Ch4&5 Key elements of Essentials of Service...
Transcript of Ch4&5 Key elements of Essentials of Service...
Dr. Scott E. Sampson
Key elements fromEssentials of Service Design and Innovation
Chapters 4 & 5(preparation for completing Analysis Exercises 4&5)
Identifying the Value Proposition 1
Dr. Scott E. Sampson
Dr. Scott E. SampsonThorsell Professor of Service
Operations ManagementBrigham Young University
Provo, Utah, USA© 2014,2020 SES
Key elements of chapter 4: Identifying the Value Proposition
Identifying the Value Proposition 2
rev 5/14, 2/15 1/19 dev effort to TVV
Dr. Scott E. Sampson
Key concepts from Chapter 4• What is value to different entities?
• Specific beneficiaries• Generic beneficiaries
• How is value manifest?• Value potential• Value realization
Identifying the Value Proposition 3
Dr. Scott E. Sampson
What is value?
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Dr. Scott E. Sampson
Principle of “value”• All participants in a process relationship do so because of perceived benefits (value), which is the satisfaction of some need (a condition of happiness).
• Some entities participate because of benefits inherent in the system. These “specific beneficiaries” are often called “customers.”
• Other entities participate in order to attain benefits through other systems. They access the other systems through monetary means. These “providers” are “generic beneficiaries” because the benefits they seek are not inherent in the given system.
• The point is, all entities, customers and providers, participate because of perceived benefits.
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Dr. Scott E. Sampson
Roles
What is a provider?
An entity with:• generic needs ($ money)• specific resources
(competencies).
What is a customer?
An entity with:• specific needs• generic resources ($)• and competencies!
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What is value?
to the provider? to the customer?
SA
Esteem
Love/belonging
Safety
Physiological
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Elemental conceptsWhat is value?Øsatisfaction of needsWhat are needs?Øconditions of happiness and well beingWhat is happiness (well being, quality of life, etc.)?Ø“the object and design of our existence”
• Joseph Smith• Ultimately, increasing happiness is the object and design of all organizations and relationships.
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The two manifestations of value
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Dr. Scott E. Sampson
Two valuesvalue potential
• a state of nature that has the potential to satisfy needs
value realization
• the actual satisfaction of needs, improving happiness (well being, etc.)
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Dr. Scott E. Sampson
Driver
process domain
interaction Independent processing Direct interaction
Toyota
process domain
Independent processing interaction
Automobile PCN Diagram
produce car sell car drive car
not co-productive interactiveco-production
not co-productive
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Dr. Scott E. Sampson
Principles of PCN Analysis• Customer value is always realized in the customers’ process domain.
• Therefore, it is important to understand what goes on in customers’ process domain.
• The primary purpose of service interaction is to facilitate value realization.
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Distinguishing between value potential and value realization
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L
Value? Psychological benefit?Value Potential Value Realization
14
JShould we
come skiing again?
I love watching Bobby crash J
LIs there Value Realization on the lift? How much?
Would Bobby be willing to pay $130 per day to ride the lift all day and not ski?
Dr. Scott E. Sampson
Differences between the two conceptsValue Potential
• Seeded by provider• Speculative• Contingent• Depends on the future• May or may not be realized• Gets power from belief• Belief is perpetuated or destroyed by value realization!
Value Realization
• Customer idiosyncratic• Real!• Independent• Depends on nothing• Transitory – real but fleeting• Persistent – change of state
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Time value of value(Four optional slides.)
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Two valuesvalue potential
• a state of nature that has the potential to satisfy needs
value realization
• the actual satisfaction of needs, improving happiness (well being, etc.)
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Dr. Scott E. Sampson
Net Present Value• NPV = ∑ R'(C'
(+,-)'/012
• Rt =expectedrevenueattimet• Ct =expectedcostattimet• i =discountrate(biastowardnearcashflows)
Net Present Happiness
• NPJ = ∑ J'(L'(+,-)'
/012
• J0 = 𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑ℎ𝑎𝑝𝑝𝑖𝑛𝑒𝑠𝑠𝑎𝑡𝑡𝑖𝑚𝑒𝑡• L0 = 𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑𝑢𝑛ℎ𝑎𝑝𝑝𝑖𝑛𝑒𝑠𝑠𝑎𝑡𝑡𝑖𝑚𝑒𝑡• i =discountrate(biastowardpresentJ andL,i=1-F)
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Dr. Scott E. Sampson
Happiness flows JL
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JJ J LL LLLJJJ J LJ LL
Dr. Scott E. Sampson
Happiness flows JL
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LJ J LJ LJJJLL L LJ JJ
Dr. Scott E. Sampson
PCN AnalysisRepresenting the value proposition
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Dr. Scott E. Sampson
Representing value on a PCN DiagramCosts and benefits to specific beneficiary (customer) are usually psychological…• put L for cost steps (waiting, inconvenience, etc.)• put J by psychological benefit steps (happiness inducing)
Costs and benefits to generic beneficiaries (providers) are usually monetary…• put -$ by cost steps• put +$ by revenue steps
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Dr. Scott E. Sampson
“Supplier” “Customer”
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
Representing a value proposition
developappetite
cookpizza
eatpizza
return home
maintainsupplies
servepizza
wait to beseatedseat customer
preheatovens review menu
presentcheck
preparecheck
paycheck
eatleftovers
wait forpizza
create order
developrecipes
-$ costs?+$ value?
