2.2.1 Managing tactically and strategically
Operations managers need to manage both tactically and strategically. Being tactical is about
being focused on the short-term, day-to-day activities. Strategy is concerned with the longterm
and with the operation’s wider contribution to the organisation (see Chapter 1 , Section
1.5 ). You may have noticed that Ahmed Jihad in Case Example 1.3 was bogged down with
day-to-day activities and seemed to have little time to deal with the future and with important
medium- and longer-term operational issues such as:
● How will the resort need to change to compete with the opening of new high-quality
resorts in the Maldives?
● How can it reduce costs to deal with economic slowdown?
● As sustainable tourism is becoming increasingly important what changes will the operation
need to make?
● How can the resort deal with rising sea levels over the next twenty years? The highest point
in the Maldives is just 2.4 metres (8 feet) above sea level.
The problem for operations managers is that a signifi cant part of the excitement of managing
operations is its immediacy. By this we mean the constant challenge of dealing with the needs
of a stream of customers, managing the staff and making operational decisions to ensure the
delivery of an appropriate quality of service at an appropriate cost. The danger of this immediacy
is that it can lead to a short-term focus. Many service operations managers concentrate
their time and effort on managing the day-to-day operations for the following reasons:
● The pressure on the operation to deliver its day-to-day services may leave little time for
medium-term operational improvement activities or longer-term strategic planning. For
example, it is diffi cult for a headteacher to put time into dealing with solving major underlying
problems, such as poor facilities, inadequate funding, high levels of absenteeism etc.,
when they are heavily involved in trying to fi nd part-time staff to cover for sudden absences,
recruiting new staff to vacant posts, processing the many forms and requests that land on
the desk each day and also dealing with a constant stream of student behavioural problems.
● Operations managers, because of the nature of the job and often their background, tend
to feel more comfortable with the unambiguous and rational nature of many short-term
tactical decisions. The more intuitive processes required for strategic thinking are quite
different and excuses found to put them to one side. The headteacher is likely to have been
promoted through the profession and they may get a ‘buzz’ and feel more comfortable in
dealing with students and the curriculum. They may be less inclined to put time into the
‘less exciting’ and ‘less pressing’ tasks of data collection, analysis, report writing and highlevel
debate and discussion with various parties to try to resolve underlying and longerterm
issues.
As a result, the development and strategic aspects of operations management are frequently
neglected and a disproportionate amount of time is spent on managing the day-to-day
What are the key strategic challenges faced
2.2 by service operations managers?
22 Part 1 Introduction
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
operations. In some organisations this problem is built in by not giving senior operations
managers a seat at the boardroom table (or its equivalent). Given they are responsible for most
of the organisation’s assets, people, costs and revenue, this would seem very short-sighted.
Good operations managers are those who can pay attention to, and create time in their day
for, both strategic issues and also managing the day-to-day operations in order to create and
sustain a successful organisation (see Chapters 7 – 14 for managing the day-to-day, tactical
issues and Chapters 15 – 17 for the strategic issues).
2.2.2 Making operations a contributor to strategy
as well as an implementer
Operations managers are involved in the ‘doing’ part of the business. It is the operation and
its staff that deliver the service, not its marketers or fi nancial managers, though in a small
organisation these roles may be undertaken by the same people. As such operations managers
are responsible for the implementation of strategy. As an implementer of strategy operations
managers must fi rst of all understand the organisation’s strategy. This may be market dominance
for a large retailer, or the speedy provision of water and food for an aid agency, or a
high level of childcare with strong links into the community for a nursery. This then defi nes
what the operation has to be good at (or how it has to compete for competitive organisations).
This might involve delivering service at a low cost with dependability (see Case Example 2.1 )
or providing a wide range of services or a pleasurable customer experience, for example. This
then defi nes the key decision areas and tasks for the operation, such as minimising costs and
implementing lean initiatives, or focusing on speed of delivery and developing supply networks,
or continually improving quality and innovating new services (we will develop this
further in Chapter 15 ).
