MD850 e-Service Operations Management

1
MD850 e-Service Operations Management

• Background on Operations Management

2
Overview

• Evolving views of E-Commerce
• Changing Competitive Environment
• Operations Strategy
• Critical Success Factors

3
Evolving Theories of E-Commerce
4
Evolving Theories

• Business 2.0
• Principle of 2000 MATTER MATTERS LESS
• information processing more powerful and
  cost-effective than moving physical products
• value is found more in intangibles than in
  tangibles
• Criticism
• Our command over matter now often matters even
  more
• Information processing is only a facilitator of
  this command over matter
• Real value is often derived through integration
  of matter and information
• Business 2.0 Annotated Principle of 2001
• HMMM, maybe we were wrong

5
Evolving Theories

• Business 2.0
• Principle of 2000 SPACE/DISTANCE HAS VANISHED
• The world is your customer and your competitor
• Geographical barriers are removed
• Criticism
• Ability to reach everywhere is not sufficient for
  successful service operations it may
  over-extend you and dissatisfy
• Management of distances is extremely crucial
• Business 2.0 Annotated Principle of 2001
• STILL TRUE, TO AN EXTENT
• Certain things dont work so well over wires

6
Evolving Theories

• Business 2.0
• Principle of 2000 TIME IS COLLAPSING
• Instant interactivity is critical
• Instant response
• Ability to learn
• Criticism (In Agreement)
• Management of time depends on analyzing data fast
  enough so that the world doesnt change before
  you act on your insights
• Depends on appropriate technology choices
• Depends on fast optimization routines (good O.R.)
• Business 2.0 Annotated Principle of 2001
• STILL TRUE

7
Evolving Theories

• Business 2.0
• Principle of 2000 PEOPLE ARE THE CROWN JEWELS
• Brain power means huge value
• Criticism (In Agreement)
• Theyre also the NetSlaves who need to be
  scheduled for the third shift who roll out of
  bed at 300 am to manage servers
• Business 2.0 Annotated Principle of 2001
• STILL TRUE

8
Evolving Theories

• Business 2.0
• Principle of 2000 GROWTH IS ACCELERATED BY THE
  NETWORK
• Increasing returns
• Explosive growth
• Criticism
• Increasing returns have been oversold, and are
  very difficult to create an e-Service environment
  for
• Networks affect growth in a variety of ways
• Collaborative Peer-to-Peer can fractionate
  consumer markets and limit growth and economies
• Expansion of service-product design variety
• Business 2.0 Annotated Principle of 2001
• OOPS, NETWORK EFFECTS sprinkled like pixie dust
  on thousands of business plans

9
Evolving Theories

• Business 2.0
• Principle of 2000 VALUE RISES EXPONENTIALLY WITH
  MARKET SHARE
• due to network effect
• give away things to establish market share
• Criticism
• Network effects from creating standards are
  very difficult to create in many e-Service
  segments
• Value is short-lived due to lack of barriers to
  entry, honeymoon effects
• Value ultimately comes from customer value
• Business 2.0 Annotated Principle of 2001
• OOPS, NETWORK EFFECTS sprinkled like pixie dust
  on thousands of business plans

10
Evolving Theories

• Business 2.0
• Principle of 2000 EFFICIENCY MANAGERS WONT GET
  DISINTERMEDIATED
• New infomediaries turning data into useful
  information
• Criticism (In Agreement)
• This requires a lot of O.R. and Statistics
• Modeling tools that allow one to better model
  supply chain and make it efficient may be a
  better approach than eradicating supply chain
• Business 2.0 Annotated Principle of 2001
• STILL VERY TRUE

11
Evolving Theories

• Business 2.0
• Principle of 2000 POWER BALANCE IS SHIFTING IN
  MARKETS
• Buyers have new power
• Sellers have new opportunities
• Intelligent software will help buyers find the
  best deal
• Criticism
• We havent seen much intelligent software in
  e-Services yet
• e-Services still mainly competing on search and
  sort
• Business 2.0 Annotated Principle of 2001
• WELL MAYBE, but in general, humans are much too
  lazy to grasp the power

12
Evolving Theories

• Business 2.0
• Principle of 2000 TRANSACTIONS WILL BECOME
  PERSONALIZED
• Information is easier to customize than hard
  goods
• Criticism (In Agreement)
• Some types of manufacturing, because of their
  network technology, directly facilitate
  customized hard goods
• Business 2.0 Annotated Principle of 2001
• STILL TRUE

13
Evolving Theories

• Business 2.0
• Principle of 2000 IMPULSE BUYING IS KING
• Every product is available everywhere
• Impulses to buy no longer separated by physical
  distance and mental barriers
• Processes for marketing, sales, and fulfillment
  are merging
• Criticism
• Stimulus-response is much harder to study and
  understand
• Marketing models not sufficient for analyzing
  hordes of real-time data
• Personalization technologies need to scale to
  enterprise level, requiring lots of O.R.
• Business 2.0 Annotated Principle of 2001
• THE JURY IS STILL OUT