J
L
J
L
-$
-$
+$
-$
-$
-$
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L
J
Dr. Scott E. Sampson
see Analysis Exercise 4
Identifying the Value Proposition 24
Dr. Scott E. Sampson
Dr. Scott E. SampsonThorsell Professor of Service
Operations ManagementBrigham Young University
Provo, Utah, USA© 2014 SES
Key elements of chapter 5: Strategic Process Positioning
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rev 1/14,5/14, 2/19
Dr. Scott E. Sampson
Strategic Process PositioningSandwiches and Investment analysis
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Dr. Scott E. Sampson
Sandwich Consumer
Consumer’s Process Domain
Direct interaction
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Sandwich Supplier
Supplier’s Process Domain
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Sandwich example from the chapter
assemble prepackaged sandwich in a factory for
sale at grocery storeassemble sandwich to order in restaurant
kitchen
assemble sandwich at a
Subway sandwich as customer
selects orders
assemble sandwich at
a buffet restaurant
assemble sandwich at home using ingredients
from the refrigerator
assemble sandwich
Strategic Process Positioning 27
simple quiz
assemble sandwich assemble sandwich assemble sandwichassemble sandwich
assemble sandwich
Dr. Scott E. Sampson
Thinking about Process Positioning
Your assignment…1. Describe what it would mean for the “analyze investments” step to be in regions 1 through 5.
2. Which of the alternatives is superior in terms of ààà
• economies of scale?• customization potential?• efficiency?
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Investment firm Client
Provider's Process Domain Investor's Process Domain
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
analyzeinvestments
1 2 3 4 5
Dr. Scott E. Sampson
1 2 3 4 5Your assignment…1. Describe what it would mean for the “analyze investments” step to be in regions 1 through 5.
2. Which of the alternatives is superior in terms of ààà
Thinking about Process Positioning
Strategic Process Positioning 29
Investment firm Client
Provider's Process Domain Investor's Process Domain
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
Option 1:analyze
investments for printing in a newsletter
Option 2:centrally analyze client investor’s
investment portfolio
Option 3:discuss client investor's financial needs and help client analyze investment
alternatives
Option 4:analyze own
investments using provider's online
tools
Option 5:analyze own investments
using a spreadsheet
analyzeinvestments
Dr. Scott E. Sampson
Thinking about Process Positioning
Strategic Process Positioning 30
Invest firm Client
Provider's Process Domain Investor's Process Domain
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
analyzeinvestments
Option 1:analyze
investments for printing in a newsletter
Option 2:centrally analyze client investor’s
investment portfolio
Option 3:discuss client investor's financial needs and help client analyze investment
alternatives
Option 4:analyze own
investments using provider's online
tools
Option 5:analyze own investments
using a spreadsheet
2. Which alternative is superior in terms of…economies of scale
customizationpotentialefficiencyefficiency
the most common economy of scale is the acquisition of expertise
Dr. Scott E. Sampson
Principles of process positioningInvest firm Client
Provider's Process Domain Investor's Process Domain
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
Option 1:analyze
investments for printing in a newsletter
Option 2:centrally analyze client investor’s
investment portfolio
Option 3:discuss client investor's financial needs and help client analyze investment
alternatives
Option 4:analyze own
investments using provider's online
tools
Option 5:analyze own investments
using a spreadsheet
greater scale and expertise greater customization potentiallowest
operatingefficiency
31Strategic Process Positioning
analyzeinvestments
Dr. Scott E. Sampson
Principles of process positioningInvest firm Client
Provider's Process Domain Investor's Process Domain
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
Option 1:analyze
investments for printing in a newsletter
Option 2:centrally analyze client investor’s
investment portfolio
Option 3:discuss client investor's financial needs and help client analyze investment
alternatives
Option 4:analyze own
investments using provider's online
tools
Option 5:analyze own investments
using a spreadsheet
greater scale and expertise greater customization potentiallowest
operatingefficiency
32Strategic Process Positioning
process requiresspecialized skills/assets
process requirescustomized attention
process requires both
Process positioning decision…
analyzeinvestments
“skillfulcustomization”
or low-cost labor andprovider wants control
Dr. Scott E. Sampson
back to assembling sandwiches
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Dr. Scott E. Sampson
Sandwich Consumer
Consumer’s Process Domain
Direct interaction
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Sandwich Supplier
Supplier’s Process Domain
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Principles of process positioning
Which option provides the best…?