SouthWest Airlines is a US organisation that
many budget airlines have copied in recent
years. There are a number of reasons for its
continued success but fi rst and foremost
SouthWest delivers the concept of lowcost,
dependable transportation incredibly
well. They understand that what passengers
want is not airport to airport transport
but rather door to door. They also understand
that competition comes in the form
of buses and cars rather than other airlines.
In order to deliver this proposition,
SouthWest Airlines have focused on cost
and dependability as the heart of their operations
strategy. Key decision areas were
● Using secondary airports (lower cost and less congestion delivering dependability)
● Using short haul fl ights with no interconnections (dependability)
● Use of one type of plane (lower maintenance and crewing costs)
● Direct booking only (low cost – and greater visibility of demand)
● Choice of routes with potential to grow volume (cost and dependability).
Case Example 2.1 SouthWest Airlines
Source: Southwest airlines
Chapter 2 Understanding the challenges for operations managers 23
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
ISBN 1-323-17409-5
The additional stroke of genius with SouthWest Airlines is that even though this is a high-volume, standardised
service, they have managed to create a customer-focused culture with some life to it! As the CEO of
SouthWest Airlines, Gary Kelly, stated, ‘Our people are our single greatest strength and most enduring longterm
competitive advantage’. You only have to go on to YouTube to see some of the antics of cabin crew
which go towards creating a friendly service and an incredibly loyal customer base. SouthWest concentrates
on building relationships, both internal and external, and this is their leadership focus. It is perhaps no surprise
that other low-cost airlines can copy the product but not the experience!
As we can see from Case Example 2.1 operations also have an important proactive role as
a major contributor to strategy. For example service operations managers might be able to
provide the platform for future competitive advantage. Rather than taking a service concept
(see Chapter 3 ) and designing and running an operation to deliver it, it may be that there are a
set of competences in the operation that can be turned to create a strategic advantage. The
webcam installed by the nursery (see Case Example 2.2 ) might provide it with a competitive
advantage that may be diffi cult for less technologically advanced nurseries to provide by, for
example, extending it to provide a daily or weekly webcast by the children to their parents.
Thus service operations managers can have a signifi cant contribution into developing
strategy ( Chapter 15 ) by knowing what they can, or could, deliver ( Chapters 7 – 11 ) and by
driving change and improvement through the organisation to provide it ( Chapters 12 – 17 ).
The very fi rst webcam was set up by a group
of Cambridge University students from the
School of Computer Science. They focused
it on the faculty coffee machine so that
members of staff could see on their desk
computer a ‘live’ picture of the machine, updated
every few minutes. This allowed them
to check whether or not the coffee jug was
empty before they went to use the machine.
Webcams are now everywhere. Anyone
with an internet connection can now see
some breathtaking and bizarre sights, including
the conditions at 3,880 metres on Mount
Everest, the view of the top of the ski run at
Lake Tahoe, sights in the African bush, views from the Palazzo Senatorio in Rome, weddings at Las Vegas’
Little White Chapel, the view from the Trans-Siberian Railway during its 5,700-mile journey from Moscow to
Vladivostok, even the contents of a Swedish family’s fridge!
One application has been the use of webcams in nurseries so that anxious parents can use their computer
at work or home to ‘look in’ on their children. Security is tight, with pictures being encrypted and passwords
required for access. The pictures parents receive are single frames, updated every minute, but the quality
is good enough for parents to check if their child is relaxed, happy and well cared for – and to remind them
what life is about!
While parents and grandparents are revelling in this innovation, others are queuing up to condemn it.
Some psychologists are concerned that it becomes an on-screen substitute for involvement in a child’s upbringing
that simply assuages the guilt of working mothers. Other people worry about it fuelling the current
paranoia about child safety. However, at a time when childcare is needing an injection of trust and with more
and more working parents, cybernurseries could soon be commonplace.
