Monthly Archives: March 2016

2016 Services Leadership Institute Recap in Pictures

We had another engaging educational program this year! The 3 day event was packed with insightful and dynamic presentations by business and academic thought leaders, small group discussions and networking events. We were excited to welcome teams from over 20 companies who joined us for Services Leadership Institute at W. P. Carey School of Business this year to learn from the experts and share their own experiences in transforming and leading their organizations in this highly competitive and rapidly changing business environment. While this program is now over, stay tuned for our other upcoming events. We hope to see you at Services Leadership Institute next year! Continue reading

What Service Innovators Can Learn From Coproduction in Prolonged Complex Services

By Jelena Spanjol

While frontline employees are critical in creating positive service encounters, many customers are left to their own devices to fully extract the potential value from a service. Across industries such as education, personal finance management, and healthcare, customers are the primary agents in the production of value from services provided by companies. For example, while a university might staff the classrooms with excellent faculty and administrative functions with well-trained employees, the value of a higher education is to a large extent created by the students themselves, through everyday dedicated learning, attending classes, etc. Similarly, financial advisors and counselors might have the best advice and tools to offer their clients to save for retirement and college funds, but customers have to do the hard work of cutting down on expenditures and persisting in budget planning and implementation. It is not surprising, then, that many college students do not finish their degrees[1] and many consumers of financial services firms do not achieve their goals[2].

Our research focuses on such prolonged and complex service encounters, where consumers are required to contribute resources (time, effort, etc.) and do so well beyond the immediate interactions with the service provider. We were particularly interested in exploring three major questions:

  • How do consumers experience such extensive service coproduction mandates?
  • What challenges do consumers face in their coproduction attempts?
  • What strategies and tactics do consumers use to successfully coproduce services over the long run?

To generate insight into the dynamics of complex and prolonged service coproduction, we focused on the healthcare services industry. This industry was particularly suitable for our inquiry, since healthcare services are predominantly consumed by individuals with chronic illnesses. The Robert Wood Johnson Foundation reported in 2010 that 93% of all prescriptions are filled and 79% of all physician visits in the U.S. are made by chronically ill patients, with an increasing trend. At the same time, about 50% of medications prescribed to manage chronic diseases are not taken as recommended, resulting in premature death, preventable hospitalizations, and $290 billion of avoidable annual medical spending according to New England Healthcare Institute. In this context, coproduction is critical in order to generate value from healthcare services. However, such coproduction reflects a continuous and laborious effort by consumers.

We conducted qualitative, depth interviews with hypertensive adults in order to understand how prolonged and complex service coproduction might be more successful. What we found indicates that consumers engaged in ongoing coproduction must develop a system that is contextualized in order to effectively integrate interdependent coproduction behaviors.

A contextualized coproduction system reflects and leverages the enmeshed nature of service coproduction in a consumer’s daily life. This encompasses coproduction behaviors that are defined by their scope as well as their temporal intervals and regularity. For example, finding the most effective pill containers, having medication refill routines in place as well as having a different set of routines for traveling or unexpected visits to one’s home, represent three different types of coproduction behaviors which, together, construct an effective coproduction system. The totality of the co-production system helps consumers prevent disruptions that otherwise might compromise their coproduction efforts.

Our findings have two critically important implications for service providers in education, financial management, and healthcare. First, many standardized tools that service providers offer to their consumers will fail to adequately help consumers in their coproduction efforts, if they do not take into account each consumer’s unique living condition, daily rhythms, social interactions, etc. For example, the standard pillboxes often don’t work for consumers, since they don’t fit into the enactment of coproduction behaviors. Customized and tailored partnering between service providers and consumers is paramount. Innovative solutions must not aim at improving coproduction per se, but rather at helping consumers discover the characteristics of their environment and existing behavioral patterns that impinge on coproduction efforts. In other words, supporting the development of tailored coproduction tools by consumers themselves, based possibly on a set of modular templates, would be much more fruitful for service providers to focus on.

