving its accessibility for the distributed team. The
company transferred all of its systems to the cloud server (includ-
ing CRM and telecommunications) to achieve its goal. However,
the company did not have a dependable, easy-to-use online file
server in place. Service Strategies wanted to take advantage of
the virtualisation strategy so that it was notdependent on a single
physical location. With a geographically disperse workforce and
international client base, it was essential for Service Strategies
to have an effective operating strategy to be able to access and
share files and business data from anywhere in the world. Since
the company had already moved its other systems online, a cloud-
based file server was also incorporated which helped Service
Strategies to complete its transformation.

•
CASESTUDY2
N O T E S
SOLUTION
Service Strategies had already moved its operations to cloud-

based systems with the exception of a file server. The main pri-
ority of Service Strategies was file sharing and easy access and
transfer of large files without using email was a requisite. The
company found out about Egnyte through an online search and
signed up for a trial. Egnyte provided the company with the facil-
ity of easy navigation and sharing of files.
Prior to Egnyte (a US-based company that provides software for

enterprise file synchronisationand sharing), the company was us-
ing Microsoft Small Business Server for network and file storage
purposes. The main reason behind this step was that the compa-
ny wanted to eliminate the costs of in-house IT maintenance and
the hassle of managing a Virtual Private Network (VPN), while
making it easier to access and share files.
Egnyte had a simple and easy to use interface which made it easy
for the company's employees to get acquainted with the new
file server without the need for any training or tutorial. The re-
mote team can work from anywhere in the world without being
hindered by the latency issues of a VPN. Egnyte helped Service
Strategies to become a virtual company while also enabling it to
save thousands of dollars every year.
KEYBENEFITS
□ Data can be accessed and shared easily
□ Employees can work from anywhere in the world
□ Elimination of expenses incurred on software updates, fire-
walls and management file servers
□ Simple and easy to use interface that allows secure file shar-
ing with partners and other professionals
Source: https://www.egnyte.com/assets/case-studies/case-study-Service-Strategies.pdf
1a&H,4i1Mi9
1. What was the challenge faced by Service Strategies?
(Hint: To have an ability to access and share files and
business data from anywhere in the world)
2. What were the key benefits derived by Service Strategies
after employing the services of Egnyte?
(Hint: Easy access and sharing of data, elimination of
expenses incurred on software updates, firewalls and
management file servers, etc.)

CASESTUDY3
N O T E S
-
DEVELOPMENT OF SERVICE DESIGN OF RAILWAY
WORKSHOP PROGRAM FOR NETHERLANDS RAILWAYS
This Case Study discusses the development of service design for the
'Railway Workshop' program, an initiative of the Netherlands Rail-
ways. It is with respect to Chapter 3 of the book.
IL 11 II 1111 I I I I I I I II I I 111 II 11 I I I I I
31VOLTS
L ■
Source: https://image.slidesharecdn.com/community-of-talentsa2-0-en-090902090957-
phpapp02/95/service-design-a-new-design-discipline-45-728.jpg?cb =1251936039
ABOUT THE CLIENT
Bureau Spoorbouwmeester is a Dutch independent body tasked

with advising, inspiring, monitoring and evaluating design mat-
ters within the railway industry. This agency was established by
Netherlands Railways (NS) and ProRail, a government institution
responsible for the maintenance and extension of the Dutch na-
tional railway network infrastructure.
Bureau Spoorbouwmeester hired the services of 31Volts, a ser-

vice design agency to develop an ideal design and structure for
the Railway Workshop. Railway Workshop is a new project meth-
od created for optimising and defining cooperation between di-
rect stakeholders as quickly as possible.
BACKGROUND
In 2011, ProRail, NS and Bureau Spoorbouwmeester collabo-

rated together to work on 'Railway Workshop' programme. The
purpose of this programme was to quicken the development of
specific 'products' that would be in sync with the policies of the
Railways. These 'products' may involve an analysis of a railway
station, or a vision of a station and its environment.
Bureau Spoorbouwmeester asked 31Volts to propose a service de-

sign for the Railway Workshop programme.
APPROACH
The design chosen by 31Volts comprised three distinct phases:

□ In the first phase (Learn), research was carried out byholding
interviews with various representatives of Bureau Spoorbou-
wmeester, NS and ProRail.
NMIMS Global Access· School for Conhnumg Education

•
CASESTUDY3
N O T E S
0 In the second phase (Create), theresults derived from the re-

search were used to create possible solutions in partnership
with the involved parties.
0 In the third phase (Deliver), these results were further devel-
oped into early samples or prototypes.
RESULTS
31Volts developed a 'blueprint' for the Railway Workshop pro-

gramme which described various steps in the programme, the
necessities of each step and the requisite materials. For example,
materials were created for a participant (a homework kit with as-
sociative thinking cards) to prepare for the first Railway Work-
shop meeting.
31Volts also made use of a booklet named 'Once there was a...'
for noting down observations made during workshop meetings.
Moreover, a toolkit was also developed that was equipped with
manual and other materials for the facilitator. The toolkit com-
prised material for workshops along with a complete depiction of
the entire process starting from invitations to the final evaluation.
It also contained recommendations for appropriate places where
the workshops could be held.
QUESTIONS
1. What is the purpose of 'Railway Workshop' programme?
(Hint: To quicken the involvement process of the