Case Example 2.2 Cybernurseries
Source: Pearson Education Ltd/Jules Selmes
24 Part 1 Introduction
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
ISBN 1-323-17409-5
2.2.3 Making the business case for service
Many of the service operations managers we speak to tell us that they totally understand how
important service is. At the end of Chapter 1 , we summarised why good service, and good
operations management, mean making things better for the customer, better for the staff
and better for the organisation. (Better for the organisation may mean retaining customers,
attracting new customers, entering new markets, increasing revenues, reducing costs, making
greater profi t or simply meeting budget targets.) Yet when asked to make the case to demonstrate
that better service does indeed make things better for the organisation they often fall
back on belief and intuition. The nursery manager (see Case Example 2.2 ) will intuitively
know that spending more money on improving the facilities will bring in more customers,
thereby increasing revenue, but they may have diffi culty persuading the owner to invest without
some hard evidence. Making a business case to the fi nancial director, or the equivalent,
in order to obtain the resources required to provide a better operation and deliver a better
service requires a clear argument providing evidence of the relationship between service and
costs and revenues. Such knowledge will also enable the operations manager to understand
the impact of any decisions they make on both the service provided and organisational success.
We will explain how this can be done in Chapter 17 .
2.2.4 Understanding the service concept
Strategically it is important that there is a shared and defi ned view about the nature of the
service that the organisation provides. The service concept defi nes what the organisation
does, what marketing have to sell and what the operations have to deliver. In a product-based
organisation this is usually straightforward; the product can be seen and touched. But a service
is an activity or process and it is easy for various people inside the organisation to have
quite different views about what that process is. Likewise there may also be differing views
about what an organisation is ‘selling’ and what the customer is ‘buying’. Some parents may
see the nursery as simply a babysitting service; others may see it as a critical educational experience
for their offspring. Articulating and communicating the service concept ( Chapter 3 )
is critical for clarifying the organisation’s product to all its customers, internal and external,
and for ensuring that it can be, and is, delivered ( Chapters 7 – 11 ).
What are the key tactical challenges faced by service
2.3 operations managers?
The key tactical, day-to-day, challenges faced by most service operations managers include:
● Understanding the customer perspective
● Managing multiple customers
● Managing the customer
● Managing in real time
● Co-ordinating different parts of the organisation
● Encouraging improvement and innovation.
2.3.1 Understanding the customer perspective
A key challenge (and sometimes a difficulty) for many managers in service operations
is that they see things from an internal, organisational viewpoint, often referred to as
Chapter 2 Understanding the challenges for operations managers 25
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
ISBN 1-323-17409-5
‘inside-out’. 1 The operation’s perspective understands the service provided . It focuses on the
inputs that have to be managed (including the customer – often seeing them as an ‘input’ to
be processed rather than as a person) and making sure that all the processes are working well.
Managers, quite naturally, spend their time worrying about managing their resources and
processes, managing capacity, scheduling people, meeting performance targets and fi nancial
goals (see Chapters 8– 11).
However, the customers will see (the same) things from a very different perspective,
‘outside-in’ (see Figure 2.1 ). They are interested in the service received , their experience
and the outcomes such as how they feel, the ‘products’ they receive and how they benefi t
from the service. Customers of the service are less concerned with the management of
resources, processes and targets; they want a good experience, they want to have a good
outcome and to benefi t from the service. The nursery staff may see their key activities as
child development and education, whereas the parent (as customer) may see it as an expensive
babysitting service while they are at work. These different views may cause some
confl icts. For example, when the parent is held up at work they may expect a babysitting
service to wait a while for them, whereas a teacher will expect the parent to be on time
and make alternative arrangements should they be late. Managing the relationship with
the customer (see Chapter 4 ), managing customer expectations and perceptions (see
Chapter 5 ) and delivering the customer experience (see Chapter 7 ) are key challenges in
managing service operations.
Seeing things from a customer point of view is, surprisingly, unusual in service organisations.
Table 2.1 illustrates these two perspectives for three different services, hip replacement
surgery, education and consultancy.