The second implication stems from our finding that coproduction behaviors are interrelated and interdependent. Service providers should therefore develop specific coproduction behavior monitoring capabilities that support consumers in recognizing (and doing so more quickly) when their coproduction efforts are falling short and endangering the entire system. Innovative solutions will be aimed at supporting, not educating consumers. By deeply understanding what it truly means for consumers to coproduce prolonged and complex services, providers face a tremendous opportunity to create innovative new service components and truly enhance consumer wellbeing.

[1] The US Department of Education reports that only “59 percent of first-time, full-time students who began seeking a bachelor’s degree at a 4-year institution in fall 2007 completed the degree at that institution by 2013” (https://nces.ed.gov/fastfacts/display.asp?id=40)

[2] In an April 2012 survey of over 1,000 consumers who have retirement savings accounts, conducted by State Street Global Advisors and Boston Research Group, 78% reported knowing that saving more toward retirement is important and 83% reported being able to cut their household expenses by at least 5% to increase their retirement savings rate. However, only 33% of all respondents reported knowing how to go about increasing their retirement savings.

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The research Jelena Spanjol and her colleagues completed focusing on the topic of co-production in prolonged negative services was published in the Journal of Service Research as part of the Journal’s special issue on Transformative Service Research.

Where Does the Employee Fit in a Service Operation?

By: David Bowen

In the classic 1978 HBR article, “Where does the customer fit in a service operation?” Richard Chase described the impact of high or low customer contact on the efficiency of the service production system. The article also posed the question, “What do you, (a service operation), have to give up in order to let the customer have it his way?

Fast forward to today’s rapidly changing context in which services are delivered and the unanswered question now seems to be, “Where does the Employee fit in a service operation?” It often appears that employees are what service firms give up in order to let the customer “have it his way”.  Technology, particularly IT, frequently substitutes for frontline employees in both consumer retailing, and even some professional services (Brynjolfsson and McAfee 2011; Rust and Huang 2014). Ironically, this technology substitution is said to yield more personalized service (Rust and Huang 2014).  Technology allows the customer to get what they want, when they want it, in whatever way they want.

The Apparent Rise and Fall in Importance of Where Frontline Employees Fit

Many years ago, the emerging services marketing literature cast frontline employees in essential, critical roles in delivering service and creating satisfied customers. Christopher Lovelock (1981) described frontline employees as a “service trinity” who help run the service operation, market the service, and are equated by customers with the service itself.  In organizational behavior, the strong linkage between front line employee perceptions and attitudes and those of customers were highlighted (e.g. Schneider and Bowen 1985).

Now a robot (Ford 2015) can replace the “trinity” and services marketing theory has shifted from a producer/employee perspective to a consumer perspective on value creation (Vargo and Lusch 2004; Heinonen et al. 2010). The recent “Service Research Priorities” study (Ostrom et al. 2015) found that “understanding organization and employee issues relevant to successful service” was rated only 9th in importance out of 12 for moving the field forward. Today’s “stars” in successful service delivery are technology and customers.

Where Frontline Employees Should Fit Now and in the Future.

Service employees can make unique, irreplaceably “human” contributions to the customer experience. For example, consider four “new”, explicitly defined employee roles made all the more essential in the new context of service (Bowen, 2016):

  • Differentiator —providing the non-substitutable human touch that avoids commoditization and makes all the more difference in the context of large ecosystems and technology dominance;
  • Innovator—-human creativity is key for the ideational innovation necessary to drive business success and growth. Frontline employees significantly help drive innovation volume and radicalness (Ordianni and Parasuraman 2011);
  • Coordinator—integrating resources and actors across the service system to create a seamless, successful customer experience; and
  • Enabler—-providing customers the resources, role clarity, motivation and rewards they need to successfully do their “jobs” in coproduction (Bowen 1986; Bettencourt, Lusch, and Vargo 2014). Also, ensuring that technology fulfills its role.

