Service Design and Delivery

5  Designing Competitive Service Models 77

Products Services

Product based nitro- 1960 1970 1980 1990 Customised solution-
glycerine Time mobile units
Pump emulsion into
Manufacturing holes
process Proximity of depots to
customers
Process delivery- Almost inexistent
explosives into holes services

Product embedded Product Trend
in the solution
Service Trend
...

Fig. 5.6  ICI Explosives’ products and services transformation over time

5.2.4  Value-in-Use

ICI Explosives has been one of the few multinationals that recognised the need to
understand “What customers value from the use of the product-service offerings.”
It was then when it re-designed a new proposition of value to the customers. The
revised foundational premises of service-dominant logic from Vargo (2008) high-
light that service is the fundamental basis of exchange. In the exchange, the cus-
tomer is always a co-creator of value. While value is created in the customer space,
organisations cannot deliver value, but only offer “value propositions.” Hence in
designing a new value proposition it is an imperative to assess the value-in-use that
the customer gets out of the offering’s consumption.

The “technological integrator” value proposition of ICI Explosives proved to be
the most profitable and difficult model to replicate by its competition. It embraced
the tailored service approach to the key customers’ needs.

Servitized organisations appear to be divided into two distinct groups: those that
thrive under a servitization model with service margins up to eight times those in
product sales, and those who are struggling to break even because they are unable
to convince customers to pay for their services (Reinartz and Ulaga 2008).

5.2.4.1  Understanding Customer Value-in-Use

Value has several meanings in management literature. Frequently, customer value
is defined from the supplier’s perspective. For example, the customer value concept
defines value as the economic worth to a firm of a customer, while the value-added
concept allows sellers to think of bundles of attributes and seller-controlled vari-
ables (Woodruff and Flint 2006). Vargo and Lusch (2004) have inspired much
recent discussion on this topic, proposing in particular an emphasis on value-in-use,
but they neither define this term nor develop an argument as to how it can be cre-
ated. Building on Vargo and Lusch (2004), Woodruff (1997) and Woodruff and

78 V. Martinez and T. Turner

Flint (2006), Value-in-use is defined as a customer’s functional outcome, purpose
or objective that is directly served through the product/service consumption.

Macdonald, Martinez and Wilson (2009) propose that value-in-use may provide
a missing link in assessing the customer perception of value in product-service
offerings. A value-in-use perspective may be superior to the existing embedded
value perspective which is defined as: the presence of product//service attributes,
and performances against those attributes, for which the customer is prepared to
pay (Vargo and Lusch 2004). Vargo and Lusch (2006) highlight that there is no
value until an offering is used.

A company has control over the design of attributes of its products or services;
however, “value is not created in a factory or in the back office of a service firm”
(Gronroos 2006). Value cannot be embedded in goods created by the supplier; instead,
goods are distribution mechanisms for value creation (Vargo and Lusch 2006). The
customer uses the supplier’s product-services offerings as a means of satisfying their
ends. In this process, value emerges as the consumer uses the offering.

Indeed the evidence from the operations and marketing literatures show that
existing customer insight measures do not accurately predict customer satisfaction
or firm performance. They suggest that better understanding of the co-creation of
value-in-use that gets closer to the customer, may be appropriate. Research in this
gap is currently being carried out by Cranfield University; it aims to shade some
light on the understanding of value-in-use, as a media to redesign innovative and
successful value propositions to customers.

The success of the current ICI Explosives’ value proposition “technological inte-
grator” resides on the analysis and understanding of the value-in-use. This value-in-use
analysis came unconsciously when the mining, technical and marketing teams started
discussing the real value that the customers appreciate out of their jobs. The teams
concluded that customers’ value some aspects of the product service offering such as,
the simulation analysis of blasts lay out, the explosion effectiveness and hassle free
contracts renewals among others. Table  5.3 shows the value-in-use that customers
appreciated from the ICI Explosives’ offerings.

Table 5.3  Customer value-in-use and ICI Explosives response

Customers value-in-use ICI Explosives full fill the customers’ value with

Simulation analysis Simulation of blasts Engineering team
of blasts lay out
Customised formula Engineering and mining
Explosives effectiveness teams
Particles size analysis
Hassle free explosive ICI took the ownership of the explosive Mining team
licence Marketing team
product, processes and licences
Explosives risk adverse Explosives’ transport and material Engineering and mining
teams
Hassle free contracts: handling and storage
renewals and reviews Created partnerships through Marketing team

Drill hole process long term contracts This was supervised by the
Subcontracted the drilling mining team

5  Designing Competitive Service Models 79

By identifying the sort of attributes and performance the customers value from
the offering, ICI Explosives was able to customise a solution. Then the solution was
tested with other customers. In this way, the company managed to create the mobile
units complemented with the analysis of the particle size ground, simulation of
the blast and quarry analysis. By providing a service, ICI absorbed ownership of
the technology, material and skills.

This change was partially pushed by the customer’s desire to compete in econo-
mies of scales in an Australian site; where the transport of the slurry was highly
ineffective to cope with the daily blasting demands.

5.2.5  The Strategic Value Creation Road Map

This chapter demonstrates the importance of the definition of the value proposition
as a means to establish a sustainable and profitable business model. The strategic
value creation road map (Fig. 5.7) highlights the series of analyses that need to be
carried out to understand the company’s competitive position and realise offerings
that better suit the customer’s value-in-use.

Suppliers Markets New
Business
Competitors Economy Model

New Entrants PESTEL EMERGENT STRATEGY
Analysis
Customers VALUE-IN-USE Assessment Re-definition:
Value
Analysis of External Proposition

Environment Gap Redesign to meet
future needs
Analysis

Analysis of Internal Business
Environment Model

Benchmark A.

CURRENT STATE OF BUSINESS Plan
Strategy
Mission, vision Capabilities Alignment:
and ambitions
Deliberated/ Skills operations, mgmt
current strategy Core competencies and customers

Value drivers Technology STRATEGIC THINKING
Products & services Processes

STRATEGIC LEARNING

Fig. 5.7  The strategic value creation road map

80 V. Martinez and T. Turner

The strategic value creating road map starts with an analysis of the external
environment, including a stakeholder analysis and the crucial customers’ “value-in-
use” analysis. Once the customer value-in-use and the external environment are
understood, the analysis of the internal environment is carried out. This includes the
analysis of the current state of the business including the business objectives,
ambitions, capabilities, skills, technology (R&D) and competitive processes.

The internal and external analyses are compared and contrasted. The resulting
analysis points out the gaps on the current business model, and potential new ways
to do business. The current business proposition and potential new opportunities to
deliver value are mapped in the value matrix. In the value matrix, the transforma-
tion from one value proposition to other are mapped and analysed. The result of this
analysis will point out a new business model. The operationalisation of the new
business model comes to life when the current resources, capabilities and skills are
re-aligned with the new value proposition in a form of a new business model.

5.3  Conclusions

This chapter discusses how organisations could compete as services through the
re-direction of the value propositions. The chapter demonstrates through the illus-
tration of the ICI Explosives case that this could only be achieved by understanding
the customers’ value and transformation paths that organisations could take towards
a servitized journey. The first part of this chapter the “ICI Explosives” case shows
how the company has transformed its value proposition, business model, service
delivery, capabilities and operating models from the 1960s to the 1990s. The
second part of the chapter provides some model, frameworks and toolkits for the
analysis and design of other competitive service models. An innovative and crucial
element in this analysis is “the customer value-in-use analysis.” The better under-
standing companies have on the value that their product/services provide to the
customers, the better the operating business model could be.

Acknowledgment  The authors would like to acknowledge the support of the EPSRC/IMRC
under grants numbers [IMRC 154 and 144], which is supporting the Product Service Systems
research.

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wwwwwwwwwwwwwwww

Chapter 6

Shifting from Production to Service
to Experience-Based Operations

Jannis Angelis and Edson Pinheiro de Lima

6.1  From Production to Service …

This chapter covers the shift in focus of value added business operations from
p­ roduction to services, and in turn, to experience-based operations where customer
involvement itself becomes part of the offering. The shift has significant implica-
tions for how businesses are managed. The greater service focus affects the firm’s
unique value proposition, which necessitates considerations on strategy, supplier
relations, post-sale offerings and so on. Meanwhile, the inclusion of customer
e­ xperiences affect the way operations are designed and employed so that these are
structurally systematically captured and capitalised.

Services can be defined as activities or performance provided to satisfy customer
needs, whereas goods are tangible products or stable intangible assets. The mix may
range from pure tangible good, through hybrid goods and services, to pure service.
While the typical manufacturing company has a total offering of tangible goods with
accompanying services, the trend is toward hybrid offerings. Traditionally manufac-
turing is defined as the transformation of material into a finished product. However,
the boundaries between products and services are increasingly blurred (Heineke and
Davis 2007). Many manufacturers offer services in support of their products.

Also, the goods/services separation has become somewhat of an artificial dis-
tinction as demand for services as an input to the production of goods has grown
steadily. For instance, traditional manufacturing firms such as aerospace engine
maker Rolls Royce, now derive substantial income from post-sale service and
maintenance to the engine users. Similarly, healthcare companies are recognised as
service firms while many of the healthcare processes employed rely heavily on
manufactured products. Indeed, health care was one of the earliest sector adopters
of the principles of scientific management and industrial engineering. Barnes’
motion and time study from 1937 describes ‘operating-room setup showing tables

J. Angelis (*)
OM Group, Warwick Business School, Coventry,

CV4 7AL, UK

e-mail: [email protected]

M. Macintyre et al. (eds.), Service Design and Delivery, Service Science: Research 83
and Innovations in the Service Economy, DOI 10.1007/978-1-4419-8321-3_6,
© Springer Science+Business Media, LLC 2011

84 J. Angelis and E.P. de Lima

for instruments and supplies designed to facilitate the work of the surgeon, his
assistants and the nurses’ (1980,p.177).

So care needs to be taken when using the traditional industrial classifications for
production and service. For instance, McDonald’s main competitive advantage is
its knowledge in operating restaurants with high customer turnover. Application of
scientific management to its operations was the key factor underlying McDonald’s
early success (Chase and Apte 2007). Today, it arguably exhibits process applica-
tions to a greater degree than do many manufacturers in its main operating princi-
ples, such as standardisation and reduction of product variety, simplification and
automation of processes and performance monitoring and control.

Technological progress in information and communication technologies have
both enabled and hastened the pace of change in the way products and services are
made and offered, Apt and Mason (1995). For instance, use of information systems
makes business process outsourcing viable to many companies. To this effect sev-
eral concepts have emerged that encompass the reality of manufacturing and ser-
vice firms, ranging from product-service systems, servitization and high value
manufacturing. There has also been a significant research interest in service opera-
tions. Table 6.1 lists the main ideas developed in respective decade. It reveals an

Table 6.1  History of research in service operations (Adapted from Chase and Apte 2007)

Time period Key theoretical and practical ideas

1900–1950s Application of scientific management to services
Walt Disney: industrialised fantasy
Holiday Inns: consistency in multi-site services

1960s McDonald’s: production-line approach to services
Service economy and operations in health care

1970s Industrialization of services
Match supply and demand in services
Customer contact model
Data envelopment analysis

1980s Classify services to gain marketing and operational insights
Gap model of service quality and SERVQUAL
Psychology of queues
Yield management

1990s Service profit chain
Using fail-safe methods in service systems
Globalisation of information-intensive services
Emergence of experience economy

2000s Behavioural science in service operations
Information technology in services and e-services
Global business process outsourcing
Service design

2010s Process driven behavioural operations
Experience-based operations

6  Shifting from Production to Service to Experience-Based Operations 85

extension of the process-focused shift towards greater customer involvement
(Sower et  al. 1997; Roth and Menor 2003; Sprague 2007). Research on service
operations has also incorporated behavioural considerations, as discussed by
Boudreau et al. (2003); Bendoly and Hur (2007) and Heineke and Davis (2007).

