Service Innovation Customer Relationship Management Minder Chen

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Service Innovation & Customer Relationship Management Minder Chen, Ph. D. Associate Professor of MIS CSU Channel Islands Minder. Chen@CSUCI. EDU

Human Activities: Sociotechnical System Evolution Estimated world (pre-1800) and then U. S. Labor Percentages by Sector Estimations based on Porat, M. (1977) Info Economy: Definitions and Measurement © Minder Chen, 2009 Services - 2

SSME (Service Sciences, Management, & Engineering) Because the world is a giant service system. Top Ten Nations by Labor Force Size (about 50% of world labor in just 10 nations) A = Agriculture, G = Goods, S = Services Nation % WW Labor % A % G % S 25 yr % delta S 2004 United States China 21. 0 50 15 35 191 (A) Agriculture: India 17. 0 60 17 23 28 Value from harvesting nature U. S. 4. 8 3 27 70 21 3. 9 45 16 39 35 Brazil 3. 0 23 24 53 20 Russia 2. 5 12 23 65 38 Japan 2. 4 5 25 70 40 Nigeria 2. 2 70 10 20 30 Banglad. 2. 2 63 11 26 30 Germany 1. 4 3 33 64 44 Indonesia © Minder Chen, 2009 (G) Goods: Value from making products (S) Services: Value from enhancing the capabilities of things (customizing, distributing, etc. ) and interactions between things The largest labor force migration in human history is underway, driven by global communications, business and technology growth, urbanization and low cost labor. Services - 3

Service Characteristics • A service is a deed, a performance, a process, an effort. • What is being bought is intangible. • Services are produced and consumed almost simultaneously. Services in principle cannot be inventories. (No inventory) • Customers are involved in the production of the services. (Co-production) • Manufacturing firms also have a service component of their own. • Instant delivery and custom design (personalization) are both services. © Minder Chen, 2009 Services - 4

Distinguishing services from goods Inseparability § Services are created and consumed at the same time § Services cannot be inventoried § Demand fluctuations cannot be solved by inventory processes § Quality control cannot be achieved before consumption Consideration: Does the ability to tailor and customize goods to the customers’ demands and preferences mean that these goods also have an inseparability characteristic? Heterogeneity § From the client’s perspective, there is typically a wide variation in service offerings § Personalization of services increases their heterogeneous nature § Perceived quality-of-service varies from one client to the next Consideration: Can a homogeneous perception of quality due to customer preference idiosyncrasies (or due to customization) also benefit the goods manufacturer? © Minder Chen, 2009 Services - 5

Distinguishing services from goods Intangibility § Services are ideas and concepts that are part of a process § The client typically relies on the service providers’ reputation and the trust they have with them to help predict quality-of-service and make service choices § Regulations and governance are means to assuring some acceptable level of quality-of-service Consideration: Do most services processes involve some goods? Perishability (No inventory) § Any service capacity that goes unused is perished § Services cannot be stored so that when not used to maximum capacity the service provider is losing opportunities § Service capability estimation and planning are key aspects for service management Consideration: Do clients who participate in some service process acquire knowledge which represents part of the stored service’s value? What might the impact be? Co-produced © Minder Chen, 2009 Services - 6

Industry vs. Services: A Matter of Degree © Minder Chen, 2009 Services - 7

Services: The Front-stage Experience manufacturing © Minder Chen, 2009 Services - 8

Service Layering • Pure service: Legal service, barber shop • IT-enabled Service/Self service: Google for information search, e. Bay for online auction services, Web. MD for online health information • IT Services: IT outsourcing service provider (IBM Global Service), on-demand data center (EDS), on-demand computing (IBM) • Service-wrapped IT products: i. Tune and i. Pod; GM On. Star (Emergency service + remote diagnosis & sensing + GPS & Navigation) • Manufacturing services: IC design houses, TSMC foundry service • Pure manufacturing: Manufacturing of commodity products Source: Minder Chen, 2007 © Minder Chen, 2009 Services - 9