Strategic Process Positioning 34
assemble prepackaged sandwich in a factory for
sale at grocery store
assemble sandwich to order in restaurant
kitchen
assemble sandwich at a
Subway sandwich as customer
selects orders
assemble sandwich at
a buffet restaurant
assemble sandwich at home using ingredients
from the refrigerator
assemble sandwich
economies of scalecustomization
potentialefficiencyefficiency
Dr. Scott E. Sampson
Sandwich Consumer
Consumer’s Process Domain
Direct interaction
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Sandwich Supplier
Supplier’s Process Domain
Surrogate interaction
Independent processing Surrogate interaction
Direct interaction
Principles of process positioning
assemble prepackaged sandwich in a factory for
sale at grocery store
assemble sandwich to order in restaurant
kitchen
assemble sandwich at a
Subway sandwich as customer
selects orders
assemble sandwich at
a buffet restaurant
assemble sandwich at home using ingredients
from the refrigerator
assemble sandwich
Strategic Process Positioning 35
process requiresspecialized skills/assets
process requirescustomized attention
process requires both
Process positioning decision…
“skillfulcustomization”
or low-cost labor andprovider wants control
greater scaleincluding expertise
greater customizationpotential
lowestoperatingefficiency
Dr. Scott E. Sampson
Principles of PCN Analysis• Process positioning has strategic implications.• Process positioning defines your value proposition.
• You can change and improve your value proposition by repositioning process steps.
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Enabling Innovations and Relieving Innovations
Take and bake pizza case study
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Take-and-bake pizza“Supplier” “Customer”
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
call restaurant
cook pizza
eatleftovers
eatpizza
travelhome
maintainsupplies
developrecipes
travel to store
discuss options and
specials
place order
L
customer costs? Lvalue? J
J
J
L L
Lwork
play
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Dr. Scott E. Sampson
Enabling innovation?“Supplier” “Customer”
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
call restaurant
preheatovens
cook pizza
eatleftovers
eatpizza
travelhome
maintainsupplies
developrecipes
travel to store
discuss options and
specials
place order
work
play
L
L
L
Strategic Process Positioning 39
Dr. Scott E. Sampson
Enabling innovation?“Supplier” “Customer”
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
call restaurant
preheatovens
cook pizza
eatleftovers
eatpizza
travelhome
maintainsupplies
developrecipes
travel to store
discuss options and
specials
place order
“enabling” innovations moveprocess steps towards customers
work
play
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Dr. Scott E. Sampson
work
play
Enabling innovation“Supplier” “Customer”
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
preheatovens
cook pizza
eatleftovers
eatpizza
place orderon mobilephone app
travelhome
maintainsupplies
developrecipes
travel to store
call restaurant
discuss options and
specials
place order
The NEW Pizza Hut
iPhone App
“enabling” innovations moveprocess steps towards customers
J
Improved value
proposition
Strategic Process Positioning 41
Dr. Scott E. Sampson
Relieving innovation?“Supplier” “Customer”
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
call restaurant
preheatovens
cook pizza
eatleftovers
eatpizza
travelhome
maintainsupplies
developrecipes
travel to store
discuss options and
specials
place order
“relieving” innovations moveprocess steps away from customers
Strategic Process Positioning 42
L
Dr. Scott E. Sampson
Relieving innovation?“Supplier” “Customer”
Pizza Restaurant Pizza Consumer
Independent processing
Surrogate interaction
Direct interaction
Direct interaction
Surrogate interaction
Independent processing
developappetite
pay for pizza
assemble pizza
prepare components
wrappizza
preheatovens
cook pizza
eatleftovers
eatpizza
travelhome
maintainsupplies
developrecipes
deduct from customer account
place pizza in customer’s porch box
travel to store
“relieving” innovations moveprocess steps away from customers
call restaurant
discuss options and
specials
place order
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L
Dr. Scott E. Sampson
Principles of PCN Analysis• Service innovation comes from process repositioning…• Enabling innovations move process steps toward
customers.• Relieving innovations move process steps away from
customers.• Optimal positioning depends on customer segment requirements.
44Strategic Process Positioning
Dr. Scott E. Sampson
see Analysis Exercise 5
Identifying the Value Proposition 45