Formalising service

1. Formalising service Drs. Thijs Ott de VriesPh. D. student, KUB/OrdinaSIKS/SOBU Symposium, Tilburg, 23 November 2001

2. Overview • Introduction – service formalisation • General plan of study • Context – when to formalise, when not?

3. Service formalisation • “A service is an activity or a series of activities which take place in interactions with a contact person or a physical machine and which provides consumer satisfaction.” (Lehtinen’s definition of service, in Gronroos: Service Management and Marketing) • Why study service formalisation? • ‘Sourcing’ trend (BSP, BPO, ASP, …) • SLA’s in contracts, more or less formal • Degree of automatic support increasing (internet) • Example • Morneau Sobeco (Canadian pension company) and Deloitte & Touche together offering pension handling to companies • Using rigid SLA proposal with high non-conformance penalties

4. Analist prediction of increasing importance of ‘sourcing’(Gartner, nov 2001) “By 2005 ... Users will select business solutions — not IT solutions — that are pre-configured to meet specified vertical and process requirements. The leading ESPs* will consort with a variety of technology and service vendors to deliver holistic, pre-configured business solutions in a value chain approach.” *ESP: External Service Provider

5. Assumptions about result of this study • Formalising service descriptions: • improves clarity in goals, trade-offs and agreements; hence better management & monitoring; • facilitates ‘sourcing’ processes (e.g. [Parish] on SLA’s); • is needed for electronic (internet) service-provision. • Background, link with other work activity: • Develop a ‘consultancy method’ for formalising a service in practice • Based on formal service ‘language’ • Method is not part of this project

6. Overview • Introduction – service formalisation  General plan of study • Context – when to formalise, when not?

7. Develop characterisation and scope of services that can be formalised; identify service properties (broad literature study) Develop formal model for these services Case study/tool support (not yet decided) for validating/supporting formalisation Approach • Currently in step 1; broad study & scope

8. Disciplines considered, so far Focus of talk Servicemarketing & operations Service quality models Servicetypologies Serviceformalisation Process modelling & workflow Legal argumentation Defeasible , deontic logics Gametheories LAP & some semiotics Economic contract theories Logic Law

9. Overview • Introduction – service formalisation • General plan of study  Context – when to formalise, when not?

10. Current studying input from: Transaction cost & economic contract theory Service management & marketing Auditing theory What service properties make a service amenable to formalisation?

11. Transaction cost theory Transaction cost theory - A firm's decision to produce a product within the organisation or to buy it from the market is determined by production costs and by transaction costs. Transaction costs are the costs to gather information, contract and to arrange the transaction. Frequency of transactions – the need for formalisation may be higher when transactions are frequent; the ROI of formalisation may be earlier Uncertainty and complexity of the transaction – formalisation may be harder (and hence more costly) or impossible to undertake completely Asset specificity – 1) formalisation may not lead to a resuable solution (no standardisation)

12. Service typologies • Many attempts at classifying services exist, each with their own goal of classification (Gronroos; survey by Cook, Goh, Chung). Mixes of typologies have also been investigated (Lovelock). • Service organisation typology (Mills & Margulies) • Operational services classification (Lovelock & Yip)

13. Service organisation typology(Mills & Margulies) • Goal: classify organisations on the interface between the employee and the customer, geared primarily at the organisation’s work flow. • Three types of organisation: • maintenance-interactive (e.g. banks) • task-interactive (e.g. engineering companies) • personal-interactive (e.g. legal and medical organisations) • Differences attributed to 7 ‘personal interface variables’ Information (nature of input and output), customer involvement in decision, time spent in gathering information and decision making, the ability to clarify the problem, the transferability of employees, the perceived expert power by the employee, the attachment of the employee to the organisation.

14. Operational services classification(Lovelock & Yip) • Goal: to assign categories based on the commonalities and differences in operations; whether primarily tangible, and the extent to which customers need to be physically present. • Three classes: • People-processing services (passenger transportation, health care) • Possession processing services (warehouse, car repair) • Information based services (banking, consulting, education, news) • Eight supplementary services: • Information • Consultation • Order-taking • Billing • Payment • Hospitality • Exceptions • Safekeeping

15. Auditing theory • Auditing can be seen as contract monitoring in company practice • Completeness control harder than correctness (Blokdijk, Cockburn and Gordon) • Company typology (Starreveld) Looks more at general auditability of company results than at service interaction