Achieving Service Excellence

Achieving Service Excellence

Maximizing Enterprise Performance Through Innovation and Technology
C. M. Chang

Achieving Service Excellence: Maximizing Enterprise Performance Through Innovation and Technology Copyright Business Expert Press, LLC, 2014. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any meanselectronic, mechanical, photocopy, recording, or any other except for brief quotations, not to exceed 400 words, without the prior permission of the publisher. First published in 2014 by Business Expert Press, LLC 222 East 46th Street, New York, NY 10017 www.businessexpertpress.com ISBN-13: 978-1-60649-544-5 (paperback) ISBN-13: 978-1-60649-545-2 (e-book) Business Expert Press Service Systems and Innovations in Business and Society Collection Collection ISSN: 2326-2664 (print) Collection ISSN: 2326-2699 (electronic) Cover and interior design by Exeter Premedia Services Private Ltd., Chennai, India First edition: 2014 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

Dedicated to my loving family, wife Birdie Shiao-Ching, son Andrew Liang Ping, son Nelson Liang An, daughter-in-Law Michele Ming Xiu, Grandson Spencer Bo-Jun, and Granddaughter Evya Bo-Ting

Abstract
As the service sectors play an increasingly important role in all economies worldwide, service executives and professionals are well advised to recognize two main pathways to achieving sustainable success in services, namely, enhancing the strategic differentiation and operational excellence of their service enterprises; obviously, these executives and their employees need to develop the knowledge and skills required to achieve such success. This book discusses actionable methodologies needed to generate creative ideas, including deciding on which ones to pursue, how to justify projects nancially, how to manage the development projects for innovative services, how to reach out to customers, and how to offer them superior service support. The book will also illustrate how operational excellence can be achieved by emphasizing the importance of standardizing work processes. It will demonstrate how quality can be enhanced and time-to-market can be reduced through a variety of methods including the application of tools (such as lean six sigma, value stream mapping, quality assurance, Failure Mode and Effect Analysis (FMEA), web-based enablers, and SOA-based emerging productivity tools), incorporation of emerging technologies into the workow, and the retraining of staff with a goal of increasing their productivity by adopting and constantly improving upon known best practices. This book summarizes the key skills and knowledge in a threedecker framework comprised of engineering management, business management, and service leadership, cumulating in an actionable Take Charge model. After having studied this book, service professionals and executives will know how to apply the actionable methodologies outlined herein to maximize their contributions in achieving sustainable success for their service employers.

Keywords
strategic differentiation, operational excellence, service excellence, engineers and service professionals, skills and knowledge, innovation and technology.

Contents
Preface ..................................................................................................xi Chapter 1 Service Growth...................................................................1 Chapter 2 Strategic Differentiation ...................................................11 Chapter 3 Operational Excellence .....................................................51 Chapter 4 Take ChargeConclusions............................................101 Notes .................................................................................................117 References ...........................................................................................121 Index .................................................................................................127

Preface
As the prot-seeking service enterprises play an increasingly important role in the U.S. and global economies, service professionals and leaders are well advised to recognize two main pathways to bestow their businesses with predictable growth advantages, namely, enhancing the strategic differentiation and operational excellence of their service enterprises, and having the wherewithal to do so. Innovation is the key driving force for creating strategic differentiation and the prudent application of technologies enables the rapid attainment of operational excellence. Differentiation and productivity confer competitive advantage. This book discusses actionable methodologies to generate creative service ideas (e.g., the DeepThink Methodologies), select the protable ones to pursue, justify service projects nancially, manage development projects of innovative services, reach out to service customers, and manage customer relationship. Operational excellence may be achieved by standardizing work processes, adopting and constantly improving known best practices, enhancing quality and reducing cycle time by utilizing tools, such as Lean Six Sigma, Value stream mapping, quality assurance, web-based enablers and SOA-based emerging productivity tools, as well as seeking additional productivity improvement by taking advantage of Cloud Computing, Mobile Computing, Big Data and other emerging technologies. Service professionals and leaders need to hone some requisite skills and acquire broad experience in design, engineering, marketing and nance to succeed as top employees of their service organizations. This book suggests twelve specic skill sets, which, being mutually exclusive and collectively exhaustive, are presented in a Three Decker Knowledge Architecture. They are also advised to practice a set of good habits to tackle the daunting challenges of making both innovation and productivity central to their services, to pounce on new opportunities in the

