Designing Service

Processes to Unlock Value

Designing Service
Processes to Unlock Value
Second Edition
Joy M. Field

Designing Service Processes to Unlock Value, Second Edition

Copyright Business Expert Press, LLC, 2017.
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted in any form or by any
meanselectronic, mechanical, photocopy, recording, or any other
except for brief quotations, not to exceed 400 words, without the prior
permission of the publisher.
The Center for Services Leadership (CSL) is a research center within
the W. P. Carey School of Business at Arizona State University (ASU)
and an outreach arm from ASU to the business community and the
global academic community. The CSL has established itself as a globally
recognized authority on how to compete strategically through the
profitable use of services.
First published in 2012 by
Business Expert Press, LLC
222 East 46th Street, New York, NY 10017
www.businessexpertpress.com
ISBN-13: 978-1-63157-395-8 (paperback)
ISBN-13: 978-1-63157-396-5 (e-book)
Business Expert Press Service Systems and Innovations in Business and
Society Collection
Collection ISSN: 2326-2664 (print)
Collection ISSN: 2326-2699 (electronic)
Cover and interior design by Exeter Premedia Services Private Ltd.,
Chennai, India
Second edition: 2017
10 9 8 7 6 5 4 3 2 1
Printed in the United States of America.

To family and friendsthe value co-creators in my life.

Abstract
The service process design landscape is changing, with many of the
previous limitations disappearing on how and by whom services are
delivered. Opportunities for new service design configurations are

being supported, to a large extent, by technology-enabled innovations;

many tasks p
reviously performed by the service provider may now be
performed by either the customer or the service provider. As a result,
customers are playing a more active role in the service process, not only
through self-service but also by providing information to the service provider to create a more personalized service experience. Designing Service
Processes to Unlock Value explores how service processes can be designed
to leverage the expanding range of opportunities for service providers and
customers to co-create value. Readers will learn about frameworks for
value co-creation and models for designing all types of service processes,
as well as the unique challenges of designing knowledge-intensive services. And with the growing number of alternatives for designing service
processes and determining who performs the various service tasks, service
performance outcomes are increasingly dependent on the knowledge,
skills, and abilitiesthat is, capabilitiesof both service providers and
customers. Thus, the book concludes with approaches to unlock these
capabilitiesand further boost value co-creation.
The 2nd edition of Designing Service Processes to Unlock Value includes
new and updated examples of technology-enabled innovations that
provide unprecedented flexibility in service process design and continue
to transform how service providers and customers co-produce services.
At the same time, readers will see how these innovations can have
importantand sometimes surprisingimpacts on the nature of the
benefit and cost trade-offs and synergies that determine value co-creation.

Keywords
customer, innovation, processes, self-service, services, service inventory,
service process design, service provider, value co-creation

Contents
Acknowledgments....................................................................................xi
Chapter 1 Introduction......................................................................1
Chapter 2 The Changing Nature of Service Processes..........................9
Chapter 3 Value Co-Creation in Service Processes............................47
Chapter 4 Knowledge-Intensive Services...........................................87
Chapter 5 Unlocking Capabilities...................................................111
Notes133
References139
Index149

Acknowledgments
No project is ever truly a solo effort, and I would like to thank everyone
who has helped and encouraged me on both editions of the book.
First, thanks to Scott Isenberg from Business Expert Press, who suggested I write a book on a topic I am passionate about, which is how
Icame to write Designing Service Processes to Unlock Value. Scott fielded
my many questions and assuaged my concerns during the process.
My colleagues Linda Boardman Liu and Mark Davis and my husband
Richard Field read the book from cover to cover and provided constructive
feedback and ideas for improvement. They were enthusiastic supporters
of this project along the way, for which I am extremely grateful.
I also want to acknowledge the role my students have played in the
writing of this second edition. The ideas and types of examples they found
most interesting are the ones I have emphasized and expanded in this
edition.
And finally, to my familyhusband Richard and sons Ben, Evan,
and Jonall my love and gratitude for everything you have brought to
my life.
Joy Field
October 2016

