Electronic Business: Concepts, Methodologies, Tools, and Applications (4-Volumes) P42 pdf

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Chapter 2.3 Building and Managing Modern E-Services John Hamilton James Cook University, Australia ABSTRACT This chapter addresses the development cycle of recent ‘services’ models. It considers that all products involve services and consequently maybe be considered as service systems. First, the issue of ‘services’ is described; next, the enhancement of ‘services’ via value creation is described, along with the progression from supply and demand chains, to value chains, to service value chains, DQG¿QDOO\WRVHUYLFHYDOXHQHWZRUNV7KLVSUR- gression pathway has developed over time, and has enabled ‘service’ and ‘e-service’ businesses to deliver and further develop competitive busi- ness solutions. The combinations of integrated, highly competitive, e-supply chains delivering WKH ¿QDO µVHUYLFHV¶ VXLWH WR WKH IURQWOLQH EXVL- ness seller moves the e-supply chain model to a more advanced level.Today, the recent concept of utilizing service value networks offers a key to future competitive solutions. Service value networks house fully integrated e-demand and e-supply chains working in harmony to the de- liver both services and e-services. They are also KLJKO\DJLOHDQGRIIHUFXVWRPHULQGXFHGÀH[LEOH business solutions to customer requests. This chapter highlights the progression to service value networks. In addition it also offers the manager a balanced scorecard structural mechanism via which management controls over e-services and service value networks may be developed and maintained. DEFINITION OF SERVICES 'H¿QLWLRQVRIZKDWFRQVWLWXWHVDVHUYLFHKDYH varied across the service sector. Clark (1940) divided all economies into three sectors: pri- mary (agricultural), secondary (manufacturing), and tertiary (services). The service sector used three partsdomestic related services (food and 348 Building and Managing Modern E-Services lodging), business services, and others (includ- ing recreation, health care, and education)to focus on involvement and improvement of the customer relationship. The services industry provides services, not goods (Hughes, Mitchell, & Ramson, 1993). In 1870 the service sector employed slightly more than 20% of the U.S. workforce, while by 2002 it employed in approximately of 82% of the U.S. workforce, and 81% of the private sector GDP (U.S. Bureau of Labor Statistics, 2002/2004). Services management is a ‘trans-functional’ research area (Kamarkar, 2002). It covers areas including service quality (Chase, Jacobs, & Aq- uilano, 1996), services encounters (Cook, Goh, & Chung, 1999), and service execution (Nie & Kellog, 1999). Services operations management and services marketing provide still other per- spectives to services. 'H¿QLWLRQV RI VHUYLFH KDYH UDQJHG IURP WKH narrow to the broad. In 1960 the Committee on 'H¿QLWLRQVRIWKH$PHULFDQ0DUNHWLQJ$VVRFLDWLRQ GH¿QHGVHUYLFHVDV³$FWLYLWLHVEHQH¿WVRUVDWLVIDF- tions which are offered for sale, or are provided, in connection with the sale of goods.” (p.21) Examples of a service include: accommoda- WLRQEDQNLQJHGXFDWLRQHQWHUWDLQPHQW¿QDQFH medical areas, real estate servicing, transporta- tion, as well as the individual services provided by a barber shop, a piano tuner, a beautician, and assistance areas like repair, maintenance, and after-sales services, through to support services institutions like credit rating bureaus. Judd (1964) and Rathmell (1974) believed in the service sector of the economy and emphasized the true nature of services. Murdick, Render, and Russell (1990) and Quinn, Baruch, and Paquette EURDGHQHGH[LVWLQJVHUYLFHVGH¿QLWLRQVWR include all economic activities where output was not a physical product or construction, was usually consumed when produced, and was delivered as an intangible value-add (like travel comfort) to WKHFXVWRPHU7KXVWKHVHUYLFHGH¿QLWLRQPRYHG again. Zeithaml et al. (1988) believed services were intangibleslike deeds, processes, and performancesbut could also be tangible (e.g., health care). Czinkota, Ronkainen, and Moffett (2005) split services into tangible areas involving SHRSOH¿WQHVVFHQWHUVRUSRVVHVVLRQSURFHVVLQJ (like freight transportation), and intangible areas involving mental stimulus like (education and religion) and information processing (like bank- ing and data processing). Often services are integrally enmeshed with manufactured goods, or to the delivery (or en- abling) of goods. Thus the distinction between goods and services is imprecise, and no clear boundary between manufacturing and service ¿UPVH[LVWV%HUU\3DUDVXUDPDQ/HY- LWWVXJJHVWV³7KHUHLVQRVXFKWKLQJDVD service industry. There are only industries whose service components are greater or less than those of other industries … Everybody is in service.” Czinkota et al. (2005) also partially support this approach. Thus it may be suggested that all manu- facturing is indeed a service, and that services may be considered from a range of viewpoints. One approach to draw such diversities of opinion together is provided by Rust and Metters (1996). They use a ‘topologies’ approach to group some services complexities into models. Their topolo- gies approach, built upon other recent service LQGXVWU\PRGHOVPD\DVVLVWLQWKHLGHQWL¿FDWLRQ of key knowledge and research gaps. As the service industry has continued to move towards globalization (Kathawala & Abdou, 2003) and incorporate more electronically based delivery systems, it has become possible to deliver a value chain, e-service operation. France, Da Rold, and Young (2002) recognized the importance of the µVHUYLFHYDOXHFKDLQ¶VWDWLQJWKDW³WRVDWLVI\FOLHQW demands holistic solutions will require focused providers cooperating along services value chains.” Thus ‘e-service value chains’ may offer a pathway to delivering enhanced customer value. 349 Building and Managing Modern E-Services SERVICE TYPOLOGIES From an operations and marketing perspective, topology schemes for services have generally lacked empirically tested works, but they offer a useful mechanism to draw together the con- stituent components applicable to the delivery of services. Empirical works (Verma & Boyer, 2000; Akkermans & Vos, 2003; Chen & Paulraj, 2004) offer some key exceptions, but overall empirical services related research is in its infancy. A topolo- gies approach, based on recent service industry PRGHOVLGHQWL¿HVNH\NQRZOHGJHJDSVDQGHVWDE- lishes possible empirical research areas. SERVICE MODELS Figure 1 presents Rust and Metters’ (1996) view of services. They grouped service models as customer models (external) or service provider models (in- ternal). Each model was then segregated, as shown in Figure 1, into two of the three models: • Customer behavior models, incorporat- ing dynamic models of customer retention (like loyalty), stochastic models of customer behavior (like satisfaction), and customer be- havior models (like churn rate or a customer lost through a single service encounter). • Service Quality impact models, incorporat- ing aggregate models (like customer satisfac- tion effects) and disaggregated models (like ¿QDQFLDOLPSDFWVRIDVHUYLFHFRPSRQHQW • Normative service models, housing orga- nizationally focused marketing models (like incentive schemes and trade-offs between satisfaction and productivity) and operations models (like queuing). In 1999, Cook et al. developed the ‘integrated schematic representation of services’ matrix. Figure 2 displays this integrated services schematic. Cook et al. (1999) recognized that services could be split into marketing (product) or opera- tions (process) orientations. They believed that LQGHOLYHULQJD¿QDOµFXVWRPL]HG¶VROXWLRQWKHUH remained a need to integrate and interact with Figure 1. Mathematical models of service (Source: Rust & Metters, 1996) Service models Ex ternal Customer Models Internal Service Provider Models Customer Behaviour Models •Dynamic Models of Retention •Stoc hastic Models of Behaviour Service Quality Impact Models •Aggregate Models •Disaggregate Models Normative Service Models •Marketing Models •Complaint Management •Cust omer Satisfaction •Quality-productivity trade-off •Operations Models Service models Ex ternal Customer Models Internal Service Provider Models Customer Behaviour Models •Dynamic Models of Retention •Stoc hastic Models of Behaviour Service Quality Impact Models •Aggregate Models •Disaggregate Models Normative Service Models •Marketing Models •Complaint Management •Cust omer Satisfaction •Quality-productivity trade-off •Operations Models 350 Building and