Role of Services in an Economy Role of Services in an Economy Welcome to Service Management Service Management Professor James Fitzsimmons University of Texas at Austin

Learning Objectives n Describe the central role of services in an economy. n Discuss the evolution of an economy from an agrarian society to a service society. n Describe the features of preindustrial, industrial, and postindustrial societies. n Describe the features of the new service economy

Service Definitions Services are deeds, processes, and performances. Services are deeds, processes, and performances. Valarie Zeithaml & Mary Jo Bitner A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer. A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer. James Fitzsimmons James Fitzsimmons

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

Role of Services in an Economy

Percent Service Employment for Selected Nations Country United States Canada Israel Israel Japan France Italy Italy Brazil Brazil China China

Trends in U.S. Employment by Sector

Stages of Economic Development Pre- Use of Standard Pre- Use of Standard dominant human Unit of of living dominant human Unit of of living Society Game activity labor social life measure Structure Technology Society Game activity labor social life measure Structure Technology Pre- Against Agriculture Raw Extended Sub- Routine Simple hand Pre- Against Agriculture Raw Extended Sub- Routine Simple hand Industrial Nature Mining muscle household sistence Traditional tools Industrial 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 nature nature Post- Among Services Artistic Community Quality of Inter- Information Post- Among Services Artistic Community Quality of Inter- Information industrial Persons Creative life in terms dependent industrial Persons Creative life in terms dependent Intellectual of health, Global Intellectual of health, Global education, education, recreation recreation

The New Experience Economy

The Four Realms of an Experience

Experience Design Principles n Theme the Experience (Forum shops) n Harmonize Impressions with Positive Cues (OHare airport parking garage) n Eliminate Negative Cues (Cinemark talking trash containers) n Mix in Memorabilia (Hard Rock T-shirts) n Engage all Five Senses (Mist in Rainforest)

Source of Service Sector Growth n Innovation Push theory (e.g. Post-it) Pull theory (e.g. Cash Management) Services derived from products (Video Rental) Information driven services Difficulty of testing service prototypes n Social Trends Aging of the population Two-income families Growth in number of single people Home as sanctuary

Discussion Topics n Illustrate how the type of work he or she does influences a persons lifestyle. For example, contrast a farmer, a factory worker, and a school teacher. n Is it possible for an economy to be based entirely on services? n What is the value of self-service in an economy?

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