CHAPTER 1

Introduction
As firms strive to grow their revenues and profits, they increasingly look
to services as a source of competitive advantage. Traditional service process designswhere the service provider takes the lead and the customer
is the recipient of the service producthave given way to a different
paradigm in which the service provider and customer work together to
co-create value. Oftentimes this involves the use of innovative technologies that support new ways of delivering services. Service providers who
embrace this model are enhancing their competitive position through
service processes that provide more value to customers and higher profits
to the firm.
But what exactly are service providers and customers doing to unlock
the tremendous value co-creation potential from this new approach to
service process design? Based on my research and experience, I wrote this
book to help answer that question and to share the stories of how service
firms and their customers are leveraging the new opportunities to design
state-of-the-art service processes while confronting the inevitable challenges that arise.
Before continuing, it is important to be clear about what is meant by
a service process. Processes, in general, can be defined as any transformation that converts inputs to outputs.1 Of course, for business p
rocesses,
the goal is not just to convert inputs to outputs, but to add value in
the process. The elements of the transformation include a network of
activities or tasks to be performed, along with the process resources
(labor, capital, information) that are necessary to complete the tasks. For
a service process, in particular, the customer provides significant inputs
[resources] into the production [transformation] process.2 Customer
inputs include self-inputs (themselves, their labor), tangible belongings
(their property), and/or customer-provided information. In other words,

DESIGNING SERVICE PROCESSES TO UNLOCK VALUE

customers and their resources are always involved in some way in their
own service process.
An example of a supermarket grocery shopping process will help to
make these concepts more concrete. For illustrative purposes, assume
that the transformation process starts when customers arrive at the
supermarket and ends when they complete their shopping. Inputs to the
process include customers, their shopping lists, and payment method.
The shopping process, in brief, involves finding the desired items, placing them in a cart (resource), and checking out. Other resources are the
store itself, products on the shelves (or in the freezer, refrigerator, behind
the counter), employees, information (e.g., signs indicating what types of
products are in each aisle), and various technologies (e.g., for checkout).
The outputs (or service products) are the bagged and purchased groceries and (hopefully) satisfied customers.
But the in-store grocery shopping process is not immune to the
changes going on in the increasingly dynamic business environment for
services. In fact, the industry is undergoing the type of paradigm shift
mentioned above. Traditional supermarkets are facing escalating competition due to the proliferation of store formats (convenience store to
super-store) and from online delivery channels. Grocery services delivered
through an online channel are now being offered by brick-and-mortar
chains as well as online-only players such as Amazon and Peapod. More
recently, online firms such as Blue Apron, Plated, and Hello Fresh deliver
fresh ingredients to conveniently prepare meals at home, providing the
exact amount of ingredients needed with no waste. In addition, changes
to in-store processes are altering the way in which the service providers
and customers co-create value; the introduction of new technologies
customer-operated scanners, self-service checkout, digital kiosksallow
(or, in some cases, require) customers to perform tasks previously done by
store employees. However, the ongoing example of the self-service checkout should serve as a cautionary tale of the challenges firms encounter
when changing the way services are delivered. In fact, a good starting
point for identifying the opportunities and challenges facing service process designers is with self-service technologies and their incorporation
into the service process.

 Introduction 3

Why Customers Love Automatic Teller Machines

But Not Self-Service Checkout
Consider two service processes with which were all familiar: personal
banking and supermarket checkout. For years, both processes have
had a self-service optionautomatic teller machines (ATMs) and self-
service checkoutsyet ATMs have been met with a much higher level of
customer acceptance and use. Why is that?
To answer the question we need to look at how each of these self-
service options creates value for the participants in the service process and
how it compares to the full-service option. Value is created when benefits (including access to resources and capabilities) are perceived to be
greater than costswhich include money, time, and effortassociated
with obtaining these benefits.3 For a service process to be provided by
the firm and used by the customer, both parties must individually realize
value. However, the value the firm and customers acquire from the s ervice
process, are not independent from each other. Because of this, and due
to the significant inputs that customers have into the service process, it
follows then that joint firm and customer value is necessarily co-created
through the interactions of service providers with the customers themselves, their property, and/or their information. (Note that co-creation is
different from co-production; co-production refers specifically to the labor
contributed by participants in the service process to complete service
tasks.) With this in mind, lets contrast value co-creation for self-service
banking using an ATM with self-service checkout at the supermarket.
From the perspective of a bank or a supermarket, these self-service
technologies reduce the number of employees needed by transferring service tasks to the customers. So the customers unpaid labor replaces the
paid labor of the bank teller and supermarket cashier. This labor cost
reduction benefit is offset by the costs to buy, install, support, and maintain the ATMs and self-service checkouts. Support and maintenance
costs for ATMs include access to employees by phone or other means
when customers have questions or problems, collection of deposits and
restocking cash, and preventative maintenance or unscheduled repair of
a malfunctioning unit. And self-service checkouts still require employee

