Lovelock Ppt Chapter 15
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Chapter 15:
Organizing for Change Management and Service Leadership Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 1
Overview of Chapter 15 Effective Marketing Lies at the Heart of Value Creation Integrating Marketing, Operations, and Human Resources Creating a Leading Service Organization In Search of Human Leadership Change Management
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 2
Effective Marketing Lies at the Heart of Value Creation
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 3
The Service-Profit Chain (Fig 15.1) Internal
External
Operating strategy and service delivery system Loyalty
Service Concept
Target Market
4-7 Customers
Satisfaction Productivity Employees and Output Quality Capability
Revenue growth
Service Value
3
Satisfaction
2
Loyalty
1
Profitability
Service Quality • Workplace design • Job design • Selection and development • Rewards and recognition • Information and communication • Tools for serving customers Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Quality and • Attractive value productivity • Service designed Improvements and delivered to yield higher meet targeted service quality customers’ needs and lower costs Services Marketing 6/E
• Lifetime value • Retention • Repeat business • Referral
Chapter 15 - 4
Links in the Service-Profit Chain Table 15.1
1. Customer loyalty drives profitability and growth 2. Customer satisfaction drives customer loyalty 3. Value drives customer satisfaction 4. Employee productivity and retention drive value 5. Employee loyalty drives productivity 6. Employee satisfaction drives loyalty and productivity 7. Internal quality drives employee satisfaction 8. Top management leadership underlies chain’s success Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 5
Qualities Associated with Service Leaders Understands mutual dependency among marketing, operations and human resource functions of the firm Has a coherent vision of what it takes to succeed Strategies are defined and driven by a strong, effective leadership team Responsive to various stakeholders Value creates through customer satisfaction
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 6
Integrating Marketing, Operations, and Human Resources
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 7
Reducing Interfunctional Conflict One challenge is to avoid creating “functional silos” High-value creating enterprises should be thinking in terms of activities, not functions
Top management needs to establish clear imperatives for each function that defines how a specific function contributes to the overall mission The marketing imperative The operations imperative The human resources imperative
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 8
Defining the Three Functional Imperatives Marketing Imperative Target “right” customers and build relationships Offer solutions that meet their needs Define quality package with competitive advantage
Operations Imperative Create and deliver specified service to target customers Adhere to consistent quality standards Achieve high productivity to ensure acceptable costs
Human Resource Imperative Recruit and retain the best employees for each job Train and motivate them to work well together Achieve both productivity and customer satisfaction
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 9
Creating a Leading Service Organization
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 10
From Losers to Leaders: Four Levels of Service Performance (1) Service Losers Bottom of the barrel from both customer and managerial perspectives Customers patronize them because there is no viable alternative New technology introduced only under duress; uncaring workforce
Service Nonentities Dominated by a traditional operations mindset Unsophisticated marketing strategies Consumers neither seek out nor avoid them
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 11
From Losers to Leaders: Four Levels of Service Performance (2) Service Professionals Clear market positioning strategy Customers within target segment(s) seek them out Research used to measure customer satisfaction Operations and marketing work together Proactive, investment-oriented approach to HRM
Service Leaders The crème da la crème of their respective industries Names synonymous with outstanding service, customer delight Service delivery is seamless process organized around customers Employees empowered and committed to firm’s values and goals
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 12
Dilbert’s Boss Loses Focus and His Audience Fig 15.3
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 13
Moving to a Higher Level of Performance Firms can move either up or down the performance ladder Organizations that are devoted to satisfying their current customers may miss important shifts in the marketplace As a result, they may face difficulties attracting demanding new consumers with different expectations Companies defending their control of their competitive edge may have encouraged competitors to find higherperforming alternatives Organizations with a service-oriented culture may turn otherwise as a result of a merger or acquisition that brings in new leaders who emphasize short-term profits Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 14
In Search of Human Leadership
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 15
Leading a Service Organization Involves Eight Stages (1) Creating a sense of urgency to develop the impetus for change Putting together a strong enough team to direct the process Creating an appropriate vision of where the organization needs to go Communicating that new vision broadly
Source: John Kotter Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 16
Leading a Service Organization Involves Eight Stages (2) Empowering employees to act on that vision Producing sufficient short-term results to create credibility and counter cynicism Building momentum and using that to tackle tougher change problems Anchoring new behaviors in organizational culture
