CHAPTER 15 Organizing for Change Management and Service

CHAPTER 15 Organizing for Change Management and Service Slide © by Lovelock, Wirtz and Chew 2009 Leadership Essentials of Services Marketing Chapter 1 - Page 1

Overview of Chapter 15 § Effective Marketing Lies at the Heart of Value Creation § Integrating Marketing, Operations, and Human Resources § Creating a Leading Service Organization § In Search of Human Leadership Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 2

Effective Marketing Lies at the Heart of Value Creation Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 3

The Service Profit Chain Slide © by Lovelock, Wirtz and Chew 2009 (Fig. 15. 3) Essentials of Services Marketing Chapter 1 - Page 4

Links in the Service Profit Chain Slide © by Lovelock, Wirtz and Chew 2009 (Table 15. 1) Essentials of Services Marketing Chapter 1 - Page 5

Firm Value Created by Customer Satisfaction (Fig. 15. 4) Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 6

Integrating Marketing, Operations, and Human Resources Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 7

Interdependence Between Functions (Fig. 15. 5) Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 8

Service Leaders Integrate Functions § Implementation of Service Profit Chain requires complete understanding of how marketing, operations and human resource functions relate to a firm’s strategy § Integrated functions create value for the firm § Strategies are defined and driven by a strong, effective leadership team ØHas a coherent vision of what it takes to succeed Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 9

Defining the Three Functions § Marketing Function ØTarget “right” customers and build relationships ØOffer solutions that meet their needs ØDefine quality package with competitive advantage § Operations Function ØCreate, deliver specified service to target customers ØAdhere to consistent quality standards ØAchieve high productivity to ensure acceptable costs § Human Resource Function ØRecruit and retain the best employees for each job ØTrain and motivate them to work well together ØAchieve both productivity & customer satisfaction Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 10

Creating a Leading Service Organization Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 11

From Losers to Leaders: Four Levels of Service Performance (1) § Service Losers ØBottom of the barrel from both customer and managerial perspectives ØCustomers patronize them because there is no viable alternative ØNew technology introduced only under duress; uncaring workforce § Service Nonentities ØDominated by a traditional operations mindset ØUnsophisticated marketing strategies ØConsumers neither seek out nor avoid them Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 12

From Losers to Leaders: Four Levels of Service Performance (2) § Service Professionals ØClear market positioning strategy ØCustomers within target segment(s) seek them out ØResearch used to measure customer satisfaction ØOperations and marketing work together ØProactive, investment-oriented approach to HRM § Service Leaders ØThe crème da la crème of their respective industries ØNames synonymous with outstanding service, customer delight ØService delivery is seamless process organized around customers ØEmployees empowered and committed to firm’s values and goals Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 13

Moving to a Higher Level of Performance § Firms can move either up or down the performance ladder § Organizations that are devoted to satisfying their current customers may miss important shifts in the marketplace ØAs a result, they may face difficulties attracting demanding new consumers with different expectations § Companies defending their control of their competitive edge may have encouraged competitors to find higher-performing alternatives § Organizations with a service-oriented culture may turn otherwise as a result of a merger or acquisition that brings in new leaders who emphasize short-term profits Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 14

In Search of Human Leadership Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 15

Leadership vs. Management § Leadership ØConcerned with development of vision and strategies, and empowerment of people to overcome obstacles, make vision happen ØEmphasis on emotional and spiritual resources ØWorks through people and culture ØProduces useful change, especially non-incremental change § Management ØInvolves keeping current situation operating through planning, budgeting, organizing, staffing, controlling, and problem solving ØEmphasizes physical resources—raw materials, technology, capital ØWorks through hierarchy and systems ØKeeps current system functioning Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 16

Setting Direction vs. Planning § Planning Øa management process, designed to produce orderly results, not change § Setting direction Øinvolves creating visions and strategies that describe a business, technology, or corporate culture in terms of what it should become over long term and articulating feasible way of achieving goal § Many of best visions and strategies combine basic insights and translate them into realistic competitive strategy Ø“Stretch” – a challenge to attain new levels of performance and competitive advantage that might as first seem to be beyond the organization’s reach § Planning follows and complements direction setting, serving as useful reality check and road map for strategic execution § See Service Insights 15. 2 : Can Cirque du Soleil Stretch Further? Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 17

Individual Leadership Qualities § Love for the business § See service quality as foundation for competing § Recognize key role of employees § Driven by a set of core values they pass on § Make communication a priority § Work with a team on decision-making § Know when to change when necessary § Walk the talk Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 18

Leadership, Culture and Climate (1) § Leadership traits are needed of everyone in supervisory or managerial positions, including those heading teams ØEffective communication is essential for a leader § Organizational culture: ØShares understanding regarding what is important in the organization ØShares values about what is right or wrong ØShares understanding about what works and what doesn’t work ØShares beliefs, and assumptions about why things are important ØShares styles of working and relating to others Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 19

Leadership, Culture and Climate (2) § Organizational climate ØThe tangible surface layer on top of the organization’s underlying culture ØFactors of influence: - Flexibility, Responsibility, Standards that people set, Perceived aptness of rewards, Clarity people have about mission and values, Level of commitment to a common purpose § Creating a new climate for service, based on understanding of what is needed for market success, may require Øradical rethinking of HRM activities, operational procedures, and the firm’s reward and recognition policies Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 20

Summary of Chapter 15: Change Management and Service Leadership (1) § Service profit chain provides useful summary of behaviors required of service leaders to manage effectively § Marketing, operations, and human resource management functions need to be closely coordinated and integrated in service businesses § Four levels of service performance ØService losers ØService nonentitites ØService professionals ØService leaders § Service leadership is not based on outstanding performance within a single dimension, but must cut across marketing, operations and human resources Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 21

Summary of Chapter 15: Change Management and Service Leadership (2) § To be effective, leaders need to understand difference between leadership vs. management, as well as setting direction vs. planning § Role modeling is one of traits of successful leaders § Leaders play a big part in nurturing an effective organizational culture that transforms an organization into a successful one Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 22