Recognising both of these perspectives is important. Operations managers need to manage
their operations to create their services; they need to manage their suppliers, people, facilities,
process and technology (see Chapters 6 and 8 – 11 ), but at the same time they need to recognise
how their efforts create value for the customer which in turn creates value for the organisation
(see Chapter 1 ). Indeed some people argue that the customer is the ultimate arbiter of the
value an organisation creates and delivers. 2 While value is delivered through the process and
the service, it is located in the customer’s experience and the outcomes for the customer (see
Chapters 1 and 3). 3
Figure 2.1 Inside-out versus outside-in
OPERATION
Service provided
CUSTOMER
Service received
INPUTS
materials
equipment
customers
staff
technology
facilities
OUTCOMES
‘products’
benefits
emotions
judgements
intentions
PROCESS
EXPERIENCE
26 Part 1 Introduction
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
ISBN 1-323-17409-5
Table 2.1 The operation’s and customer’s perspectives
Service The operation’s (inside-out) perspective
Inputs Processes Outputs
Surgery GP, nurses, surgeon, bed,
operating theatre
Diagnosis, operation, aftercare Hip replacement
Education Lectures, library, computers,
seminar rooms
Timetabling, lectures, exams,
marking
Information, slide packs,
degrees
Consultancy Consultants, information,
skills, knowledge
Data collection and analysis Presentations, reports
Service The customer’s (outside-in) perspective
Experience ‘Products’ Benefi ts
Surgery Empathetic and pain-free
treatment
A working hip Greater mobility
Education Memorable and useful
lecturers/seminars
Knowledge, confi dence
and skills
Better job prospects/
capability
Consultancy Helpful and timely discussions
and advice
Solutions Reduced costs and greater
commercial success
We fi nd many organisations today talk about developing a ‘customer focus’ or becoming
‘customer orientated’. A better understanding of the outside-in perspective is a good way to
start this process. Cathay Pacifi c is one organisation that takes an outside-in perspective, focusing
on the customer’s experience and the emotions they should feel (see Case Example 2.3 ).
In Chapters 4 , 7 and 15 – 17 we explain how this outside-in perspective can be developed.
Cathay Pacifi c Airways is an international
airline based in Hong Kong, offering scheduled
passenger and cargo services to over
100 destinations around the world. The
airline owns Dragonair and is also a major
shareholder in Air Hong Kong, an all-cargo
carrier operating in the Asian region. Cathay
Pacifi c and its subsidiaries and associates
employ over 25,000 people worldwide, with
around 18,600 staff in Hong Kong, making
it one of Hong Kong’s biggest employers.
The airline is a founder member of the
oneworld global alliance, whose combined
network serves almost 700 destinations in
150 countries worldwide.
Case Example 2.3 Cathay Pacifi c Airways
Source: Cathay Pacifi c
Chapter 2 Understanding the challenges for operations managers 27
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
ISBN 1-323-17409-5
2.3.2 Managing multiple customers
Many service organisations do not serve a homogeneous group of customers; they often
serve, in different ways, different types of customers. The nursery’s customers (see Case
Example 2.2 ) include both the child for whom it is providing an education and social experience,
and also the parents for whom it is providing a ‘parental substitute’ service. There are
other customers, sometimes termed stakeholders, such as education authorities and health
and safety offi cials, for whom the nursery provides information and related services. There
are also internal customers – the staff – whose welfare and training needs, for example, need
to be provided for. Understanding who are the various customers ( Chapter 4 ), understanding
their needs and expectations ( Chapter 5 ), developing relationships with them ( Chapter 4 )
and managing the various customers ( Chapters 7 – 9 ) are key tasks for service operations
managers.
2.3.3 Managing the customer
The nature of service means that the operation’s process is the customer’s experience. In
product-based organisations these two are usually distinct. A car manufacturer’s processes
for building a car are quite separate from their customer’s experience of buying and then
driving the car. This is not the case in service organisations. In universities, for example, the
process of education is inseparable from the educational experience. Likewise the childcare
and the childcare experience are inseparable. This provides several particular challenges for
service operations managers.