Source: John Kotter Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 17
Leadership versus Management Leadership Concerned with development of vision and strategies, and empowerment of people to overcome obstacles—make vision happen Emphasis on emotional and spiritual resources Works through people and culture Produces useful change, especially non-incremental change
Management Involves keeping current situation operating through planning, budgeting, organizing, staffing, controlling, and problem solving Emphasizes physical resources—raw materials, technology, capital Works through hierarchy and systems Keeps current system functioning
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 18
Setting Direction versus Planning Planning A management process, designed to produce orderly results—not change Setting direction Involves creating visions and strategies that describe a business, technology, or corporate culture in terms of what it should become over long term and articulating feasible way of achieving goal Many of best visions and strategies combine basic insights and translate them into realistic competitive strategy “Stretch”—a challenge to attain new levels of performance and competitive advantage that might as first seem to be beyond the organization’s reach Planning follows and complements direction setting, serving as useful reality check and road map for strategic execution See Service Persp. 15.1 : Can Cirque du Soleil Stretch Further? Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 19
Individual Leadership Qualities Possesses a special perspective Able to believe in their employees and make communicating with them a priority Love of the business Being driven by a set of core value that they infuse into the organization Need not be charismatic, but has to be principled Must have personal humility blended with intensive professional will, ferocious resolve, and willingness to give credit to others but take blame themselves Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 20
Change Management
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 21
Evolution versus Turnaround (1) Evolution involves continual mutations designed to ensure the survival of the fittest Top management must proactively evolve the focus and strategy of the firm to take advantage of changing conditions and the advent of new technologies
Turnaround situations are where leaders seek to bring distressed organizations back from the brink of failure and set them on a healthier course Example: Amex (Service Perspectives 15.2) Can be advantageous to bring in a new CEO from outside the organization
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 22
Evolution versus Turnaround (2) Hurdles that leaders face in reorienting and formulating strategy
Cognitive hurdles Resource hurdles Motivational hurdles Political hurdles
Turning around an organization that has limited resources requires concentrating those resources where the need and the likely payoffs are greatest Example: William Bratton’s 20-year police career in Boston and New York
A firm’s search for growth often involves expansion—even diversification into new lines of business Example: IBM Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 23
Role Modeling Desired Behavior “Management by walking around” Provides insights to both backstage and front-stage operations The ability to observe and meet both employees and customers, and opportunity to see how corporate strategy is implemented on the front line Best Practice In Action 15.2
This approach may lead to a recognition that changes are needed in that strategy A risk of prominent leaders becoming too externally focused at the risk of their internal effectiveness
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 24
Leadership, Culture, and Climate (1) Leadership traits are needed of everyone in supervisory or managerial positions, including those heading teams Effective communication is essential for a leader
Organizational culture Shares perceptions or themes regarding what is important in the organization Shares values about what is right or wrong Shares understanding about what works and what doesn’t work Shares beliefs, and assumptions about why these things are important Shares styles of working and relating to others
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 25
Leadership, Culture, and Climate (2) Organizational climate The tangible surface layer on top of the organization’s underlying culture Factors of influence: ― Flexibility, responsibility, standards that people set, perceived aptness of rewards, clarity people have about mission and values, level of commitment to a common purpose
Creating a new climate for service, based on understanding of what is needed for market success, may require Radical rethinking of HRM activities, operational procedures, and the firm’s reward and recognition policies
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 26
Summary of Chapter 15: Change Management and Service Leadership (1) Service profit chain provides useful summary of behaviors required of service leaders to manage effectively Marketing, operations, and human resource management functions need to be closely coordinated and integrated in service businesses Four levels of service performance
Service Service Service Service
losers nonentitites professionals leaders
Service leadership is not based on outstanding performance within a single dimension, but must cut across marketing, operations and human resources Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 27
Summary of Chapter 15: Change Management and Service Leadership (2) Leading a service organization involves eight stages To be effective, leaders need to understand difference between leadership versus management, as well as setting direction versus planning Transformation of organization can take place in two ways: Evolution Turnaround
Role modeling is one of traits of successful leaders Leaders play a big part in nurturing an effective organizational culture that transforms an organization into a successful one Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 28
