Shift Happens…
Turnarounds
Early identification of problems
Who is authorized/expected to act?
When is the unit ‘out of the woods’?
Does the company learn from
failures?
Are failures positives/negatives?
Copyright © 1989-2012 Jens Mueller [email protected]
Turnaround
Is leadership tainted?
Can the charismatic leadership rally
the troops?
If strategy can be redefined quickly do it! Otherwise, act quickly anyway.
Divest assets, divest people.
Copyright © 1989-2012 Jens Mueller [email protected]
Signs of Trouble Ahead
Communication problems
Downward revision of budgets
Missing performance targets
Cashflow and liquidity issues
Staff turnover
Board resignations
Changes in banks/lenders
Copyright © 1989-2012 Jens Mueller [email protected]
Recovery Strategies
Fast and furious; absolutely no time
to waste on niceties
Direct hands-on involvement of
directors and CE; “in your face”
management
More frequent meetings with CE and
managers
Less focus on investment, more
emphasis on cutting losses
Copyright © 1989-2012 Jens Mueller [email protected]
Service Opportunities
Historic Shifts
Agriculture: Most activity occurs
within one farming unit
Industrial Revolution: Functional
separation and specialization causes
units to trade with each other
Services: Transformation of time,
space and location
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Historic Shifts
Prosumers: Use of more
discretionary time to service
ourselves
Service includes knowledge,
organization and management
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Changing Demographics
Before the French Revolution, Paris
had two restaurants
Shortly afterwards, there were more
than 500 restaurants
Why?
Copyright © 1989-2012 Jens Mueller [email protected]
New Manufacturing Firms
Is General Motors a manufacturing
firm, when it has become one of the
world’s largest leasing firms?
2/3s of the cost of a North Sea oil rig
is attributable to service activities.
Copyright © 1989-2012 Jens Mueller [email protected]
“New” Manufacturers
Value Added Services
Finance, Leasing, Insurance
Internal Manufacturing
Finance, Accounting, Legal, IP, R&D
Business Services
Consulting, auditing, advertising, waste
management
Distribution Services
Wholesaling, Retailing, Repairing
Copyright © 1989-2012 Jens Mueller [email protected]
Manufacturing as Driver
New VCRs create demand for
Movie productions
Movie rental
VCR repair services
Upgraded programme schedules, TV
Guide, etc.
Repackaged old movies, TV series reruns, etc.
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Service as Driver
Type and frequency of repair
services provide information to
manufacturers about failure,
changing consumer tolerances, price
sensitivities
Better medical care creates a need
for more ancillary products, changes
in home designs, etc.
Copyright © 1989-2012 Jens Mueller [email protected]
Stature of Services
“Servitude” – low value work?
Traditionally performed by staff with
lesser qualifications
Everyone claims expertise
US 1956: More white-collar workers
than blue-collar workers
Major growth in professional jobs
Copyright © 1989-2012 Jens Mueller [email protected]
Stature of Services
Some services appear to be “common
sense”
Is it more prestigious to manufacture
a new computer chip, or to manage
the Olympic Games in Sydney?
Stature improves with Knowledge
Transfer
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Knowledge Transfer
Compare the impact of a nurse
instructing a patient how to measure
his insulin level, with a nurse
explaining to the same patient why
blood glucose levels rise and fall
throughout the day, and how the
levels can be fine-tuned by the
patient’s eating and activity habits.
Copyright © 1989-2012 Jens Mueller [email protected]
Stature of Services
Vast range on the status scale:
Used car salesperson
Teacher
Politician
Priest
Neurosurgeon
Undertaker
Autopsy technician
Panelbeater
Pilot
Copyright © 1989-2012 Jens Mueller [email protected]
Stature of Services
Implications of stature:
Developing and maintaining a ‘culture’
Recruiting and retention
Motivation of the workforce
Societal/community appreciation
Government intervention
Voluntary support by education
providers
Copyright © 1989-2012 Jens Mueller [email protected]
Importance of Services
How many cars does a buyer
consume versus how much can she
eat or drink?
