If a service firm is to remain competitive, continuous improvement in productivity and quality must be part of its strategy and corporate culture. The framework shown in Table 3.5 was developed by Chase and Hayes to describe the role of operations in the strategic development of service firms. This framework also is useful as an illustration of the many sources of productivity and quality improvement (i.e., new technology is only one source). In addition, the framework provides a way to measure and evaluate a firm’s progress in the development of its service delivery system. It organizes service firms into four different stages of development according to their competitiveness in service delivery, and for each stage, the management practices and attitudes of the firm are compared across key operational dimensions. It should be noted that services need not start at stage 1, but during their life cycle, they could revert to stage 1 out of neglect. For example, one might argue that Federal Express began service as a stage 3 competitor because of its innovative hub-and-spoke network concept, whereby all sorting is accomplished at the single Memphis hub (thus guaranteeing overnight delivery).
Available for Service
Some service firms and, often, government services in particular fall into this category because they view operations as a necessary evil to be performed at minimum cost. There is little motivation to seek improvements in quality because the customers often have no alternatives. Workers require direct supervision because of their limited skills and the potential for poor performance that results from minimal investment in training. Investment in new technology is avoided until it is necessary for survival (e.g., consider the long-overdue adoption of Doppler radar by the Federal Aviation Administration for air traffic control). These firms are essentially noncompetitive, and they exist in this stage only until they are challenged by competitio.
Available for Service
Some service firms and, often, government services in particular fall into this category because they view operations as a necessary evil to be performed at minimum cost. There is little motivation to seek improvements in quality because the customers often have no alternatives. Workers require direct supervision because of their limited skills and the potential for poor performance that results from minimal investment in training. Investment in new technology is avoided until it is necessary for survival (e.g., consider the long-overdue adoption of Doppler radar by the Federal Aviation Administration for air traffic control). These firms are essentially noncompetitive, and they exist in this stage only until they are challenged by competitio.
Journeyman
After maintaining a sheltered existence in stage 1, a service firm may face competition and, thus, may be forced to reevaluate its delivery system. Operations managers then must adopt industry practices to maintain parity with new competitors and avoid a significant loss of market share. For example, if all successful airlines used the same kind of plane, then a fledgling airline just entering the market also might be inclined to use that same aircraft. The contribution of operations in this hypothetical situation becomes competitive-neutral, because all the firms in the industry have adopted similar practices and even look like each other (because they have purchased equipment from the same supplier). When firms do not compete on operations effectiveness, they often are creative in competing along other dimensions (e.g., breadth of product line, peripheral services, advertising). The workforce is disciplined to follow standard procedures and is not expected to take any initiative when unusual circumstances arise. These firms have not yet recognized the potential contribution of operations to a firm’s competitiveness.
Distinctive Competence Achieved
Firms in stage 3 are fortunate to have senior managers with a vision of what creates value for the customer and who understand the role that operations managers must play in delivering the service. For example, Jan Carlzon, CEO of Scandinavian Airlines (SAS), realized that recapturing the business-traveler market, which had been lost to aggressive competition, required improving on-time departure performance. To achieve this goal, he had to provide a leadership role that fostered operations innovations, which then would improve the delivery system. Operations managers are the typical advocates of continuous improvement (Six Sigma) in their firms and take the lead in instituting service guarantees, worker empowerment, and service-enhancing technologies. Workers in these organizations often are crosstrained and encouraged to take the initiative when necessary to achieve operational goals that are stated clearly (e.g., overnight delivery for Federal Express). Firms in this category implement management strategies to achieve the corporate vision and, thereby, differentiate themselves from their competition.
World-Class Service Delivery
Not satisfied with just meeting customer expectations, world-class firms expand on these expectations to levels that competitors find difficult to meet. Management is proactive in promoting higher standards of performance and identifying new business opportunities by listening to customers. World-class service firms such as Disney, Marriott, and American Airlines define the quality standards by which others are judged. New technology no longer is viewed only as a means to reduce costs; it is considered to be a competitive advantage that is not easily duplicated. For example, Federal Express developed COSMOS ( C ustomer O perations S ervice M aster O n-line S ystem) to provide a system that tracks packages from pickup to delivery. Customers, using the Internet and the FedEx Web site, can receive information on the exact location of their packages. This system also can be used to tell a driver en route to make customer pickups. Working at a world-class firm is considered to be something special, and employees are encouraged to identify with the firm and its mission. For example, a Disney trash collector is considered to be a “cast member” who helps visitors to enjoy the experience. Sustaining superior performance throughout the delivery system is a major challenge. Duplicating the service at multiple sites, however, and in particular overseas, is the true test of a world-class competitor
After maintaining a sheltered existence in stage 1, a service firm may face competition and, thus, may be forced to reevaluate its delivery system. Operations managers then must adopt industry practices to maintain parity with new competitors and avoid a significant loss of market share. For example, if all successful airlines used the same kind of plane, then a fledgling airline just entering the market also might be inclined to use that same aircraft. The contribution of operations in this hypothetical situation becomes competitive-neutral, because all the firms in the industry have adopted similar practices and even look like each other (because they have purchased equipment from the same supplier). When firms do not compete on operations effectiveness, they often are creative in competing along other dimensions (e.g., breadth of product line, peripheral services, advertising). The workforce is disciplined to follow standard procedures and is not expected to take any initiative when unusual circumstances arise. These firms have not yet recognized the potential contribution of operations to a firm’s competitiveness.
Distinctive Competence Achieved
Firms in stage 3 are fortunate to have senior managers with a vision of what creates value for the customer and who understand the role that operations managers must play in delivering the service. For example, Jan Carlzon, CEO of Scandinavian Airlines (SAS), realized that recapturing the business-traveler market, which had been lost to aggressive competition, required improving on-time departure performance. To achieve this goal, he had to provide a leadership role that fostered operations innovations, which then would improve the delivery system. Operations managers are the typical advocates of continuous improvement (Six Sigma) in their firms and take the lead in instituting service guarantees, worker empowerment, and service-enhancing technologies. Workers in these organizations often are crosstrained and encouraged to take the initiative when necessary to achieve operational goals that are stated clearly (e.g., overnight delivery for Federal Express). Firms in this category implement management strategies to achieve the corporate vision and, thereby, differentiate themselves from their competition.
World-Class Service Delivery
Not satisfied with just meeting customer expectations, world-class firms expand on these expectations to levels that competitors find difficult to meet. Management is proactive in promoting higher standards of performance and identifying new business opportunities by listening to customers. World-class service firms such as Disney, Marriott, and American Airlines define the quality standards by which others are judged. New technology no longer is viewed only as a means to reduce costs; it is considered to be a competitive advantage that is not easily duplicated. For example, Federal Express developed COSMOS ( C ustomer O perations S ervice M aster O n-line S ystem) to provide a system that tracks packages from pickup to delivery. Customers, using the Internet and the FedEx Web site, can receive information on the exact location of their packages. This system also can be used to tell a driver en route to make customer pickups. Working at a world-class firm is considered to be something special, and employees are encouraged to identify with the firm and its mission. For example, a Disney trash collector is considered to be a “cast member” who helps visitors to enjoy the experience. Sustaining superior performance throughout the delivery system is a major challenge. Duplicating the service at multiple sites, however, and in particular overseas, is the true test of a world-class competitor
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