Products vs. Services • Products can be seen as the physical embodiment of the service provided. – Cars » provide comfortable transportation services – Televisions » deliver entertainment – Cosmetics » offer beatification services – Cameras » provides services for wonderful memory © Minder Chen, 2009 Services - 10

On. Star Service from GM On. Star By GM | On. Star. com, Car Safety Device and Vehicle Security System http: //www. onstar. com/us_english/jsp/index. jsp Screen clipping taken: 2007/3/6, 上午 07: 56 © Minder Chen, 2009 Services - 11

i. Pod and i. Tune Apple - i. Pod + i. Tunes, http: //www. apple. com/itunes/, Screen clipping taken: 2007/3/6, 08: 02 © Minder Chen, 2009 Services - 12

Apple Stores © Minder Chen, 2009 Services - 13

Experience Economic: Build-A-Bear Workshop http: //www. buildabear. com/aboutus/ourcompany/process. aspx © Minder Chen, 2009 Services - 14

Computing Clouds: Amazon Web Services Developer Connection : AWS Solutions Catalog http: //solutions. amazonwebservices. com/connect/index. jspa Screen clipping taken: 2007/3/6, 上午 08: 08 © Minder Chen, 2009 Services - 15

More T-shaped People to work in, study, and innovate service systems Social Science (People) Management (Business) Slide by Jean Paul Jacob Engineering (Technology)

Which Has More Value? • Nike provide service to distribute comfortable shoes and an imagination (90% value) • A factory in Indonesia produces shoes (10% value) § Apple offers i. Phones for better communication and entertainment (85% value) § Foxconn manufactures i. Phones for Apple (15% value) © Minder Chen, 2009 Services - 17

Service-Oriented Model & Architecture The service target may be the service client itself. © Minder Chen, 2009 Services - 18

Service innovation is inherently multidisciplinary Knowledge sources driving service innovations… Science & Engineering Technology Innovation Social-Organizational Innovation Social Sciences (Micro-lending/Microcredit) Business Innovation Demand Innovation Business Administration and Management Global Economy & Markets 合板印刷 /Groupon SSME = Service Sciences, Management, and Engineering © Minder Chen, 2009 Services - 19

Customer Relationship Management (CRM) The measures an organization takes to – – – identify, select, acquire, work with, and retain its customers. Acquiring new customer vs. retaining existing customer Acquisition costs vs. customer life time value © Minder Chen, 2009 Services - 20

Objectives of CRM • • The right offer (products or services) To the right person (target marketing) At the right time (spacing outbound calls) Through the right channel (direct vs. channel) • Via appropriate media (phone, email, Web) • By the right employees and service partners. © Minder Chen, 2009 Services - 21

Recency, Frequency, and Monetary Value • An organization can find its most valuable customers by using a formula that industry insiders call RFM: – How recently a customer purchased items (recency) – How frequently a customer purchases items (frequency) – How much a customer spends on each purchase (monetary value) © Minder Chen, 2009 Services - 22

The Evolution of CRM © Minder Chen, 2009 Services - 23

Three Types of CRM Usages © Minder Chen, 2009 Services - 24

CRM Data © Minder Chen, 2009 Services - 25

Operational CRM and Analytical CRM © Minder Chen, 2009 Services - 26

Software as a Service: Salesforce. com Close More Deals Close deals faster by providing a single place for updating deal information, tracking opportunity milestones, and recording interactions. Easily analyze your sales pipeline so you can quickly identify and eliminate any bottlenecks in the sales cycle. Top 10 Deals Month-to-Date Trending Closed Business by Month Top Sales Reps Sales Marketing Open Opportunities You can monitor your opportunities reports and dashboards to keep track of your top deals and prioritize your time. © Minder Chen, 2009 Presentation Proposal Negotiation Won Yes No New Customers Support Customize Salesforce to fit your internal sales methodologies and Salesforce gives your entire processes, making it easier to company a 360 -degree view of monitor your sales pipeline. Keep an archive of your dead opportunities. your customers and facilitates collaboration across your Use email marketing and call organization, helping you build downs to re-market to your strong, lasting customer archived opportunities. relationships. Services - 28