DESIGNING SERVICE PROCESSES TO UNLOCK VALUE

support, with one employee monitoring several machines to aid customers, prevent theft, and verify purchases with age restrictions. Although
support and maintenance costs are somewhat variable by customer volume, the cost of buying and installing an ATM or self-service checkout
unit is essentially fixed. As a result, the value of these technologies to the
firm increases as customer utilization of the self-service option increases
and fewer employees are needed.
While the basic value calculations from the firms standpoint are similar for ATMs and self-service checkouts, they differ radically from the
customers point of view. First, think about what banking services are
offered by an ATM. ATMs are designed so that only standardized and
simple transactions such as withdrawing cash or depositing checks can be
completed by the customer through this self-service channel. As a result,
the customer interface with the ATM is correspondingly standardized
and simple, making it easy for the customer to learn and use. For other
banking services such as error resolution or renting or accessing a safe
deposit box, the customer must still interact with a bank employee either
due to the complexity of the service or for security reasons. Because the
standard and simple services available from ATMs are also the most common ones, customers have the choice of using the ATM rather than a
teller for a majority of their banking needs.
However, service task types are not as neatly separable when using
self-service checkouts. While scanning barcodes on prepackaged boxes or
cans is straightforward, the checkout process for fresh fruits and vegetables is more complicated and involves coding in the item identifier and
the number or weight of the items. In fact, a study of checkout times at
a discount retailer has found that for a similar basket of items, it takes
an average of 50 percent longer for self-service checkout compared to
full-service checkout with cashiers who are trained to efficiently handle all
types of items. And to add to their burden, self-service customers are often
responsible for performing additional steps not part of the full-service
processsuch as weighing the individual itemsthat help p
revent theft.
This is the situation faced by the typical customer with a mix of items
when deciding whether to use self-service or full-service checkout. Compared with ATMs that limit self-service transactions to ones that are standardized and simple for the customer to perform, self-service checkout

 Introduction 5

involves a wider range of task difficulty requiring more customer time and
effort, which many customers, frankly, find intimidating.
But what about the benefits to customers? How do ATMs compare
with self-service checkout? The most obvious benefit of ATMs is their
convenience in terms of time and place; customers can access ATMs 24/7
at branches as well as other locations close to work and home. In fact, as
the network of ATMs grows and accessing an ATM becomes even more
convenient, the value of this self-service channel to the customer increases
in what is known as a network effect. Customers are no longer limited to
bankers hours for common transactions. In contrast, self-service checkout is available only during supermarket store hours and only for customers shopping at that particular store. In addition, three quarters of the
respondents to a 2015 Harris poll for Digimarc said that they sometimes
avoid self-service checkouts, often because of anticipated technical problems.4 And another survey found that one in three shoppers have actually
walked out of a store without the items they intended to buy due to a bad
experience with a self-service checkout.5
Ironically, because many customers do not perceive that the benefits outweigh the costs, customers who are comfortable using self-service
checkout may benefit from an overall underutilization of this channel
and, therefore, have brief or no waits. And even customers who would
otherwise be willing to use self-service checkout with a short line over
full service with a longer line might think twice before choosing self-
service. After all, any customer ahead of them in the self-service line is an
unknown variable compared to the more reliable checkout process with
a cashier.6 Underutilization, in turn, negatively impacts the value of selfservice checkout to the company as the expected employee labor reductions to offset the costs of the technology fail to materialize. To make
matters worse, any negative experiences with other customers in self-
service checkout lines spill over to perceptions of poor service quality
provided by the supermarketeven if no supermarket employee was
involved in the p
rocess.7 The high perceived value of ATMs by customers,
in contrast, contributes to the co-creation of value with the bank through
high utilization, lower labor costs, and an expanded network of ATMs.
However, years of experience with self-service checkout has led to a
better understanding of how customers perceive and use the technology.