Netherlands Railways (NS) and ProRail in order to
develop specific 'products' that would be in sync with the
policies of the Railways)
2. What was the result achieved by 31Volts?
(Hint:A 'blueprint' forthe Railway Workshop programme
was developed which described various steps in the
programme, the necessities of each step and the requisite
materials)

CASESTUDY4
N O T E S
-
DEVELOPMENT OF AUTOMATION SOLUTION AND SERVICE
PROCESS DESIGN OF A FROZEN FOOD PLANT
This Case Study discusses the development of an automation solu-

tion and service process design for a frozen French fry plant. It is
with respect to Chapter 4 of the book.
c,,.1cemt'
systemsl
Source: https://www.automation.com/pb/lib/get_file.php ?id= 67714&key= a3bafa76ae-
7974a6844b5lc4d775ee3a0ce4bc3f&inline=1
ABOUT THE CLIENT
The client was a US-based food manufacturer that wanted to

expand its frozen sweet potato fries business by building a new
plant.
CHALLENGE
The food manufacturer wanted to expand its production capacity

by building a new frozen French fry plant that would be seamless-
ly integrated starting from the receiving area of sweet potatoes till
the frozen grading area. Sweet potatoes are not uniform in shape
and size which made developing a control system for the process-
ing of sweet potatoes a complex affair. This variation required in-
novative thinking with respect to the processing of sweet potatoes
in an efficient manner.
APPROACH
The food manufacturer hired the services of Concept Systems

Inc., which is a provider of automation solutions for manufactur-
ing industries.
SOLUTION
Concept Systems served as the lead integrator and developed an

integrated control system for engineering and a Programmable
Logic Controller (PLC) for all the processing line equipment of
the plant. The company also developed a service process design
for coordinating all process control development, timelines, sta-
tus reporting, meeting needs, costs, documents and other aspects
of the project.

• • •
CASESTUDY4
N O T E S
Apart from this, Concept Systems was also responsible for devel-
oping service design for timeline management, controlling de-
velopment status reporting, meeting coordination, ensuring ad-
herence to standards, reviewing project costs, managing project
documents, among other relevant process control development
activities.
Moreover, Concept Systems also served as the Original Equip-

ment Manufacturer (OEM) coordinator for the plant. They were
responsible for overseeing the processing facility's integration
tasks, including controls requirements and development, system
interfaces, and installation and commissioning efforts.
RESULTS
The plant was awarded with the LEED Platinum certification,

making it the first frozen food processing plant in the world to
achieve this feat. The plant also won Food Processing Magazine's
2011 Green Plant of the Year Award which is given for design
innovation and economic sustainability. The client was so im-
pressed by Concept Systems work that it retained its services to
serve as the lead integrator for the expansion of their processing
plant situated in Northwest America.
ta·fi941iMii
1. What was the challenge posed by the processing of sweet
potatoes?
(Hint: Sweet potatoes are not uniform in shape and size
which made developing a control system for the processing
of sweet potatoes a complex affair.)
2. Was the frozen food processing plant a success?
(Hint: The plant was awarded with the LEED Platinum
certification, making it the first frozen food processing
plant in the world to achieve this feat.)

CASESTUDY5
N O T E S
INNOVATIVE SERVICE DELIVERY OF HEALTHCARE

SERVICES AT THE UNIVERSITY OF VIRGINIA
This Case Study discusses innovation in service delivery in the

health careindustry through shared medical appointment. It is with
respect to Chapter 5 of the book.
Source: https://img.clipartfest.com/1 0ef25b20f436617aro0a994100a49b3_university-of-vir-

ginia-logo-uva-Jogo-clipart_988-988.png
The University of Virginia Health System started an innovative

concept of shared medical appointment, known as Club Red. Un-
der this initiative, the delivery of preventive cardiac health care
is offered to patients. Generally, cardiology patients at the Uni-
versity of Virginia (UVA) are assigned a half an hour appointment
with the doctor. However, at Club Red, they are offered a choice
between a 30 minute one-on-one appointment and a 90-minute
shared appointment, wherein the cardiologist sees each patient in
a group setting comprising as many as 11 other patients.
The members of Club Red convene in a meeting room, where

they fill out any prescribed forms and meet the doctor privately
for a short physical exam. In the shared appointment, the doctor
provides each individual patient counsel, checks prescriptions,
orders tests and discusses each patient's progress and future
treatment plans. Consultation at Club Red is not private whereby
personal service and privacy has been inviolable in the medical
field with respect to doctor-patient confidentiality.
The benefits of the shared medical appointment as observed are

as follows:
□ Improved productivity as in 90 minutes a doctor can examine
10 to 12 patients rather than just 3 to 5 in 30 minutes
□ Higher satisfaction levels of patients, which have been gauged
at around 98%.

•
CASESTUDY5
N O T E S
0 Shorter waiting time for patients for fixing appointments.