Organizing for Change Management and Service Leadership Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 1
Overview of Chapter 15 Effective Marketing Lies at the Heart of Value Creation Integrating Marketing, Operations, and Human Resources Creating a Leading Service Organization In Search of Human Leadership Change Management
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 2
Effective Marketing Lies at the Heart of Value Creation
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 3
The Service-Profit Chain (Fig 15.1) Internal
External
Operating strategy and service delivery system Loyalty
Service Concept
Target Market
4-7 Customers
Satisfaction Productivity Employees and Output Quality Capability
Revenue growth
Service Value
3
Satisfaction
2
Loyalty
1
Profitability
Service Quality • Workplace design • Job design • Selection and development • Rewards and recognition • Information and communication • Tools for serving customers Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Quality and • Attractive value productivity • Service designed Improvements and delivered to yield higher meet targeted service quality customers’ needs and lower costs Services Marketing 6/E
• Lifetime value • Retention • Repeat business • Referral
Chapter 15 - 4
Links in the Service-Profit Chain Table 15.1
1. Customer loyalty drives profitability and growth 2. Customer satisfaction drives customer loyalty 3. Value drives customer satisfaction 4. Employee productivity and retention drive value 5. Employee loyalty drives productivity 6. Employee satisfaction drives loyalty and productivity 7. Internal quality drives employee satisfaction 8. Top management leadership underlies chain’s success Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 5
Qualities Associated with Service Leaders Understands mutual dependency among marketing, operations and human resource functions of the firm Has a coherent vision of what it takes to succeed Strategies are defined and driven by a strong, effective leadership team Responsive to various stakeholders Value creates through customer satisfaction
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 6
Integrating Marketing, Operations, and Human Resources
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 7
Reducing Interfunctional Conflict One challenge is to avoid creating “functional silos” High-value creating enterprises should be thinking in terms of activities, not functions
Top management needs to establish clear imperatives for each function that defines how a specific function contributes to the overall mission The marketing imperative The operations imperative The human resources imperative
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 8
Defining the Three Functional Imperatives Marketing Imperative Target “right” customers and build relationships Offer solutions that meet their needs Define quality package with competitive advantage
Operations Imperative Create and deliver specified service to target customers Adhere to consistent quality standards Achieve high productivity to ensure acceptable costs
Human Resource Imperative Recruit and retain the best employees for each job Train and motivate them to work well together Achieve both productivity and customer satisfaction
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 9
Creating a Leading Service Organization
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 10
From Losers to Leaders: Four Levels of Service Performance (1) Service Losers Bottom of the barrel from both customer and managerial perspectives Customers patronize them because there is no viable alternative New technology introduced only under duress; uncaring workforce
Service Nonentities Dominated by a traditional operations mindset Unsophisticated marketing strategies Consumers neither seek out nor avoid them
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 11
From Losers to Leaders: Four Levels of Service Performance (2) Service Professionals Clear market positioning strategy Customers within target segment(s) seek them out Research used to measure customer satisfaction Operations and marketing work together Proactive, investment-oriented approach to HRM
Service Leaders The crème da la crème of their respective industries Names synonymous with outstanding service, customer delight Service delivery is seamless process organized around customers Employees empowered and committed to firm’s values and goals
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 12
Dilbert’s Boss Loses Focus and His Audience Fig 15.3
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 13
Moving to a Higher Level of Performance Firms can move either up or down the performance ladder Organizations that are devoted to satisfying their current customers may miss important shifts in the marketplace As a result, they may face difficulties attracting demanding new consumers with different expectations Companies defending their control of their competitive edge may have encouraged competitors to find higherperforming alternatives Organizations with a service-oriented culture may turn otherwise as a result of a merger or acquisition that brings in new leaders who emphasize short-term profits Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 14
In Search of Human Leadership
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 15
Leading a Service Organization Involves Eight Stages (1) Creating a sense of urgency to develop the impetus for change Putting together a strong enough team to direct the process Creating an appropriate vision of where the organization needs to go Communicating that new vision broadly
Source: John Kotter Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 16
Leading a Service Organization Involves Eight Stages (2) Empowering employees to act on that vision Producing sufficient short-term results to create credibility and counter cynicism Building momentum and using that to tackle tougher change problems Anchoring new behaviors in organizational culture
Source: John Kotter Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 17
