Service Operations Management - Case Study Example

Executive Summary A service can be expressed as either an outcome or a process. s participate in the service process inasmuch as they are recipients of the outcome of that process. While these two concepts are closely related, they are primarily discussed separately in the services literature (Lovelock and Wirtz, 2004). Also, operations management seems to be concerned primarily with the process of delivering a service, despite the fact that developing the service outcome is largely influenced by a service marketing orientation (Mayer, Bowen, and Moulton, 2003). Lovelock and Wirtz (2004) described the service concept as the outcome received by the customer consisting of an assortment of primary and supporting elements which can be both tangible and intangible. Using the processes described by Lovelock and Wirtz (2004), the customer support processes of British Airways were blueprinted. Specifically, this blueprint addresses services provided by British Airways from purchasing a ticket through the flight process. The customer segment refers to the three methods of buying a ticket: online, over the telephone or at the airport. Customer actions are clearly outlined along the top row of the blueprint - beginning with 'purchase ticket' through to 'claim baggage'. The contacts that customers have with employees are also identified in the blueprint, both onstage and backstage. Support processes are listed near the bottom of the blueprint, just above the physical evidence. Finally, links connecting customer to employee activities and to support functions are also clearly identified in the blueprint. Table of Contents Introduction 2 Theoretical Concepts 4 Customer Support Blueprint 7 British Airways Overview 8 Services Provided 8 Recommendations 10 Conclusions 13 References 14 Figure 1: Looking at the big picture: the service strategy triad 2 Figure 2: Reductionist vs. Holistic view of service delivery processes 4 Figure 3: Service process according to the UST 5 Figure 4: Different service environments: different process-configurations 5 Figure 5: British Airways Customer Support Blueprint 7 Service Blueprint for British Airways Introduction Defining service as a process has considerable implications from a service operations management perspective in view of the fact that the process-view is seen as the foremost model in operations management (Ponsignon, Smart and Maull, 2007). Additionally, according to Roth and Menor (2003) service operations management as a field of study is important to the design, delivery and assessment of services. They further noted that the design of services is instrumental for allowing an organisation to make sure that its strategy can translate into operations. In other words, mistakes made at the design level will result in mistakes made in operations as well. Based on their understanding, Roth and Menor (2003) proposed that, in order to be effective, a service design must consider how services are delivered, what the concept of service is, and identify the right customers. This is illustrated in Figure 1. Figure 1: Looking at the big picture: the service strategy triad Source: Roth and Menor, 2003 Other authors and studies have indicated the importance of understanding the needs and expectations of customers which is vital to success in service design (Goldstein et al., 2002; Roth and Menor, 2003). By and large, the dominant purpose of such a design is to create a service that meets or exceeds customer expectations (Slack, Chambers and Johnston, 2004). A successful design is one that guarantees that both the service outcome and the process of delivering that service are such that will produce customer satisfaction (Dabholkar and Overby, 2005), which in turn drives customer retention. Indeed, service that is designed properly and is effectively carried out will provide an organisation with competitive advantage in its sector (Verma et al., 2002). A service can be expressed as either an outcome or a process. Customers participate in the service process inasmuch as they are recipients of the outcome of that process. While these two concepts are closely related, they are primarily discussed separately in the services literature (Lovelock and Wirtz, 2004). Also, operations management seems to be concerned primarily with the process of delivering a service, despite the fact that developing the service outcome is largely influenced by a service marketing orientation (Mayer et al, 2003). Lovelock and Wirtz (2004) described the service concept as the outcome received by the customer consisting of an assortment of primary and supporting elements which can be both tangible and intangible. The Concept of Service Blueprinting Service blueprinting is a beneficial process, as it allows a clearer understanding of the service process, especially as viewed from a customer's prospective. According to Lovelock and Wirtz (2004, p. 233), there are seven key elements in constructing a service blueprint: Building a Service Blueprint 1. Clearly articulate the service process or sub-process to be blueprinted 2. Specify which customer segment is the focus of the blueprint 3. Specify customer actions 4. Specify contact employee actions, both onstage and backstage 5. Specify support processes 6. Add links