Firstly customers are an input into some of the service operation’s processes and they take
some part, active or passive, in that process. As a consequence service operations managers
not only have to manage their usual inputs and processes, they have to manage the customer
as well. In universities we don’t only have to deliver the material in a lecture, for example; we
also need to manage the student’s learning experience by trying to enthuse them and create a
passion for our subject and learning (see Chapters 7 and 8 ).
The company’s vision is to make Cathay Pacifi c the most admired airline in the world by:
● Ensuring safety comes fi rst
● Providing ‘Service Straight from the Heart’
● Encouraging product leadership
● Providing rewarding career opportunities.
Angelique Tam was Cathay Pacifi c’s Head of Customer Relations. She explained what was meant by
‘Service Straight from the Heart’:
Service Straight from the Heart means that our staff have to be resourceful, and be able to fi nd sensible
on the spot solutions. They need to be dynamic and be proactive and fi nd opportunities to excel and serve
our customers well. We also expect them to show the highest standards of care and professionalism so
they need to be fully committed. We want to create an experience that makes our customers feel welcome,
comfortable, appreciated and above all, reassured. This is not as easy as it sounds. We need to be friendly
but not overly intimate, caring but not over-attentive, effi cient but not mechanical, consistent but with a
willingness to be fl exible, anticipating but not presumptuous and professional but very approachable.
Not surprisingly Cathay Pacifi c has been the recipient of many awards for its service. It was named as
Airline of the Year 2009 by Skytrax, and most admired company in Hong Kong by Wall Street Journal Asia
in 2010.
28 Part 1 Introduction
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
ISBN 1-323-17409-5
Secondly the customer’s mood, attitude and actions may affect not only their own experience
but that of other customers, thereby having a direct bearing on the quality of other
people’s experiences. The behaviour of students in a lecture (such as talking, coming in late,
taking phone calls) or the behaviour of diners in a restaurant (such as talking loudly, swearing
or throwing bread rolls) will impact the other customers and affect the quality of their
experience.
Thirdly, the experiential nature of services provides particular problems for both specifi cation
and indeed control. Some contact centres, for example, use scripts to ensure conformance
and clarity, but such scripts lose out on fl exibility, development of rapport and maybe also
opportunities for cross-selling. The nursery needs clear guidelines and protocols about how to
deal with particular issues but each situation may be different; the staff will need to apply some
degree of judgement. This requires clarity about the service concept (see Chapter 3 ), how to
deal with and learn from problems (see Chapter 13 ) and how to set up appropriate measurement
and control systems to make sure that staff respond in the ‘right’ way (see Chapter 9 ).
So, service operations managers, unlike their manufacturing counterparts, have to manage,
so far as is possible, the customer during the service process. This requires careful design
of not only the back offi ce processes but those front offi ce processes that handle the customer.
The design of these processes must manage the customer through the process with an awareness
of the impact on the customer’s experience and other customers’ experiences. A good
design will also take account of how the processes impact on the employees’ feelings, as their
attitudes will have a signifi cant bearing on service performance (see Chapters 7 – 11 ). A key
task for the nursery workers is managing the children in their care and recognising that tears
or tantrums can easily affect the other children in the group.
The presence of the customer also means that the operation is visible to the customer. In
the nursery the facilities and activities are visible not only to the child but also to the parents
when dropping off and picking up the child and during the day as they ‘drop in’ via the web.
So the service environment, sometimes referred to as the ‘servicescape’, needs to be designed
to create the right atmosphere for the service to fi t with the service concept ( Chapter 3 ). A
high-class restaurant, for example, should not have peeling wallpaper and dirty fl oors. The
nursery should smell fresh and look clean with tidy and colourful pictures around the room.
