Chapter 4Services and Information Technology

Learning Objectives• Discuss the role of the customer in service process

innovation.• Place an example of service automation in its proper

category.• Discuss the managerial issues associated with the

adoption of new technology.• Discuss the competitive roles of information.• Explain the virtual value chain concept.• Discuss the limits in the use of information.

Technological Innovation in Services• Challenges of Adopting New Technology

The Process is the ProductBack Office vs Front Office ChangesNeed for Standardization

• Managing the New Technology Adoption Process

Classification of Service Automation• Fixed-sequence (F) - parking lot gate• Variable-sequence (V) - ATM• Playback (P) - answering machine• Numerical controlled (N) - animation• Intelligent (I) - autopilot• Expert system (E) - medical diagnosis• Totally automated system (T) - EFT

Examples of Automation in ServicesWholesale and retail trade, 23.1%*

F Dry cleaner’s conveyor V Point-of-sale electronic terminalF Newspaper dispenser I Self-serve grocery checkoutV Automatic car wash T Automated distribution warehouseV Automatic window washers T Automated security systemsV Optical supermarket T Telemarketing

Utilities an government services, 17.9%*

F Automated one-person garbage trucks I Airborne warning and control systemsV Mail-sorting machine I Doppler radarV Optical mail scanner T Electric power-generating plantsN IRS Form 1040EZ reader T Electric computer-originated mail

Examples of Automation in Services (cont.)

Health care services, 7.6%*

F Electronic beepers I Automated medication-delivery systemsF Pacemakers I Electronic ambulance-dispatching systemsV CAT and MRI scanners I Medical information systemsV Fetal monitors

Restaurants and food services, 6.0%*

F Assembly-line and rotating-service V Automatic french fryer cafeteriasF Vending machine

Examples of Automation in Services (cont.)

Financial services, 4.9%*F Pneumatic delivery systems V MasterCard II --the electronic checkbookV Automated trust portfolio analysis E Stock tradingV Automated teller machines T Electronic funds transfer systemsV IBM 3890 encoded-check processor Transportation services, 4.9%*F Automatic tollbooth I France’s TGV trainsI Air traffic control systems I Ship navigation systemsI Autopilots T Space shuttleI Bay Area Rapid Transportation system Communication and electronic services, 2.2%*V Collating copying machines T Teleconference phone, PicturephoneV Two-way cable television T Telephone switching systemsP Telephone answering machines

Competitive Role of Information in Services

Strategic Focus Competitive Use of Information

On-line Off-line

(Real time) (Analysis)

Creation of barriers to entry: Data base asset:

External Reservation system Selling information

(Customer) Frequent user club Development of services

Switching costs Micromarketing

Revenue generation: Productivity enhancement:

Internal Yield management Inventory status

(Operations) Point of sale Data envelopment

Expert systems analysis (DEA)

The Virtual Value Chain• Stages in Physical Value Chain

(Inbound logistics, Production process, Outbound logistics, Marketing/Sales)

• Marketplace vs Marketspace• Creating New Markets Using Information (Gather,

Organize, Select, Synthesize, and Distribute)• Exploiting the Virtual Value Chain (Example of

USAA).

Limits in the Use of Information• Anticompetitive (Barrier to entry)

• Fairness (Yield mangement)

• Invasion of Privacy (Micro-marketing)

• Data Security (Medical records)

• Reliability (Credit report)

Mrs. Fields Strategic Use of Information

Strategic Focus Competitive Use of Information

On-line Off-line

(Real time) (Analysis)

Creation of barriers to entry: Data base asset:

External

(Customer)

Revenue generation: Productivity enhancement:

Internal

(Operations)

Mrs. Fields Management Information System

• Advantages

• Disadvantages

Mrs. Fields Questions• How might the MIS contribute to a reported

100% turnover of store managers?

• Will the MIS support or inhibit the growth of outlets (domestic and overseas)?