connecting customer to employee activities and to support functions 7. Physical evidence is typically the last component added (p. 233). Customer Support Blueprint Using the processes described by Lovelock and Wirtz (2004), the customer support processes of British Airways were blueprinted, as pictured in Figure 5. Specifically, this blueprint addresses services provided by British Airways from purchasing a ticket through the flight process. The customer segment refers to the three methods of buying a ticket: online, over the telephone or at the airport. Customer actions are clearly outlined along the top row of the blueprint - beginning with 'purchase ticket' through to 'claim baggage'. The contacts that customers have with employees are also identified in the blueprint, both onstage and backstage. Support processes are listed near the bottom of the blueprint, just above the physical evidence. Finally, links connecting customer to employee activities and to support functions are also clearly identified in the blueprint. Figure 5: British Airways Customer Support Blueprint Areas Marked with * Indicate Possible Failure Points ORIGINAL but Blueprint adapted from: www.bus.ucf.edu/npomirleanu/blueprint%20aa.pdf British Airways Overview In 1988, British Airways (BA) was a state-owned, money-losing enterprise with a reputation for customer relationship passivity and lack of interest. Sir Colin Marshall, with a managerial background in American consumer products (Hunt-Wesson) and services (Hertz and Avis), became CEO in 1987. Except for airlines like Southwest, few others have a customer loyalty and value-based strategy that moves them to the top of the Customer Loyalty PyramidSM and keeps them there. BA has done it with a focus on customer service (Jackson, Harris and Eckersley, 2003). BA does not compete on price. Even for a seeming commodity such as air travel, an element of the travelling public is willing to pay a slight premium for superior services. These are the people BA has been trying to attract and retain as customers. Jackson et al (2003) observed that many airlines - especially in the United States - have failed to meet the standards that are expected on the typical European flight. Indeed, according to Jackson et al (2003), BA has conducted extensive research with US airlines and has very strong indications that most passengers flying from the US would be happy to pay a higher fare if it would guarantee better service on their flights. They want to be respected and rewarded for their business. There is another critical element of the BA approach to serving customers: filling customers' value-driven needs. Research conducted by Jackson et al (2003) showed the majority of airline passengers have a need for personalised service instead of just taking what they are given. With that in mind, BA has tried to develop its service concepts around what the passenger wants. That being the case, they try to think about what kind of impression or feeling each interaction between the company and a customer will generate. Services Provided Part of the positive interaction strategy BA has developed includes increasing contact between passengers and the in-flight crew, and otherwise creating a feeling that each passenger's individual needs are being proactively addressed. One example of this is the BA 'Sleeper Service' for first class passengers. Before boarding for a long flight, say New York to London, first class passengers can have their meal in the first-class lounge, and change into pyjamas on the plane so they can rest without being disturbed. They can also have individual cabins, which can be used as offices, dining rooms for two, or bedrooms. After arriving in London, they can use the BA arrival lounge to retrieve messages, have breakfast, and get ready. Services offered include showers, manicures, hair care and clothes pressing for their day's activities. Limousines then take these passengers to their London-area destinations. Such services increased premium ticket business by 9%, with some routes increasing by as much as 25% (Neely, 2002). Their strategy has been supported and guided by an innovative monitoring and information-gathering group called the Marketplace Performance Unit. The Marketplace Performance Unit is charged with evaluating British Airways' performance relative to internal standards, customers' evolving expectations, and competitive delivery (Neely, 2002). Specifically, the Marketplace Performance Unit tracks over 300 performance standards and produces a monthly report for senior management. The report details key attribute performance levels and problem areas. The unit functions interactively with top executives, responding to requests to evaluate performance issues or proactively recommending areas of service for study or upgrade (Neely, 2002). On a business strategy level, BA has adopted a broad approach, with seven different categories, or brands, of service, each with its own manager (Jackson et al, 2003). Every few years, BA refreshes each brand by adding major new dimensions of service, such as providing totally different in-flight entertainment. Each brand targets an individual category of customers (based on type and cost of service selected) and strives to provide the best value and need fulfilment for that category. British