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PREFACE

global marketplace as they rise, and to follow the proactive steps as outlined in a Take Charge model. Three major themes permeate this book: service workers will add real value by creating strategic differentiation, achieving operational excellence, and learning to acquire and practice requisite skills and knowledge. They should not let minutiae to obscure this bigger picture. After having studied this book, service professionals and leaders will know how to apply the actionable methodologies outlined herein to maximize the performance of their service enterprises through innovation and technology. This book is written primarily for service professionals and leaders, college graduates of disciplines such as engineering, computer science, business administration, and medicine, as well as others who would like to explore what it would take to contribute to the corporate success of service enterprises. The book is organized as follows: Chapter 1 discusses the dominant roles service sectors play in the U.S. economy, as well as in the economies of worldwide regions. Because the service sectors represent those which are projected to enjoy the biggest employment growth in the future, the relative urgency and importance of this books coverage becomes selfevident. This book should be particularly timely to young professionals who are in the process of making career decisions. Chapter 2 denes what constitutes strategic differentiation for a service enterprise. It also addresses the questions: How valuable it is for an enterprise to create strategic differentiation, in order to sustain longterm competitiveness in the marketplace? How can it be implemented, including specic methods to create novel service ideas, develop some of these ideas into marketable service offerings, customize them to meet users specic needs, and then manage customer relationship to assure long-term health of the enterprise? Chapter 3 lists the best practices being applied in industry to standardize work processes in order to cut wastes, shorten cycle time, reduce costs, and make work processes efcient. Web-base tools are discussed, which could improve productivity of various work processes, such as those related to managing projects, customers, and supply chains. A few emergent technologies (e.g., web services, Service Oriented Architecture

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xiii

(SOA), Cloud Computing, and Big Data applications, etc,) are also briey mentioned. Chapter 4 emphasizes the notion that service professional and leaders need to take charge in preparing themselves well and practicing the guidelines offered in this book in order to add value to their service enterprises. They must take initiatives to acquire the requisite knowledge and skills in twelve specic domains, which are represented in a Three-Decker Knowledge Architecture framework. Service enterprises may use these twelve domains as selection metrics to bring in new workers or assist in the development of current employees, so that they all become procient in helping to create strategic differentiation and operational excellence for their enterprises. Also discussed in this chapter is the need to establish a set of good habits to meet the six-dimensional challenges in the global marketplace, and the Take Charge mindset, which is essential for service professionals and leaders to be self-motivated in constantly seeking opportunities to practice the knowledge and skills they have amassed. Action speaks louder than words. Only when they diligently apply their knowledge and skills, will they create competitive advantages for their service enterprises. I would like to express my sincere appreciation to State University of New York at Buffalo for the opportunities of teaching the graduate courses on Engineering Management there in the past 25 years. During a part of this 25-year period, I was employed full-time at Praxair, a Fortune-100 company specialized in industrial gases, to develop R&D technologies and conduct business development activities. After I left Praxair and joined SUNY-Buffalo, I was involved in the development of a Master Degree Program in Service Systems Engineering at its Department of Industrial and Systems Engineering in 2006, and was appointed as its full-time Director for a brief period of time. Both sets of industrial and academic work experience offered me excellent opportunities to gain useful insights which have beneted me when writing this book. It is my pleasure to thank Dr. James C. Spohrer of IBM and Dr. Haluk Demirkan of Arizona State University to have invited me to write this book as a part of their collection on Service Systems and

