Senior decision makers brought up in a product environment may feel that service is too complex. What primary skills and capabilities do they need to overcome this barrier to effective service management? Don Blumberg offers nine essentials for success.
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Extensive experience clearly shows that executive and senior management direction, vision and general strategy are crucial to the success of any service organisation. In essence, a business simply does not run itself. However, the basic business model, which is built upon the presumption of a product, is not rich or definitive enough to enable the typical executive or manager to deal with the complexities of a service business. More often, there is a complaint from executives or managers brought up in a product environment that service is too complex or doesn’t fit the same business standards. Executives and managers moving into the service environment are often called upon to ‘think out of the box’ or to be ‘market centric’. These broad descriptions are driven by the vague appreciation that managing and optimising a service business is in certain ways different from a product business. What then are the primary skills and capabilities that an executive or manager should have in order to step up to the issues and problems associated with managing a service business? At a minimum, a service executive or manager needs to understand and have a grasp of the following critical aspects of service: - An operating environment in which the lack of a tangible product inventory makes time-sensitivity a critical element of analysis and management. A real differentiation in service versus a product business is the critical importance of time, and particularly time viewed from a perception of the buyer or market. In general, the customer/market in service is very time-sensitive in terms of such factors as the time of day and day of week coverage, response time, service completion time, guaranteed performance within a certain time, etc. The service executive must be very sensitive to time and time-related issues in his or her management process.
- Understanding and focus on customer perceptions and requirements. The lack of a product means that the service executive must recognise the need to focus on customer requirements and perceptions, rather than the reality of a product form, fit, and function. The service environment and the attitude or perception of the potential or current customer is, in fact, more important than the view of the service provision from the supplier standpoint.
In essence, in a product business, maximum attention must be given to the product itself. In the service business, the maximum attention must be placed on the customer’s perception of service. In effect, management measures and data must reflect both external market perceptions and, in the context of the internal operations, actual performance against these external requirements, in order to fully control the operation.
- Randomness of demand. In the product environment, the randomness of demand can be dealt with though inventorying or stockpiling of products in anticipation of that demand. In the service environment, since inventory or stockpiling is not possible, the successful service executive or manager must have a full understanding or training in statistics, probability, and the ability to meet unanticipated or rapidly changing demand patterns. This, in particular, requires the successful service executive to understand the importance of excess capacity in meeting customer requirements and needs. In a product environment, the excess capacity situation must be minimised. However, in a service environment, excess capacity is the key towards meeting rapidly changing requirements and needs of customers.
- Market and market segment- oriented focus. Most product- oriented executives immediately accept the concept of market segmentation as a basis for differentiating products. However, for many the idea of segmenting customers in a service environment is not as obvious. There are, in fact, different service requirements and needs in different market segments and subsegments. The service requirements in banking, in which banks operate on essentially a five-day week/eight-hour day, are quite a bit different from hospitals in which the service is 24/7. An insurance company’s ability to process claims rapidly can give it a competitive advantage over others who do not. There tends to be a reasonably high correlation between meeting customer/market requirements for service time and customers willingness to pay.
Those service organisations which more effectively meet the service time and needs of specific customer segments, and, in effect, charge a premium for added value, will be more profitable and well managed than those who don’t.
- Need for strong grounding in marketing and sales administration. Successful executives and managers in all business environments need to understand and have some basic training in finance, administration, and marketing. Since many service organisations historically operate as cost centres, or in support of a product or manufacturing business, it was generally assumed that service managers did not require such interdisciplinary training. However, as service has moved to become a profit centre or line of business, it is essential that the service executive manager also becomes fully crossed-trained. The need to understand marketing and selling is especially important in terms of the criticality of market density in managing service business.
In summary, the successful service executive or manager will have an orientation in, and experience with, service type businesses in which time and customer perceptions are critically important. These individuals should view service as a standalone business, with its own revenues, costs and profit margins.
- Finding and recruiting service managers and executives. Unfortunately, there are, at present, very few schools that produce trained service executives and managers. Most undergraduate and graduate (MBA) programmes tend to focus on management within the context of a product business environment.
Alternatively, service oriented management courses and programmes tend to deal with a specific anecdotal service business (ie banking, insurance, retail etc). Therefore, the classically-trained manager might not be fully educated in all the elements required to successfully manage and direct a service business.
On the other hand, individuals with a well defined business management or marketing management education are probably best equipped to deal with the subject. Obviously, formal management and/or marketing training, coupled with experience in a service environment, will help to produce an individual or individuals who can be successful in managing service as a business.
- Managing and recruiting service personnel. As we move the focus from senior service management and executives to operational personnel in the service business environment, there is a much greater supply of candidates. Many vocational and technical schools train personnel for service positions in fields such as technology, product maintenance and repair, banking, retail, insurance, medical healthcare, etc. Since there is a high percentage of service oriented activities in the military, it has also has been a traditional source of field service and support personnel. Finally, many organisations establish their own internal training and orientation programmes, in order to orient newly acquired service oriented personnel with the specifics of the service functional responsibility to be assigned. These service programmes typically run between two to four weeks.
- Use of systems and infrastructure in managing the service enterprise. Having established a need and, in fact, creating the senior service executive and management structure, we can then turn to the design, construction, and implementation of the management systems infrastructure. This infrastructure will make use of customer relationship management (CRM) principles and technology, but will have an increased level of focus on the specific functions, processes, and dynamic structure associated with managing the service enterprise. We will discuss this design and structure in Part II.
- Marketing density and improvement to achieve economies of scale. The final leg in managing the service business is the requirement to focus on the served market. In both the retail and real estate business, the real problem is that there are three very critical factors; location, location, location.
This is another way of recognising the served market density is a critical key to success in service. If we can find a location which offers the maximum access to customers, or create a service portfolio and service focus which can achieve the highest density customer base, we can, in turn, maximise our ability to achieve economies of scale and service. This is so because density can be directly related to response time, travel time, and the ability to make maximum use of the logistics pipeline and material availability.
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