The distinction between high- and low-contact customer systems provides a
basis for classifying service production systems. Following Chase’s (1978) cus-
tomer contact model of services, the less direct contact the customer has with the
service system, the greater is the potential of the system to operate at peak ­efficiency
since the transformation of products is easier to manage when customer interaction
is limited. This may result in the practice of decoupling services into front-office
and back-office operations, with the former responsible for the high-contact ele-
ments of work and the latter taking care of the low-contact elements (Metters et al.
2006). An additional advantage of such decoupling services is that the back-office
work can be detached from the physical locations that deal with the customers and
moved to less expensive locations, including foreign countries.

The services can be categorised into three distinct types: professional services,
service shop, and mass services (Schmenner 1986). Professional services, as clas-
sified by Silvestro et al. (1992) and further explored by Ng et al. (2007), are organi-
sations with relatively few transactions, highly customised, process oriented, with
relatively long contact time. Most value is added in the front office, where consider-
able judgement is applied in meeting customer needs. Examples include manage-
ment consulting and corporate banking. Mass services are characterised by a large
number of customer transactions that involve limited contact time and little cust-
omisation. Offerings are predominantly product-oriented, with most value being
added to the back office and little judgement applied by front office staff. The ser-
vice shop category falls between professional and mass services. Service industries
are distinct from manufacturing in the required immediacy of response. After all,
as a rule hotel rooms must be available for occupancy when and where travellers
want them. This necessitates a managerial emphasis on balancing supply and
demand (Chase and Apte 2007). Expanding on this distinction, Haywood-Farmer
and Nollet (1991) define service in terms of intangibility, heterogeneity, perishabil-
ity and customer participation in the production process.

6.2  … to Experiences

But as services and products become commoditised, customers derive greater value
from experience. And for the product and service providers, offering such experi-
ences enhances their value proposition and hopefully also improves their competi-
tiveness (Fitzsimmons and Fitzsimmons 2005). This means that the customer’s
experience becomes an integral part of the offering, and that least part of the produc-
tion design explicitly aims at the emotional engagement of the customer (Sampson
and Froehle 2006; Heineke and Davis 2007; Hartsuiker 2008). It also means that
value is determined not only through the products and services themselves, but by

86 J. Angelis and E.P. de Lima

the value they create (or offer), as perceived by their customers. This requires that
managers understand the value proposition of both, and capturing this interactive
process is important for successful product definition, development and delivery.

Pullman and Gross (2004) emphasise the customer loyalty effect caused by
emotional connections made because of the experience. Apple and Nike concept
retail stores, or indeed the visit-your-car-being-built schemes many automakers
employ are examples of such pursuit. Using the passive/active and absorption/
immersion axis classification of Pine and Gilmore (1999) to differentiate various
customer experiences, experience-based operations fit in the immersive and active
category. Customers must actively participate in and be an integral part of the offer-
ing. Researchers Prahalad and Ramaswamy (2004) call the business offering of
such experiences co-creating. The customer engagement enables the product or
service they receive. Moreover, according to Hartsuiker (2008), experience-based
operations have two distinguishing criteria that separate them from traditional prod-
ucts and services: there is an explicit aim of the production process to emotionally
engage customers in a personal and memorable way; and a concurrent customer
presence in the production process.

But unlike traditional product and service offerings, experience-based opera-
tions typically involve several interaction points with customers. This provides
many opportunities for value added activities, but also many opportunities for not
fulfilling customer expectations. This means that organisations need to, and often
do, pay a lot of attention to their front line staff and the services they are providing.
This can be experienced just by comparing the service differences when flying first,
business or economy class with the same airline.

As shown by Martin and Pranter (1989), experiences are also influenced by
other customers, who may through crowding, unruly or unanticipated behaviour
negatively impact on the perceived service quality. Thus, to be successful, employed
process must take into consideration a range of factors that may influence the
c­ ustomer experience. For instance, in many services, the customer is present in the
delivery process. This means that the perception of quality is influenced by out-
come as well as its process.

6.3  Implication for Business Models

The shift towards greater service content has resulted in a variety of new business
models, such as servitization, product-service systems, experiential services, services
sciences and service-dominant logic. This has made business decisions for both
manufactures and service providers converge as strategies and operations increas-
ingly face similar demands and solutions. Manufacturers tend to view services as a
means to differentiate their manufactured offerings. The services are treated as fea-
tures of the product. Such strategy of non-technical differentiation may include
s­ ervice elements at pre-purchase, at-purchase and after-sales services. Figure  6.1
illustrates these changes in business focus in manufacturing and services.

6  Shifting from Production to Service to Experience-Based Operations 87

Fig. 6.1  Shifts in the supply chain for manufacturers and service providers

The intangibility of service offerings means that they can be purchased separately
from other transactions. For instance, a manufacturer can offer a service product
that supports the products of competitors on the customer’s site as well as the
manufacturer’s own supply. As described by Sawhney et  al. (2004), typically,
manufacturers’ service ventures take new positions in the value chain by adding
services to the chain (i.e. temporal expansion), controlling activities previously
performed by customers (temporal reconfiguration), or introducing related chains
(spatial expansion and reconfiguration). The integrated solutions business model
means that firms expand their value-adding transformations. However, while manu-
facturing companies expand their operations downstream and pursue the after-sale
market, service companies increase their operations upstream, towards the product
manufacture, to ensure greater reliability in the integrated offerings.

Facing similar environmental considerations as the manufacturers, service pro-
viders must build competitive capabilities such as consistent quality, convenience,
accessibility to channels, customization, and low costs and ensure that these con-
tribute to the required offering. The attainment of quality in products and services
became a pivotal concern in the 1980s. Quality in services is measured by the
SERVQUAL survey developed by Parasuraman et al. (1988) for managing the gap
between expected and perceived service delivery. It is extensively used for measur-
ing service quality in both operations and marketing. In addition, in services, yield
or revenue management plays an important part. For instance, effective seat inven-
tory control by an airline depends on forecasts of future bookings, the revenue
values associated with each fare type, and an ability to make systematic tradeoffs
between booking requests so as to maximise total flight revenues.

As services and products are becoming commoditised, experience has become
important whereby firms add value by providing offerings that create memorable or
valued experiences for the customer. Businesses such as Disney theme parks and
Starbucks coffee shops have been successful largely because their business models
have incorporated the creation and sustain of service experience.

In services one can make a distinction between intended and realised service
offerings. The intended service is the planned customer offering. Realised service
is the service actually perceived or purchased by the customer. In successful ser-
vices it is important that the linkage between the intended and realised is close. In
experience based operations, the two may be identical.

88 J. Angelis and E.P. de Lima

Customer awareness and understanding that was previously hidden from
back-office personnel is now often a requirement. This in turn places pressure on
supporting facilities, such as selection and training of the personnel. Also, decisions
include customer contact touch points, such as number and types of distribution
channels (e.g. traditional stores, Internet).

Customer expectations and perceptions need to be understood to better person-
alise their experiences. For general application, especially in a global context, service
firms are finding that what sells in some countries or indeed local regions may have
little appeal elsewhere. This affects the degree of standardisation that realistically
and successfully can be employed. In turn, on corporate level it has an impact on
how centralised the service design should be. One solution is to keep the offering
highly standardised, and seek to influence demand through indirect means such as
marketing or price. Firms with global products, such as Coca-Cola and Procter
&Gamble with its Pringles chips, are examples of such an approach. Another
­solution is for firms to employ mass-customisation, whereby products and services
offered appear unique or customised to the customer while the operations and ­trans­f­orm­a‑­
tions needed to make the offering have been both modularised and standardised.

6.4  Implication for Operations and Management

The service profit chain developed by Heskett et al. (1997) links profitability and
revenue growth of a service firm with the satisfaction and loyalty of its employees.
Hence, a key issue for any service operations is selecting the target market.
Companies usually segment potential customers into groups based on common
attributes or characteristics, such as age, income and location. However, for
p­ rocesses, customers are often divided into operational attributes, such as degree of
customer contact, process labour intensity, or degree of customisation.

To successfully provide experiences that customers desire, relevant components
that impact the experiences must be incorporated deliberately and from the outset
(Pine and Gilmore 1999). Hence, in addition to the components required in services
provision, such as appropriate physical environment, implemented processes and
sufficient staff, managers must also incorporate behavioural components. As
argued by Fynes and Lally (2006), these can be clustered into emotions and partici-
pation activities. These two components require particular emphasis in the develop-
ment and implementation of experienced-based operations.

Service industries ranging from call centres to the healthcare services are well
positioned to apply processes. The main limitation is the variation inherent in
human interactions. Such processes include TQM and agile operations. All share
many concepts and techniques and can successfully be applied in a service environ-
ment despite having originated in manufacturing. For instance, Lean operations and
its use of poka-yoke fail-safe methods to prevent human error during work tasks is
found in the indented trays for surgical instruments in hospitals which assure that
instruments do not go missing.

6  Shifting from Production to Service to Experience-Based Operations 89

Mistakes are often inevitable in any business environment, but in a service
context creating dissatisfied customers must be avoided. This is partly done through
proper offering, and partly through recovery from service failures. The latter may
also turn dissatisfied customers into loyal ones (Hart et  al. 1990). An additional
advantage in including the customer in the service provision is that it provides an
excellent opportunity for product and process innovation (Voss et  al. 2006; Voss
and Zomerdijk 2007). This means that design choices are based on substantial and
systematic data collection on both customer preferences and their experience. In
this, customer-based operations have the advantage over traditional products and
service offerings in that feedback can be captured relatively easily and with less
time lag. The increased customer involvement also necessitates the use of fool-
proof design to ensure that their own actions do not inadvertently affect experiences
negatively. If employed correctly, techniques such poka-yoke provide the benefit of
reduced customer discretion while simultaneously retaining their feeling of control.
The former is necessary to ensure that quality standards and in turn customer
expectations, are met. Such expectation management is vital in the design and
management of operations in a service context.

Human error cannot be managed out of a process, so businesses relying on cus-
tomer interaction as part of their offering may have to make changes in staff job
roles to ensure that quality standards are consistently met. This may require a dif-
ferentiation of work roles according to task discretion. In their study of process
implementation in a service context, Ritchie and Angelis (2008) categorise roles
into role-centric job families, identifying skill type based on extent of training and
qualification, and varied autonomy levels (see Table 6.2). These skill categories are

Table 6.2  Job families (Ritchie and Angelis 2008)

Autonomy

Low discretion High discretion

Little or no choice Medium or high choice in which skills to
in the skills employ to fulfil task
employed in
fulfilling the task Low governance High governance

Skill type Environment has Medium or high
little or no external external influence
governance applied on working practices

High-skilled specialist Nurse Actuary GP

Specialist qualification
>36 months

High-skilled generalist Control Officer Senior Manager Company Director

>36 months accredited
training

Semi-skilled Corgi-Gas Fitter Software Policeman
Accredited training Developer

Low-skilled Call Centre Agent Porter Financial Product
On the job training Sales

90 J. Angelis and E.P. de Lima

further separated into high-discretion and low-discretion types. Discretion is the
freedom or authority to make judgements and to act as one sees fit, understood as
the role holder’s ability to make procedural decisions (the independence from others
when making those decisions). For instance, nurses are identified as ‘low-discretion’
roles. They are expected to assess the situation and respond with set procedures set
by professional bodies without deviation. In contrast, a manager may decide that
current processes being run are not efficient and may decide to commission a new
process. Those with high-discretion are categorised into either high levels of gov-
ernance or low levels of governance. Governance refers to the degree of external
control that is applied to the role.