Future research should specify: (1) actors’ roles in value co-creation, e.g. the roles of employees and technology on the frontline, and the role of the customer with which the frontline interacts, for different services (2) the types of interdependence patterns amongst these roles, and (3) the portfolio of coordination mechanisms best matched to different types of interdependence patterns that will help yield a seamless customer experience (see also, Ostrom et al. 2015). Finally, given the interdependent roles of employees, technology, and customers, this topic is primed for interdisciplinary attention.

A Need for Humanistic Management in the Internet Age

Many lower level, frontline employees would likely claim they never experienced the rise in perceived importance that service marketing academics advocated in the lower-tech early days of the services discipline! Actually, even with all the change in how service is delivered it seems one thing has remained constant: these employees tend to be low paid; little respected; “bossed” by supervisor and customer alike; poorly selected and trained; suspect job security;  have little autonomy; and marginal opportunities for advancement.

Yet one thoughtful observer opined that the emphasis on more value to the customer via the internet can take place only with more humanistic management of employees (Dennig 2015). He maintains that it will be impossible to give customers whatever they want, e.g. solving their problems in customized fashion, via old, stiff hierarchical approaches to management. More horizontal arrangements become necessary, for example. What a wonderful paradox if the rise of technology, often displacing employees, could spark a change to a more humanistic management philosophy that would appreciate where employees fit in a service operation yielding benefits for both them and their customers.

David Bowen will be speaking on “Can you copy the inimitable? Lessons learned from the Four Seasons culture” at the Center for Services Leadership’s 30th Annual Services Leadership Institute on March 21 – 23, 2016. For more information, visit the CSL website.

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References

  • Bettencourt, Lance A., Robert F. Lusch, and Stephen L. Vargo (2014), “A Service Lens on Value Creation: Marketing’s Role in Achieving Strategic Advantage,” California Management Review, 57 (1), 44-66.
  • Bowen, David E. (1986), “Managing Customers as Human Resources,” Human Resource Management, 25, 371-384.
  • Bowen, David E. (2016), “The Changing Roles of Employees in Service Theory and Practice: An Interdisciplinary View,” Human Resource Management Review, 26 (1), 4-13.
  • Brynolfsson, Erik and Andrew McAfee (2011). Race Against the Machine. Lexington, Mass.: Digital Frontier Press.
  • Denning, Steve. (2015), “The Internet is Finally Forcing Management to Care About               People,” Harvard Business Review “Managing People” posting, May, 5th, for upcoming 7th Global Drucker Forum.
  • Chase, Richard B. (1978), “Where Does the Customer Fit in a Service Operation?” Harvard Business Review, 56 (6), 137-142.
  • Ford, Martin (2015), Rise of the Robots: Technology and the Threat of a Jobless Future. Basic Books.
  • Heinonen, Kristina, T. Stranvik, K-J Mickelsson, B. Edvardsson, E. Sundstrom, and P.      Andersson (2010), “A Customer-Dominant Logic of Service, “ Journal of Service Management, 21, 531-548.
  • Lovelock, Christopher H. (1981), “Why Marketing Needs to Be Different for   Services”. In J.H. Donnelly and W.R. George (Eds.), Chicago: American Marketing Association.
  • Ordanini, Andrea A. and A. Parasuraman (2011), “Service Innovation Viewed Through a Service-Dominant Lens: A Conceptual Framework and Empirical   Analforysis,” Journal of Service Research, 14 (1), 3-23.
  • Ostrom, Amy L., A. Parasuraman, David E. Bowen, Lia Patricio, and Christopher Voss (2015) “Service Research Priorities in a Rapidly Changing Context,” Journal of Service Research, 18 (2), 127-159.
  • Rust, Roland T. and Ming-Hui Huang (2014), “The Revolution and the Transformation of Marketing Science,” Marketing Science, 33 (2), 206-221.
  • Schneider, Benjamin and David E. Bowen (1985), “Employee and Customer Perceptions of Service in Banks: Replication and Extension,” Journal of Applied Psychology, 70 (3), 423-433.
  • Vargo, Stephen L. and Robert F. Lusch (2004), “Evolving to a New Dominant Logic for Marketing,” Journal of Marketing, 68 (January), 1-17.