Transcript Effective Marketing Lies at the Heart of Value Creation

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
and
Employees
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
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 - 5
Integrating Marketing, Operations,
and Human Resources
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 6
Reducing Interfunctional Conflict
 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 - 7
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
―E.g., Online Buying
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 8
Creating a Leading Service
Organization
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 9
From Losers to Leaders: Four Levels of
Service Performance (1)
 Service Losers (certain govt. organisations)
 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 (local diners and restaurants)
 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 - 10
From Losers to Leaders: Four Levels of
Service Performance (2)
 Service Professionals (Toni and Guy)
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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 (Nestle or Educational Institutes)
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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 - 11
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 - 12
In Search of Human Leadership
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 13
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 - 14
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 - 15
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 - 16
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 17
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 - 18
Change Management
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 19
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
 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 - 20
Evolution versus Turnaround (2)
 Hurdles that leaders face in reorienting and formulating
strategy
 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
 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 - 21
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
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Service losers
Service nonentitites
Service professionals
Service 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 - 22
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 - 23
 Diff between management and leadership
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 24