In a normal product or service context such categorisation of job families is use-
ful because it clarifies where operations can be standardised and where highly
skilled staff are needed. However, in an experience-based environment staff of all
levels interact with customers. Indeed, it is often the lowest trained (and paid) staff
that have the greatest degree of customer involvement. And in this interaction the
degree of task discretion may be difficult to fully take out, which may necessitate
investments in higher skilled workers or more training. Both are costly and time
consuming, especially in a context with many atypical or temporary workers. Of
course, automation can be employed to reduce discretion, for instance, through the
use of scripted responses to customer requests. But such deskilled tasks do not fully
utilise staff, nor does it help in attracting skilled employees.

In a manufacturing context, Hootegem et al. (2004) explain how the team work
system at Volvo Ghent operates. The system relies on horizontal and vertical
assembly line task integration. It combines the benefits of non-discretionary on-line
work tasks with off-line improvement projects that require active operator involve-
ment. The former is achieved through various design-for-manufacturing and poka-
yoke techniques, while the latter employs projects where the participating team
members seek to improve the existing processes. Each member rotates from limited
discretion on-line tasks to off-line improvement tasks i.e. work packages focused
on particular areas (e.g. quality or safety). The system provides the quality benefits
of low task control with the social and individual benefits of greater task control
and captured worker insights. Operator focus on improving the process rather than
the product is beneficial since the latter is better achieved through dedicated prod-
uct design teams (Angelis and Fernandes 2007). The system at Volvo Ghent pro-
vides substantial transfer of tasks and responsibilities from line management and
staff departments to the shop-floor.

In a service context a similar approach to participation and improvement can be
employed, with customers acting as operators. In an experience-based context the
operators also play the part of the product. So the system remains valid, with the
note that customers generally cannot be relied upon to participate in off-line
improvement projects. Hence, their insights and expertise must be captured in a
different manner. In a way, this means that the distinction between front- and
back-office operators remains, as illustrated in Fig. 6.2. Back-office staff support
front-office staff (1) who themselves provide direct customer service (2). Customers
act as front-office participants in the operations (3) and associated improvement

6  Shifting from Production to Service to Experience-Based Operations 91

Fig. 6.2  Off- and on-line customer involvement

projects (4). In addition, select customers may be invited to participate in off-line
projects, to ensure that their perceptions and views on possible improvement are
captured (5).

In experience based operations, the closer interaction between customers and
staff also means that the link between internal and external service quality is more
direct. The two may even be difficult to distinguish, making it unfeasible to have
too great a disparity between back- and front office and customer conditions. For
instance, staff minimum wages and poor work conditions may affect customer
consumption behaviour less when buying a pair of sneakers than when eating in an
expensive restaurant. And the more value the customer places on the experience,
the less gap customers may accept.

For services to generate maximum value, the psychological side must be taken
into account (Bendoly et al. 2006). For instance, people tend to value the peak and
ending in a sequence of events higher in their recollection of an experience. Unlike
the manufacturing of goods, services require processes that motivate the customer
to undertake service co-production. Also, unlike most industrial goods, services
need to be adjusted to different cultures and support the customers’ business goals
and practice. For experience-based operations, the consideration of subjected cus-
tomers and their perceptions are similarly important, but extending to the opera-
tions as a whole rather than merely the downstream operations. Hence, customers
naturally play a greater co-producing role in the delivery of experiences than for
products or services. In the initial design stages of an experience-based operation,
select customer representatives need to be included, to ensure their perceptions are
captured and preferences recorded. This is similar to design stages of end-user
value focused processes such as lean, where the customer is an integral part of the
early design stages to ensure that perceived value is accurately captured in the final
product or service.

Operations with a greater degree of customer interface also necessitate particular
consideration of the physical environment. Bitner (1992) calls such environments

92 J. Angelis and E.P. de Lima

created by supporting facilities ‘servicescapes’. They are designed to influence
customer and employee behaviour and their perceptions. For instance, significant
efforts are made in automotive products to give cabin materials a particular feel
when touched, and sounds when doors are closed or buttons pressed are also given
consideration. Similarly, bright colours in fast food outlets to hasten meals, or calm
music in elevators to keep anxiety levels down are designed to improve the cus-
tomer experience.

Once developed and fully functioning, an experience-based operation will
require customer involvement as part of the offering itself as well as a means of
capturing ideas and suggestions for improving the offering (Voss and Zomerdijk
2007). Such suggestions may be a combination of explicit and implicit techniques.
For the former, suggestion boxes and feedback forms may be employed. This also
signals that their views matter, which in itself may enhance the customer experi-
ence. For the latter, tracking movement or purchases offer data on customer prefer-
ences and hence act as a proxy for their experiences. But, as stated earlier, to ensure
offerings meet customer expectation, the customer participation must be combined
with techniques for task discretion to prevent human error (Conti and Warner
1997). This is even more important in a complex system environment where actions
of one operation impacts on other operations.

6.5  Conclusion

To conclude, this chapter has discussed the shift from manufacturing to services
and the increased operational emphasis on customer experience as part of the
business value proposition. This transformation has several implications. For
select business models or strategies, this means that significant value-add will
continue to be found downstream combined with greater customer interaction
being incorporated upstream. For the employment and management of opera-
tions needed to realise these offerings, the emphasis on customer experience
means that customer empathy and participation activities will require particular
consideration. Operations need to be designed with customer perception and
experience in mind, with corresponding performance measures and management.
The split between front- and back office becomes less distinct, with greater cus-
tomer involvement throughout the supply chain and stages of product or service
life cycles.

The experience-based operations do, by default, mean that we all, as custom-
ers become part of companies’ value proposition. On the positive side, it does
mean that we are increasingly involved in the design of our own experience. This
may lead to higher quality experiences, as defined by the eye of the beholder. But
whether this also leads to greater control of the experiences as well only time
will tell.

Try the following exercises, to test and cement your learning.

6  Shifting from Production to Service to Experience-Based Operations 93

Exercise

How do experience-based operations impact on positional value along the supply
chain, and what are the implications for first and second tier suppliers?

How can patients be integrated and involved in a healthcare environment, including
primary and acute care?

What should such a designed healthcare process consider to ensure maintained
service quality?

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Chapter 7

Complex Deployed Responsive Service

Glenn Parry, Marc McLening, Nigel Caldwell, and Rob Thompson

7.1  Introduction

A pizza restaurant must provide product, in the form of the food and drink, and service
in the way this is delivered to the customer. Providing this has distinct operational
challenges, but what if the restaurant also provides a home delivery service? The
service becomes deployed as the customer is no-longer co-located with the production
area. The business challenge is complicated as service needs to be delivered within a
geographic region, to time or the pizza will be cold, and within a cost that is not
­prohibitive. It must also be responsive to short term demand; needing to balance the
number of staff it has available to undertake deliveries against a forecast of demand.

Pizza is a relatively simple product. How do you manage when you are looking
at repair and maintenance of a mechanical product such as an aircraft or even ‘fixing’
a person? A complex product adds to the challenge of meeting this service demand.

This chapter will explore the nature of ‘complex deployed responsive service’
(CDRS) – providing examples and exploration of the challenge of taking service
out to the customer. We shall explore just three core business challenges; providing
geographic coverage, responding to dispersed customer bases and dealing with
variability of demand. Three case examples are used to illustrate real examples
from the automotive, health and aerospace sectors.

7.1.1  The RAC

The Royal Automobile Club (RAC) was selected for study as is has been ranked as
the number one roadside assistance service provider within their segment for the
years 2006 and 2007 (JD Power 2007). The survey of over 3,000 UK motorists
showed that it received the highest ratings for all three factors driving customer

G. Parry (*) 95
Bristol Business School, University of the West of England, BS16 1QY
e-mail: [email protected]

M. Macintyre et al. (eds.), Service Design and Delivery, Service Science: Research
and Innovations in the Service Economy, DOI 10.1007/978-1-4419-8321-3_7,
© Springer Science+Business Media, LLC 2011

96 G. Parry et al.

satisfaction: timing (time taken for help to arrive and time taken at the scene),
operator/dispatcher (including time taken to answer the phone, friendliness and
reassurance) and mechanic/vehicle driver (includes appearance, courtesy and the
ability to do what was needed). The study also highlighted that the use of subcon-
tractors by the RAC is one of the lowest in the industry, which was recognised as a
key element of satisfaction for the motorist.

7.1.1.1  The Business

RAC is part of Aviva, the world’s fifth-largest insurance group (based on gross world-
wide premiums for the year ending 31 December 2005) and the biggest in the UK,
where it operates under the Norwich Union brand. The RAC brand offers a range of
motoring products and services including breakdown cover, windscreen replacement,
car insurance, loans, driving schools and vehicle HPI checks. Its primary business is
a road-side assistance service that utilises a network of patrol vehicles to attend vehicle
breakdowns on the roadside – which will form the focus of this case example.

The service offered in its most basic form operates thus; when a customer of the
RAC has a problem with their vehicle, such as a breakdown on the road, he or she
phones the RAC who sends out a trained technician in a van to assist the individual
wherever they are in the UK and get them back on the road again.

The RAC customers pay an annual fee that allows them to access an agreed level
of service – the more they pay, the greater the range of services on offer. The s­ ervices
range from basic roadside assistance to packages that guarantee completion of
journey, provide a replacement vehicle or hotel accommodation and offer recovery
of the vehicle to a garage for repair etc.

7.1.1.2  Providing Geographic Coverage

Of the 2.7 million breakdowns per annum that RAC attended, 91% of these were
by RAC directly and 9% were attended by contractors. They have 1,900 of their
own patrols, a number of ‘specialist’ patrols, such as the 100 VW specialist assis-
tance, and prestige services for vehicles including Porsche, Lexus, Lamborghini
and Bentley. They have 50 dedicated recovery vehicles. Each patrol effectively acts
as its own business. They work from home and each has their own fully equipped
patrol vehicle, though the larger recovery trucks are not located with individuals.

10–15 patrols are grouped together under a ‘lead’ patrol. The lead is an ‘active’
patrol, but would spend a couple of days per week on management and admini­
strative duties that support their patrols. Service delivery managers have 10–15 lead
patrols reporting to them. They operate nationally in the UK and divide the country
into geographic areas, the size depending on the number of patrols, which is in turn
dependent on population and vehicle traffic density. There are 230 distinct ­operational
‘cell’ areas across the UK. Cell size depends on population and demand, many
within London that may be only 2 miles by 2 miles; some may be up to 50  miles,
such as one that covers Norfolk.

7  Complex Deployed Responsive Service 97

7.1.1.3  Responding to Customers

A call is received by the RAC and routed to a call centre. The safety of the customer
is the sole priority of the service and it responds accordingly. The delivered
response to calls is prioritised only on this basis.

The RAC operates three call centres, entitled ‘Breakdown Assistance Centres’,
which are located in Stretford, Glasgow and Bescot. The three centres provide
regional coverage for the whole country. Each builds up specialised knowledge of
responding to their geographic area. However, the IT employed allows all three
centres to provide national coverage and act as a single centre, able to seamlessly
route calls between themselves during busy periods. The three separate centres
provide physical resilience to the service at an optimal economic level.

For service provision there are three key pieces of information that need to be
established. Firstly, is the caller entitled to service? Secondly, what is the vehicle?
Thirdly, what is their location?

