Role of Services in an EconomyRole of Services in an Economy

Welcome toWelcome to

Service ManagementService Management

Professor James FitzsimmonsProfessor James Fitzsimmons

University of Texas at AustinUniversity of Texas at Austin

Learning ObjectivesLearning Objectives

Describe the central role of services in an Describe the central role of services in an economy.economy.

Discuss the evolution of an economy from Discuss the evolution of an economy from an agrarian society to a service society.an agrarian society to a service society.

Describe the features of preindustrial, Describe the features of preindustrial, industrial, and postindustrial societies.industrial, and postindustrial societies.

Describe the features of the new service Describe the features of the new service economyeconomy

Service DefinitionsService Definitions

Services are deeds, processes, and performances.Services are deeds, processes, and performances.Valarie Zeithaml & Mary Jo BitnerValarie Zeithaml & Mary Jo Bitner

A service is a time-perishable, intangible A service is a time-perishable, intangible experience performed for a customer acting in experience performed for a customer acting in the role of a co-producer.the role of a co-producer.

James Fitzsimmons James Fitzsimmons

Definition of Service FirmsDefinition of Service Firms

Service enterprises are organizations that Service enterprises are organizations that facilitate the production and distribution of facilitate the production and distribution of goods, support other firms in meeting their goods, support other firms in meeting their goals, and goals, and add valueadd value to our personal lives. to our personal lives.

James James FitzsimmonsFitzsimmons

Role of Services in an EconomyRole of Services in an Economy

Percent Service Employment for Selected NationsPercent Service Employment for Selected Nations

Country 1980 1987 1993Country 1980 1987 1993 20002000United States 67.1 71.0 74.3United States 67.1 71.0 74.3 74.274.2

Canada Canada 67.2 70.8 74.8 67.2 70.8 74.8 74.174.1

Israel 63.3 66.0 68.0Israel 63.3 66.0 68.0 73.9 73.9

Japan 54.5 58.8 59.9Japan 54.5 58.8 59.9 72.7 72.7

France 56.9 63.6 66.4France 56.9 63.6 66.4 70.870.8

Italy 48.7 57.7 60.2Italy 48.7 57.7 60.2 62.8 62.8

BrazilBrazil 46.2 46.2 50.0 50.0 51.9 51.9 56.5 56.5

ChinaChina 13.1 17.8 21.2 13.1 17.8 21.2 40.6 40.6

Trends in U.S. Employment by SectorTrends in U.S. Employment by Sector

0

10

20

30

40

50

60

70

80

90

1850

1870

1890

1910

1930

1950

1970

1990

Year

Pro

po

rtat

ion

of

tota

l em

plo

yem

ent

Service

Manufacturing

Agriculture

Stages of Economic DevelopmentStages of Economic Development

Pre- Use of StandardPre- Use of Standard dominant human Unit of of living dominant human Unit of of living Society Game activity labor social life measure Structure TechnologySociety Game activity labor social life measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple handPre- Against Agriculture Raw Extended Sub- Routine Simple hand Industrial Nature Mining muscle household sistence Traditional toolsIndustrial Nature Mining muscle household sistence Traditional tools power Authoritative power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines Industrial Against Goods Machine Individual Quantity Bureaucratic Machines fabricated production tending of goods Hierarchical fabricated production tending of goods Hierarchical naturenature Post- Among Services Artistic Community Quality of Inter- InformationPost- Among Services Artistic Community Quality of Inter- Information industrial Persons Creative life in terms dependentindustrial Persons Creative life in terms dependent Intellectual of health, GlobalIntellectual of health, Global education,education, recreation recreation

The New Experience EconomyThe New Experience Economy

Economy Agrarian Industrial Service Experience

Function Extract Make Deliver Stage

Nature Fungible Tangible Intangible Memorable

Attribute Natural Standardized Customized Personal

Method of supply

Stored in bulk

Inventoried Delivered on demand

Revealed over time

Seller

Trader

Manufacturer

Provider

Stager

Buyer

Market

User

Client

Guest

The Four Realms of an ExperienceThe Four Realms of an Experience

Customer Participation

Passive Active

Environmental

Absorption Entertainment (Movie)

Education (Language)

Relationship Immersion Esthetic (Tourist)

Escapist (ScubaDiving)

Experience Design PrinciplesExperience Design Principles

Theme the Experience (Forum shops)Theme the Experience (Forum shops) Harmonize Impressions with Positive CuesHarmonize Impressions with Positive Cues

(O’Hare airport parking garage)(O’Hare airport parking garage) Eliminate Negative CuesEliminate Negative Cues

(Cinemark talking trash containers)(Cinemark talking trash containers) Mix in Memorabilia (Hard Rock T-shirts)Mix in Memorabilia (Hard Rock T-shirts) Engage all Five Senses (Mist in Rainforest)Engage all Five Senses (Mist in Rainforest)

Source of Service Sector GrowthSource of Service Sector Growth

InnovationInnovationPush theory (e.g. Post-it)Push theory (e.g. Post-it)Pull theory (e.g. Cash Management)Pull theory (e.g. Cash Management)Services derived from products (Video Rental)Services derived from products (Video Rental)Information driven servicesInformation driven servicesDifficulty of testing service prototypesDifficulty of testing service prototypes

Social TrendsSocial Trends Aging of the populationAging of the populationTwo-income familiesTwo-income familiesGrowth in number of single peopleGrowth in number of single peopleHome as sanctuaryHome as sanctuary

Discussion TopicsDiscussion Topics

Illustrate how the type of work he or she Illustrate how the type of work he or she does influences a person’s lifestyle. For does influences a person’s lifestyle. For example, contrast a farmer, a factory example, contrast a farmer, a factory worker, and a school teacher.worker, and a school teacher.

Is it possible for an economy to be based Is it possible for an economy to be based entirely on services?entirely on services?

What is the value of self-service in an What is the value of self-service in an economy?economy?

Interactive Class ExerciseInteractive Class Exercise

The class breaks into small groups. Each The class breaks into small groups. Each group identifies service firms that should be group identifies service firms that should be listed in the top listed in the top Fortune 100Fortune 100 and places and places them in rank order of estimated annual them in rank order of estimated annual revenue.revenue.

www.fortune.com/lists/F500/index.htmlwww.fortune.com/lists/F500/index.html