CRM Framework © Minder Chen, 2009 Services - 29

Highest Level Business Flow Source: Oracle. © Minder Chen, 2009 Services - 30

Customer Life Cycle The Proof! Translate Failure into Success! k ac b Awareness W rge "Moments of Truth" in e siv en Int are C Ta Pre-Di vorce/ Divorc e tin g Market and Customer Research and analysis W e om c el Sales Processes (Including Business Partners) Delivery, Welcoming service and Continuous Contact Processes © Minder Chen, 2009 Gettin g To Kn ow t un ent co Ac gem na Ma Cross-Selling, Profit Opportunities Services - 31

MOT Analysis Example: A Credit Card Company • Pri to MOT – Recognition – Information gathering – Comparison • MOT – – – – Applying for Credit Card Receiving Credit Card Using Credit Card Providing Information Changing and Upgrading Gifts giving Emergency Assisting • After MOT – No usage follow-up – Stop membership follow-up © Minder Chen, 2009 Services - 32

Employees and Customers “You don’t get happy guests with unhappy employees. ” J. W. Marriot © Minder Chen, 2009 Services - 33

The Inverted Organizational Pyramid © Minder Chen, 2009 Services - 34

Customers at the Top Steve Alter, Service system fundamentals: Work system, value chain, and life cycle, IBM SYSTEMS JOURNAL, VOL 47, NO 1, 2008. Services - 35 © Minder Chen, 2009

Value Chain of People + Employee Value + + Customer Satisfaction + + + © Minder Chen, 2009 Business Profitability Shareholder Value Services - 36

Service Profit Chain Source: Putting the Service-Profit Chain to Work (HBR Classic) © Minder Chen, 2009 Services - 37

Southwest Airline Flight Attendant doing raps!! at http: //www. youtube. com/watch? v=ivjybzd. XVm. I © Minder Chen, 2009 Services - 38

Lifetime Value of a Customer CLTV: Customer Life Time Value = $8, 000 © Minder Chen, 2009 Services - 39

Customer Loyalty From why satisfied customers defect. By Jones, T. D. & Sasser Jr. , W. E. Harvard business Review, (November–December), 1995 p. 91. © Minder Chen, 2009 Services - 40

The Wheel of Loyalty © Minder Chen, 2009 Services - 42

The Service Triangle WOM: Words of Mouth © Minder Chen, 2009 Services - 43

Service Value Chain Framework © Minder Chen, 2009 Services - 44

Service blueprint components Physical evidence Desktop PC and applications, ticket, records Customer actions IT request, problem call to help desk, etc Line of interaction Onstage Employee actions Takes call, opens ticket, visit to employee desk side Line of visibility Backstage Employee actions Refers to manuals, asks for help from team Line of internal interaction Support processes © Minder Chen, 2009 Time recording, payroll, training, etc Services - 45

Service Blueprint of Luxury Hotel © Minder Chen, 2009 Services - 46

Serv. Qual (Service Quality Gap) Model Customer gap Communication gap Performance Gap Listening Gap Service Design and standards gap © Minder Chen, 2009 Services - 47

The Cycle of Success © Minder Chen, 2009 Services - 48

Integrated Framework for CRM Strategy Development Process Value Creation Process Multi-channel Integration Process Performance Assessment Process Information Management Process © Minder Chen, 2009 Services - 49