2.3.4 Managing in real time
Because the customer is an input to, and involved in, the process, i.e. the process is their
experience, many services happen in real time – they cannot be delayed or put off. A passenger
wanting to purchase a ticket for immediate travel may not be willing to return if the agent is
busy. Streams of aircraft coming into land cannot easily be put on hold while equipment is
serviced or controllers take a break. Children screaming for attention or in danger of hurting
themselves in the nursery likewise cannot be ignored. Furthermore, during a service encounter
it is not possible to undo what is done or said – things said in the heat of the moment
or promises made that cannot be kept. Unlike in manufacturing organisations where it is
possible to scrap defective products and remake them, in service there is no ‘undo’ or ‘rewind’
button. Smacking a child in the nursery is inexcusable and will not go unnoticed with webcam
‘spies’ in the room. Managing resources ( Chapter 11 ), managing staff/employees ( Chapter 10 )
and creating an appropriate culture ( Chapter 16 ) are key tasks in managing real time services.
2.3.5 Co-ordinating different parts of the organisation
The service operations manager is responsible for co-ordinating the various parts of the
organisation in the delivery of the service; this includes not only understanding the needs
of customers (see Chapter 5 ) but also overseeing the logistics of the supply chain to ensure
that all materials and equipment are in the right place at the right time (see Chapter 6 ) and
Chapter 2 Understanding the challenges for operations managers 29
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
ISBN 1-323-17409-5
working closely with the other functions in the organisation (see Section 1.5 ). A nursery without
the right staff and the right materials will not only provide a poor experience for the child
but could be potentially dangerous.
2.3.6 Encouraging improvement and innovation
A challenge faced by all service operations managers is how continually to improve and
develop their processes and their customers’ experiences ( Chapters 12 – 14 ), ensure that the
outcomes are real improvements ( Chapter 9 ) and that there is a culture that is supportive
of service and change ( Chapters 15 and 16 ). The challenge for some organisations is how to
create a world-class service organisation ( Chapter 17 ).
Improving the operation is about taking what exists and developing it. Innovation, on the
other hand, looks for what is not there, i.e. what is new. Innovation therefore usually requires
an element of risk; fi nancial risk because innovations require time and money, and often
personal risk as the ‘champion’ for change puts their reputation on the line. Intro ducing
the webcam to the nursery was an innovation that required some expense and no doubt
attracted some detractors. Whether it is a success only time will tell. A critical role for service
operations managers is to be alert to, and seek out, new ideas but also to have the will, and
support, to assess them carefully and follow through if appropriate (see Chapters 12 , 13 ,
14 and 17 ).
2.4 What are the challenges for different types of services?
Although much of the general theory and practice described in this book applies to all operations,
each sector of the service economy (such as fi nancial services, tourism, leisure, charities,
government, hospitals, business-to-business services) has its own set of specifi c challenges.
Managing a for-profi t consultancy with a small number of high-value clients poses rather different
problems to managing an aid agency in a disaster-struck, heavily populated region of a
developing country. This section describes some of the differences between the various types
of services and outlines some of the particular challenges faced by each sector. In reading this
section, it is necessary to be aware that each of these services will also have issues relating to
aspects such as:
● The volume of transactions in a given time period. The hypermarket has very different
operation challenges from the local grocery store, not least in simply managing the fl ow of
hundreds of customers in the store.
● The mode of service delivery. The retail sector provides a good example of this diversity,
with face-to-face service in traditional stores, remote service through mail order, telephone
shopping or web-based services.
We will deal with these ‘process’ differences in the next section. Here we explore some
of the key differences in service provision between fi ve broad sectors of the service economy
(see Table 2.2 ):
● business-to-business (B2B) services
● business-to-consumer (B2C) services
● internal services
● public (G2C) services
● not-for-profi t services.
It is important to remember that we use the term ‘customer’ as an all-embracing term that
covers users, consumers, internal customers, etc.