0 Increased knowledge about cardiovascular conditions as the
patients can listen to the doctor counselling other patients.
Consequently, the patients became more knowledgeable
about the symptoms of cardiovascular diseases. They also
learnt about what lifestyle changes they are required to make
and the medications they may need in the future.
0 Stronger connection with the doctor, as the patients can ob-
serve his or her expertise and empathy while dealing with oth-
er patients.
Patients infrequently speak to each other in shared medical ap-

pointments and generally meet different patients at every meet-
ing. However, patients to have the option to attend meetings with
fellow attendees through recommended classes and exercise
groups.
Radical innovation in the delivery of a service is comparatively

rare when compared to product manufacturing. Redefining of
services requires an extensive understanding of how to meet cli-
ents' needs which can create great value for these service provid-
ers and for their customers. The challenge is to provide managers
a system wherein they can question howa service is to be defined
and delivered while also being able to identify an opportunity to
achieve significantly better results.
QUESTIONS
1. What is meant by a shared-medical appointment?
(Hint: A group of patients (up to 12) can see the doctor

at the same time and discuss their ailments and medical
issues.)
2. What are the benefits of the shared medical appointment?
(Hint: Shorter waiting time for fixing appointments,
increased knowledge of patients, improved productivity
of doctors, etc.)

CASESTUDY6
N O T E S
QUALITY CUSTOMER SERVICE AT THE BRITISH COUNCIL
This Case Study discusses the collaboration of the British Council

with the Institute of Customer Service for providing quality service
to its customers. It is with respect to Chapter 6 of the book.
The British Council is a British institution that is involved m
building cultural relations and providing educational opportuni-
ties. It operates in more than 100countries, wherein it interacts
with millions of young people and professionals annually teach-
ing English, sharing cultural art and delivering education and so-
ciety programmes.
ee BRITISH
eecoUNCIL
Source: https://www.britishcouncil.org/80moments/media/british-council-logo-2-color-2-
page-001-hr.jpg
In order to fulfil its mission, the British Council has to deliver

consistent high quality customer service. This is a huge organi-
sational challenge as there were 10.9 million face-to-face and 116
million digital interactions as per the 2013/14 annual report.
The British Council is partly funded by a government grant (less

than 20%), though most of its funding comes from its own pri-
vately funded sources through language courses and cultural
programmes. The British Council joined The Institute of Custom-
er Service in order to provide high quality customer experience
across the world. Customer Management Director, Eva Choong
believes there are clear benefits of membership: "Our market was
growing rapidly, so we needed to find a way to scale up and profes-
sionalise our approach to customer service. There was an aware-
ness that theworld is becoming more sophisticated and customer ex-
pectations are growing, so we wanted to do more, and do it better."
The British Council started 'Customer Service Excellence' proj-

ect in order to improve the quality of service at the institute. It col-
laborated with The Institute of Customer Service to ensure that
best practices were followed.
Ms. Choong recalls: "It was seen that by focusing on customer ser-
vice, putting resource into it and clarifying what was expected lo-
cally and globally, we were achieving better results. It was good for
business. You couldn't just do it for two years - this was something
we needed to be doing all the time."
•
CASESTUDY6
N O T E S
The British Council used The Institute's Professional Qualifica-

tions program to ensure consistent quality experience for its cus-
tomers and serve as its main framework for providing customer
service training worldwide. Susan Burnett, Global Qualifications
Programme Manager (QPM), has a responsibility to ensure that
the British Council derives utmost business benefit from the pro-
gramme. The programme enables organisations to train staff
wherever they are; furthermore the Institute's in-house asses-
sors and coaches deliver training either face-to-face or remotely
through telephone, videoconference or Skype.
Tohighlight the strategic importance of the programme, the Brit-

ish Council's former Chief Executive, Martin Davidson, also took
a qualification exam. "Martin wasin London, and was coached re-
motely by a Warsaw-based colleague" says Susan."The fact that our
Chief Executive took a qualification himself shows - at the highest
possible level - just how important customer service and profession-
al development for customer service is.''
279senior executives have taken part in the British Council's ICS

Professional Qualifications programme across Africa, the Amer-
icas, China, India, Europe and Eastern Europe, thus, helping to
ensure that a consistent, quality service is being delivered across
the world.
The British Council has also achieved tangible business benefits

from improved service through this programme as Susan states:
"Yes, for sure.Working with The Institute has provided us with pro-
fessional insight in support of our improvement projects across the
global network. We started with the basics. Before we started this
project we couldn't say with certainty how many phone calls and
emails we were answering. Now we have trend data over several
years, as well as activities like mystery shopping and customer sur-
veys, sowe're able to see where we are."
"In many parts of the world we're exceeding our targets, and we
have pockets of world-class best practice emerging in unexpected
places - Colombia for one."
Susan comments: "Overall we've made considerable progress in

responding more effectively to customer enquiries, being more ac-
cessible and being able to target investment, resource, time, man-
agement and support where it's most needed."
"Customers are happier with the experience they are getting at the
British Council, and staff are happier because they know the di-
rection, and they understand the standards that they are expected
to work to." The Institute's Professional Qualifications also had a
positive impact on staff engagement. "Staff are more engaged be-

