Planning the service delivery system L4

Service Quality and Design: Planning the Service Delivery System

Strategic Choice Perspective and Influence of Strategists

  • Strategic Choice Perspective:

    • Challenges the idea that organizational behavior is entirely predetermined by environmental conditions.
    • Emphasizes that top managers' choices significantly determine organizational structure and processes.

  • Managers' Problems:

    • Entrepreneurial Problem: Defining and developing a specific good or service and identifying a target market or market segment.
    • Engineering Problem: Creating a system that operationalizes management's solution to the entrepreneurial problem.
    • Administrative Problem: Reducing uncertainty within the organizational system.

Moving Through the Cycle: Defenders, Prospectors, and Analyzers

  • Defenders:
    • Entrepreneurial Problem Solution: Seal off a portion of the total market to create a stable set of products and customers.
      • Narrow and stable domain.
      • Aggressive maintenance of domain (e.g., competitive pricing and excellent customer service).
      • Tendency to ignore developments outside of the domain.
      • Cautious growth through market penetration.
      • Some product development closely related to current goods or services.
    • Engineering Problem Solution: Produce and distribute goods or services as efficiently as possible.
      • Cost-efficient technology.
      • Single core technology.
      • Tendency toward vertical integration.
      • Continuous improvements in technology to maintain efficiency.
    • Administrative Problem Solution: Maintain strict control of the organization to ensure efficiency.
      • Financial and production experts form dominant coalition.
      • Tenure of dominant coalition is lengthy; within-promotions.
      • Intensive and cost-oriented planning before acting.
      • Functional structure tendency.
      • Centralized control and long-looped vertical IS.
      • Simple coordination and problem-solving through hierarchy.
      • Performance measured against previous years.
  • Prospectors:
    • Entrepreneurial Problem Solution: Locate and exploit new product and market opportunities.
      • Broad and continuously developing domain.
      • Monitors a wide range of environmental conditions and events.
      • Creates change in the industry.
      • Growth through product and market development.
      • Growth may occur in spurts.
    • Engineering Problem Solution: Avoid long-term commitments to a single technological process.
      • Flexible, prototypical technologies.
      • Multiple technologies.
      • Low degree of routinization and mechanization.
    • Administrative Problem Solution: Facilitate and coordinate numerous and diverse operations.
      • Marketing and R&D form dominant coalition.
      • Dominant coalition is large, diverse, and transitory.
      • Key managers may be hired from outside or promoted from within.
      • Broad planning that cannot be finalized before acting.
      • Tends toward product structure with low labor division and formalization.
      • Decentralized control and short-looped horizontal IS.
      • Complex coordination and conflict resolution through integrators.
      • Performance measured against key competitors.
  • Analyzers:
    • Entrepreneurial Problem Solution: Locate and exploit new product and market opportunities while simultaneously maintaining a firm base of traditional products and customers.
      • Hybrid domain that is both stable and changing.
      • Surveillance mechanisms mostly limited to marketing; some research and development.
      • Steady growth through market penetration and product-market development.
    • Engineering Problem Solution: Be efficient in stable portions of the domain and flexible in changing portions.
      • Dual technological core (stable and flexible component).
      • Large and influential applied engineering group.
      • Moderate degree of technical rationality.
    • Administrative Problem Solution: Differentiate the organization's structure and processes to accommodate both stable and dynamic areas of operation.
      • Marketing and engineering (+production) form dominant coalition.
      • Intensive planning between marketing and production concerning stable portion of domain; comprehensive planning among marketing, engineering, and product managers concerning new products and markets.
      • Structure combining both functional divisions and product groups.
      • Moderately centralized control system (vertical + horizontal feedback loops).
      • Very complex coordination (some conflict resolution through product managers, some through hierarchical channels).
      • Performance based on effectiveness and efficiency.

Importance of Perspective in Planning the Service Delivery System

  • Survival of the Fittest vs. Survival of the Fitting:
    • Living creatures are in constant struggle for existence, and natural selection prefers the fittest.
    • Survival of the fitting emphasizes innovation.

Innovation

  • Innovation Fitness:

    • Early Birds (Innovators)
    • Parrots (Fast Movers)
    • Bears (Late Adopters)
    • Frogs (Bureaucrats)

  • Early Birds (Innovators):

    • Valuable companies
    • Profit is not their primary concern
    • Attempt at creating value
    • Problem: very few are successful
    • Risks are high.
    • If an early bird survives, its reputation will usually be that of the grand innovator.

  • Parrots (Fast Movers):

    • Repeat what others have already said
    • Rarely create value and never create new knowledge
    • Replicate the early bird’s innovation and become profitable by delivering it well
    • Low spending on R&D but high on advertising
    • Customer-focused: offer new things only when they are verified

  • Bears (Late Adopters):

    • Need a long time to catch up
    • Highly efficient primarily achieved through low costs
    • Bringing only the well established values to their customers at good prices
    • Often adhere to some sort of traditional values, such as maintaining highstreet branches in the era of e-banking

  • Frogs (Bureaucrats):

    • Do not change and they will prevent changes if they can help it
    • Their strength is their position
    • Bureaucratic and spend most of their effort on intriguing with other Frogs how to keep up the status quo and prevent newcomers from entering their market
    • Really large and in control
    • Only survives in a habitat that does not change much

  • Achieving and Revising Harmony:

    • Early Birds are not the best and Frogs the worst!
    • In different habitats different animals survive!
    • Organizations must always consider their habitat and their innovation fitness; if these two are not in harmony, they must establish a new harmony by changing their fitness, or changing their habitat, or both  dynamic harmony

New Frontiers of Innovation

  • Prahalad and Ramaswamy (2003)
    • Experience space
    • Product space
    • Solution space
    • Locus of innovation
    • Locus of competence
    • The Firm and Its Supply Base
    • Extended Enterprise
    • Enhanced Network of Competence Including Consumer Communities

Key Questions

  1. What is meant by ‘survival of the fittest vs. survival of the fitting’?
  2. Is innovation more likely to happen in small and agile or large and powerful organizations?
  3. Can you explain the notion of strategic choice perspective?
  4. Peter Drucker once said: “Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window. The best way to predict the future is to create it.” Please explain.
  5. Managers are said to face three problems: (i) the entrepreneurial, (ii) the engineering , and (iii) the administrative problem. Please explain.