Systematic questions and call centre computer databases are used to establish
the answers to these questions. The RAC has access to DVLA data and registration
details are used as a key that draws information to populate a customer data screen
that helps determine both customer right to service and also vehicle data. The ser-
vice has developed a bank of contextual questions to facilitate vehicle diagnostics
over the phone. This ‘expert system’ of questions may allow them to diagnose
the problem. As such, the patrol person arrives at the scene with knowledge of the
problem they are facing and how long the job may take. It also means that ‘simple’
problems may be remedied by the customer themselves from the driver’s seat. This
provides a dual benefit – RAC does not incur the expense of a patrol attending and
the customer is moving again more quickly, as well as the customer having a posi-
tive emotional response with the satisfaction of ‘fixing’ their own vehicle.

The expert system allows them to ascertain a percentage probability of a patrol
being able to fix the problem at the roadside. If a roadside fix is not possible, a
secondary tow would be required. It is better for both the utilisation of the patrol
fleet and the customer if the correct vehicle is sent out first time – either a patrol
for roadside or a recovery vehicle if a tow is required.

Location is established using digital maps which have over 14 million local
landmarks on them. These are used with customers to establish where they are
based on what they see around them. It is possible, with the customer’s permission,
to establish a ‘fix’ on their position using their mobile phone. However, within the
limits of current technology this is not very accurate, but is used when the customer
doesn’t know what region of the country they are in.

The command and control centre knows exactly where each patrol vehicle is, as
each vehicle has a gps tracking device. Coupled with knowledge of the likely repair
required, this allows the centre to estimate job times, travel times, customer loca-
tions and can thus give the customer an estimated time of arrival for assistance. If
changes occur and the system shows that the service will arrive earlier than pre-
dicted, either a phone call or an automated SMS text message will be issued. If the
service is lagging, a phone call is made. Bad news is always given over the phone
as this personal contact is experienced more positively by the customer.

98 G. Parry et al.

7.1.1.4  Customer Demand

Customer demand is highly variable and follows cyclical patterns of greater car use,
linked to key holiday dates, seasons and the weather. In bad weather, more people
use their cars. A cold work and school day Monday in the winter may lead to
10,000 calls being received in a morning. Monday is a key day as a customer’s car
may not have moved for a few days and, coupled with cold weather, leads to greater
call out numbers – the common fault a flat battery. During a sunny mid-week in the
summer only 5,000 calls may be received all day. Weather is a key driver of the
business. Weather patterns are very localised, as is response. The service needs to
forecast and plan accordingly. To operate effectively the workforce needs to be
adaptable to meet the demand patterns.

Our business is highly variable in terms of the demand at the roadside. It varies with the
time of day, with the day of the week, with the time of the year – and then those volumes
are themselves influenced by things like the weather and also by one off events, you know
if Manchester United were playing at home, then there’s going to be a lot of people driving
along that area, and that will create local peaks in demand.

In March breakdowns peaked at 11,300 in a day, but the lowest was 6,000. Peaks
may reach 15,000 and troughs may be at 5,000 leading to a threefold variability.
These effects are amplified as demand will also peak at specific times during the
day in question, for example, during the rush hour.

7.1.1.5  Meeting Customer Demand

Meeting variability is dependent on the area of operation as one additional call out
in a highly populated area will not increase the percentage workload, whereas in
sparsely populated areas each job has a more significant effect on demand and
hence resource required.

In Carlyle if you get one additional breakdown you probably increased [demand] by 100%
in that hour. In Corey, you get one additional, which probably increased by 7% and that’s
just the scale that we have to cope with.

The RAC has a system that forecasts its potential demand on a daily basis. The
demand forecast model includes numerous variables such as long term weather
forecasting, holidays and major events and over its years of operation, the RAC has
developed and fine tuned their advanced rostering system. A great deal of effort has
been focussed on developing the power of their models as their ability to predict
demand determines the efficiency of their operations. Typically a greater number of
patrols are rostered for a Monday and a greater number of patrols are rostered for
a winter Monday than in the summer.

Most patrols are contracted to complete a basic 40 h week. It is then possible
for a patrol to take on additional hours from an hours ‘pool’, up to a maximum of
48  h. This floating availability gives the RAC greater productivity from their
patrols, and importantly, increased ability to rapidly meet unexpected peaks in demand

7  Complex Deployed Responsive Service 99

and hence provide greater customer satisfaction. The patrols also benefit as they are
rewarded for the extra work that they perform. In addition, call centre staff
are incentivised through pay structures so that they may also be rapidly mobilised
to add capacity. A ‘tree structure’ of contact details allows the RAC employees to
rapidly contact colleagues and request additional support during spikes in demand.
The RAC has found that this system works very well as many of their employees
work flexible hours and live close to their call centres.

Having discussed RAC, we will now examine the NHS ambulance service. Like
the RAC they respond to telephone calls for assistance from customers who are
geographically dispersed. However, their requirement to prioritise customers by
need and respond quickly is literally a matter of life and death, and the volume of
demand placed upon their operations is significantly greater.

7.1.2  NHS: Ambulance Service

In 1948 the Government of the United Kingdom set up a National Health Service
(NHS) with slight variations across the four components of the UK (England,
Scotland, Wales and Northern Ireland). Prior to 1948 healthcare was largely paid for
by individuals, the introduction of the NHS created a system of publically funded free
healthcare for the first time. The NHS is responsible to the Department of Health and
accounts for most of that department’s expenditure of £98.7 billion in 2008–2009.

The NHS is divided into Primary and Secondary care providers. Primary care
providers are the first point of contact for patients and are responsible for the gen-
eral health of the population e.g. local doctors, pharmacies, opticians and dentists.
Secondary care providers (acute hospitals and ambulance services) deliver elective
(planned) or emergency services. Whereas planned health care interventions are
delivered within the acute hospitals, emergency interventions usually start at wher-
ever the patient is.

7.1.2.1  The Service

Hospitals began operating a dedicated ambulance service to transport sick and
injured people in the eighteenth century. Patients were transported to and from hos-
pital by cart and horse-drawn carriage up to about 20 miles. Patients from rural areas
were transported by train and collected from the station. The main advantage of
motor-powered vehicles, developed in the 1900s, was the ability to transport patients
more quickly and over greater distances. Their adoption accelerated throughout
World War I as demand for ambulances increased. Motorised ambulance fleets were
established in urban areas and distributed around towns and cities. Initially, ambu-
lances were staffed by drivers with limited first aid training. Ambulance services
have gradually progressed from simply conveying patients to and from hospitals, to
delivering medical capability into the community and treating patients on-scene.

100 G. Parry et al.

The ambulance service has traditionally provided emergency care, focusing on
transportation of patients to hospitals. With recent changes in the NHS (including
the creation of a new role, the Emergency Care Practitioner or ECP) the ambulance
service is attempting to move away from emergency care and towards urgent care,
by providing treatment and discharging patients in their own homes. Such initia-
tives bridge the gap between the primary and secondary healthcare sectors.

Finally whilst the emergency journey is the headline grabber, the bulk of the
work of the ambulance service in terms of journeys is more mundane. Planned/
non-emergency patient journeys – include all other patient journeys by the Trust.
These are for any patients not given emergency, urgent or special priority e.g. most
journeys for outpatient’s appointments, hospital admissions and discharges of a
routine nature, including transport to and from other healthcare facilities. In 2007/8
this figure was 9.51 million journeys.

7.1.2.2  Providing Geographic Coverage

In England, NHS Ambulance Trusts are responsible for providing emergency
access to NHS healthcare services and in some cases provide transport for patients
to get to hospital. There are currently 12 Ambulance Trusts, defined by geographic
location, shown in Fig. 7.1.

National performance standards are managed by a prioritisation procedure intro-
duced in April 2001. These have nationally set response times which act as key
performance indicators for the service. There are three categories for prioritisation
of response, defined below:

• Category A: presenting conditions, which may be immediately life threatening
and should receive an emergency response within 8 min irrespective of location
in 75% of cases. Presenting conditions which require an ambulance vehicle
capable of transporting the patient to attend the incident must be on the scene
within 19 min in 95% of cases.

• Category B: presenting conditions, which though serious are not immediately
life threatening and must receive a response within 19 min in 95% of cases.

• Category C: presenting conditions which are not immediately serious or life
threatening. For these calls the response time standards are not set nationally but
are locally determined.

Response time starts when details of the telephone number of the caller, the exact
location of the incident and the nature of the chief complaint have been ascertained.
Response time ends when the first emergency response vehicle arrives at the scene
of the incident. A response within 8 min means 8 min 0 s or less. Similarly, 19 min
means 19 min 0 s or less. This standard is itself being tightened so that the clock
will start when the call is connected to the control room. For example East Midlands
Ambulance Service attended 79% of life threatening (category A) calls within
8 min and 94% of urgent (category B) calls within 19 min in 2007/08.

7  Complex Deployed Responsive Service 101

Fig. 7.1  Map of ambulance trusts by geographic region

7.1.2.3  Responding to Customers

In 1937, London launched the first dedicated emergency telephone number.
Dialling 999 from a telephone triggered a red light and buzzer in the operator
exchange. By the 1970s this service was available from every telephone in the
UK The European Union (EU) adopted 112 as a common emergency telephone
number in 1991. This service works alongside each country’s local emergency
number and can be called free of charge from landlines and mobile telephones.
Each year there are around 100 million medical emergencies reported in the EU.
In the UK the ambulance service receives more than six million emergency
telephone calls each year; twice as many as a decade ago.

The Advanced Medical Priority Dispatch System (AMPDS) is used to triage 999
calls by the ambulance service call taker. It is made up of a sequence of questions
that help to assess how urgent a medical problem is. First of all, the call taker will
establish the location of the caller. BT landlines automatically let the call taker
know the address of the caller. This information ensures that an ambulance can be
dispatched, should it be required. Then a general explanation of the problem is
required. This determines an initial level of response that is appropriate and hence
medical dispatch requirements.

102 G. Parry et al.

The expert system is based on 32 chief complaints – chest pain, breathing
difficulty, falls and so on – each of which has a different set of questions. As the
call progresses computer software updates the relevant questions and the severity
of the call. To ensure that Category A calls are reached within the allotted 8 min,
ambulances are dispatched almost immediately and then downgraded if it becomes
apparent that the 999 call is less serious than first thought. For example, certain
types of call, such as a fainting, may begin as a Category A, because the person is
unconscious, but is rapidly downgraded as they regain consciousness. Of the 5.9
million calls received in 2007/8 calls resulting in an emergency response, 31% (1.8
million) were classed as category A – immediately life threatening incidents and
42% (2.5 million) were classed as category B – serious but not immediately life-
threatening incidents (NHS 2008).

Information received by the call taker is transferred to a medical dispatcher. The
computer system highlights the nearest available vehicles on a control screen, pos-
sible as each has GPS tracking, and it is then up to the dispatcher to identify the
most appropriate vehicle/s. This might be determined by the type of call, if for
example a crew member has paediatric expertise and a child is the patient. The
dispatcher logs the times of acceptance by a crew and arrival on scene. It is also up
to the dispatcher to manage the availability of the crews and their rest breaks.
999 calls that do not require an ambulance, but have a medical requirement, may be
transferred for telephone advice by NHS Direct. This is a 24 h telephone service
that provides urgent care services, response to health scares and support for patients
with long-term conditions, out of hours support for GPs and dental services, pre and
post operative support for patients and remote clinics via telephone.

7.1.2.4  Customer Demand

There were 7.2 million emergency and urgent calls in England during 2007/08, 5.9
million of which resulted in an emergency response and 4.26 million required a
patient journey.