CASESTUDY6
N O T E S
cause they're being listened to, their ideas are being used. It's got to
be good for our business."
The Institute's Professional Qualifications programme also of-

fers other business benefits such as finding new business op-
portunities. A staff member who was in charge of conducting
English language exams was advised for opening a new cen-
tre in a neighbouring city based on high customer demand.
As part of her Institute qualification, she created a customer
feedback project that helped prove the existing demand in the
neighbouring city, and as a result, a new centre was opened.
Susan points out:"This wasa slice of the market that we had previ-
ously missed out on. Through the qualifications, a staff member was
encouraged to think beyond her specific job, to see an opportunity
and find a way of acting on it."
The British Council still faces technological challenges in some

countries, whereas in other areas unstable environment make it
difficult to maintain service levels at all times. "Nevertheless,"
Susan says, "our customer experience - building trust, inspiring
through our products and services and making it easy for people
to do business with us - is really strong. "Trust is our USP - both
when we're selling a language course, and representing the UK as
a whole."
1. Why did British Council collaborate with the Institute of

Customer Service?
(Hint: To improve the quality of service at the institute
through its 'Customer Service Excellence' project.)
2. Whydid the BritishCouncil use Professional Qualifications
program?
(Hint: To ensure that consistent quality experience is
provided to its customers and serve as its main framework
for providing customer service training to its executives
worldwide.)

.' •
CASESTUDY7
N O T E S
REIGNING IN RISING LABOUR COSTS BY EMPLOYING A

YIELD MANAGEMENT SYSTEM
This Case Study discusses howa restaurant chainwas able to check

rising labour costs by implementing a yield management solution. It
is with respect to Chapter 7 of the book.
Source: http://www.hotelnewsnow.com/Media/Default/Legacy//Featurelmages/la-
bor-cost-feature.jpg
CLIENT
The client is a US-based quick service restaurant chain that was

facing an issue of rising labour costs. This was because over the
past decade, several states in the US passed legislation indexing
state minimum wage to Consumer Price Index (CPI). Moreover,
the government also implemented its three phase plan raising
the federal minimum wage under the Fair Minimum Wage Act of
2007.
The restaurant chain hired a management solutions provider to

help in rising labour costs. The solutions provider made use of its
proprietary statistical methodology to help independent franchi-
sees and corporate-owned restaurants of the chain better under-
stand price actions that would yield optimal results.
APPROACH
The firm also developed restaurant-specific price points that

helped raise gross margin dollars at the unit level. This was
achieved by identifying the intrinsic price opportunities in indi-
vidual items of the restaurant menu by employing a yield man-
agement system. The solutions provider leveraged the same
restaurant-level data set after identifying price opportunities in
order to understand and influence local demand.

CASESTUDY7
N O T E S
Source: https://previews.l 23rf.com/images/dolgachov/dolgachov1404/dolgacho-

v140401100/27329191-restaurant-couple-and-holiday-concept-smiling-man-looking-into-
girlfriends-or-wifes-menu-at-restaura-Stock-Photo.jpg
RESULTS
The management solutions provider focused on local demand

which helped it to provide price recommendations that managed
to check rising labour costs without pricing restaurants out ofthe
market or losing crucial transaction counts. The management
program was not implemented by all franchisee restaurants.
Those restaurants that did not take part, managed to offset their
labour costs by aggressively pricing their menu items in order to
yield a similar result.
1. What was the challenge being faced by the quick service

restaurant chain?
(Hint: Hampered by rising labour costs)
2. What were the results achieved by the management
solutions provider?
(Hint: By focusing on local demand that helped in
establishing price recommendations, the restaurants
were able to check the rising labour costs)

.: •
CASESTUDY8
N O T E S
FASTCO EMPLOYS NEW PRICING STRATEGY TO

INCREASE ITS PROFIT MARGINS
This Case Study discusses a pricing strategy implemented by a

restaurant chain to increase its profit margins. It is with respect to
Chapter 7 of the book.
BACKGROUND
FastCo is a quick-serve restaurant chain with over 1000 branch-

es. The chain was under severe financial stress as its profit mar-
gins were declining rapidly and the company needed to revise
its pricing strategy. The restaurant chain followed the policy of
pricing all items the same in every restaurant irrespective of the
location of restaurants. FastCo however came to realise that some
locations should have a higher price bandwidth than others, but
feared that making changes in prices in the wrong location would
lead to a loss of customers. Moreover, the chain was concerned
about which items' prices to rise and by how much. FastCo hired
the services of Revenue Management Solutions (RMS) to provide
a yield management solution for a new pricing strategy.
The solution provided by RMS helped the chain:

0 identify and classify restaurants into groups having similar
characteristics to categorise them into different price tiers
0 recommend the total number of price tiers that have to be im-
plemented
0 categorise specific price levels for each tier and item based on
pricerecommendations bylocation
0 estimate the expected impact on restaurant profits of the new
strategy
0 track the results of the pricing strategy implemented in order
to fine tune prices if needed
Source: https://www.schick-hotels.com/files/images/content/f-b-restaurant-schick/restau-
rant-wien-schick.jpg