DESIGNING SERVICE PROCESSES TO UNLOCK VALUE

As a result, improvements in both the technology and in-store self-service

checkout process have attempted to change the value equation for the
customer by making self-service checkout more attractive. Many supermarkets now limit self-service checkout to customers with only a few
items, positioning them more as a quick alternative to the full-service
option than as a substitute for cashiers. Newer self-service checkout
screen designs have decreased the time to page through produce codes by
highlighting the top-selling fruits and vegetables first or, if the customer
scans a loyalty card, their own previous purchasing history.8 Other innovations include moving this time-consuming and complicated part of the
checkout process offline by providing scales with barcode printers next to
the fresh fruits and vegetables. Supermarket chains such as Stop & Shop
have taken the self-service concept further through the introduction of
in-store SCAN IT! scanners and smartphone app that allows customers to
scan and bag their groceries while they shop and quickly check out using
the app.9 And Tesco has even redesigned its self-service checkouts to be
friendlier, more helpful and less talkative by softening their phrasing
and eliminating phrases deemed as unhelpful (and annoying) by customers, such as please take your items.10
Rather than attempting to bolster the perceived value of self-service
checkout, other supermarkets have gone in the opposite direction. Large
chains such as Costco, Jewel-Osco, and Albertsons have removed some or
all of their self-service checkouts, citing doubts as to whether the technology was benefitting their customers.11 According to Craig Jelinek, Costco
CEO, Costco is eliminating self-service checkout because employees do
a better job.12 Arguably, these firms executives see more value co-creation
resulting from the full-service checkout process than by enhancements to
the self-service checkout technology.
As the examples of personal banking and supermarket checkout
clearly show, service process design choices have a significant impact on
howand to what extentvalue is co-created by the service provider
and customer. Focusing on the self-service options for each of these services highlights how technology-enabled service innovations are altering
the service process design landscape by allowing customers to perform
what were previously service provider tasks. However, as the case of the
supermarket self-service checkout illustrates, the movement toward more

 Introduction 7

self-service does not necessarily lead to an overall increase in value. In

fact, some firms (such as Costco) have concluded that moving away from
self-service generates greater net value when jointly considering their own
value calculation and that of their customers. And that Stop & Shop
made a different service process design choice by augmenting, rather than
removing, the self-service option reflects the diversity of options firms
now have.

A Roadmap for the Book

By the end of this book, readers should understand how firms can gain
a competitive advantage by designing service processes to make the most
of the extraordinary opportunities for value co-creation available. Our
journey begins by examining the changing nature of service processes in
Chapter 2. Three trendsthe rapid pace of technology-enabled service
innovation, the expanded role of the customer, and the increasing use
of service inventoryare largely responsible for the explosion of service
process design options that are enabling service providers and customers to integrate their resources to co-create value in ways previously
unimaginable.
We then delve further into the concept of value and what it means
to each of the participants in the service process. The value co-creation
framework in Figure 3.1 shows how the service process design brings these
participants together to co-create value. The value co-creation measurement model then identifies the benefits, costs, trade-offs, and synergies
to consider when assessing value co-creation. Chapter 3 concludes with a
step-by-step process for designing service processesincluding the trends
from Chapter 2to unlock value co-creation.
Next in Chapter 4, we focus on knowledge-intensive services such
as managerial and technology consulting, health care, legal services,
and education in which the service process activities and service products are primarily centered on information and information flows. These
complex and highly customized services are singled out because they
present a few unique challenges for service process designers: although
both the s ervice provider and customer possess information necessary for
the co-production of the knowledge-based service product, information

DESIGNING SERVICE PROCESSES TO UNLOCK VALUE

transfers between the parties are often difficult and costly (i.e., sticky). In
addition, the actual service need is not always apparent at the start of the
process, so knowledge-intensive service contracts are often left incomplete
and subject to renegotiation in real time. With these challenges in mind,
Box 4.2 provides guidance for designing knowledge-intensive service processes that complement the design recommendations in Chapter 3.
Finally, the roadmap leads to the foundation of value co-creation
the capabilities of the service participants. In other words, unlocking value
co-creation hinges on unlocking the capabilities of the service providers
and customers. This occurs by integrating service provider and customer
resourcesthemselves, information, equipment, materialsto improve
the knowledge, skills, and abilities of each party. In Chapter 5 we see how
service providers are unlocking the capabilities of customers; customers
are unlocking the capabilities of service providers; and, most importantly,
how the parties jointly unlock capabilities with a self-reinforcing cycle of
capability synergies. This book concludes with a series of questions that
help service process designers determine which capabilities to unlock and
how.
I hope you find our journey through this book to be one of value
co-creation!

Index
After-sales support services, 8385
Assemble-to-order process, 35, 4243
Automatic teller machines (ATMs),
37, 9, 27, 113
Back office support, 1720
Balanced scorecard approach, 7475
Barren organizational context, 95
Building blocks, knowledge-intensive
services, 8997
information processing and
transfer, 9093
information stickiness, 9395
information transfer and processing
costs, 9597
Business intelligence (BI) platforms,
126
Business-to-customer (B2C) services,
48
Call center management software, 16
Capabilities, unlocking
customer capabilities, 116117
customer-driven service innovation,
122123
firm, within the, 114115
self-reinforcing cycle, 127
service inventory revisited,
119122
service inventory, 126
service product innovation,
124126
service supply chain, 127128
Capability synergies, 124128
Capability-building, 58
Co-producers, customers and service
providers, 3, 2527
Corporate social responsibility (CSR)
initiatives, 59
Cost, 53, 5758
Customer benefits, 4850