Demand for emergency services show a very stable pattern over time with huge
spikes in demand on Friday and particularly Saturday nights with a large number of
alcohol related calls. Boxing Day, 26 December, is another peak and generally the
emergency service is less used in the early hours of the morning. Weather conditions
are less of a factor in driving up demand than outbreaks of serious conditions
(e.g. vomiting and diarrhoea). Although it is clearly not possible to predict the exact
location of an incident, demand models can indicate areas where incidents are most
likely to occur. Historical data is used to prepare rosters and match demand against
resources. Additional planning is put in place for large events that may require
a higher level of cover and risk assessments are undertaken for each event to
determine the potential resources required from the ambulance service.

The importance and hence demand for ambulance service is expected to increase
in coming years. The case for delivering urgent healthcare in the community, as
opposed to hospital settings, has been strengthening. Those aged over 65 are
healthier and are living longer, and 75% of NHS users are now aged 65 and over

7  Complex Deployed Responsive Service 103

(Health Development Agency 2005). By 2031 the number of people over 65 will
grow to 15.8 million; a 60% increase (Government Actuary Department 2007).
These individuals have a great deal to gain from the community delivery of urgent
care via ambulance because they are less mobile and more dependent on commu-
nity support than their younger counterparts. Furthermore, there is growing concern
regarding systemic pressures on the UK health care system. A 2001 report
(Department of Health 2001) found that emergency admissions in the UK had risen
by 20% in the previous 10 years. This pattern of increasing emergency admission
is the result of a complex arrangement of factors; for example, local doctors are no
longer required to provide out of hours services.

7.1.2.5  Meeting Customer Demand

This section discusses meeting customer demand at two levels of analysis, macro
and micro. At the macro level there are social changes and cost pressures which
favour treating people in the community instead of at hospitals and at the micro
level strategies are employed to provide capacity flexibility.

Increasingly the NHS and the Ambulance Trusts in particular are being forced
to examine ways of reducing demand at key pressure points in the healthcare sys-
tem, one of these being Accident and Emergency admissions. Most 999 calls do not
lead to hospital admission, and many patients currently conveyed by ambulance are
discharged from the emergency department within 4  h of arrival. A substantial
proportion of these patients could be successfully treated in the community and
closer to home if the correct services and supporting technologies were in place.
There were 6.3 million 999 calls made in England during the year 2006/07, an 8%
rise on the previous year and almost double the number of calls received 10 years
previously. As mentioned above, in 2007/8 this rose again to 7.2 million. This
inexorable rise in demand will lead to a corresponding rise in hospital emergency
department attendances and emergency hospital admissions unless steps are taken
to prevent this. Once admitted as an emergency, patients stay in hospital for an
average of 6.8 days at a cost of around £7,000 to the NHS. The emergency ambu-
lance service is therefore undergoing a transformation from an organisation
designed to convey patients to hospital, to a professional group that is capable of
assessing urgency and delivering the appropriate treatment to the patient providing
the right response, first time, in time (Department of Health 2005).

At the micro level, all managers at Ambulance Trusts have to maintain their
paramedic skills, such that in an extreme incident such as a multiple motorway pile
up or major fire etc the entire management team can be called to provide additional
capability. To add immediate capacity ambulance trust managers carry ambulance
kit in their personal vehicles. In addition the Armed Forces maintain their own
emergency healthcare specialists and this is another potential resource.

Having discussed two national providers of responsive service, we shall now
examine a service that responds to customers call for assistance anywhere in the
world, a truly global support service provider Dowty Propellers Field Service
Support, part of GE Aviation.

104 G. Parry et al.

7.1.3  Dowty Propellers Field Service Support

GE is the world’s leading provider of aviation services, providing customers with
the experience and resources they require to keep their aircraft flying. Dowty
Propellers, part of GE Aviation, is a leading supplier of all-composite propeller
systems. Dowty Propellers supplies most of the modern generation turboprop
engines.

All-composite blade propeller systems feature advanced aerodynamics for opti-
mised take-off, climb and cruise performance and low noise. The modular control
system ensures excellent maintainability and low lifecycle cost. The over 19,000
all-composite blades produced to date have accumulated more than 270 million
propeller flying hours, with lead propellers achieving in excess of 40,000 h flying
time. Designs offer low noise with minimal vibration. The propellers’ modular
configuration allows ease of maintenance and coupled with their high reliability,
provide users with low through life costs. Service is driven by lean processes
­focusing on value added activities by eliminating waste and an economical and
environmentally sound ‘repair first, replace last’ philosophy. Dowty Propellers
manufactures the original equipment and completes scheduled repair and overhaul
services within their facilities. In addition they also provide a global field repair
service which will be the focus of this study (Fig. 7.2).

The Field Service Repair (FSR) team’s work is predominantly focussed on sup-
porting six different aircraft types, representing approximately 1,000 aircraft in

Fig. 7.2  C130J Aircraft shown with composite Dowty Propellers

7  Complex Deployed Responsive Service 105

operation around the world. This includes the global fleet of Bombardier Q400s, a
70-seater regional aircraft used by airlines including Flybe UK, Tyrolean, Japan Air
Commuter, Air Philippines, Horizon US, as well as the military Lockheed C130J
transport aircraft used by national air forces including the RAF (UK), RDAF
(Denmark), RAAF (Australia), USAF (USA), AMI (Italy).

7.1.3.1  The Field Service Repair Business

Dowty Propellers (DP) Field Service Repair business is primarily operated from
their manufacturing centre in Gloucester, UK. The service operates 24 h a day, 365
days a year and responds to aircraft operators across the world.

Two different business models operate to provide field service support.
A Dowty Propeller Field Service Representative (FSR) may be permanently placed
at the customer’s facility responding to local needs and requirements. The second
option is a responsive service whereby the aircraft operator may telephone with a
repair request and an FSR representative will travel to a location where the repair
will take place.

The urgency of a potential repair will depend on a number of factors, including
the availability of spare propellers. An aircraft operator is able to remove a dam-
aged propeller and replace it with a functional spare. He can then contact DP and
schedule an FSR to come and repair the damaged propeller. An airline operator
with five spare propellers and ten aircraft flying would not have the same urgent
requirement for a repair as an airline with 60 aircraft flying and only five spare
propellers.

As an example of cost, should a civil aircraft operated by an airline be unexpect-
edly grounded due to a lack of available spares, referred to as an AOG (aircraft on
ground), the potential economic cost to an airline may run into the tens of thou-
sands of pounds. This includes not just the cost of lost business, but also the poten-
tial cost of providing a replacement aircraft or compensation for customers and
potential loss of future custom.

The decision over which service is most appropriate to the aircraft operator will
be made based on fleet size, their capability to perform repairs themselves, their
spares availability and likely urgency and cost impacts of potential repair required.
The majority of permanent FSRs are assigned to military contracts.

7.1.3.2  Providing Geographic Coverage

To meet global demand for responsive service DP locates FSRs in key locations
around the world based on the demand in geographic regions. FSRs have been
placed in Australia, Canada, Denmark and France with the remaining technicians
based in the UK.

Despite the need to provide global coverage the number of individuals in the
field service repair team is relatively small, numbering in the 10s. This is due to

106 G. Parry et al.

factors including operator capability in repairing their own propellers, global
competitors and the option, if spares are available, to send the damaged propeller
to a repair and overhaul facility; this is equivalent to taking your car to a garage vs.
calling out the RAC.

The number of global field service technicians is also limited due to the highly
skilled nature of the repair work and the requirement for the technician performing
the repair to have the necessary qualifications to provide a guarantee that the work
performed is of sufficient standard to allow the safe operation of an aircraft.

The challenge facing the FSR management team is sending an FSR, the neces-
sary tooling and materials required to complete a repair to a location. This raises a
number of challenges:

• The individual FSR may require a work visa to enter the country where the air-
craft is located to carry out the repair. The nationality of the individual FSR will
also have an impact on the ability to gain visas and for them to travel.

• The location of the repair has a bearing on whether the FSR will drive or fly.
This decision has implications for the transportation of tooling and the materials
used for the repair of composite propellers.

• The tooling required to carry out propeller repairs can be relatively large,
depending on the repair required. To reduce response time some tooling has
been strategically located with customers. If it is necessary to fly to the loca-
tion, the tooling will require air freight to be organised as it cannot be carried
on board.

• Repair materials may include adhesives and composites that are classed as
hazardous. This presents another set of challenges in transporting them across
the world. Allowance must be made in predicted response times due to delays
caused by import/export regulations and compliance.

7.1.3.3  Responding to Customers

Initial contact is made by telephone to the DP Product Support Department. Some
customers have highly skilled technicians on site who are able to accurately describe
the nature of the repair required. In such cases a repair schedule is rapidly agreed
with the operator. Other customers do not have this capability and a dialogue between
a DP technician and the customer will begin that may include the emailing of digital
images of the damage so that the nature of the repair required may be diagnosed.
Based on the customer description of the problem and the photographic image of the
repair a judgement will be made on whether to send additional materials to site to
mitigate the risk of delays caused by any possible additional work required.

The Product Support Department must identify the appropriate individual for a
repair dependent on individual FSRs training and capability to carry out the
required repair, their availability and the geographic location of the propeller. The
Product Support Department then puts travel arrangements in place to transport
the FSR to the location required.

7  Complex Deployed Responsive Service 107

FSRs have their own tool suites for repairs and major tooling, parts and materials
required to complete the repair are picked from the Dowty Propeller store by
Product Support. These are then given to the Dispatch Department who package
and prepare the required paperwork for transportation across the world.

As Dowty Propellers is the original equipment manufacturer they usually have
immediate access to the materials and tooling required for repairs which gives them
a competitive advantage over other companies who have to order materials and
tooling from their supply chain.

7.1.3.4  Customer Demand

The FSR responsive service currently receives approximately 200 calls per year.
Patterns of demand appear stable over a year as the volume of work is linked to the
operating hours undertaken by the aircraft. This is dictated by the winter and
s­ ummer operating schedule of the airlines, as more flights are undertaken during
the two main holiday seasons. The routes the aircraft fly also influence the service
requirement. Aircraft operating in and out of European airports are less likely to
require unscheduled maintenance than those landing in airports that do not have
smooth runways, are not as well controlled or where the propellers may be subject
to airborne abrasion from dust or sand.

Due to the low number of responsive calls, statistical analysis is difficult.
Spikes in demand occur when any unforeseen technical issues occur with the
propeller, due to accidental damage or changes made in the maintenance practice
or supplier.

7.1.3.5  Meeting Customer Demand

Responsive services are dealt with based on need. Aircraft on Ground (AOG) takes
priority over other requests in the airline industry. The global airline community is
small, with most operators knowing their equivalents in other airlines personally.
There is an understanding between parties that AOGs take priority and there is a
great deal of co-operation and some joint contracts between airlines to help each
other with spares and support to keep their aircraft flying safely.

Typically response times are 5 days from receiving the call to attending site.
However, average response times do not make much sense in this context as they
can vary from a local repair that may be responded to and the FSR returned to base
on the same day, to a time of a week or more, typically caused when hazardous
materials are held up by customs. A factor is also the current location of the FSR,
in some cases it may be the same day and others longer if they have to make a long
haul flight.

Politics adds an additional challenge to global service operations. GE Aviation
is a US owned company. As such, certain trading restrictions apply to the business
so that they are unable to service aircraft that may belong to or operate in countries

108 G. Parry et al.

that fall outside permitted US trade agreements. Attention must also be paid to the
geo-political stability of any region that a field operative is sent to and travel advice
from governments is sought.