CASESTUDY8
N O T E S
APPROACH
Firstly, RMS acquired all FastCo's product mixinformation of the

previous two years. This data was analysed to find out the cus-
tomer view of pricing. Each restaurant's weekly product data was
assessed to gain insight into customer reaction of restaurants to
past price changes. This analysis was performed at each restau-
rant to analyse the price sensitivity of each restaurant pertain-
ing to customer traffic and gross profit changes. The analysis re-
vealed diverse customer reactions to price changes ranging from
highly sensitive to highly insensitive.
RMS assessed a number of different factors such as location, de-

mographics and economic conditions of restaurant sites. It also
assessed FastCo's ability to handle multiple price tiers in order to
determine the number and composition of price tiers. Based on
the above analysis, the final price tiers of restaurants were devel-
oped by making use of geographic proximity and economic con-
ditions.
RMS created five price tiers. This decision was based on the as-
sessment of internal factors and potential customer reaction. The
price tiers having the highest prices were those with the least sen-
sitive restaurants, and highest Consumer Price Index (CPI). Plus,
a price tier for a certain location characterised as having poor
economic conditions and highly sensitive restaurants was given
a price decrease.
The price changes for the tiers fluctuated from a rise of 6.9% to
a fall of 2.0%. One tier's pricing was kept constant and left un-
changed to serve as a benchmark for gauging the effectiveness of
the new strategy.
FastCo and RMS considered several different scenarios with re-

spect to price changes. The final price decision chosen by FastCo
exceeded what RMSfelt could be achieved without having an im-
pact on customer traffic. Due to this reason, the estimated gross
profit was adjusted to reflect customer resistance to price change.
RMSestimated that a weighted average price increase of 4.8% for
all restaurants would result in 5.9% increase in gross profit.
The price changes were first tried out in a small number of lo-
cations where minimal customer complaints were received. Af-
ter this initial test, price adjustments were rolled out in different
phases, with a view to cause minimal effect on customer resis-
tance.

•
CASESTUDY8
N O T E S
RESULTS
The price changes were implemented by the restaurant chain

with marginal customer resistance. The gross profit of the restau-
rant chain increased by 5.4% instead ofexpected as 5.9%. Though
the expected profit impact was slightly less than originally mod-
elled, FastCo decided to ramp up their promotion in order to off-
set the predicted loss in customer traffic. This decision lowered
the effective price increase; however, it did lessen the impact on
customers as anticipated.
QUESTIONS
(Hint: Rapidly decreasing profit margins)

2. What was the solution implemented by RMS?
(Hint:A new pricing strategy was implemented consisting
five tiers based on restaurant location and customers'
sensitivity to price change)

CASESTUDY9
N O T E S
DECOUPLING OF SERVICES IN THE UK CONSTRUCTION

INDUSTRY
This Case Study discusses the decoupling of aggregates consump-

tion and construction output in the UK construction industry. It is
with respect to Chapter 8 of the book.
INTRODUCTION
This case study describes a decrease in the usage of aggregates

(sand, gravel, crushed rock, and their associated substances) as
basic material in the construction industry of the United King-
dom (UK).
In the European Union (EU), aggregates are used in the following

ways:
Crushed Rock Residential

from Quarries Buildings
49% Houses, Apart-
ments) 25%
Commercial
Sand & Gravel New Buildings (Offi-
from Pits Aggregates Construction cers, Factories,
41% Extraction Contracts etc.) 20%
Processing
Off-Site&
Recycled Stockpiling, On-Site
Aggregates Transport
fromC&D Repair
Materials 6%
Concrete Maintenance,
&Asphalt Improvement (Bridges,
Marine Plants Harbom; etc.)
Aggregates Recycling Demolition Offshore
(Sea or Lake Plants & Recycling Pipeline stabil-
Dredged)2% plants isation 15%
Armour
Stone 3%
Manufactured Roads,
Aggregates Asphalt Run\vays,
(Crushed, Slag Products Railways,
Fly-ash) 2% 10% aterways 20'7,
Source: Bicket and Salmons 2013. p.12.
Herein, the environmental impact of the use of aggregates during

their extraction and disposal stages in the UKis discussed. There
are a diverse range of impact on the environment caused by the
extraction of aggregates such as noise, dust, traffic, contamina-
tion of ground water and surface water, as well as impact on ar-
chaeology, historical monuments and wildlife.
APPROACH
The approach used in this case study wasbased on ex-post evalua-

tion ofpolicy measures that were focused on reducing the usage of
resources. This policy approach differentiated between the effect