Airways' corporate strategy has translated into a more proactive functional strategy for its customer relations department. Aligning with the corporate strategy of delivering superior value to each product class, customer relations created a new plan to champion customers. Previously, the strategic role of customer relations at British Airways could best be defined as defensive. It had four rules: Insulating the company from unhappy customers Assigning blame for problems, rather than helping to fix or prevent them Mollifying and silencing customers at the lowest possible price Processing the largest possible number of customer complaints (Jackson et al, 2003). More recently at BA, championing the customer means one thing - creating optimum customer loyalty and value. The customer relations strategy now includes better customer knowledge and data distribution, reducing problems through teamwork, enhanced customer compensation and an internal focus on effective means of customer retention. The bottom line became preventing customer defection. It was translated into a protocol of retain, invest, prevent, which was incorporated into all training programmes, coaching sessions and performance criteria. First and foremost, BA had to retain the customers' business (Jackson et al, 2003). According to Lovelock and Wirtz (2004), BA's Executive Club members receive both air miles toward redemption of air travel awards and points toward silver- or gold-tier status for travel on BA. With the creation of the OneWorld airline alliance with American Airlines, Qantas, Cathay Pacific and other carriers, Executive Club members have been able to earn miles (and sometimes points) by flying these partner airlines too (Lovelock and Wirtz, 2004). Although the airline makes no promises about complimentary upgrades, members of BA's Executive Club are more likely to receive such invitations than other passengers, with tier status being an important consideration. Unlike many airlines, BA tends to limit upgrades to situations in which a lower class of cabin is overbooked, rather than letting frequent travellers believe that they can plan on buying a less expensive ticket and then automatically receive an upgraded seat (Lovelock and Wirtz, 2004). SWOT Analysis (Harvard Business School Press, 2008) British Airways needs to constantly assess the changes taking places in its external environment, and constantly match up its internal environment to match up to those changes. That creates a dynamic business organization that is highly adaptable to change. There are constant changes taking place in the external environment such as customers' aspirations and demands, competitors' behavior and strategies, and technologies, methods and processes. To determine its long-term competitive strategy and product and market positioning, let us conduct a SWOT analysis as follows: STRENGTHS British Airways chief strength is its brand value and image of dependability that has been cultivated over a long period of time. The company receives a strong competitive advantage in the marketplace due to its goodwill and trusted brand name. Secondly, the company has a good organization structure in place, with customer at the center of all organizational activities. The strong customer focus and a quality and service oriented competitive strategy are key to the company's ability to command a premium in price compared to its rivals. WEAKNESSES The key weakness lies in the delivery of customer service. Customers who come with queries or problems, do receive kind and prompt attention, but not necessarily a substantive response that can actually help to resolve the problem. One can infer that the customer service staff of British Airways is either not adequately motivated to resolve the problem, or not trained or equipped enough to be able to handle customer issues more professionally and find solutions. Secondly, the customer feedback indicates that there is a perceptible difference in service in a regular flight compared to a delayed flight that results in better service from the in-flight crew. This is a clear alarm for a company that is solely basing its competitive strategy on customer service and quality. It is evident that something is lacking drastically somewhere in terms of employee motivation or training and development. OPPORTUNITIES As the world population grows and the global economy continues to improve, along with advancement of technologies in aviation, the market opportunity for a good airline is abundant. British Airways has great opportunities within Europe as well as outside Europe. Being one of the leaders in the industry, it enjoys the economies of scale, vast pool of experience and knowledge, and financial and organizational capabilities to expand the business on a global scale. THREATS Increasing levels of competition, entry of cheaper cost carriers who operate at very low margins, and grab the business volumes, are the biggest threat to the survival of large and sophisticated airlines who have an old work culture, employee unions, and slow adaptability to change. The biggest threat to British Airways is that it must not become a dinosaur of the industry, and must continue to evolve and reinvent itself in order to stay forever young and constantly alert, and highly adaptable to change. Read More