The business is currently running at full capacity and is seeking to expand and
grow through recruitment and training of skilled technicians. As such the FSR’s
time is at a premium. If there is any ‘dead time’ then the FSR’s will contribute to
analysis of reliability data or may be used to add capacity to OEM production.

7.1.3.6  Service Management

The three business models described all provide services that are responsive to
customer demand, though each on a different scale. The ambulance service
responded to over seven million calls in 2007/8, over twice that of the RAC at
2.7  million and both vastly greater than Dowty Propellers’ 200 service requests.
The ambulance service is effectively a monopoly and has to provide total national
coverage. In contrast, both the RAC and Dowty Propellers operate in a competitive
market and to a certain extent can select the areas in which they chose to offer their
service – the limits being customer demand, their capability and ability to access
the area, and the financial viability of providing that service.

7.1.3.7  Managing Geographic Coverage

The scale of geographic coverage offered by the services is also markedly differ-
ent. Dowty Propellers offering an almost global service, limited by customer
demand, current political tensions and international trading legislation. In contrast
both the RAC and ambulance service offer national coverage. However, to provide
appropriate management of geographic coverage all of the services described have
divided the area they cover into regions. Both the RAC and Dowty have defined
their regional boundaries and located their personnel based solely on customer
demand within the geographic markets in which they provide service. The
Ambulance trusts have followed a similar strategy, though their boundaries are
derived from both customer and service provider – in this case the hospital – loca-
tion. This is because there is a criticality in the service they provide in that they
must be able to reach both their patients and hospitals within a given timescale
and so their ability to specify coverage boundaries are linked by two separate
drivers.

All three services locate their individual service repair assets strategically to
facilitate rapid response. Dowty place a permanent individual at the location of
customers likely to have a large volume of work and then act responsively to the
rest of their market. When not on a repair, both the RAC and Ambulance service
strategically locate their responsive vehicles on standby in places where they are
likely to be required and are also able to quickly respond to and reach a customer
e.g. motorway junctions, railway stations (Black and Davies 2005).

7  Complex Deployed Responsive Service 109

7.1.3.8  Managing Customer Contact

All of the case examples use telephones as the primary customer contact. All
advertise a single customer phone number and then route calls appropriately. Due
to differences in volumes of calls there are differences in how calls are handled.

The lowest volume of calls are to Dowty Propellers responsive service where
customers are all directed to a single point, the location of the Field Service team
in Gloucester, UK. The caller speaks directly to an agent who is able to assess the
issue and gather the required data from the caller. It is likely that the caller is an
engineer from an airline and so will have specific and detailed knowledge of the
repair required. If they are not, experts at Dowty can diagnose the problem through
discussion and may also use digital images sent by the customer to ascertain the
problem faced. Whilst potentially a time critical service, it is important that time is
spent identifying the problem so that the correct materials and tooling are taken to
site as sending further materials across the world could add significantly to the time
taken to complete a repair. Aircraft served will all be at airfields and so identifica-
tion of exact customer location is not an issue as with the other cases. However, the
nature of the airline customer operation may give rise to other challenges. A request
for service may be received from a number of different sources including an airlines
head office, its engineering function or from the aircraft itself. Contact may be
necessary with all three and each may be located in a different country. This may
lead to complications in communication that the service operator has to handle
including the nature of the repair required, any contractual obligations between the
airline and Dowty, the responsibility to sign off any invoices generated, and differ-
ences in time zone and hence availability of required individuals.

The larger call volumes handled by the RAC and Ambulance services utilise
routing technology to place calls through call centres. Both utilise ‘expert systems’,
a structured series of key questions, to allow them to diagnose the nature of the
problem and appropriate service response required. This approach alleviates the
need for expert knowledge on the part of either the caller or operator. Further tech-
nology allows the dispatcher to identify where their assets are and to contact them
and direct them to the necessary location.

All of the services are time critical and the prioritisation of customers in
terms of response is an important factor. None of them operate a queuing system
leading to a First In First Out (FIFO) strategy as all have customer safety as a core
principle. Both the RAC and Ambulance service prioritise calls based solely upon
the safety of their customers. The RAC examines the location and nature of the
caller to judge the potential danger the customer may be in – with those on the
motorway hard-shoulder and single females or vulnerable individuals prioritised.
The Ambulance service uses an expert system of questions to assess caller criticality
and dispatches appropriately. Both are able to contact their service operatives in the
field and rapidly divert or reassign them should a critical incident arise. Whilst
Dowty Propellers service is safety critical in terms of the operation of the aircraft,
a grounded plane (AOG) does not necessarily pose a danger to individual clients.
Instead, Dowty must prioritise its responsive services based on the financial impact

110 G. Parry et al.

that the customer is likely to face. It is able to do this without alienating other
customers who may be waiting service repair through the tacit recognition that,
should others be in a position of having an AOG, they would be prioritised. This
situation is also facilitated by their specific market context, in that this is a small
global market and many of the airline operators and engineers know each other
personally and cooperatively support each other to keep their planes flying.

7.1.3.9  Managing Variable Demand

Whilst the services examined are all responsive to customer contact there is a
significant difference in the scale of variability of demand against that which may
have been predicted.

Despite the very large volume of calls received by the Ambulance Service, the
volume of calls they receive follows a very stable pattern allowing them to plan and
roster staff as required. Major events are analysed and if required additional
resources are built into the roster. For serious incidents or when the country is hit
by epidemics additional capacity can be mobilised by drawing upon senior
managers or the military services. Despite having a relatively small customer base
Dowty does not have flexibility of scale and its service is currently run almost to
capacity. It is able to rapidly meet priority demands when airlines experience AOGs
due to the context of the market in which it operates and the close relationships
described above. However, AOGs are described as ‘rare events’. The majority of
the ‘higher priority’ work is in response to airlines recognising they have a low
availability of spares and the potential for an AOG should those spares run out. The
RAC faces a potential threefold variation in demand in any one day, from 5,000 to
15,000 calls and many potentially being received around the same time in that day.
Management of this is made even more difficult as the demand is linked to weather
patterns which, whilst predictions improve every year, add a random variable to
their demand patterns. To help mitigate for ‘spikes’ in demand, they have developed
incentivised systems which allow them to rapidly increase and decrease their
available capacity both in their call centres and in the field which, critically, are
supported by their staff. When capacity is reached any priority calls will be dealt
with first and an agent may be taken off a current job, if it is not deemed critical, if
they are required to deal with a customer who may be in danger.

7.2  Theoretical Perspectives

7.2.1  Social and Mechanical Repair

There is much written about service culture and behaviours and the contrast with a
manufacturing culture (Anderson et al. 1997; Bowen et al. 1989; Bowen and Ford 2002)

7  Complex Deployed Responsive Service 111

but it is in tangible examples of good service that the essence of a service culture
can be discerned. The services presented provide more than mechanical or physical
repair as the customer will be calling on the service due to a physical failure and
may be in some state of distress which must also be addressed. For example the
RAC patrol not only solves the technical problem but also repairs the social damage
caused by the failure of the product (Brown and Duguid 1991). They may calm the
individual down, providing a sense of relief from their frustration or fear caused by
their vehicles failure. Representatives may also build their organisational brand by
providing relief to the customer and could even rebuild trust in a third party brand
by providing a rapid repair or support to the customer. For the services competing
in markets, the financial value of this combination of social, brand and product
repair will be reflected in the contract price negotiation.

7.2.2  Implications of Flexible Capacity

Ferdows et al. (2004) highlighted the fundamental rule of queuing models, which
shows that waiting time increases exponentially when capacity ‘gets tight’. In their
work with clothing company Zara, lower capacity utilisation in factories and distri-
bution centres is tolerated to react to peak or unexpected demands more quickly
than rivals, conferring competitive advantage. The relational model between capac-
ity utilisation, waiting time and demand variability was described by Ferdows
(2004) et al. in the context of clothing manufacturing and retail operations, and is
shown in Fig. 7.3.

The model shows that, as capacity utilisation increases at lower levels,
waiting time increases gradually. As capacity reaches certain limits, waiting
times accelerate rapidly. With increased variability this acceleration occurs at
lower levels of capacity utilisation. This holds true in the context of the services
described.

From the literature and figure we can see that as capacity utilisation increases,
waiting times increase. To explore this mathematically, we can take a simple case

Fig. 7.3  Capacity utilisation
vs. waiting time model
(Adapted from
Ferdows et al. 2004)

112 G. Parry et al.

of a single operator who works at a constant service rate and people arrive randomly

(Hendrickson 1998). In our equation w is the average waiting time and l the aver-
age arrival rate of customers, and x the service rate (in customers per unit of time).

The expected average waiting time for a customer in this situation is given by the

equation:

w= l l 
1 x 
2x2 −

We can define the average utilisation rate of the service, u, as a ratio of the average
arrival rate and the constant service rate:

u = l
x

Then, we can redefine our equation for expected average waiting time in the
queue as:

w = 2x u u)

(1 −

If the average arrival rate approaches the service rate the waiting time can
become very long. If arrivals equal or exceed the service rate then the queue
expands indefinitely.

In our case examples we can assume that customer arrivals are at best random,
but more likely volumes will be driven by specific events such as weather, rush hour
traffic, holiday seasons or attendance at an event. As such people seeking to access
the services are likely to arrive more frequently at specific times as opposed to their
demand for service being evenly spread over time. This means that service demand
is, at certain key moments, likely to exceed service rate and bottlenecks will occur
unless extra service capacity is planned and made available to accommodate these
spikes in demand.

All of the case examples are time critical in their approach to customer service.
From the literature we could infer that they should tolerate high levels of low capac-
ity utilisation to cope with the peaks in demand. This would make the service busi-
ness model very expensive. To maintain a rapid response at reasonable cost,
demand prediction analysis and flexibility of staff and staffing hours to meet unex-
pected demand spikes is required.

A services ability to rapidly vary their capacity utilisation coupled with their
experience of demand changes allows them to operate their business more cost
effectively, and closer to the limit of capacity, before the point that waiting times
increase exponentially. Being able to mange resource capacity operation close to the
limit when waiting time increases exponentially confers competitive advantage.

In the case examples given all resources employed (ambulances/medics, RAC
patrols, field service engineers) are costly to maintain and employ. Maximising the

7  Complex Deployed Responsive Service 113

return on these key assets is therefore a business priority and achieving this involves
operating a process near to full capacity whilst ensuring that the customer’s expec-
tations are met. The NHS Ambulance service does this through rostering against
fairly stable demand, RAC uses powerful forecasting models and Dowty Propellers
operates at capacity, but is able to manage customer expectation as the market
accepts priority is given to a customer with an AOG.

7.2.3  Complexity

The examples presented represent complex systems in operation. Complex systems
stem from the work on non-linear systems in the sciences to understand and
describe the function of the living world. A complex system may be described as
one made of a large number of interdependent parts which together make up a
whole that is interdependent within some larger environment (Anderson 1999).

The idea of complex systems is brought into focus by the concept of complex
adaptive systems. Four tests for whether a system is complex adaptive are proposed
(Pascale 1999). First there must be many agents acting in parallel. Second, there are
multiple levels of organisation. Third, the system is subject to the laws of thermo-
dynamics and must be replenished with energy to prevent it slowing down. Finally,
pattern recognition is employed by the system to predict the future and learn. Many
systems are complex (they meet some of the criteria), but not all are adaptive, meet-
ing all of the criteria. The problem of analysis of a business is different to a natural
system as service systems are largely constructed. We move from understanding the
system, to understanding the system under control (Taylor and Tofts 2009). In the
context of industry production and process it is proposed that complexity may be
measured along three dimensions (Daft 1992). The vertical axis shows the number
of levels in an organisation, on the horizontal is the number of departments or job
titles and on the third axis is the spatial complexity, perhaps of different geographi-
cal locations.