30 Part 1 Introduction
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
ISBN 1-323-17409-5
2.4.1 Business-to-business (B2B) services
B2B services are provided by businesses for other businesses or organisations. IBM Global
Services, for example (see Chapter 1 ), provides a range of services to its business customers,
including computer installation and maintenance and a range of management consulting
services. Other B2B services include outsourced catering services, buildings’ maintenance or
leasing and supporting equipment, fi nancial services and market research. Some of the challenges
for B2B services include:
● Dealing with multiple contacts in the organisation. Consultants may have to work with a
wide range of employees in their client organisations and so maintain relationships at different
levels in the organisation ( Chapter 4 ).
● Working with a complex set of relationships. The users or recipients of a service will frequently
not be the purchasers, and this purchasing group may in turn be different from
those who commission or specify the service standards (see Chapter 4 ).
● B2B relationships may last for a long time. The challenge here is for the relationship not to become
too ‘cosy’, with the customer or supplier being taken for granted (see Chapters 4 and 6 ).
Table 2.2 Types of service and their key challenges
Business-tobusiness
(B2B)
services
Businessto-
consumer
(B2C) services
Internal
services
Public services
(G2C)
Not-for-profi t
services
Description Services
provided for
businesses
Services
provided for
individuals
Services
provided
by internal
functions within
organisations
Services
provided by
central or local
government
Services
provided by
non-government
organisations
(NGOs) or
charities
Examples Maintenance
Consultancy
Training
Catering
Shops
Hotels
Banks
Food
Finance
Purchasing
IT
Personnel
Prisons
Hospitals
Schools
Leisure
Hospices
Counselling
Faith organisations
Aid agencies
Customers Professionals,
who are not
necessarily the
end users
Individual
consumers
Users who
have little or
no choice
of provider;
frequently
funded by
central budget
Citizens who
may have
little day-today
choice;
funded through
taxation with
the allocation
of resources
infl uenced
by political
processes
Benefi ciaries are
self-selecting or
chosen recipients;
funded through
individual and
organisational
giving
Key challenges Providing highquality
services
to business
customers who
frequently have
high purchasing
power
Providing
consistent
service to a
wide variety and
high volume of
customers
Demonstrating
value for
money against
possible external
alternatives
Balancing the
various political
pressures
and providing
acceptable
public services
Dealing with
differences
between
volunteers, donors
and benefi ciaries;
dealing with
emotional and
sometimes
overwhelming
needs
Chapter 2 Understanding the challenges for operations managers 31
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
ISBN 1-323-17409-5
2.4.2 Business-to-consumer (B2C) services
B2C services are those that individuals purchase for themselves or on behalf of another individual.
They range through leisure services such as hotels, restaurants and sports provision,
retail services such as shops and supermarkets, fi nancial services such as banks and insurance
providers, through to professional services such as lawyers and accountants. The challenges
faced by most B2C services include:
● The organisation may deal with many different customers each day. Each has their own
special needs and expectations of the service provided and, to make matters more diffi cult,
these may change for the same individual from day to day (see Chapters 4 and 5 ).
● Because the operation serves so many customers, it faces a major challenge in keeping the
experience fresh for the next new customer. It may be the fi rst and only time the customer
experiences this service, although the customer may be just one out of hundreds that an
individual member of staff sees in a day (see Chapters 7 and 8 ).
● Many B2C service operations have the added complication of the need for consistency
across many points of contact with customers, frequently spread nationally if not globally
(see Chapter 9).
2.4.3 Internal services
Most managers are involved in providing and receiving internal service, not just internal
services such as personnel, fi nance, purchasing and IT support, but also the day-to-day service
they provide to each other, such as information and support. Indeed the Internal Service
Rule highlights the importance of internal service provision: the level of external customer
service will never exceed the level of internal customer service. The challenges posed by internal
service provision include:
● Getting people within an organisation to recognise the service and the importance of the
service they provide to each other, and treat it, assess it, measure it and improve it in just
the same way as they deal with external service (see Chapters 3 to 11 ).
● Demonstrating that the internal services, such as IT and fi nance, provide at least as good
‘value for money’ as an external alternative. This is a challenge faced by many IT departments,
for example, whose users often feel that they could obtain cheaper equipment more
rapidly from the local computer store or via the internet (see Chapters 3 and 6 ).
