Friday, 23 January 2009

Service Innovation Part 1a: Definitions explained

Hooray! Someone (named Bart) commented on my previous post. He said:

Interesting definition, though I do not get it yet. Could you specify what you mean with the design of the output and management of the process? Preferably with some (simple) examples?

When we take a closer look at the services definition we see it demands three properties:

  1. the process is the product
  2. the customer/user is in control of the design of the output/outcome
  3. the customer/user is in control of the management of the process
Lets have a look at all three properties.

The process is the product - In a classical manufacturing business the production-process of the product lies fully in the hand of the producer. The producer can specify how the product is manufactured in advance . In services this is not the case, the services process is created over and over again on the spot. An example:

When I take my family to a pancake restaurant (pancakes are a local specialty, beloved by young and old) the process that the restaurant staff and "us" go through from the moment we enter the parking lot to the moment we leave it, has not been designed in advance but is co-created by both. If the staff is friendly, reacts well on the presence of my kids and guide them in a smart way to the playground, it all starts well. But when I enter the restaurant disturbing the experience of other guests by shouting "Hey, get me a table for five, we are hungry" this will certainly affect the course of events to happen during the stay.

So the product that is created by our interaction is the process. This also rebunks the idea that the services proces is owned by the services provider. Noop! The process is mutually produced - co-creation - but the process is not owned by the provider. More on this later.

The customer controls the design of the output - At first sight it is confusing to have a product and an output. This is not very "normal" in the product world. There product and output are the same. At least when they leave the factory. But as soon the product enters the channel and comes into the retail phase, the services aspect start to kick in. And in real services industries the product is customized to the extend that one can ask: who designed this thing? Two examples:
  • In the same pancake restaurant, the second thing I do is taking a look at the menu so see if they serve "ginger-bacon". If they don't I look if they serve "bacon" and "ginger". So far I have not found a pancake restaurant that don't have the second set. So when they don't serve "ginger-bacon" as a combination I ask the waiter for exactly that. Saying "I see you serve "bacon" and "ginger" pancakes. Can I have the combination? The answer has always been "yes" so far. An the bill is usually one or two Euros higher than "normal bacon". Who cares?
  • Anyone who ever saw "American Chopper" on TV must have noticed that some customer pop in during the build phase. Most come out of curiosity, but it is very clear that when the customer would say "hey, can this frame be redone, I want it shorter/longer/higher/wider, his wishes will be fulfilled. And the poor guy that works on the frame for 2 weeks (and spend the last 3 polishing it) will happily shred the frame and start anew.

In thse example it is clear that the customer controls the output. Of course it starts with the fact that I decide which pancake to order from the list of usually 60 to 80. And next I "reconfigure" the output by ordering a version that is not on the menu. So again, I'm in control of the output (of the kitchen). The same holds for the bike example.

The customer is in control of the management of the process - In agricuture and manufacturing the producer manages the production proces (altough I guess some farmers will disagree). They specify when the factory runs (when the crop is harvested), what products are produced (what to grow this year), how may people/machines are employed (harvest quick or slowly), etc.

In services this is different. Whatever the interaction between services providor and customer, it is always free for the customer to say things must be done different, stop the process for a while or even walk away. This is less true for the services providor. If one says to provide a service one should do that (to best effort). A few examples:

  • In the pancake restaurant I can say to the staff that I want a new pancake because this one arrived cold, that I want the bill now, that we will skip coffee (or even stop halfway the main dish) or that we are leaving right away because on of the children got sick. Actually I don't have to explain at all why we are leaving. Ofcourse, when you ordered a 4 stage meal you have to pay the full amount, but still you can leave.
  • If you ordered a hotel stay and the hotel notices that you will be the only guest for that night, they can do two things: stay open and serve you or cater for a good (read normally better) place to stay. They cannot (or better shouldn't) run away from their hospitality obligations.
  • Last week we left a lunch-restaurant after waiting for over 45 minutes because our orders for two simple buns hadn't arrived yet and I was given bad service by the waitress too. So we left without notice.
  • In a taxi you can always say to the driver. Please stop, I've changed my mind, I want to continue my yourney on foot (to see that park).

Bullet 1, 3 and 4 show that it is the customer who manages the proces. He/she can speed up, stop, change the service-interaction. Bullet 2 shows that the "production" can be relocated (to another hotel), but this decision is customer-focussed, not production focussed. Imagine what happens when the customer says "no, I don't want to be relocated".

So in general the process is managed by the customer, he/she owns the process, where "owning" means full control over entering, delaying, speedin, stopping or changing the services interaction.

So "Bart" I hope things are a bit clearer now. If they aren't, please let me know, else I will continue with Part2.

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