Shifting from Production to Service to Experience-Based Operations
This chapter covers the shift in focus of value added business operations from production to services, and in turn, to experience-based operations where customer involvement itself becomes part of the offering. The shift has significant implications for
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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 production to services, and in turn, to experience-based operations where customer involvement itself becomes part of the offering. The shift has significant implications 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 experiences 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 manufacturing 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 distinction 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 and Innovations in the Service Economy, DOI 10.1007/978-1-4419-8321-3_6, © Springer Science+Business Media, LLC 2011
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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 applications to a greater degree than do many manufacturers in i
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