Managing Modern E-Services Figure 2. Integrated schematic representation of services (Source: Cook et al., 1999) Services For Profit Private Not-for-Profit Public Product Process Interaction and integration Customization (9) Quality Marketing Orientated Tangibility (2) Differentiation (10) Objec t of se rvice(5) •People •Goods Type of Custom er (11) •Individual •Institutional Commitment (8) Operations Orientated Customer Contact (1) Capital Intensity (4) •People-based •Equipm ent based Cust omer involvem ent (3) Produc tion Process (12) Em ployee Directions (6) Organizational Ownership (7) Macro View Micro View Socio – Economic Environment Services For Profit Private Not-for-Profit Public Product Process Interaction and integration Customization (9) Quality Marketing Orientated Tangibility (2) Differentiation (10) Objec t of service(5) •People •Goods Type of Custom er (11) •Individual •Institutional Commitment (8) Operations Orientated Customer Contact (1) Capital Intensity (4) •People-based •Equipm ent based Cust omer involvem ent (3) Produc tion Process (12) Em ployee Directions (6) Organizational Ownership (7) Macro View Micro View Socio – Economic Environment Figure 3. The service strategy triad (Source: Roth & Menor, 2003) Service Concept What is the product bundle offered? Service Delivery System Design Choices How w ill services be delivered? Service Encounters What happens w hen service and cust omer m eet and interac t? Target Market Wh o a r e the r i ght Customers? Service Concept What is the product bundle offered? Service Delivery System Design Choices How w ill services be delivered? Service Encounters What happens w hen service and cust omer m eet and interac t? Target Market Wh o a r e the r i ght Customers? 351 Building and Managing Modern E-Services both orientations. They suggested research in the ‘interaction and integration’ area may articulate strategies and tactics for improving services. Roth and Menor (2003) delivered a further addition to the services topologies. Their ‘service strategy triad’ (displayed in Figure 3) separated the ‘what’, the ‘how’, and the ‘who’ of service en- counters. It offered a new perspective to advance an understanding of services operations manage- PHQW 7KH µZKR¶ GH¿QHV WKH ULJKW FXVWRPHUV and not just a customer segment! These targeted FXVWRPHUVFRXOG EH GH¿QHG E\ WHFKQLTXHV OLNH Forrester’s ‘technographics’, ‘psychographics’, DQGSV\FKRJUDSKLFSUR¿OLQJJURXSVRIFXVWRP- ers. The interpretation of such target markets provided a means to enhance both service and performance standards, and to allow the business to competitively align its chosen degree of cus- tomer targeting with its offered service products and delivery systems. 5RWKDQG0HQRURSHUDWLRQDOO\GH¿QHG WKHLUµVHUYLFHVWUDWHJ\WULDG¶LQWR¿YHHOHPHQWV 1. Supporting facilities (physical and struc- tural resources) 2. Facilitating goods (materials and supplies that are consumed) 3. Facilitating information (supporting the explicit services) 4. Explicit services (customer experiential DQGVHQVXDOEHQH¿WV 5. Implicit servicesSV\FKRORJLFDOEHQH¿WV They realized the total service concept by the customer may differ from the service offered by the service provider. To overcome this, a feedback loop (execution, assessment of gaps, renewal) was proposed. The ‘service delivery systems architecture’ model of Roth and Menor (2003), displayed in Figure 4, allowed a framework to investigate three interrelated and dynamic components of service delivery systems: • Strategic service design (portrayed as structural, infrastructural, and integration, and based on choices between time-phased content portfolios of major supply). • Service delivery execution system (exem- SOL¿HGE\SURJUDPVSROLFLHVDQGEHKDYLRUDO Figure 4. The service delivery systems architecture (Source: Roth & Menor, 2003) ‘Structural’ •Facilities and Layout •Tec hnology and Equipm ent •Aggregate Capacit y Planning •Service Produc t-Process Interfaces ‘Infrastructural’ •People •Policies •Prac tices •Processes •Performance System s ‘Integration’ •Operations Organizat ions & Coordination •Service Supply Chains •Integration t echnologies •Learning and Adaptive Mechanism s Realized Se r v i ce Delivery Sy stem Cu s tome r Perceived Value of the Total Se r v i ce Co n cep t Execut ion