Customer co-production, motivating,

2829
Customer inputs, 1
Customer relationship management
(CRM), 16
Customer service, 11
Customer time and effort, 53
Customer waiting time, 5455
Customer, 2527
Customers perspective, 4856
Customer-driven service innovation,
122123
Customer-facing tasks, 1617
Customer-perceived value, 5556
Customer-specific co-created, 3637
Customer-specific service inventory,
3541
Data-matrix-coded sponge (DMS)
system, 17
Demand volume, 41
Digital kiosks, 2, 1314
Digital service inventory, 3435
Electronic data interchange (EDI), 18
Electronic medical record (EMR)
systems, 60, 66, 88
Employee productivity, 61
Fertile organizational context, 95
First-of-a-kind (FOAK) program, 21
Flexibility, 4950
Incomplete contract, 89
Information processing and transfer,
9093
In-store grocery shopping process, 2
Intangible benefits and costs, 7172
Interactive voice response (IVR)
systems, 1112, 16

150 Index

Knowledge, skills, and abilities

(KSAs), 25, 57, 111
Knowledge-intensive services
building blocks, 8189
information processing and
transfer, 9093
information stickiness, 9395
information transfer and processing
costs, 9597
service process boundary-setting,
97104
service supply chain, 107109
Lead users, 122
Make-to-anticipated-order process,
37, 4243
Make-to-order process, 37, 4243
Managed service providers (MSPs),
108
Measurement model, value
co-creation, 7678
Net present value (NPV), 71
Netflix prize, 21
Nonfinancial drivers, 5860
Online
learning, 12
retailers, 121
Open innovation process, 20, 122
Physical service inventory, 3435
Quick response (QR) code, 17
Recurring services, 99102
Remote monitoring super-service, 31
Remote monitoring technologies, 52
Repeatability, 4142
Retained surgical items (RSIs), 17
Return on investment (ROI), 7172
Return on quality (ROQ) approach,
7274
Self-reinforcing cycle, 127
Self-service model, 98

Self-service technologies (SSTs),

1015, 58, 92
Service innovation, 50
Service inventory, 33, 4144, 6770,
126
customer-specific service inventory,
3541
digital service inventory, 3435
physical service inventory, 3435
positioning, 4244
revisited, 119122
undifferentiated service inventory,
3541
valuable service inventory, 4144
Service process boundary-setting
recurring services, 99102
single service encounters, 9799
Service process design, 5556
Service processes, changing nature of
co-producers, customers and service
providers, 2527
customer co-production,
motivating, 2829
customer, role of, 2432
customer-specific service inventory,
3541
physical and digital service
inventory, 3435
service inventory, use of, 3245
service process, 32, 4445
super-service, 3031
technology-enabled service
innovation, 924
undifferentiated service inventory,
3541
valuable service inventory, 4144
Service processes, co-creation in
balanced scorecard approach,
7475
customer benefits, 4850
customer time and effort, 53
customer-perceived value, 5556
intangible benefits and costs, 7172
measurement model, 7678
nonfinancial drivers, 5860
return on quality approach, 7274
service process design, 5556
service provider revenues and costs,
5758

 Index 151

serviceprofit chain, 6061

three trends, 6670
trade-offs, 5153
unlock value co-creation,
7985
value co-creation framework,
6165
value co-creation, measuring, 66
value-based lens, 7071
Service product innovation, 124126
Service provider capabilities,
119124
Service provider revenues and costs,
5758
Service providers perspective,
5660
Service providers, technologies for,
1522
back office support, 1720
customer-facing tasks, 1617
Service quality, 48
Service supply chain, 10, 2324,
107109, 127128
Serviceprofit chain, 6061
Shinsei bank, 26
Single service encounters, 9799
Social business model, 127
Social, mobile, and location
(SoMoLo) customer
information, 121
Sticky information, 9395
Supermarket grocery shopping
process, 2
Super-service, 3031

Talent management processes, 114

Tangible benefits, 71
Technology-enabled service
innovations, 924, 6667
self-service technologies, 1015
service providers, technologies for,
1522
service supply chain, 2324
Text analytics, 1819
Trade-offs, 28, 5153
Traditional service process designs, 1
Training (e-learning), 12
Undifferentiated service inventory,
3541
Unsourcing firms, 128
Valuable service inventory
demand volume, 41
repeatability, 4142
service inventory positioning,
4244
Value, 3
Value co-creation framework, 6165
customer, expanded role of, 6667
service inventory, increasing use of,
6770
technology-enabled service
innovation, 6667
Value co-creation, 25
Value-based lens, 7071
Vendor managed inventory (VMI), 31
Zone of opportunity, 3839, 68