Fast adaptation to changing needs:
Ageing, 2-income families, travel,
mid-career education, single heads
of household, etc.
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Ageing
Which services are created/ changed
to adapt to ageing consumers?
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2-Income Families
What service demand is created by
the growing number of 2-income
families with later childbearing?
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Singles
What services are more attractive to
singles than to families?
Copyright © 1989-2012 Jens Mueller [email protected]
Service versus
Knowledge Economy
How much new knowledge is built
into the service?
Is knowledge transmitted to the
customers by experts?
Can the knowledge be
institutionalized (i.e. automated,
stored, processed)?
Copyright © 1989-2012 Jens Mueller [email protected]
Example: Scuba Diving
What is the service?
What is transmitted to the customer?
Where is the expertise?
Why do ‘normal’ people want to sink
below the waterline?
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Business Challenges
Competition much fiercer than
before
Worldwide competition is present
everywhere
Intangible products (= services) are
most affected
Services is all about
competition
Copyright © 1989-2012 Jens Mueller [email protected]
Services are Booming
In the USA, services represent 70% of
the GDP
Service industries have grown at
twice the rate of other industries
Low barrier of entry attracts many
new industry participants
Copyright © 1989-2012 Jens Mueller [email protected]
Uniqueness of Services
Intangibility
Simultaneity/Inseparability
Perishability
Heterogeneity
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Intangibility
Communication about the
services is difficult
Managers and employees may vary in
their perception of that the services
should entail
Setting prices maybe difficult,
because costs and value perceptions
may vary greatly
Copyright © 1989-2012 Jens Mueller [email protected]
Simultaneity/Inseparability
Produced and consumed
simultaneously
No opportunity to evaluate prior
to purchase
Building rapport, trust and
relationship is essential
Customers are present when the
services are rendered: good/bad?
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Perishable
No inventoring
If demand exceeds capability,
revenue is permanently lost
Copyright © 1989-2012 Jens Mueller [email protected]
Heterogenous
No units of output are ever identical
Skills, resources, service
requirements, expectations and
temperaments vary
How can customer
expectations be
predictable?
Copyright © 1989-2012 Jens Mueller [email protected]
Competition
Rivalry among existing firms
Potential new entrants
Threat of substitute products
Bargaining power of suppliers and
buyers
Copyright © 1989-2012 Jens Mueller [email protected]
Intra-Industry Competition
Because services are hard to evaluate
prior to consumption, heavy reliance
upon image
Aggressive marketing forestalls
competition
Routinely low barriers of entry
Copyright © 1989-2012 Jens Mueller [email protected]
Substitute Services
Identify alternative in the target
market
Which ones are more/less
substitutes?
High/low switching costs
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Do It Yourselfers
Can easily do some services yourself
Where is the perceived value in
buying services?
What makes customers switch to
professional providers?
Copyright © 1989-2012 Jens Mueller [email protected]
Service Economics
Percentage of services in the total
sale:
Gasoline
Restaurant
Air travel
Haircut
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Customer Presence
Environment is not discreet
Customers usually play an active part
Can customers be motivated to
participate?
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Concentration/Diversificatio
n
Create value through focus?
Do diverse business units stimulate
management?
Can a company rely on core
competencies alone?
Copyright © 1989-2012 Jens Mueller [email protected]
Service Profit Chain
Customer targeting
Customer loyalty determines profits
Customers to recruit more
customers
Frontline employee marketing
Satisfied employees are loyal and
productive
Know your customers and needs
Copyright © 1989-2012 Jens Mueller [email protected]
Service Profit Chain
Profit and Customer Loyalty
Employee Loyalty and Customer
Loyalty
Costs of employee turnover
Assurance and expertise
Off-the-job interaction
Employee Satisfaction and
Customer Satisfaction
Ability and authority to get results
Copyright © 1989-2012 Jens Mueller [email protected]