•
CASESTUDY9
N O T E S
of the policy mix, i.e. the discernible results of measures that can
be attributed to its implementation and effectiveness, i.e. whether
or not the proposed objectives and targets have been achieved.
Moreover, the efficiency of policy mix along with environmental
sustainability was evaluated. The efficacy of the policy mix was
evaluated by comparing the achieved level of resource and im-
pact decoupling with monetary resources invested to achieve the
final result. The sustainability of the policy mix was evaluated by
assessing the environmental effects that are not covered in key
targets such as toxicity, marine issues, etc.
Before 1995, aggregate consumption and construction output

were firmly interrelated. However, when the Landfill Tax was in-
troduced in 1996, this scenario changed. It is inferred by analy-
sis that absolute decoupling was achieved which resulted in an
overall rise in construction output and an overall fall in aggregate
consumption over the period between 1995 and 2010. The figure
shown below exemplifies the trend in aggregates use compared to
construction output in the UK compared to 1995 baseline levels.
The vertical lines depict important policy changes: the introduc-
tion of the Landfill Tax (which is a tax paid by businesses which
get rid of waste using landfill sites) in 1996; the Aggregates Levy
(which is a tax on sand, gravel and rock that's either been import-
ed; dug from the ground or dredged from UK sea waters) in 2002.
The vertical lines also depict raises in the Landfill Tax and Aggre-
gates Levy in 2008; and another subsequent rise in the Landfill
Tax in 2009.
Policies and decoupling of aggregates consumption from construction output

against a 1995 baseline
150
125
§100
ll\
75
-
] 50
25
0
li) 0 li) 0 li)
0
0 0
ffi 8l 8l 0 0 C:
"' "' "'
-- Aggregates Consumption -- Volume of Construction Output -- Specific Consumpt-ion
- - - - Landfill Ta...x introduction - - - Aggregates Levy Introduction •••••••Aggregates Levy Increase
Source: Bicket and Salmons 2013, p.ll.Based on: Idoine, N.E.T. Bide, and T.J. Brown
2012. "United Kingdom Minerals Yearbook 2011", Nottingham, British Geological Survey

CASESTUDY9
N O T E S
CONCLUSION
The trend in absolute decoupling ofaggregates consumption from

construction output has contributed to a fall in environmental ex-
ternalities related with the aggregates industry. The Aggregates
Levy helped spur environmental improvement while its combi-
nation with the Landfill Tax is credited with providing impetus to
manufacturers to change their production methods and practices.
1 Ei1,4i1Mi6
1. What is aggregates levy?
(Hint: It is a tax on sand, gravel and rock that's either
l
been imported; dug from the ground or dredged from the
UK sea water.)
2. What were the results achieved bydecoupling of aggregate
consumption from the construction output?
(Hint: Helped spur environmental improvements,
provided impetus to manufacturers to change their
production methods and practices)

•
CASE STUDY 10
N O T E S
VODAFONE BECOMES THE FIRST GLOBAL IOT

PROVIDER TO REGISTER OVER 50 MILLION CONNECTIONS
This Case Study discusses Vodafone's growth in the Internet of

Things (IoT)field and theincreasing popularity of IoT in the service
sector. It is with respect to Chapter 9 of the book.
Vodafone, headquartered in London, UK, is a British telecommu-

nications MNC. It has become the first global Internet of Things
(IoT) mobile provider and registered over 50 million connections.
Vodafone is presently adding nearly 1 million connections every
month.
vodafone
Source: http://seeklogo.com/imagesN/vodafone-logo-8344E399FE-seeklogo.com.png
IoT is a technology that connects any device with an on/off switch

to the Internet and to each other. Say for example, cell phones,
coffee makers, televisions, washing machines, headphones, re-
frigerators, wearable devices such as smart watches can be con-
nected to the Internet as well as to each other.
IoT is growing at a high rate in the automotive, healthcare and

utility sectors. Vodafone's IoT solutions connect its networks with
other partner networks enabling the telecom giant to provide
its customers with simple, globally unified connectivity services
across the world.
IoT technologies have begun to enter the mainstream conscious-

ness and are quickly becoming a core focus of research and devel-
opment for a diverse range of consumer technology companies.
Vodafone offers a diverse host of IoT solutions in India which in-

cludes Vodafone Location Tracker, Automotive Telematics, Re-
mote Asset Management, Managed IoT Connectivity Platform,
Wireless Payment Solutions, Security & Surveillance solutions,
Smart Metering solutions and Special SIMS, which have been de-
signed for operating in adverse conditions.

CASE STUDY 10
N O T E S
Vodafone is tipped to be the leading telecom operator in mobile

IoT worldwide and has been earmarked by Gartner as a 'Lead-
er' in its Magic Quadrant for Managed M2M Services, Worldwide
2016, for the third consecutive year running. Vodafone was also
given recognition as 'the consistent global leader' in IoT services
by Machina Research in its 2016 IoT Communications Service
Provider Benchmarkingreport. Vodafone has been selected as
the leader in this report for the fifth consecutive year running.
Nick Gliddon, Director, Vodafone Business Services, said, "Cross-

ing the 50 million mark and being a global leader in IoT solutions is
a testimony to Vodafone's commitment and continued focus oninno-
vation in therapidly growing and dynamic IoT sector. We thank our
customers for supporting us and helping us achieve this significant
milestone."
According to Vodafone IoT Barometer, a report based on recent

research conducted in the IoT field, stated that:
□ 24%of businesses' IT budgets are being assigned to IoT.
□ 76% of companies are of the opinion that IoT will be 'critical'
for the future success of any organisation in their particular
sector.
□ 48% of companies who have adopted IoT say they are using
IoT to support large-scale business transformation
□ 86% of organisations in the industrial sector as well as com-
panies in mining, construction and waste management reveal
that they have seen 'significant' return from applying IoT
QUESTIONS
1. What is meant by the Internet of Things (IoT)?
(Hint: It is a technology that connects any device with an

on/off switch to the Internet and to each other.)
2. According to Vodafone IoT Barometer, what developments
are taking place in the IoT field?
(Hint:24% of businesses' IT budgets are being assigned to
IoT, 48% of companies who have adopted IoT say they are
using IoT to support large-scale business transformation,
etc.)

•
CASE STUDY 11
N O T E S
INFOSYS SOLUTION BOOSTS PROFIT MARGINS OF

BRITISH TELECOM OPERATOR
This Case Study discusses the significance of service operation man-

agement solution provided by Infosys to a leading British telecom
operator in reducing billing expenses. It is with respect to Chapter
10 of the book.
CLIENT PROFILE
The client is a UK-based leading communication service provid-

er that targets the retail consumer segment and Small Medium
Enterprises (SMEs). It also offers a diverse range of services to
its customers such as voice, data, Internet and multimedia assis-
tance. The client has more than 18 million customers across the
world.
BACKGROUND
The telecom industry is experiencing intense competition due to

a number of factors such as an amalgamation of operations, uni-
form pricing structures, rapidly changing consumer preferences
and rapid progress in technology. Due to these factors, the client
is obligated to regularly update its services and products to main-
tain its competitive edge. This has affected the profit margins of
the client.
The communication service provider hired Infosys to resolve its

issues. Infosys is an Indian MNC which provides business con-
sulting and IT outsourcing services. It is headquartered in Ben-
galuru, Karnataka.
POWERED
InBY NTELLECT
DRIVEN BY VALUES
Source: https://www.infosys.com/SiteCollectionlmages/media-resources/infosys-lo-
go-baseline-JPEG.jpg
CHALLENGE
The client decided to reduce its expenses incurred on billing op-

erations by outsourcing its back office functions through imple-
menting a program. The client faced certain challenges while ap-
plying the program, which are:

CASE STUDY 11: INFOSYS
CASE STUDY 11
N O T E S
D Identifying a business partner: The client wanted a business

partner that could serve as an extension of the client's UK op-
erations while also preserving the client's brand values.
D Bridging the cultural gap: The client wanted to develop a
system that would provide reliable customer experience stan-
dards to customers belonging to different cultures across all
company processes.
D Enhancing service quality: The client wanted a better con-
trol on its revenue collection system through accurate pro-
cessing of orders and providing credit management services
to their customers to keep their satisfaction levels high. This
was achieved by the:
♦ development of a long-term scalable business model that
would resolve complex business imperatives
♦ efficient management of large volumes of data through
improved resource development resulting in faster turn-
around times
INFOSYS' SOLUTION
Infosys set up an offline helpdesk to provide email support to the

client's retail customer base. The Infosys' Solution is based upon
providing the following services:
D Process improvement: By combining process automation
and process re-engineering tools and techniques, Infosys im-
proved service quality and efficiency of client's services.
D Cross skilling of resources: Infosys ensured that peaks and
troughs in work volume do not affect the workload of employ-
ees and they are effectively deployed.
RESULTS
Infosys helped the client achieve significant improvement in op-

erational metrics. Also, it helped deliver:
D 49%increase in transactions which is equal to over 6.6million
transactions without hiring a single additional employee
D Savings of £3.6 million for the clients
D Reduced headcount by 22%by automating several projects
D Enhanced resource management
D Decrease in backlog leading to immediate handling of crisis

situations

•
CASE STUDY 11
N O T E S
QUESTIONS
(Hint: Reduce its billing expenses)

2. What were the results achieved by the client by
implementing Infosys' solution?
(Hint:49%increase in transactions which are equal toover
6.6 million transactions without hiring a single additional
employee, savings of £3.6 million for the clients, etc.)

CASE STUDY 12
N O T E S
INFOSYS DEVELOPS PHR SOLUTION FOR A US-BASED

HEALTH MANAGEMENT COMPANY
This Case Study discusses the implementation of service operation

management in the health care sector by a US-based health manage-
ment company. It is with respect to Chapter 10 of the book.
CLIENT
The client is a US-based health management company that pro-

vides various benefit plans such as Health Management Organi-
sation (HMO), Preferred Provider Organisation (PPO) and Point
of Service (POS) plan to its 250,000 members spread across seven
states.
Source: http://www.nationofchange.org/20l5/wp-content/uploads/PrivateHealth-
care720l5.jpg
BACKGROUND
The health care industry in the US is presently focused on cost

savings. This can be achieved by empowering customers to fo-
cus on their health by being more proactive thereby reducing the
overall medical expenses that they may incur.
The client made extensive personalised information of their pa-

tients available to them and their physicians in the form of Per-
sonal Health Records (PHR) in order to encourage them to par-
ticipate in an active manner. Moreover, the client also wanted to
create an enhanced experience for their members to improve their
loyalty to create a niche market and differentiate their brand.
APPROACH
The client chose Infosys for developing an IT-cum-business strate-

gyfor meeting market demand. At first, the Infosys team explored
the practical feasibility of developing PHR by going through pres-
ent options made available by different states. Subsequently, In-
fosys developed a multi-disciplinary PHR model that was innova-

'. •
CASE STUDY 12
N O T E S
tive in nature. The PHR model had to be free ofsecurity loopholes

and resistant to privacy breaches.
The Infosys' solution enabled the members to interact with their

health records. The PHR solution provided decision support ca-
pabilities to the members so that they could be more aware and
conscious of their health. Moreover, the solution integrated PHR
and Electronic Health Record (EHR) programs so that Webser-
vices could be leveraged beneficially.
Infosys designed, created and executed the entire PHR program.