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PREFACE

Innovation in Business and Society. I also want to acknowledge the able assistance of the Business Expert Press, especially Scott Isenberg and Destiny Hadley, who made the publication process efcient and pleasant. C. M. Chang, Ph.D., MBA, PE State University of New York at Buffalo Buffalo, New York, USA

CHAPTER 1

Service Growth
1.1 Introduction
Service activities transform the state of an entity (e.g., person, business, community, and/or region/nation) or an entitys possessions. Historically, service activities depended upon direct interactions between a customer (beneciary) and provider (expert), as in the cases of business consulting, medical care, education, wealth management, transportation, food services, and others. Examples of such transforming activities are illustrated in Table 1.1. Today, service providers package expertise and resources in complex service systems of people and technology, so that they can simultaneously increase productivity and quality of both direct and indirect interactions with more and more customers. There are for-prot and nonprot service systems. For-prot systems include hospitals, business and engineering consulting rms, airlines, commercial banks, nancial advisement, insurance, leisure and hospitality, and they are focused on serving customers to make prots. Nonprots, which include churches, public libraries, government agencies, and charity foundations, are attempting to maximize the impact achievable by their service offerings. Both for-prot and nonprot service systems aim at achieving service excellence in order to maximize protability or impact.

Table 1.1. Service Transforming Activities Entity

Person Product Business

Examples of transforming services

Foods, legal, entertainment, nancial healthcare, education Design, maintenance, operations, logistics Management consulting, outsourcing procurement, human resource management, supply chain management, etc.

Region/Nation Economic development strategies, taxation

ACHIEVING SERVICE EXCELLENCE

Service providers are always interested in nding ways to raise the protability or impact of their offerings.They constantly reexamine their strategies in hope of ferreting out competitive advantages. This book delineates two specic pathways of maximizing service excellenceby creating strategic differentiation and securing operational excellence. As will be elucidated in the subsequent chapters, innovation and technology play very important roles in enabling the attainment of the goals of maximizing service excellence. In recent years, there have been quite a few excellent books which discuss specic aspects related to service systems such as science,1 engineering,2 systems,3 and education.4 Readers are advised to consult with them in order to gain perspectives on what might complement those that permeate this book.

1.2 Service Economies

National economies are largely comprised of many service sectors. Listed below are representatives of these service sectors: 1. Professional and business services (business, engineering, legal, investment, insurance, banking, logistics, etc.) 2. Healthcare (diagnosis, treatment, prevention, hospitalization and emergency room operations, etc.) 3. State and local governments (reghting, law enforcement, roadway maintenance, economic development for the region, etc.) 4. Education (schools and colleges) According to U.S. Labor Department, U.S. service sectors employ most people, with an upward trending percentage of the total from 1920 to 2010, see Figure 1.1.5 In contrast, the employment percentages of both the manufacturing and agriculture sectors have seen a steady decline during the latter part of the same period. This trend has continued for the period of 2000 to 2010 and further projected to 2020, as depicted in Figure 1.2. The U.S. Bureau of Labor Statistics predicts that there will be a total growth of 20.5 million new jobs in the U.S. from 2010 to 2020 and

SERVICE GROWTH

Agriculture 90 80 70 60 Percentage (%) 50 40 30 20 10 0

Manufacturing

Service

1850

1860

1870

1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

Year

Figure 1.1. Sector employment in the U.S. (18502010).

90 80 70 60 Percent 50 40 30 20 10 0 2000 2010 Year 2020 Manufacturing Agriculture Services

Figure 1.2. Sector employment in the U.S. (20002020).