Integrated Framework for CRM Strategy © Minder Chen, 2009 Services - 50

Order-to-Cash (Order Fullfilment) Service © Minder Chen, 2009 Services - 51

CRM Architecture © Minder Chen, 2009 Services - 52

Service Lifecycle Management Source: ITIL 3. 0 © Minder Chen, 2009 Services - 53

Service management processes are applied across the new Service Lifecycle © Minder Chen, 2009 Services - 54

Service Level Management Activities Very important for business/IT service outsourcing! © Minder Chen, 2009 Services - 59

Motto At The Ritz-Carlton Hotel Company, L. L. C. , "We are Ladies and Gentlemen serving Ladies and Gentlemen. " This motto exemplifies the anticipatory service provided by all staff members. © Minder Chen, 2009 Services - 60

Ritz-Carlton • Make Customer Service an Elite Club – to identify the empathetic, positive team players who, according to in-house statistics, become top performers. • Once You Have the Right People, Indoctrinate Them – Spend about $5, 000 to train each new hire. • Treat Staffers the Way They Should Treat Customers – Motto--"We are ladies and gentlemen serving ladies and gentlemen. ” – Every staff member can spend as much as $2, 000 without management approval to resolve a guest's problem. – The median annual non-management turnover rate at luxury hotels is 44 percent; at Ritz-Carlton, it's only 25 percent. http: //money. cnn. com/magazines/business 2_archive/2004/05/01/368262/index. htm © Minder Chen, 2009 Services - 61

Three Steps Of Service 1. A warm and sincere greeting. Use the guest's name. 2. Anticipation and fulfillment of each guest's needs. 3. Fond farewell. Give a warm good-bye and use the guest's name. © Minder Chen, 2009 Services - 62

The Credo • The Ritz-Carlton Hotel is a place where the genuine care and comfort of our guests is our highest mission. • We pledge to provide the finest personal service and facilities for our guests who will always enjoy a warm, relaxed, yet refined ambience. • The Ritz-Carlton experience enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests. © Minder Chen, 2009 Services - 63

The Employee Promise • At The Ritz-Carlton, our Ladies and Gentlemen are the most important resource in our service commitment to our guests. • By applying the principles of trust, honesty, respect, integrity and commitment, we nurture and maximize talent to the benefit of each individual and the company. • The Ritz-Carlton fosters a work environment where diversity is valued, quality of life is enhanced, individual aspirations are fulfilled, and The Ritz-Carlton Mystique is strengthened. © Minder Chen, 2009 Services - 64

The 6 th Diamond • The Functional components are issues around the physical or hygienic—no errors, timeliness, quality of furnishings, meeting basic expectations. These are so critical because if they are not met (and by the way, they only get noticed by the guest when they do not occur) the guest doesn’t evolve to the next level of the Sixth Diamond: Emotional Engagement. • The middle piece of the Sixth Diamond is enlivening the emotions and memories of our guests by genuinely caring and making them feel recognized, important and unique. Creating the Mystique happens when we hear guests’ requests even before the guest knows them, going so above and beyond the call that folklore (“wow” moments) spreads throughout guests and hotels. © Minder Chen, 2009 Services - 65

Service Values: I Am Proud To Be Ritz-Carlton 1. I build strong relationships and create Ritz-Carlton guests for life. 2. I am always responsive to the expressed and unexpressed wishes and needs of our guests. 3. I am empowered to create unique, memorable and personal experiences for our guests. 4. I understand my role in achieving the Key Success Factors, embracing Community Footprints and creating The Ritz-Carlton Mystique. 5. I continuously seek opportunities to innovate and improve The Ritz-Carlton experience. 6. I own and immediately resolve guest problems. 7. I create a work environment of teamwork and lateral service so that the needs of our guests and each other are met. 8. I have the opportunity to continuously learn and grow. 9. I am involved in the planning of the work that affects me. 10. I am proud of my professional appearance, language and behavior. 11. I protect the privacy and security of our guests, my fellow employees and the company's confidential information and assets. 12. I am responsible for uncompromising levels of cleanliness and creating a safe and accident-free environment. • Minder Chen, 2009 © Services - 66