● Adapting the service to business needs. If the service provision is effectively a commodity,
it can be outsourced (see Chapter 6 ). Internal service providers must demonstrate their
ability to tailor their offerings to the changing business needs in a way that external providers
cannot (see Chapter 15 ).
● Gaining acceptance from their internal customers. Centrally funded services are frequently
viewed with suspicion by local operating units and may not receive the co-operation required
to carry out their tasks effectively ( Chapter 6 ).
2.4.4 Public services (G2C)
These services are provided by central or local government for the community at large.
Funding comes through the various forms of business and individual taxation, which is then
largely allocated by policies set by government. Examples include police, prisons, hospitals
and education. Specifi c challenges for public sector services include:
● The provision of ‘best-value’ services. Public services are under continual scrutiny. As a
result, aspects of service operations that might be taken for granted by their private sector
colleagues must be carefully justifi ed in these organisations (see Chapter 9 ).
32 Part 1 Introduction
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
ISBN 1-323-17409-5
● Rationing supply of service. Public sector organisations cannot use the pricing mechanism
to regulate demand. With essential services, this can be a very sensitive issue. The health
service must make policy decisions as to how much resource can be devoted to heart operations,
to maternity services, and so on. Expenditure on intensive care units, accident
and emergency provision and very expensive drugs is particularly sensitive since lives are
at stake, but inevitably there will be times when demand outstrips supply or costs exceed
budgets (see Chapter 11 ).
● Multiple stakeholders. Public services suffer from having many ‘customers’. With B2C services
it is reasonably clear who the customers are, and if this group is satisfi ed, generally speaking
the organisation should be successful. This is not the case with the public sector, where the
recipients of the service, as individuals, have little power to infl uence. Politicians and service
managers themselves may have far more power to decide current priorities (see Chapter 4 ).
● A confused service concept. The service concept provides direction for the organisation (we
devote Chapter 3 to the discussion of the role of the service concept). Some public services
are provided for the good of society at large and are not necessarily loved by those who have
to deal with them. Prisons, police services and tax collectors may fall into this category.
2.4.5 Not-for-profi t services
Charities of various types form the majority of these services. Most engage in a mixture of
fund raising, providing information about the cause or issue that concerns them, and some
form of social action. An organisation such as Oxfam must gather funds for famine relief and
then organise to supply and distribute aid as required (see Case Example 2.4 ). Challenges for
these services include:
● Managing a workforce of volunteers who, though highly motivated, may not always follow
the organisation’s procedures (see Chapter 10 ).
● Managing the allocation of resources to ensure that maximum funds fl ow to the benefi ciaries
of the organisation, while developing effective processes and people (see Chapters 7 to 11 ).
● Dealing with differences between the activities that might infl uence and impress donors,
but which might confl ict with the requirements of their ‘customers’ (see Chapter 3 ).
● Working in a highly emotional area, sometimes being overwhelmed by demand for service
(see Chapter 11).
Oxfam is a major international development, relief and
campaigning organisation dedicated to fi nding lasting
solutions to poverty and suffering around the world.
It is a confederation of 15 international organisations
(country-based Oxfams) working with over 3,000 local
partner organisations and alongside communities in 98
countries. It has three main activates: fi rstly, responding
quickly to emergencies providing life-saving assistance
to people affected by disasters; secondly, helping
people living in poverty take control of their lives. Third,
as a part of global movement for change, Oxfam spends
time raising public awareness about the causes of poverty
and pressing decision makers to change policies
and practices to reduce poverty and injustice.
Case Example 2.4 Oxfam International
Source: Helen Jones
Chapter 2 Understanding the challenges for operations managers 33
Service Operations Management: Improving Service Delivery, Fourth Edition, by Robert Johnston, Graham Clark, and Michael Shulver. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.
ISBN 1-323-17409-5
ISBN 1-323-17409-5
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