Assessment of Gaps Re n e wa l Strategic Design Choices ‘Structural’ •Facilities and Layout •Tec hnology and Equipm ent •Aggregate Capacit y Planning •Service Produc t-Process Interfaces ‘Infrastructural’ •People •Policies •Prac tices •Processes •Performance System s ‘Integration’ •Operations Organizat ions & Coordination •Service Supply Chains •Integration t echnologies •Learning and Adaptive Mechanism s Realized Se r v i ce Delivery Sy stem Cu s tome r Perceived Value of the Total Se r v i ce Co n cep t Execut ion Assessment of Gaps Re n e wa l Strategic Design Choices 352 Building and Managing Modern E-Services aspects delivering complimentary areas of customer focus), possibly using balanced scorecard approaches. • Customer perceived value of the total service concept (intangibles and other ef- fectiveness aspects of the service). These downstream features, delivered up- stream through the external integration of the service supply chain, combined with the linked internal integration of the operational functional areas and the adaptive mechanisms available to enhance the intellectual capabilities, may provide new avenues to perceived customer value. SERVICE MODELS ANALYSIS The above models have moved the complex concept of services delivery beyond that of the immediate services business. The models indicate that the delivery of services requires the business to adopt both an internal and an external perspective. Rust and Metters (2003) showed services to be complex in nature. They showed that a variety of approaches had been adopted, leading to the development of three key areascustomer behavior models, service quality impact models, and normative service models. Cook et al. (1999) showed services may be considered from a marketing or an operations focus. They suggested it may be possible to hold the service product constant and investigate the effects of the service process (and vice-versa). Results could then be compiled, and combined, to gain further insights into services. Roth and Menor (2003) proposed that business-customer service encounters may be considered as combinations of three functional areasthe customer, the service product, and the service delivery system. Hence, enhanced business-customer service encounters could possibly be induced when one or more of these functional areas improved. In particular, an improved business-customer service encounter may arise where the customer perceived improved customer value with the services provided or in the services package being delivered. To deliver quality business-customer service encounters, the business’s supply chain became an integral delivery toolIR U W K H ¿ Q D O X S VW U HD P V H U Y LF H  provider. In addition this supply chain needed to be capable of delivering customer expectations. This required sound supply chain integration and management, the integration of the above func- tional areas, and quality communications channels throughout the supply chain network. SUPPLY CHAIN MANAGEMENT Management has sought to deliver improved business-customer service encounters using a variety of approaches. The supply chain, and more VSHFL¿FDOO\ VHUYLFH supply chain management, ZDV DQGLV D³KRWWRSLFLQ EXVLQHVV´&KDVH HW DO6XSSO\FKDLQPDQDJHPHQWLVGH¿QHG DV ³WKHLQWHJUDWLRQ RIEXVLQHVVSURFHVVHV IURP end-user through to original suppliers that pro- vide products, services and information and add value for customers” (The International Center IRU&RPSHWLWLYH([FHOOHQFH,WLV³DWHFK- nique for linking a manufacturer’s operations with those of it strategic suppliers, and its key intermediaries and customers. It seeks to inte- grate the relationships, and operations, of both immediate, ¿UVWWLHUVXSSOLHUVDQGWKRVHVHYHUDO WLHUVEDFNLQWKHVXSSO\FKDLQ´DQG³WKHJRDORI supply chain management is to improve timing and costs in manufacturing through strong vendor relationships” (An & Fromm, 2005). Fisher (1977) developed a management frame- work for product demand, and a supply chain that could best satisfy this demand. He identi- ¿HG VSHFL¿FIXQFWLRQDO SURGXFWV OLNH OLIHF\FOH percentage contribution margin, percentage product variations, average production forecast error, and make-to-order lead time. Products were categorized as primarily functional or primarily 353 Building and Managing