In the last column, I introduced the topic of services engineering and why it is going to be so important. The vast majority of the labor force is employed in services today, and nearly 80 percent of our GDP is from services industries. In this column, I will take a closer look at what a service process is and examine some distinguishing characteristics of different types of services to help better understand why we need to develop new models for documenting, analyzing and improving services.
What is a Service?
The term “services” has long been a kind of catch-all category. Whatever businesses that did not fall in the domain of agriculture, manufacturing or construction have been lumped together into the “service industry.” Some have defined services in terms of outputs. For example, services have been defined as “activities that usually have intangible outputs” or “all economic activity whose output is not a physical product or construction.”
Other definitions have focused on customer involvement in creating value in services. For example, “a service process is a series of states involving the decision- making process and experiences of the customers,” “a service is a provider/client interaction that creates and captures value,” or “a time-perishable, intangible experience performed for a customer acting in the role of co-producer.”
Types of Services
Some research organizes services businesses into three generic types by evaluating the volume of customers serviced by a work unit per day against six characteristic dimensions: people vs. equipment, front vs. back office, product vs. process, level of customization for individual customers, discretion available to front office staff, and amount of contact time available by front office staff. The generic types are professional services, service shops and mass services.
Professional services such as consultants, financial advisors, and law firms typically have a relatively low volume of customers, and a high degree of people and process focus. They customize their services for individual customers to a great extent. Mass services such as airlines, insurance, and hotels cluster at the other end of the spectrum. They have a high volume of customers and exhibit more of an orientation to equipment, products and the back office. They do relatively little customization for individual customers. Still, along all of these dimensions, mass service businesses are inherently much more like professional services than they are like manufacturing industries. Service shops like restaurants, retail shops and wholesalers fall somewhere in-between.
Engineering Service Processes
What does this imply for improving process performance in services businesses? How must this differ from traditional industrial engineering? We have to pay more attention to designing the dynamic, collaborative aspects of business processes. We need to develop techniques that focus less on control of back office operational tasks and procedures and more on the front office experience. We need to focus more on supporting rather than controlling highly-skilled knowledge workers. We need to design processes that have a greater degree of adaptability and are more responsive to customers. Next, I’ll look into the challenges of measuring and managing service process performance.