All three case studies may be described as complex adaptive. For Pascale’s
definition we find in all the case examples that there are many agents acting in
parallel to provide service. They are supported by a multi-tiered organisation with
departments providing scheduling, forecasting, materials and equipment support,
telephone call centres etc. They are human systems and so require constant re-
energising. They all employ, to a greater or lesser extent, demand forecasting and
pattern recognition to facilitate their capacity scheduling or personnel rosters. With
regards to Daft’s definition, the organisations are all geographically dispersed in
their operations. They are part of larger organisations that have great depth and
breadth of departments, but all minimise this for their specific operations to facili-
tate management.

Emergent complexity, illustrated by the combination of simple shapes to form
complex fractal patterns, is driven by a few simple objects that combine to gener-
ate infinite variety (Pascale 1999). Inherent in this natural phenomenon is the

114 G. Parry et al.

finding that it is not possible to see the final outcome at the start as there are infinite
possibilities (Kao 1997). When applied to production processes, the challenge for
managers is to set the direction for the future and adapt to environmental changes
(Santos 1998). When managing complex services like those described in the case
examples, macro levels of adaptation are critical to meet the market demand and
micro levels to deal with the customer requirement faced by the service provider
when they arrive at the customer location. Any rigid, linear process or mechanical
system would be unable to meet the variety of different customer requirements that
the service provider may face or the variability of demand placed upon the system.
The flexible process structures the case study companies utilise allow them to func-
tion successfully in their markets. Maintaining quality through management rigour,
without losing control of the process is the key challenge. Generative complexity
takes place in the boundary between rigidity and randomness – applied to process
management, if applied processes are too rigid a company will fail owing to a lack
of creativity or flexibility, too random and a company may lose direction or lose
control of its function – there are numerous examples of failed companies who could
not find a balance (Pascale et al. 2000; Santos 1998). These boundaries are where
change in the company processes are managed and these are set out in procedures.

Procedures are defined as organisational design statements and capture the meth-
ods or process to execute a task (Rogers 1995). These are written by organisations to
manage aspects of operations and many procedures in place today are still dominated
by hierarchical command-and-control structures from the past (Brodbeck 2002;
Mercer 1999; Rogers 1995). Rigid, rule bound structures are incapable of adaptation
to meet new situational requirements but provide management with a sense of control
(Stacey 2000). As organisations introduce rigid procedural structures they often
depersonalise the social elements and practices that had developed (Rogers 1995)
and create instead a rule based system that neutralises adaptability and innovation
thereby inducing a state of ‘trained incapacity’ in the employees (Stacey 2000).

Complexity theory can influence the design and development of procedures
which place a greater emphasis on the impact of natural human behaviour – the
natural drivers to ‘get the job done’. In this regard, procedures could be developed
to promote self organising frameworks utilising natural laws which in turn drive
simplicity and generate greater influence without the need for ‘force’ or through
detailed bureaucratic dictat (Anderson et al. 1999; Harald et al. 1999; Sherman and
Schultz 1998). This approach uses the language of complexity theory and describes
how things ‘fit’ into business landscapes of market opportunities and competitive
dynamics (Kauffman 1995). Self-organisation is seen as a default natural state,
which sets a new aim of aligning the formal organisation so that structures, systems
and processes fit the goals, rewards and structure of the informal organisation
(Coleman and Henry 1999). Managers often get in the way of activities that self
organise and could self correct (Weick 1979). The behaviour of individuals is self-
organising when people (or agents using the language of complexity) are empow-
ered and free to network with others and cross organisational boundaries to pursue
their goals (Coleman and Henry 1999). Most procedure is routed in a linear cause-and-
effect theory, but an approach could be taken that utilises inherent self motivational

7  Complex Deployed Responsive Service 115

desire. Increased effectiveness can be achieved through identifying formal and
informal organisational structures and employing processes that fit within each in
terms of goals, rewards and structures (Brodbeck 2002; Drago 1998).

Complexity theory identifies the gatekeepers of an organisation as those that
stand at its boundaries and translate information between the internal and external
world (Lissack 1997). It is the nature of these gate keepers interactions with other
business units, suppliers and customers that we wish to standardise without resort
to the application of rigid procedures that would destroy the evolutionary nature of
the system. Furthermore, competitive advantage may be gained through creating
the capability to continuously adapt and co evolve within the environment thereby
embedding a system capable of undergoing continuous metamorphosis in order to
respond to a dynamic business landscape (Brodbeck 2002; Lewin et  al. 1999).
Within the context of developing such a dynamic response it is recognised that time
to market is critical, though it is maintained that managing quick-response product
development is difficult (Gupta and Wilemon 1990; McDonough III and Barczak
1992; McDonough III and Spital 1984; Thomke and Fujimoto 2000). This ­difficulty
demands that gate keepers develop procedures which allow them to quickly integrate,
to take action both internally with other business units and externally with different
customers and suppliers. This speeds up the creation of an operating system and
infrastructure which will facilitate the manufacturing and delivery of the product to
its required specification and quality standard.

Organisations may increase their effectiveness if they are able to achieve good
‘fit’ between their structures and organising mechanisms and the context in which
they operate, including such factors as environmental volatility, company size and
age (Drago 1998). Fitness for purpose is therefore closely related to the flexibility
of procedures or a procedures capability to encourage employees to self-organise
as change occurs. Such procedures, modelled on complexity theory, would suggest
an improved capability to adapt and also to provide continuous fit between structure
and context (Brodbeck 2002).

Two aspects of procedural design have been identified within the literature and
can be divided into procedural requirements (form of conduct) and process require-
ments (method of doing) (Anderson 1999). Three main requirements are proposed
for procedure: the presence of a reward and penalty mechanism; consistency within
the business setting (standards); fairness in application (transparency). With regard
to process requirements the following conditions are pre requisite: relevant and
timely performance measurement; strong communication and staff involvement;
authority to act. Clearly these are requirements for success in the responsive ser-
vice case examples provided. The staff of each business must provide a coherent
consistent service offering whilst being empowered to act appropriately to meet the
customer requirement they are faced with at their location. If they became
restrained by rigid process their ability to respond to unforeseen customer require-
ments would be diminished and hence their service offering. The authors are of the
view that these requirements, which include authority, communication, and trans-
parency have resonance with the upper hierarchy needs in the motivational litera-
ture (Alderfer 1969; Kanfer 1998; Maslow 1954) and that benchmarking against

116 G. Parry et al.

industry standards is portrayed as a natural desire for self appraisal that both
encourages greater competition and fulfils esteem and self-actualisation needs
(Anderson 1999). Steve Miller, a Managing Director for the Royal Dutch Shell
Company remarked ‘The leaders provide the vision and are the context setters. But
the actual solutions about how best to meet the challenges of the moment have to
be made by the people closest to the action’ (Pascale 1999). The authors hope that
the case studies presented illustrate these theoretical concepts and provide diverse
leading examples of the management of complex deployed services.

Exercises

Having read through this chapter, try the following exercises to cement your
understanding.

Identify another service that faces a similar set of challenges?
What other elements than those highlighted here may be a challenge to the provision

and management of such a service?
What solutions could be provided to meet those challenges?
Is it appropriate to divide the service area covered into regions and if so, what are

the drivers for regional boundary positioning?

References

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Differences between Goods and Services. Marketing Science 16(2):129–145

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wwwwwwwwwwwwwwww

Chapter 8

A Multi-organisational Approach
to Service Delivery

Valerie Purchase, John Mills, and Glenn Parry

8.1  Introduction

Who is involved in delivering a service? There has been growing recognition in a
wide variety of contexts that service is increasingly being delivered by multi-rather
than single-organisational entities. Such recognition is evident not only in our expe-
rience but in a number of areas of literature including strategy development, core
competence analysis, operations and supply chain management, and is reflected in
and further facilitated by ICT developments. Customers have always been involved
in some degree in the process of value delivery and such involvement is increasing
to include complex co-creation of value. Such interactions are challenging when
they involve individual customers, however, this becomes ever more challenging
when the ‘customer’ is another organisation or when there are multiple ‘custom-
ers’. Within this chapter we will consider some of the key drivers for a multi-
organisational approach to service delivery; examine the ways in which the parties
involved in service co-creation have expanded to include multiple service providers
and customers; and finally, identify some of the challenges created by a multi-
organisational approach to service delivery.

8.2  Key Drivers for Multi-organisational Service Enterprises

Why are organisations adopting a multi-organisational approach to delivering
value? In this section we will examine some of the key drivers for the adoption of
a multi-organisational approach to service delivery. Several inter-related factors
will be considered including: the trend for organisations to narrow the scope of their
activities and outsource all non-core activities; the growing requirement of customers

V. Purchase (*)
School of Communication, University of Ulster, Jordanstown Campus, Northern Ireland

e-mail: [email protected]

M. Macintyre et al. (eds.), Service Design and Delivery, Service Science: Research 119
and Innovations in the Service Economy, DOI 10.1007/978-1-4419-8321-3_8,
© Springer Science+Business Media, LLC 2011

120 V. Purchase et al.

to have holistic solutions; and the need to work collectively with others in the value
chain to both reduce costs and improve performance.

Key drivers for the development of multi-organisational service enterprises
include the following trends:

The increasing trend towards a focus on core competence and outsourcing non-
core competence – Individual organisations are increasingly adopting a strategy of
identifying and focusing on their core competence. This leads to a narrowing of
capability and increased specialisation. A core competence perspective states that
companies should differentiate between their competencies as ‘core’, those that are
essential to compete in the market and the firm is extremely good at, and ‘non-core’
those that are not essential to compete in the market (Lonsdale and Cox 2000).
Basically, organisations are focusing on and investing in what they do best.

The objective of this approach is that firms should strengthen and leverage their
core competencies (Ellram and Billington 2001) and outsource non-core competen-
cies. This is particularly the case when ‘the total costs of owning [them] are demon-
strably higher than sourcing externally, and the associated risks of market failure or
market power are not excessive’ (Lonsdale and Cox 2000). Only those competen-
cies that are non-core should be performed externally by a third party company.

This trend is now well established in many sectors where prime contractors are
increasingly relying on ‘full service’ suppliers for whole subsystems (Gadde and
Jellbo 2002, p. 43), as well as being in charge of managing and designing their own
supply chain (Doran 2003).

The need for holistic customer solutions which cannot be delivered by individual
companies – While individual organisations have been that narrowing of their
s­ trategic focus onto certain technologies, services or processes, customers are
m­ oving in the opposite direction, increasingly seeking total solutions and services.
For example, in the Opel Automotive Plant in Ruesselsheim, Germany, a separate
company, MAN Ferrostaal, has a sequencing and logistics centre. This service
organises many of the vehicle components into the correct sequence for production
and delivers them to the production line side. Their order sequencing and line deliv-
ery operation is completely integrated within the Opel production facility, with
Opel arranging delivery of parts and components to them and then accepting the
sequenced products from them on the line.

To meet this customer need, organisations increasingly seek to offer total, sys-
temic product or service solutions. However, since the trend has been to outsource
non-core activities, fewer organisations are able to provide a one-stop solution
utilising their own resources alone. This problem has driven organisations in all
sectors toward greater collaboration. The strategy deployed is to offer the customer
a complete solution and to achieve this integration of each of the elements via close
collaboration with a network of specialist external providers (Moller and Halinen
1999). The proposition that it is collaborations of companies that now compete
rather than single companies, is well supported in the literature (Akkermans et al.
1999; Lawrence 1999; McAfee et al. 2002).

