BA 302 - Services Strategy

BA 302 - Services Strategy

Learning outcomes:

Understand and recognize the different levels of business decision making; be able to provide examples.

Understand SWOT and its relationship with internal and external perspectives.

Familiarity with Porter's five competitive forces.

Have ideas on how process design and execution can support combatting these forces.

Understand the concepts of order winners and order qualifiers.

Have some insight into the strategic role of information systems.

Relate these concepts to the product/service life cycle.

Recall the (Services) process matrix: --> operations (processes) are different for different sections of the matrix:

Low volume - high customer interaction (professional service):

High skill levels and frequent and ongoing training of personnel.

Little standardization and high flexibility.

Much front office, little back-office work.

Etc.

High volume - low customer interaction (service factory):

Lower skill levels.

Standardization and less flexibility.

Automation possible and necessary.

Little front office; lots of back-office work.

Etc.

Question (Metters et al. (p. 14)): "How does a business decide which quadrant of the matrix to position itself in?"

Depends on the business strategy.

Depends on where the product/service's position on the product/service life cycle.

Problem: What do we mean with the term strategy?

Standard organizational decision-making classification (Anthony, 1965):

Activity Time step Frequency
Process
Standardization

Strategic / Executive long low low

Tactical / Management medium medium medium

Operations short high high

Example: Netflix Inc.:

Strategic: on-line order / mail delivery and return DVD rental service.

Tactical: large assortment; good and easy-to-use search engine; short turn-around times; personalized DVD recommender service; no-hassle customer policy; fast and precise customer support; flexible, flat-rate pricing.

Operational: regional delivery centers; user-specific rental tracking; automatic credit card payments; (multiple) subscriptions; ergonomic envelopes; no due dates/late fees; permissive loss policy; mixed on-line/human-only customer support; etc.

Detailed operations:

Red, fold/sleeve envelopes.

US Postal pickup and delivery.

Bar-coded DVD sleeves.

Delivery and return emails to customer.

Treat non-arrival of DVD as returned; ship the next one.

Service centers in Salem, OR; Flushing, NY, etc.

Problem: Do you see a role for IT in all of this?

Problem: Does the Netflix case demonstrate a relationship between IT and strategy?

Overall strategy framework: SWOT (Strengths, Weaknesses, Opportunities, Threats):

SW: mostly (!) internal perspective (can be evaluated within the company).

OT: mostly (!) external perspective (evaluation must include external information).

Opportunities: Porter's generic competitive strategies (p. 36-39):
- Cost leadership:
  - Low-cost customers. (USAA example). Problem: Know other examples?
  - Standardize and/or automate processes.
  - Reduce front-office activities. (Netflix did the opposite with its customer service)
  - Decouple: move activities from front- to back-office.
  - Notice how a strategic objective (cost reduction) is executed on the operational level. ==> operations serve/are aligned with strategy.
- Differentiation:
- Market focus.
- Problem: Apple?
- Problem: Walmart?
- Problem: Southwest Airlines?
- Problem: Safeway vs. Winco?
- Problem: AARP, AAA, LinkedIn?
- Problem: Netflix?
- Threats: Porter's five competitive forces:
- Problem: does globalization have an effect on these forces?
- Problem: How to combat these forces?
- Competitive position (p. 39-40):
- IT in strategy & competition (p.40-45):
- Once again: notice how strategic objectives must be supported by operational processes ==> operational processes, IT-based or not, must always be aligned with strategy.
- Practice questions: