An online monthly research publication by the Ivey Business School 

Volume 14, Number 2
February 2008

Designing and delivering quality encounters

Larry Menor’s research shows that there’s a lot more to service innovation and management than just meeting or exceeding customers’ expectations

The sole job of the service manager is to satisfy customers, right?

Wrong, says Ivey Professor Larry Menor. “So many things that influence customer satisfaction are beyond the control of service managers,” he says. “Their primary mandate is to focus on the design and delivery of apt quality encounters that have the potential to satisfy customers.”

Menor likens each encounter between a service provider and a customer to a three-legged stool. The first leg involves understanding your target market requirements; the second leg represents the service concept, or bundle of offerings which customers purchase; and the third leg constitutes the corresponding service delivery system. The seat of the stool represents the service encounter, and the quality of that “moment of truth” depends on bringing all three legs into alignment. “To create a high quality service encounter, the service manager needs to focus simultaneously on all three complementary legs of the stool,” says Menor.

A purchase of services usually involves a series of encounters between the customer and service provider. In addition to the actual consumption transaction, which might occur face-to-face or be technology-based, there are usually touch points before and after that involve some form of customer and service interaction. Menor’s research shows that the truly innovative service provider is consumed with designing and delivering quality encounters throughout the customer’s consumption journey.

In an earlier study on U.S. retail banks, Menor developed a rigorous approach to assess their competence in new service development. He recently completed a follow-up study of these same banks, this time examining their service operations strategies. He found that the “more competent” banks focused much of their managerial emphasis on the quality of encounters with the customer. “They uniformly emphasized the criticality of aligning all three legs of the stool: understanding their customers, designing an appropriate set of offerings, and putting in place an effective delivery system,” says Menor.

The less competent banks, on the other hand, focused primarily on defining and diagnosing the adequacy of their retail offerings. “Managers in these banks were largely concerned with the appropriateness of the service offering itself, with far less emphasis placed on innovating the delivery system.”

Menor is fond of concluding in his operations and service management classes that “managing services is conceptually straightforward, except for the few million details.” Many of these details have to be explicitly dealt with during the process of designing and delivering the service offering, which includes both tangible and intangible elements. For example, tangibles include the written materials that support the transaction. The facility where the transaction takes place is also a tangible that is consumed. Intangibles include sensory attributes like cleanliness and lighting, or timing elements such as promptness. They also include psychological attributes, such as the prestige of a service provider or its experience.


In a related project funded by SSHRC, Menor is studying the service innovation strategies and practices of North American orchestras. Consistent with his research on retail banks, he is finding that innovative orchestras are going far beyond the musical offerings themselves. “They are thinking about pre-concert and post-concert encounters with customers, and all the design and delivery elements that are critical to the quality of those encounters,” he says.

Last summer Menor was invited to join 27 other internationally recognized service experts at the University of Cambridge to participate in a ground-breaking undertaking: assessing the need and defining the foundations and deliverables for a distinct field of study called Service Science. An initiative commenced a few years ago by IBM, Service Science represents an emerging multi-disciplinary approach to advancing theory, understanding and practice on the innovation and management of service systems.

Although 70 percent of IBM’s revenue is services based, the margins on these offerings are noticeably lower than on manufacturing offerings. As a result, IBM began to reach out to academics to build a body of multi-disciplinary research to help understand the complexities of service innovation and improve the management of service systems. The eventual success of Service Science depends greatly on the collaborative efforts between academia and industry.

The task for the 2007 IBM-Cambridge symposium participants – who represented a variety of management and non-management academic disciplines and industry – was to produce a manifesto for Service Science and make specific recommendations for education, business, and policy.

Menor, a contributor to the resulting manifesto entitled Succeeding through Service Innovation, hopes that this marks a beginning that will inform future research, including his own. “This initiative is unique because it consists of industry saying to academics ‘we have an important and urgent problem that we cannot solve without your help,’” he says. “This might not only revolutionize our scholarly understanding of service management and innovation, but also provide a blueprint to help academe develop a more multi-disciplinary approach to generating and disseminating knowledge.”
 

Professor Menor's Homepage

Supplement: Q&A with Professor Don Barclay on the Business of Farming

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