Chang Chapter One

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Achieving ServiceExcellence


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Achieving ServiceExcellence

Maximizing Enterprise

Performance Through

Innovation and Technology

C. M. Chang


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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, LLC222 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.


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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


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Abstract

As the service sectors play an increasingly important role in all econo-mies worldwide, service executives and professionals are well advised to

recognize two main pathways to achieving sustainable success in ser-

vices, 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 develop-ment 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 three-

decker framework comprised of engineering management, business man-

agement, 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 ser-

vice employers.

Keywords

strategic differentiation, operational excellence, service excellence, engi-

neers and service professionals, skills and knowledge, innovation and

technology.


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Contents

Preface..................................................................................................xi

Chapter 1 Service Growth...................................................................1

Chapter 2 Strategic Differentiation ...................................................11

Chapter 3 Operational Excellence .....................................................51Chapter 4 Take ChargeConclusions............................................101

Notes .................................................................................................117

References...........................................................................................121

Index.................................................................................................127


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Preface

As the prot-seeking service enterprises play an increasingly important

role in the U.S. and global economies, service professionals and lea-

ders 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 thekey 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 cus-tomer relationship. Operational excellence may be achieved by stan-

dardizing 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 produc-

tivity central to their services, to pounce on new opportunities in the


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global marketplace as they rise, and to follow the proactive steps as out-

lined in aTake Chargemodel.

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 innova-

tion and technology. This book is written primarily for service profes-

sionals 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 self-evident. 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 ser-

vice enterprise. It also addresses the questions: How valuable it is for an

enterprise to create strategic differentiation, in order to sustain long-

term 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 meetusers 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 stan-

dardize 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

xii PREFACE


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(SOA), Cloud Computing, and Big Data applications, etc,) are also

briey mentioned.

Chapter 4 emphasizes the notion that service professional and lea-

ders 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 knowl-

edge 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 For-

tune-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 Depart-ment 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 oppor-

tunities 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

PREFACE xiii


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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

xiv PREFACE


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CHAPTER 1

Service Growth

1.1 Introduction

Service activities transform the state of an entity (e.g., person, business, com-

munity, and/or region/nation) or an entitys possessions. Historically, serviceactivities depended upon direct interactions between a customer (bene-

ciary) 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

consultingrms, airlines, commercial banks, nancial advisement, insur-

ance, leisure and hospitality, and they are focused on serving customers to

make prots. Nonprots, which include churches, public libraries, gov-

ernment agencies, and charity foundations, are attempting to maximize

the impact achievable by their service offerings. Both for-prot and non-

prot service systems aim at achieving service excellence in order to max-

imize protability or impact.

Table 1.1. Service Transforming Activities

Entity Examples of transforming services

Person Foods, legal, entertainment, financial healthcare, education

Product Design, maintenance, operations, logistics

Business Management consulting, outsourcing procurement, human resource

management, supply chain management, etc.

Region/Nation Economic development strategies, taxation


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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 cre-

ating 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 engi-

neering,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, road-

way 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 totalgrowth of 20.5 million new jobs in the U.S. from 2010 to 2020 and

2 ACHIEVING SERVICE EXCELLENCE


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0

10

20

30

40

50

60

70

80

90

1850

1860

1870

1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

2010

Year

Percentage(%)

Agriculture Manufacturing Service

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

0

10

20

30

40

50

60

70

80

90

2000 2010 2020

Percent

Year

Agriculture

Manufacturing

Services

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

SERVICE GROWTH 3


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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 pro-

jected 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, there-

fore, 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 Percentage

Service-providing sectors 112,730.10 130,680.10 17,950.00 100%

Health care and

social assistance

16,414.50 22,053.90 5,639.40 31.42%

Professional and

business services

16,688.00 20,497.00 3,809.00 21.22%

Retail trade 14,413.70 16,182.20 1,768.50 9.85%

State and local government 19,513.10 21,154.80 1,641.70 9.15%

Leisure and hospitality 13,019.60 14,362.30 1,342.70 7.48%

Transportation

and warehousing

4,183.30 5,036.20 852.9 4.75%

Other services 6,031.30 6,850.70 819.4 4.56%

Educational services 3,149.60 3,968.80 819.2 4.56%

Financial activities 7,630.20 8,410.60 780.4 4.35%

Wholesale trade 5,456.00 6,200.00 744.1 4.15%

Information 2,710.90 2,851.20 140.3 0.78%

Federal government 2,968.00 2,596.00 372 2.07%

Utilities 551.8 516.1 35.7 0.20%

Total US job growth,

all sectors

143,068.20 163,537.10 20,468.90

Fraction of service

jobs in total

87.70%

Source: U.S. BLS (2012). Occupational Outlook Handbook.



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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 num-

ber of reasons:

0 1000 2000 3000 4000 5000 6000

Information

Financial activities

Transportation and utilities

Other services

Educational services

Leisure and hospitality

State and local government

Retail tradeConstruction

Professional and business services

Healthcare and social assistance

Jobs (thousands)

Figure 1.3. Projected changes in employment in service industries

(20102020).

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0 1

1

2

3

8

7

10

119

64

5

2 3 4 5 6

Annualgrowthr

ate(%)

Net change in employment (millions)

Figure 1.4. Projected U.S. job growth in selected service sectors

(20102020).1Healthcare and social assistance; 2Professional andbusiness services; 3Construction; 4Retail trade; 5State and localgovernment; 6Leisure and hospitality; 7Transportation and warehousing;8Educational services; 9Financial activities; 10other services;11Information.Source: U.S. Bureau of Labor Statistics (2012).

SERVICE GROWTH 5


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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, hospital-

ity, 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, engi-

neering, nancial, and legal) increase as related to the raised standards

of living.

3. Perceived requirements of making the service sectors more produc-

tive 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 ser-

vices sectors. As the future of any service enterprise is powered by its

employeesknow-how and dedication to add value, countless more people

should be interested in making effective contributions to service excel-lence. This book should be of great interest to them.

Table 1.3. Global Demographics

Continents

Percentage

of population

aged 65

or older

Percentage

of population

aged 65

or older

Working

age persons

per age 65

or older

person

Working

age persons

per age 65

or older

person

2011 2050 2011 2050

Europe 19.80 33.16 3.03 1.44

North America 16.61 27.42 3.48 1.81

Asia 7.92 21.49 7.33 2.61

Latin America 8.41 23.33 6.61 2.34

Africa 3.99 7.53 11.43 7.05

World 9.14 19.70 6.14 2.75

Source: 2011 Population Data, United Nations



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1.3 Service Enterprise

The competitive efcacy of a given for-prot service enterprise is based onbeing 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 afford-

able price to its target customers. Their efforts are focused and unrelent-

ing. 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 overallperformance of such a service enterprise. On the other hand, seen from

the customersviewpoint, 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

Services

Knowledge

management

Production/

engineering

Marketing

sales

Business

management

Sales

supportProfitability

Financial

management

Innovations

(science/

technology)

A

J

I

N O

L K

B

C

D E F

G

H

M

Figure 1.5. Systems view of a service enterprisemanagement.

SERVICE GROWTH 7


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Corporate performance is generally measured utilizing a set of bal-

anced scorecards,6,7 which include both the short-term and long-term

metrics:

1. Financial (cash ow, return on assets, and return on equity)

2. Customer (quality of service, speed, and cost)

3. Internal business processes (productivity and operational efciency)

4. Innovation and corporate learning (pace of creating new services and

applying new technologies)

The performance (short-term) of a service enterprise is measured bynancials, 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 chal-

lenges regarding internal interactions of business units and external expecta-

tions of customers, (c) service involves a multiple set of disciplines, and (d)

performance of a service enterprise must be pursued from both short-termand long-term perspectives, service professionals and leaders may indeed ask,

Innovate to meet

customers needsApplying

Six Sigma

Procurement,supply chains

Cycle time

Quality Features

Price

DeliveryRisk

Reliability

Valueengineering

Convenience;

user-friendliness

Design, iterative testing

Employee-customer

interface, facilities

Customer

experience

Cost-efficientoperation

Web-

based;

networking

Brand

Figure 1.6. Systems view of a service enterprisecustomer.



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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 technology-

focused 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 coun-

tries 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 ser-vice 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 path-

ways, by which service enterprises can maximize their short-term perfor-

mance 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 pre-

pare themselves to make signi

cant contributions to the goals of maximiz-ing the performance excellence of their service enterprises.

Operational

excellence

Strategic

differentiation

Frequency of developing

new and improved services

Invent novel service

features to create new values Improvement of

work procedures

Delivery

speed

ROE

Cycle

time

Unit

cost

Cash

flow

Service

quality

Figure 1.7. Potential paths to service excellence.

SERVICE GROWTH 9

Documents

Chang Chapter One