Role of Services in an EconomyRole of Services in an Economy

Welcome toWelcome to

Service ManagementService Management

Professor James FitzsimmonsProfessor James Fitzsimmons

University of Texas at AustinUniversity of Texas at Austin

Learning ObjectivesLearning Objectives

Describe the central role of services in an economy.Describe the central role of services in an economy. Discuss the evolution of an economy from an agrarian Discuss the evolution of an economy from an agrarian

society to a service society.society to a service society. Describe and contrast the features of the new Describe and contrast the features of the new

experience economy with that of previous economies.experience economy with that of previous economies. Describe the features of the new service economyDescribe the features of the new service economy Discuss the role of service managers with respect to Discuss the role of service managers with respect to

innovation, social trends, and management innovation, social trends, and management challenges.challenges.

Interactive Role of ServicesInteractive Role of Services

Service DefinitionsService Definitions

A Service is a Time-perishable, Intangible A Service is a Time-perishable, Intangible Experience Performed for a Customer Acting Experience Performed for a Customer Acting in the Role of a Coproducer.in the Role of a Coproducer.

James FitzsimmonsJames Fitzsimmons

Services are deeds, processes, and Services are deeds, processes, and performances.performances.

Valarie Zeithaml & Mary Jo Valarie Zeithaml & Mary Jo BitnerBitner

Definition of Service FirmsDefinition of Service Firms

Service Enterprises are Organizations that Service Enterprises are Organizations that Facilitate the Production and Distribution of Facilitate the Production and Distribution of Goods, Support Other Firms in Meeting Goods, Support Other Firms in Meeting Their Goals, and Their Goals, and Add ValueAdd Value to Our Personal to Our Personal Lives.Lives.

James James FitzsimmonsFitzsimmons

Stages of Economic Stages of Economic DevelopmentDevelopment

FeaturesFeatures

Pre- Use of StandardPre- Use of Standard

dominant human Unit of of living dominant human Unit of of living

Society Game activity labor social life measure Structure TechnologySociety Game activity labor social life measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple handPre- Against Agriculture Raw Extended Sub- Routine Simple hand

Industrial Nature Mining muscle household sistence Traditional toolsIndustrial Nature Mining muscle household sistence Traditional tools

power Authoritative power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines Industrial Against Goods Machine Individual Quantity Bureaucratic Machines

fabricated production tending of goods Hierarchical fabricated production tending of goods Hierarchical

naturenature

Post- Among Services Artistic Community Quality of Inter- InformationPost- Among Services Artistic Community Quality of Inter- Information

industrial Persons Creative life in terms dependentindustrial Persons Creative life in terms dependent

Intellectual of health, GlobalIntellectual of health, Global

education,education,

recreation recreation

Trends in U.S. Employment by Trends in U.S. Employment by SectorSector

0

10

20

30

40

50

60

70

80

901850

1870

1890

1910

1930

1950

1970

1990

Year

Pro

po

rtat

ion

of

tota

l em

plo

yem

ent

Service

Manufacturing

Agriculture

Percent Service Employment for Percent Service Employment for Selected Industrialized NationsSelected Industrialized Nations

Country 1980 1987 1993Country 1980 1987 1993 19991999

United States 67.1 71.0 74.3United States 67.1 71.0 74.3 80.480.4

Canada Canada 67.2 70.8 74.8 67.2 70.8 74.8 73.973.9

Japan 54.5 58.8 59.9Japan 54.5 58.8 59.9 72.4 72.4

France 56.9 63.6 66.4France 56.9 63.6 66.4 70.870.8

Israel 63.3 66.0 68.0Israel 63.3 66.0 68.0 70.770.7

Italy 48.7 57.7 60.2Italy 48.7 57.7 60.2 61.161.1

ChinaChina 13.1 17.8 21.2 13.1 17.8 21.2 26.4 26.4

The New Experience EconomyThe New Experience Economy

Economy Agrarian Industrial Service Experience

Function Extract Make Deliver Stage

Nature Fungible Tangible Intangible Memorable

Attribute Natural Standardized Customized Personal

Method ofsupply

Stored inbulk

Inventoried Deliveredon demand

Revealedover time

Seller Trader Manufacturer Provider Stager

Buyer Market User Client Guest

The Four Realms of an ExperienceThe Four Realms of an Experience

Customer Participation

Passive Active

EnvironmentalAbsorption Entertainment

(Movie)Education(Language)

Relationship Immersion Esthetic(Tourist)

Escapist(Skydiving)

Experience Design PrinciplesExperience Design Principles

Theme the Experience (Forum shops)Theme the Experience (Forum shops) Harmonize Impressions with Positive CuesHarmonize Impressions with Positive Cues

(O’Hare airport parking garage)(O’Hare airport parking garage) Eliminate Negative CuesEliminate Negative Cues

(Cinemark talking trash containers)(Cinemark talking trash containers) Mix in Memorabilia (Hard Rock T-shirts)Mix in Memorabilia (Hard Rock T-shirts) Engage all Five Senses (Mist in Rainforest)Engage all Five Senses (Mist in Rainforest)

Role of the Service ManagerRole of the Service Manager

Entrepreneurial InnovationEntrepreneurial Innovation Capitalizing on Social TrendsCapitalizing on Social Trends Management ChallengesManagement Challenges

Economies of Scale (MRI scanner)Economies of Scale (MRI scanner)Economies of Scope(Convenience store)Economies of Scope(Convenience store)Complexity (Yield Management)Complexity (Yield Management)Boundary Crossing (Bank vs Brokerage)Boundary Crossing (Bank vs Brokerage)International Competitiveness(Diversity) International Competitiveness(Diversity)

Discussion TopicsDiscussion Topics

Illustrate how the type of work he or she does Illustrate how the type of work he or she does influences a person’s lifestyle.influences a person’s lifestyle.

Is it possible for an economy to be based entirely Is it possible for an economy to be based entirely on services?on services?

Speculate on the effect that the Internet will have Speculate on the effect that the Internet will have on the delivery of services.on the delivery of services.

What is the value of self-service in an economy?What is the value of self-service in an economy? Comment on the role that marketing plays in the Comment on the role that marketing plays in the

service innovation process.service innovation process.

Interactive Class ExerciseInteractive Class Exercise

The class breaks into small groups. Each The class breaks into small groups. Each group identifies service firms that should be group identifies service firms that should be listed in the Fortune 100 and places them in listed in the Fortune 100 and places them in rank order of annual revenue.rank order of annual revenue.