2010

ACHIEVING SERVICE EXCELLENCE

87.7% of this new growth will be in the service sectors. As shown in Table 1.2, the two service sectors which will enjoy the largest job growth are (a) healthcare and social assistance (31.4%) and (b) Professional and business services (21.2%), see Figure 1.3. Some of the high-growth service sectors are further depicted in Figure 1.4, based on their respective annual growth rate and total projected job increases. They represent the major growth opportunities for jobs in the U.S. Among the 13 service sectors included in Table 1.2, the vast majority of them are involved with for-prot business activities. This book is, therefore, focused on discussing useful strategies for the prot-seeking service
Table 1.2. Projected Job Growth in U.S. (20102020) Year 2010 Year 2020 Change
Service-providing sectors Health care and social assistance Professional and business services Retail trade State and local government Leisure and hospitality Transportation and warehousing Other services Educational services Financial activities Wholesale trade Information Federal government Utilities Total US job growth, all sectors Fraction of service jobs in total
Source: U.S. BLS (2012). Occupational Outlook Handbook.

Percentage
100% 31.42% 21.22% 9.85% 9.15% 7.48% 4.75% 4.56% 4.56% 4.35% 4.15% 0.78% 2.07% 0.20%

112,730.10 16,414.50 16,688.00 14,413.70 19,513.10 13,019.60 4,183.30 6,031.30 3,149.60 7,630.20 5,456.00 2,710.90 2,968.00 551.8 143,068.20

130,680.10 22,053.90 20,497.00 16,182.20 21,154.80 14,362.30 5,036.20 6,850.70 3,968.80 8,410.60 6,200.00 2,851.20 2,596.00 516.1 163,537.10

17,950.00 5,639.40 3,809.00 1,768.50 1,641.70 1,342.70 852.9 819.4 819.2 780.4 744.1 140.3 372 35.7 20,468.90 87.70%

SERVICE GROWTH

Healthcare and social assistance Professional and business services Construction Retail trade State and local government Leisure and hospitality Educational services Other services Transportation and utilities Financial activities Information

1000

2000 3000 4000 Jobs (thousands)

5000

6000

Figure 1.3. Projected changes in employment in service industries (20102020).

3.5 3.0 Annual growth rate (%) 2.5 2.0 1.5 1.0 0.5 0 11 9 8 7 10 6 4 5 3 1

2 3 4 Net change in employment (millions)

Figure 1.4. Projected U.S. job growth in selected service sectors (20102020). 1Healthcare and social assistance; 2Professional and business services; 3Construction; 4Retail trade; 5State and local government; 6Leisure and hospitality; 7Transportation and warehousing; 8Educational services; 9Financial activities; 10other services; 11Information.
Source: U.S. Bureau of Labor Statistics (2012).

enterprises to achieve service excellence, even though the basic concepts advocated here are generally applicable to non-prots as well. The expected high growth rate of service sector jobs is due to a number of reasons:

ACHIEVING SERVICE EXCELLENCE

1. Demographics. As displayed in Table 1.3, the percentage of elderly people will drastically increase in all continents from 2011 to 2050. Elderly people want service offerings related to healthcare, hospitality, leisure, nancial consultation and investment, among others. 2. Customers demand more service for improving their quality of life and for eliminating hassles and delays. The demands for banking, insurance, education, transportation, and consulting (business, engineering, nancial, and legal) increase as related to the raised standards of living. 3. Perceived requirements of making the service sectors more productive by taking advantage of information technology and other tools already perfected in the manufacturing sector. As a consequence, service activities will become increasingly more dominant in the U.S., as well as in other countries in the years to come. It can be anticipated that many more people will be working in the services sectors. As the future of any service enterprise is powered by its employees know-how and dedication to add value, countless more people should be interested in making effective contributions to service excellence. This book should be of great interest to them.