Leadership versus Management Leadership Concerned with development of vision and strategies, and empowerment of people to overcome obstacles—make vision happen Emphasis on emotional and spiritual resources Works through people and culture Produces useful change, especially non-incremental change
Management Involves keeping current situation operating through planning, budgeting, organizing, staffing, controlling, and problem solving Emphasizes physical resources—raw materials, technology, capital Works through hierarchy and systems Keeps current system functioning
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 18
Setting Direction versus Planning Planning A management process, designed to produce orderly results—not change Setting direction Involves creating visions and strategies that describe a business, technology, or corporate culture in terms of what it should become over long term and articulating feasible way of achieving goal Many of best visions and strategies combine basic insights and translate them into realistic competitive strategy “Stretch”—a challenge to attain new levels of performance and competitive advantage that might as first seem to be beyond the organization’s reach Planning follows and complements direction setting, serving as useful reality check and road map for strategic execution See Service Persp. 15.1 : Can Cirque du Soleil Stretch Further? Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 19
Individual Leadership Qualities Possesses a special perspective Able to believe in their employees and make communicating with them a priority Love of the business Being driven by a set of core value that they infuse into the organization Need not be charismatic, but has to be principled Must have personal humility blended with intensive professional will, ferocious resolve, and willingness to give credit to others but take blame themselves Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 20
Change Management
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 21
Evolution versus Turnaround (1) Evolution involves continual mutations designed to ensure the survival of the fittest Top management must proactively evolve the focus and strategy of the firm to take advantage of changing conditions and the advent of new technologies
Turnaround situations are where leaders seek to bring distressed organizations back from the brink of failure and set them on a healthier course Example: Amex (Service Perspectives 15.2) Can be advantageous to bring in a new CEO from outside the organization
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 22
Evolution versus Turnaround (2) Hurdles that leaders face in reorienting and formulating strategy
Cognitive hurdles Resource hurdles Motivational hurdles Political hurdles
Turning around an organization that has limited resources requires concentrating those resources where the need and the likely payoffs are greatest Example: William Bratton’s 20-year police career in Boston and New York
A firm’s search for growth often involves expansion—even diversification into new lines of business Example: IBM Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 23
Role Modeling Desired Behavior “Management by walking around” Provides insights to both backstage and front-stage operations The ability to observe and meet both employees and customers, and opportunity to see how corporate strategy is implemented on the front line Best Practice In Action 15.2
This approach may lead to a recognition that changes are needed in that strategy A risk of prominent leaders becoming too externally focused at the risk of their internal effectiveness
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 24
Leadership, Culture, and Climate (1) Leadership traits are needed of everyone in supervisory or managerial positions, including those heading teams Effective communication is essential for a leader
Organizational culture Shares perceptions or themes regarding what is important in the organization Shares values about what is right or wrong Shares understanding about what works and what doesn’t work Shares beliefs, and assumptions about why these things are important Shares styles of working and relating to others
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 25
Leadership, Culture, and Climate (2) Organizational climate The tangible surface layer on top of the organization’s underlying culture Factors of influence: ― Flexibility, responsibility, standards that people set, perceived aptness of rewards, clarity people have about mission and values, level of commitment to a common purpose
Creating a new climate for service, based on understanding of what is needed for market success, may require Radical rethinking of HRM activities, operational procedures, and the firm’s reward and recognition policies
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 26
Summary of Chapter 15: Change Management and Service Leadership (1) Service profit chain provides useful summary of behaviors required of service leaders to manage effectively Marketing, operations, and human resource management functions need to be closely coordinated and integrated in service businesses Four levels of service performance
Service Service Service Service
losers nonentitites professionals leaders
Service leadership is not based on outstanding performance within a single dimension, but must cut across marketing, operations and human resources Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 27
Summary of Chapter 15: Change Management and Service Leadership (2) Leading a service organization involves eight stages To be effective, leaders need to understand difference between leadership versus management, as well as setting direction versus planning Transformation of organization can take place in two ways: Evolution Turnaround
Role modeling is one of traits of successful leaders Leaders play a big part in nurturing an effective organizational culture that transforms an organization into a successful one Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 28
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