The team took the help of physicians and applied domain and
technical expertise to conceptualise and implement the program
successfully. They also organised workshops to reach an agree-
ment pertaining to PHR requirements. Moreover, concerns re-
lated to privacy of data and integration of technology were also
identified and resolved. Lastly, the Infosys team reviewed their
strategic plan, the client's requirements and clarified the revised
project implementation schedule.
RESULTS
The benefits of implementing this program were as follows:
D The Infosys' solution provided the members with a strong
member outreach program which helped the members and
health care providers to collaborate with each other.
D The program integrated business and IT best practices so that
they can be used for marketing efforts.
D The newly designed IT infrastructure solution provided new
strata of PHRcapability for the subsequent phases of the pro-
gram.
1"·f\i,4iiMii
1. What were the features of the solution implemented by
Infosys?
(Hint: Enabled the members to interact with their health
records, provided decision support capabilities to the
members so that they could experience and participate in
their health care, etc.)
2. What were the results achieved by Infosys?
(Hint: Strong member outreach program which helped
members and health care providers to collaborate with
each other, program integrated business and IT best
practices so that they can be used for marketing efforts,
etc.)

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SERVICE OPERATIONS MANAGEMENT

NMIMS GLOBAL ACCESS

Chief Academic Officer

TOC Reviewer Content Reviewer

Author: Sanjive Saxena

CHAPTER NO. CHAPTER NAME PAGE NO.

1 Introduction to Service Operations Management 1

2 Service Strategy Formulation and Execution 15

7 Service Productivity Measurement and Management 135

>"' Service Decoupling 157

Service Operations Management in Different Sectors

11 Case Studies 231

Service Productivity Measurement: Performance measurement, quality measurement, tools, produc-

NMIMS Global Access- School for Conhnumg Education

SERVICE OPERATIONS IN AVANTIKA HOSPITAL

Avantika Hospital is a small hospital situated in Indirapuram

Thus, it can be observed that Avantika Hospital provides quality

NMIMS Global Access- School for Conhnumg Education

After studying this chapter, you will be able to:

Service operations management involves understanding the require-

This chapter describes the concept, classification and characteristics

CONCEPT AND MEANING OF SERVICES

NMIMS Global Access- School for Conhnumg Education

The term 'service' refers to an intangible product such as an action,

The nature of services provided by different businesses under the

NMIMS Global Access- School for Conhnumg Education

1.2.1 CLASSIFICATION OF SERVICES

Services can be classified based on various criteria as shown m

Figure 1.1: Classification of Services

Let usdiscuss the classification of services as follows:

NMIMS Global Access- School for Conhnumg Education

1.2.2 CHARACTERISTICS OF SERVICES

Some important characteristics of services are as follows:

NMIMS Global Access- School for Conhnumg Education

1.2.3 SERVICE PROCESS: MEANING AND CLASSIFICATION

NMIMS Global Access- School for Conhnumg Education

□ Job shop operation Gobbing) processes: Job shop operations in-

In addition to the above types of service operation processes, service

SELF ASSESSMENT QUESTIONS

1. The concept of aftersales service led to the advent of the

CONCEPT OF SERVICE OPERATIONS

Operations management in the service industry is called service oper-

NMIMS Global Access- School for Conhnumg Education

that converts inputs (consumers) to desired outputs (satisfied con-

1.3.1 ROLE OF OPERATIONS IN SERVICES

An efficient service operation helps in achieving effective and timely

NMIMS Global Access- School for Conhnumg Education

1.3.2 CHALLENGES FACED BY SERVICE OPERATIONS

Managing service operations is different and a bit tougher than man-

SELF ASSESSMENT QUESTIONS

4. Service operations ensure that the of service is

NMIMS Global Access- School for Conhnumg Education

SERVICE OPERATIONS VS.

TABLE 1.1: DIFFERENCES BETWEEN SERVICE AND

NMIMS Global Access- School for Conhnumg Education

s. Manufacturing Operations Service Operations

(;r SELF ASSESSMENT QUESTIONS

NMIMS Global Access- School for Conhnumg Education

□ A service operation helps in achieving effectiveness and efficiency

□ Inventory: Raw materials or other semi-finished goods that are

Ill DESCRIPTIVE QUESTIONS

2. Describe the role of operations in the service industry.

NMIMS Global Access- School for Conhnumg Education

IDANSWERS AND HINTS