Table 1.3. Global Demographics

Percentage of population aged 65 Continents or older 2011
Europe North America Asia Latin America Africa World 19.80 16.61 7.92 8.41 3.99 9.14

Percentage of population aged 65 or older 2050

33.16 27.42 21.49 23.33 7.53 19.70

Working age persons per age 65 or older person 2011

3.03 3.48 7.33 6.61 11.43 6.14

Working age persons per age 65 or older person 2050

1.44 1.81 2.61 2.34 7.05 2.75

Source: 2011 Population Data, United Nations

SERVICE GROWTH

1.3 Service Enterprise

The competitive efcacy of a given for-prot service enterprise is based on being able to provide a service offering better than its rivals. The ability of the enterprise to shape outcome relies on interactions between various business units to design and offer the highest service quality at an affordable price to its target customers. Their efforts are focused and unrelenting. Figure 1.5 represents a systems view, seen from the corporate management standpoint, of a service enterprise and the arrows indicate the direction of the relevant outputs from one unit to another. Service professionals are engaged in a variety of functions to maximize the overall performance of such a service enterprise. On the other hand, seen from the customers viewpoint, the systems view of a service enterprise takes on a different emphasis, as shown in Figure 1.6. Customers are interested in companys performance in nine specic areasservice feature, price, delivery efciency, customer experience, convenience/userfriendliness, reliability, risk, cycle time and quality. Service professionals must pay close attention to these areas in order to maximize customer satisfaction, which procreates superior corporate performance.

Customers/ clients A

J Sales support L O Production/ engineering G H Marketing sales

Profitability Services C M Innovations (science/ technology) E N Knowledge management F Business management

Financial management

Figure 1.5. Systems view of a service enterprisemanagement.

ACHIEVING SERVICE EXCELLENCE

Applying Six Sigma Procurement, supply chains Quality Cycle time

Innovate to meet customers needs Cost-efficient operation

Features

Price Webbased; networking

Brand

Risk

Delivery

Reliability Value engineering Convenience; user-friendliness

Customer experience Employee-customer interface, facilities

Design, iterative testing

Figure 1.6. Systems view of a service enterprisecustomer.

Corporate performance is generally measured utilizing a set of balanced scorecards,6,7 which include both the short-term and long-term metrics: 1. 2. 3. 4. Financial (cash ow, return on assets, and return on equity) Customer (quality of service, speed, and cost) Internal business processes (productivity and operational efciency) Innovation and corporate learning (pace of creating new services and applying new technologies)

The performance (short-term) of a service enterprise is measured by nancials, customer value, and internal business processes. Its health (long-term) is measured by customer loyalty, innovation, and corporate knowledge gained by learning. Recognizing the fact that (a) service sectors are becoming increasingly important to any economy, (b) the systems view illustrates the complex challenges regarding internal interactions of business units and external expectations of customers, (c) service involves a multiple set of disciplines, and (d) performance of a service enterprise must be pursued from both short-term and long-term perspectives, service professionals and leaders may indeed ask,

SERVICE GROWTH

Strategic differentiation

Operational excellence

Frequency of developing new and improved services Service quality Invent novel service features to create new values

Cash flow Unit cost

ROE Cycle time Delivery speed

Improvement of work procedures

Figure 1.7. Potential paths to service excellence.

how they need to perform to meet such Mount Everesttype challenges and make efcacious contributions to achieve service excellence? This book offers two pathways to achieve service excellence, namely, strategic differentiation which emphasizes innovation, and technologyfocused operational excellence. By keeping these two pathways front and center, service professionals and leaders will become most effectual in emanating the advantage of their service enterprises8 (see Figure 1.7).

1.4 Conclusion
The for-prot service sectors in the United States and many other countries are expected to become more and more dominant in their respective economies, representing areas of major job growth in the future. Service enterprises should use all necessary people, knowledge and technologies to help ourish their business initiatives. It is therefore useful for those service professionals and leaders who aspire to become the top employees in the service sectors to conceptualize the future, identify unstoppable trends, develop new ways to grow, and to appreciate the two main pathways, by which service enterprises can maximize their short-term performance and long-term health through innovation and technology. Indeed, innovation matters and results count. The chapters to follow will describe in detail these pathways and how service professionals and leaders can prepare themselves to make signicant contributions to the goals of maximizing the performance excellence of their service enterprises.