Modern E-Services innovative. Each category required a different kind of supply chain, and mismatches between product W\SHDQGVXSSO\FKDLQFRXOGEHLGHQWL¿HG Lee (2002) further developed Fisher’s frame- work, and suggested that uncertainties revolving around the supply side were important drivers for correct supply chain strategies. He argued that functional products were more applicable to a more mature, and stable, supply process. Lee GH¿QHGWKHstablesupplyprocess, where manufac- turing process and technology were mature and ‘stable’, and the evolving supply process,where manufacturing and technology were in early stages of development and were rapidly chang- ing. From Lee’s perspective the market challenge for business was to operate a supply chain as a responsive or an agile model. Responsive supply chains, like fashion apparel or popular music, operated in low-uncertainty, stable markets and are highly innovative. They WDUJHWHGUHVSRQVLYHÀH[LEOHµEXLOGWRFXVWRPHU order’ strategies, and followed the changing needs of the customer. These responsive supply chains, where demand and supply communications chan- nels intertwine, deliver business-determined, information-based, customer-targeted outcomes that may be termed e-supply chains. A business engaging an agile supply chain structurelike a telecom operating in an evolv- ing, highly uncertain marketoften remains highly innovative. It employs highly responsive, DJLOHVXSSO\FKDLQVDQGUHPDLQVÀH[LEOHLQLWV VHUYLFHRIIHULQJV,WDWWHPSWVWRHQJDJHVSHFL¿F customer needs-focused strategies, and responds rapidly to the changing, diverse, and unpredict- able demands of the customer. Thus demand uncertainty and supply uncertainty remained a framework for understanding both supply chain and e-supply chain strategies. The agile supply chain model has typically targeted the high-risk, customer-driven solutions, while minimizing the downstream risks of sup- ply disruptions. Hence, the strategic scope of the business’s supply chain now necessarily included the ‘internal’ integration within organizations, and also captured the ‘external’ expansion throughout various supply chain links. From around 1994, when standard Internet browsers became available, the Internet has be- come a vital strategic management tool. Using the Internet, appropriately interconnected busi- nesses, along with their Internet-connected supply chain partners, have the capacity to freely share information. This has allowed many competitive improvements to develop. More accurate supply and component planning, improved supplier and business performance, less stock holdings, greater HI ¿ F LH QFL H V D QG ID VW H UU HV S R Q V H U D W H VK DYH D O OE HH Q  recognized (Reid & Sanders, 2005). THE INTERNET The Internet (encapsulating intranets [‘internal’ networks] and extranets [‘external’ networks]), combined with sophisticated interconnected com- puter networks, has delivered necessary and key enablers, to deliver responsive and agile supply chain strategies. This inter-business connectivity allows for near instantaneous, enhanced informa- WLRQÀRZV7XUEDQ5DLQHU3RWWHU7KH Internet has driven new supply chain solutions in information storage and transmission, e-business, Web-based customer relationship management (e- CRM), and supply chain management (Lawrence, Newton, Corbitt, Braithwaite, & Parker, 2002). Dell (www.dell.com) and others have delivered customized e-purchasing across their Web sites, but the absolute one-on-one ‘customerized’ solution is still not a realistic solution for many businesses. The pressure to dynamically adjust, and adapt, the businesses supply chain strategy to the demands of the customer remains great (Frohlich & Westbrook, 2002). . strategies, and responds rapidly to the changing, diverse, and unpredict- able demands of the customer. Thus demand uncertainty and supply uncertainty remained a framework for understanding both. and stable, supply process. Lee GH¿QHGWKHstablesupplyprocess, where manufac- turing process and technology were mature and ‘stable’, and the evolving supply process,where manufacturing and. International Standard ISO/IEC JTC1/SC 30. Geneva, Switzerland: International Standards Organization. Jo, K. Y., Pottmyer, J. J., & Fetzner, E. A. (1995). DoD electronic commerce/electronic