OPSM 405 Service Operations Management Class 3: Service Process Matrix Koç University Zeynep Aksin

Overview from previous class  Service characteristics –Simultaneity –Heterogeneity –Intangible –Perishable  In most cases product=process

Firms compete on product attributes. This requires process capabilities.  Price (Cost) P  Quality Q –Customer service –Product quality  Time T –Rapid, reliable delivery –New product development  Variety V –Degree of customization “order winners” To deliver we need “capabilities”

Shouldice Business Model  Medical –Simple hernias –Optimized process –Check-ups and follow- up  Social –Club Med like experience –Co-production at individual and cohort level –A network for life

Shouldice Patient Experience COST QUALITY SPEED FLEXIBILITY Low, both real and opportunity Low recurrence, satisfaction with experience Fast operation and recovery The process rules; only simple hernias

Comparison to General Hospital Hernia complexity Shouldice: prepares for the simplest General Hospital: prepares for the most complex

A product/process matrix General Hospital: Variety & flexibility High cost Low margins Low Cost High margins Shouldice Hospital: Standardization Cost, speed, quality Process Flexible job Rigid line flow Product High customization Low volume High unit margin High standardization High volume Low unit margin Industrialization

Shouldice as a lean enterprise ShouldiceGeneral Hospital Focus on low risk casesNo focus, multiple goals Clear single value prop.Confusion of value prop. Predictable processUnpredictable process Strive for perfectionStrive for threshold perf. Eliminate wasteTolerate some excess Manage patient flowsView patients as functional tasks Pull patients into process Push patients through process Womack and Jones (2000) From Lean Production to Lean Enterprise, HBR March-April 1994

Shouldice Process Life Cycle  Birth of the Shouldice formula  Process selection, design, and improvement  Innovation at the interfaces  Process overtaken

Focus at Shouldice: the results  Breakthrough service  High customer and employee satisfaction  Industrial approach

Service management challenges  The dominant front office  interaction with doctors  interaction with hospital staff  the process as a performance: moment of truth  hard to control quality  improve productivity  every customer is different  need well engineered process  or highly trained and empowered personnel The Shouldice approach

Focus as a strategy  Focus: the differentiation and selection of market segments, and the adjustment of the process and infrastructure parameters to meet the needs of those segments.  Can focus on customer group, service concept, operating strategy/process, service area or site  the risks of over focusing: beware of becoming obsolete! Need to look at the entire service delivery system when considering different focus options

Customization and Judgement Service FactoryService Shop Mass Service Professional Service Low High Low: TaylorismHigh: High performance workplace Degree of Workplace Empowerment (Process) Degree of Customization (Product)

The move to the diagonal Service FactoryService Shop Low High Low: TaylorismHigh: High performance workplace Degree of Workplace Empowerment Degree of Customization Hospitals Airlines Retailing Banks Law Professional ServiceMass Service

Management challenges Service FactoryService Shop Low High Low: TaylorismHigh: High performance workplace Degree of Workplace Empowerment (Process) Degree of Customization Mass ServiceProfessional Service process design flexible technology managing loyalty managing people efficient technology creating warmth incentive design quality control

Next class  Read the Southwest case  Try to understand the Southwest business model and operating decisions that have been taken to support this model