Need for collaborative cost reduction and performance improvement – a further
key driver for multi-organisational collaboration is the need to reduce overall

8  A Multi-organisational Approach to Service Delivery 121

service costs. Globalisation and customer demands for better products and services
at lower costs has led companies to seek ways to reduce the overall cost of deliver-
ing customer value. While individual company costs might be reduced by a single
company approach, the systemic impact of such cost reductions may be detrimental
to the whole service. Therefore a multi-organisational service enterprise perspec-
tive is needed to achieve significant cost reduction. Inter-organisational cost man-
agement techniques, including the use of target costing, may deliver significant
benefits if they are adopted in an integrated manner (Slagmulder 2002).

In the same vein, performance improvement in the overall service to customers
is similarly only possible from a service enterprise perspective, in order to avoid
‘islands of excellence’ in an otherwise dissatisfactory service.

8.2.1  Multi-organisational Solutions for Service Delivery

Individual organisations can be difficult to delineate and define. ‘Organizations are
social entities that are goal-directed, are designed as deliberately structured and
coordinated activity systems’ (Daft 1992). Such organisations may have multiple
divisions and locations and yet still be seen as single organisations providing a
product or service. Within this section, we will examine the organisational solutions
developed to deliver service, which can be delivered by ‘multi-organisational enti-
ties’ which may be functionally, or geographically and legally distinct. Such multi-
organisational enterprises are, nevertheless, also goal directed and designed as
deliberately structured and coordinated, activity systems to deliver customer value.
As you will see, however, there are many challenges in managing such systems.

Starting from the simplest standpoint, service delivery involves at least two
­parties – the service provider and the customer. Considering only two parties
enables organisations to design their service offerings and processes within a basic
dyadic framework (Fig. 8.1). Customers will clearly undertake some of the process
element in service delivery including establishing their need for a service and their
willingness to accept and pay for the value delivered.

For example, a patient walks into the health centre to have a routine asthma
review with a nurse. In this example, it would seem clear that a single provider

Fig.  8.1  Service delivery by a single provider organisation showing the limits of the service
enterprise

122 V. Purchase et al.

organisation has delivered a service through their employee. On the provider side,
even within this simple framework, it is often the case that a variety of distinct
organisational sub-units coordinate their various functional activities with varying
degrees of success to deliver service. However, service delivery is often and
increasingly more complex than this dyadic framework suggests. Even in this
seemingly simple example of service delivery, there may be a more complex
organisational solution for delivering basic healthcare. The receptionist who made
the appointment may be employed by the local health centre; the nurse may be sup-
plied by a separate agency or specialist asthma unit within the nearby hospital; the
premises where the service was located may belong to the local community centre.
In such cases several organisations have come together to provide a much needed
accessible service. In the following sections, we will examine how service enter-
prises have expanded to include, firstly, more involvement from other service pro-
viders and secondly, greater involvement of customers in co-creating value.

8.3  Moving Beyond Single ‘Service Provider’ Boundaries

As highlighted earlier, organisations increasingly need to look beyond their own
boundaries for the capabilities necessary to deliver customer value in terms of both
delivering services and products. Evidence of this trend towards multi-o­ rganisational
collaboration is found in a number of areas of the literature, and has led to a ­prolifera-­
tion of multi-organisational concepts. A number of brief case study illustrations will be
presented including examples from both within and across the private and public
sectors.

At a strategic level companies have been encouraged to consider how they might
work with others to deliver customer value. In an important early paper, Normann
and Ramirez (1993) suggested that in today’s volatile competitive environment,
strategy is no longer a matter of individual companies positioning a fixed set of
activities along a value chain, and argued instead for value constellations where the
task for firms is the reconfiguration of roles and relationships among a constellation
of actors to deliver value. They move our thinking away from a focus on individual
organisations by

beginning with the simple observation that any product or service is really the result of a
complicated set of activities: myriad economic transactions and institutional arrangements
among suppliers and customers, employees and managers, teams of technical and organi-
zational specialists. In fact, what we usually think of as products or services are really
frozen activities, concrete manifestations of the relationships among actors in a value-­
creating system.

(Normann and Ramirez 1993, p. 68)

In taking this perspective, organisations are then free to consider what activities
companies were able to provide to deliver products or services and where they can
link with others to provide other elements of value. A number of other writers simi-
larly took this stance and suggested that companies identify capabilities and

8  A Multi-organisational Approach to Service Delivery 123

compete together to deliver customer value. The concept of ‘value nets’ (Parolini
1999; Bovet and Martha 2000) similarly emphasises the notion of systems of activi-
ties performed by a set of different economic players involved in delivering a total
customer solution. For example, a food court in a shopping mall has a number of
competing suppliers operating food outlets. The outlets must provide complemen-
tary offerings to support the service variety demanded by the mall owner to attract
the maximum number of customers to their mall. They will co-operate in sharing a
space where their customers consume their food, and provide a shared third party
cleaning and clearing service to minimise their individual costs and keep the eating
environment pleasant. Whilst they compete, they also work together to provide
customer value.

To create an effective multi-organisational value net, Parolini strongly empha-
sises the primacy of designing to meet customer needs, rather than starting with
existing company functions and competence as the starting point for strategic
analysis and the involvement of the customer in the value chain. In the value net
approach to strategic analysis the elementary units are activities which it is argued
‘allows us to begin by identifying the activities leading to the creation of customer
value and describing their characteristics, before moving on to explore how these
activities are divided among the various economic players involved in carrying
them out’.

A further group of writers, based at the Sydney Graduate School of Management
in Australia, have also advocated adopting a multi-organisational approach to
­delivering value, describing the organisations as being part of a ‘value chain’
which delivers products and services to customers. In similar ways to earlier writ-
ers, this group advocate that companies should examine what they do best from
both a strategic and operational perspective, and look for ways in which all parties
could benefit from collaborating to deliver value (Walters and Lancaster 2000;
Walters 2004; Rainbird 2004). Rainbird (2004) further recommends that compa-
nies need to ‘understand the industry value chain context that it operates in and
should seek to maximise it’s place in the industry value chain by positioning itself
in that chain based on its resources and capabilities’. Thus, managing your posi-
tion in multi-organisational service enterprises becomes an important task for
companies.

The relationships between partners in a multi-organisational collaboration can
vary in formality and status. Partners may operate together through a traditional
supplier customer relationship where a focal company contracts to deliver services
and simply contracts with the suppliers to deliver certain elements of the product/
service (Fig. 8.2).

On the other hand relationships between partners can be much closer than those
developed between contractor and supplier. Often referred to as Strategic Partnering,
this relationship can involve an up-front agreement between parties who see eco-
nomic advantage and risk-sharing benefits in working together (Veludo et al. 2006).
These relationships can be highly formal. Both parties have ownership or some
proprietary claim on the product or service, though this may not necessarily be
50/50 (Cox et al. 2001).

124 V. Purchase et al.

Fig. 8.2  Moving beyond single entity to multi-organisational delivery of service by extending the
part played by a number of provider organisations in delivering a total service solution

In the context of this book on service design and delivery, the multi-organisational
entity will be called a ‘multi-organisational service enterprise’ and this will comprise
all the key parties in delivering service including the key supplier and their constituent
organisational units, and core elements of the supply chain.

Supply chain companies are being encouraged to more closely align their strate-
gies and operations to support the delivery of customer value. This process of closer
integration has been evolutionary beginning with an operational focus.

Initial supply chain integration efforts have focused on a­ chieving high levels of transparency
and visibility of inventory and information throughout the supply chain, and utilizing tech-
nology that enables the trading partners to “see” the relevant operational transactions of
their other supply chain members. Companies such as Dell and Hewlett Packard have
demonstrated the effectiveness of such practices in generating leaner inventories, lower
working capital, higher profits and productivity, and better customer service.

(Spekman et al. 2002, p. 414)

However, the concept of extended enterprises has moved beyond sharing opera-
tional information. Different tiers of the supply chain are integrated through com-
mon objectives in order to facilitate both improved operational and strategic
performance; knowledge sharing is emphasised to allow customers and suppliers to
adapt readily to changing needs and circumstances (Coughlin et al. 2003).

There are many challenges to achieving such co-orientation in the supply chain,
as outlined in a later section of this chapter. Nevertheless, despite the implementa-
tion challenges, the rewards for companies who can build this collaborative enter-
prise culture seem to be considerable. As a study by Spekman et  al. (2002)
highlighted, companies who value a culture of collaboration and learning across the
supply chain, tend to be more responsive, adaptive and flexible; report lower inven-
tory levels, greater customer account penetration, improved cycle time and faster
new product development. Hence service provider organisations would seem to

8  A Multi-organisational Approach to Service Delivery 125

Fig.  8.3  Moving beyond strategic partnerships by providers, to a ‘service ethos’ in the supply
chain

need their suppliers to move away from simply seeing themselves as supplying
products, towards viewing their role as providing a ‘service’ of which the product
may be part of that service. In this way the whole supply chain can better support
the delivery of value to the customer (Fig. 8.3).

8.4  Beyond Provider Organisations to Greater ‘Customer
Involvement’ in Service Delivery

In the healthcare case described previously, we examined how a number of strategic
partners delivered service to customers as a ‘multi-organisational service enter-
prise’. Such enterprises can be made up of a variety of provider organisations and
also have the customer play a significant role in value co-creation. The developing
prominence of the customer’s involvement in co-creating value has been high-
lighted by many writers within academic literature. As previous chapters have
highlighted services generally involve at least some proportion of customer involve-
ment. This involvement may be minimal, such as when you purchase your coffee,
select your drink and add your own milk, sugar etc. or more extensive as the next
case study will illustrate. This section will examine how customers have become
increasing involved in the service delivery process.

Normann and Ramirez (1993) used the example of IKEA to illustrate their dis-
cussions on how companies were operating as part of larger systems or ‘constella-
tions’ for creating value. They described how customers were becoming a

126 V. Purchase et al.

fundamental part of ‘value co-creation’. IKEA challenged our understanding of the
role of customer in a number of ways, including their role in delivering their own
value – literally.

IKEA offers customers an opportunity to be involved in getting well-designed
products at substantially lower prices. Within their business model, the customer
helps to reduce costs by agreeing to undertake certain activities which would have
traditionally been undertaken by the manufacturers and retailers including selection
from the warehouse, delivery and assembly.

IKEA wants its customers to understand that their role is not to consume value but to create
it. IKEA offers families more than co-produced furniture, it offers co-produced improve-
ments in family living – everything from interior design to safety information and equip-
ment, insurance, and shopping as a form of entertainment. To call these services amenities
is to underestimate their central significance to IKEA’s strategic intent: to understand how
customers can create their own value and to create a business system that allows them to
do it better

(Normann and Ramirez 1993, p. 67)

Certainly in our everyday experience, we can see examples of situations where as
customers, we are undertaking some of the service roles once provided by the service
provider companies. In the past, when you wanted to go on holiday, a travel agent
provided a full service of organising holiday packages, booking service and providing
tickets and travel schedules. Many holiday makers now book their own flights,
arrange hotels and transport using a single or multiple IT platforms. The service
providers provide the infrastructure which enables the customer to take part in the
‘co-creation of value’ (see Fig. 8.4).

This shift in view, where customers are part of the value creating enterprise
has been highlighted by many writers. Vargo and Lusch (2004, 2008) described

Fig. 8.4  Moving beyond single entity to multi-organisational delivery of service by extending the
part played by customers in value co-creation