1. Welcome to Service Management Chapter 01 Role of Services in an Economy
James Fitzsimmons
Seay Professor of Business Emeritus
University of Texas at Austin
McGraw-Hill/Irwin
Service Management: Operations, Strategy, and Information Technology, 6e
Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.

2. Learning Objectives Identify traits that all services have in common.
Discuss the central role of services in an economy.
Identify and differentiate the five stages of economic activity.
Describe the features of preindustrial, industrial, and postindustrial societies.
Describe the features of the new service economy.
Contrast the push vs. pull theories of innovation.
Identify the sources of service sector growth.
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3. Service Definitions 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.
James Fitzsimmons
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4. 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.
James Fitzsimmons
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5. Role of Services in an Economy
FINANCIAL SERVICES
· Financing
· Leasing
· Insurance
INFRASTRUCTURE SERVICE
· Communications
· Transportation
· Utilities
· Banking
PERSONAL SERVICES
· Healthcare
· Restaurants
· Hotels
MANUFACTURING
Services inside company:
· Finance
· Accounting
· Legal
· R&D and design
DISTRIBUTION SERVICES
· Wholesaling
· Retailing
· Repairing
CONSUMER
(Self-service)
BUSINESS SERVICES
· Consulting
· Auditing
· Advertising
· Waste disposal
GOVERNMENT SERVICES
· Military
· Education
· Judicial
· Police and fire protection
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6. Percent Employment in Services Top Ten Postindustrial Nations
Country
1965
1975
1985
1995
2005
United States
59.5
66.4
70.0
74.1
78.6
United Kingdom
51.3
58.3
64.1
71.4
77.0
The Netherlands
52.5
60.9
68.3
73.4
76.5
Sweden
46.5
57.7
66.1
71.5
76.3
Canada
57.8
65.8
70.6
74.8
76.0
Australia
54.6
61.5
68.4
73.1
75.8
France
43.9
51.9
61.4
Japan
44.8
52.0
57.0
68.6
Germany
41.8
n/a
51.6
60.8
68.5
Italy
36.5
44.0
55.3
62.2
65.5
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7. Trends in U.S. Employment by Sector
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8. Distribution of GDP in the US Economy
Product
Services
Physical
Information 6%
10%
31%
53%
37%
63%
84%
16% D B A C
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9. Stages of Economic Development
Pre Use of Standard
dominant Human Unit of of Living
Society Game Activity Labor Social Life Measure Structure Technology
Pre Against Agriculture Raw Extended Sub Routine Simple hand
Industrial Nature Mining muscle household sistence Traditional tools power Authoritative
Industrial Against Goods Machine Individual Quantity Bureaucratic Machines
fabricated production tending of goods Hierarchical
nature
Post Among Services Artistic Community Quality of Inter Information
industrial Persons Creative life in terms dependent
Intellectual health,
education,
recreation
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10. Economic Evolution Economy Agrarian Industrial Service Experience
Offering
Food
Packaged
goods
Commodity
service
Consumer services
Business
services
Function
Extract
Make
Deliver
Stage
Co-create
Nature
Fungible
Tangible
Intangible
Memorable
Effectual
Attribute
Natural
Standardized
Customized
Personal
Growth
Method of Supply
Stored in bulk
Inventoried
Delivered on demand
Revealed over time
Sustained over time
Seller
Trader
Producer
Provider
Stager
Collaborator
Buyer
Market
Customer
Client
Guest
Expectation
Quantity
Features
Benefits
Sensations
Capability
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11. The Four Realms of an Experience
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12. Experience Design Principles
Theme the Experience (Forum shops)
Harmonize Impressions with Positive Cues (O’Hare airport parking garage)
Eliminate Negative Cues (Cinemark talking trash containers)
Mix in Memorabilia (Hard Rock T-shirts)
Engage all Five Senses (Mist in Rainforest)
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13. Source of Service Sector Growth
Information Technology (e.g. Internet)
Innovation Push theory (e.g. Post-it) Pull theory (e.g. Cash Management)
Services derived from products (e.g. Netflix)
Exploiting information (e.g. Auto part sales)
Difficulty of testing service prototypes
Changing Demographics Aging of the population Two-income families Growth in number of single people Home as sanctuary
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14. Typology of Services in the 21st Century
Core Experience
Essential Feature
Examples
Creative
Present ideas
Advertising, theater
Enabling
Act as intermediary
Transportation, communications
Experiential
Presence of customer
Massage, theme park
Extending
Extend and maintain
Warranty, health check
Entrusted
Contractual agreement
Service/repair, portfolio mgt.
Information
Access to information
Internet search engine
Innovation
Facilitate new concepts
R&D services, product testing
Problem solving
Access to specialists
Consultants, counseling
Quality of life
Improve well-being
Healthcare, recreation, tourism
Regulation
Establish rules and regulations
Environment, legal, patents
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15. Discussion Topics
Illustrate how the type of work he or she does influences a person’s lifestyle. For example, contrast a farmer, a factory worker, and a school teacher.
Is it possible for an economy to be based entirely on services?
What is the value of self-service in an economy?
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16. Interactive Class Exercise
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.
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