Ritz-Carlton • Offer "Memorable" Service – "What others call complaints, we call opportunities. " • Talk About Values and Stoke Enthusiasm – all 25, 000 Ritz-Carlton employees participate in a 15 minute "lineup" to talk about one of the basics. • Eschew Technology, Except Where It Improves Service – "We will not replace human service with machines. " © Minder Chen, 2009 Services - 67

Five Key Areas for Service Innovation in High Tech 1. The Capture, Management and Re-use of Knowledge is progressing slowly. Where are the breakthroughs? – In electronic self help? In professional services/consulting IP capture? 2. The Growing Complexity of the Customer’s Systems is increasing cost-toserve and negatively effecting customer satisfaction. How can we apply innovative approaches to tracking the customer environment, the cause of problems and to facilitate cooperative service provision among different companies with common customers? 3. What are future approaches to Building Supportability Into Technology Products? – Predict environments conducive to problems – Sense developing problems; Take Pre-emptive actions (automated and non) – Collect information for service providers 4. Service organizations know more about the use of products and changing customers environments than any other part of the company. How can we Turn Mountains of Data Into Usable Management Information for services management, the sales force and product development teams? 5. The Services Supply Chain is becoming increasingly complex. Innovation around the “service system” business model that can help companies partner effectively will help both the quality of customer solutions and the bottom line. © Minder Chen, 2009 Services - 69

Servant Leadership • • © Minder Chen, 2009 Customer Distributors/Dealers Front-line workers Supervisor Managers CIO, CFO, COO CEO Services - 70

Empowered Customer-Focus Processes Manager as Coach Teamwork Empowered Font-line worker © Minder Chen, 2009 Customer-facing Process Values and Quality delivered to Customers timely Services - 71

Think from the Customer Back The Customer Define Outcomes Redesign Outputs Activities/Tasks Functions/Processes Organization Determine Activities Define Job Responsibilities Management * Adapted from The Price Waterhouse Change Integration Team, Better Change, Irwin, 1995, p. 163. © Minder Chen, 2009 Develop Organization Structure Services - 72

The Change/Reengineering Diamond Customers & Suppliers Foster Enlighten Business Processe & Functions Customers & Info. Tech. Entail Culture © Minder Chen, 2009 Competitors Values and Beliefs Management & Measurement Systems Demand Jobs , Skills, & Organizational Structures Markets Services - 73

Service-Oriented Enterprise Architecture View Service Strategic Service View strategy Tactic View Operatio nal View Process People Service value chain framework Customer segmentati on & Employee attributes Service Customer Organizatio portfolio & managem nal catalogue ent activity structure & model human workflow Customer Service involveme blueprintin teams nt, Service g & operations Customers & Web services © Minder Chen, 2009 Information Motivation Enterprisewide conceptual information model Visions, Missions, & Business strategy Logical data Business model & goals Dimensional model for data warehouse Physical Performan data model ce measure & Service quality Services - 74

The Business Context of Business Networking Virtual Enterprising Suppliers/ Partner N C Company N C Share: • Costs • Skills • Market access • Technology Customer N C Customer's Customer N C Competitor N: Needs and Perceived Needs C: Capabilities Source: Adapted from Charles M. Savage, "The Dawn of the Knowledge Era, " OR/MS Today, pp. 18 -23. © Minder Chen, 2009 Services - 77

End-to-End Processes Customer Account Receivable Marketing/ Sales Shipping Manufacturing © Minder Chen, 2009 Inventory Mgmt. Services - 78

TI Semiconductor Business Process Map Customer Communication Market Customers Concept Development Manufacturing Strategy Development Product Development Customer Design & Support Order Fulfillment Manufacturing Capability Development Source: Adapted from Hammer and Champy, 1993, p. 119. © Minder Chen, 2009 Services - 79