14
Evolving Theories

• Theories that were corrected
• MATTER MATTERS LESS
• SPACE/DISTANCE HAS VANISHED
• GROWTH IS ACCELERATED BY THE NETWORK
• VALUE RISES EXPONENTIALLY WITH THE MARKET SHARE
• POWER BALANCE IS SHIFTING IN MARKETS
• IMPULSE BUYING IS KING
• The reason why each of these was misinterpreted
  was largely due to a lack of an understanding of
  manufacturing, service, and e-service operations
  issues

15
Modern Strategic Environment Affecting Operations
Management
16
Strategic Environment

• Executive expectations of future business
  environment
• Continuous discontinuity (52)
• One-time discontinuity, followed by continuous
  but incremental change (25)

17
Strategic Environment

• Sense and Respond organization
• Identifies changing customer needs
• Identifies new business challenges as they happen
• Responds to changing needs and challenges quickly
  and appropriately, before the new opportunities
  disappear
• Characterized by
• Flexibility
• Agility
• Responsiveness
• Adaptiveness

18
Strategic Environment

• Old Environment
• Think Firm-forward
• Push
• Forecast (plan) and produce
• Certainty (if only statistically)

• New Environment
• Think Customer-back
• Pull
• Sense and respond
• Certainty of uncertainty

Note In either case, e-services can be
delivered, leading to two types of environments
that the e-service manager must think about.
19
Strategic Environment

• Challenge
• Matching up various strategies and their
  implementation so the fit together, or are
  aligned or complement each other
• Fit or Alignment
• Identify issues in external environment
• Identifying competitive strategy that responds
  (fits) well to competitive environment
• Identifying operations strategy that fits well
  with business strategy
• Identifying IS strategy that fits well to
  operations strategy and business strategy

20
Strategic Environment
E-/Operations Strategy Model
Business Environment
Alignment or Fit
Business Strategy



Business Performance

Operations Strategy

Info. Sys. Strategy
21
Operations Strategy
22
Operations Strategy

• A Web site is merely another type of operation
  (p. 64, E-Commerce Operations Management)

23
Operations Strategy

• Operating environments
• Traditional manufacturing
• Traditional services
• Internet services/e-Services

24
Operations Strategy

• Operational responsibilities in each operating
  environment
• Manufacturing
• Goods
• Services
• Produce person-to-person services
• Provide information about service
• Transform/use a good that facilitates the service
• Internet services/e-Services
• Online content online services
• Goods
• Information
• Offline services

25
Operations Strategy

• Operations Strategies (in any environment)
• Cost/Price
• Quality
• Flexibility
• Delivery/Time

26
Operations Strategy

• Resources available (in any environment)
• Capital
• Technology
• Information
• People
• Materials
• Energy

27
Critical Success Factors
28
Critical Success Factors

• Tasks within realm of Operations Management
  increases in e-Services
• Manufacturing
• Internally, goods-focused
• Services
• Externally focused on customer perceptions
• e-Services
• Internal
• External focus
• Additional change-oriented and IT-oriented
  operations tasks

29
Critical Success Factors

• Transformation process during service delivery
• Functionality of electronic services
• Website
• Phone/PDA/etc.
• Transactions involving traditional goods and
  services, and possibly their integration to the
  electronic services

30
Critical Success Factors

• Difficulty
• Each e-Service will have different operational
  priorities placed upon each of the (goods,
  services, e-service) involved in the overall
  service

31
Critical Success Factors

• Functions of e-Service Operations Management
• Customer service and support
• Quality of products and services Product design
• Technical infrastructure Process design
• Human resources management
• Forecasting and scheduling
• Inventory management
• Supplier management
• Distribution and logistics
• Change management
• Security and disaster recovery management

32
Critical Success Factors

• Underlying Theme is a Focus on High Quality
• High quality customer service/support
• Quality inventory management processes
• Quality distribution and logistics
• Quality technical infrastructure
• Quality supplier relationships
• Quality of security and disaster recover plans
• Quality of change management plan

33
Critical Success Factors

• Quality Motivates Operational Design
• Build in quality/Design for quality (in product
  and system)
• Design system to facilitate monitoring of quality
  (of product, process, supply chain activities)
  while the system is up and running
• Need to be able to quantify what is taking place
  in your e-Service operations

34
Critical Success Factors

• Customer as a Co-Producer
• Customers are usually passive recipients of
  service in many person-to-person service
  environments
• In e-Services, the customer becomes an active
  co-producer of the service
• Customer takes over the roles/activities that
  would usually be performed by service employee

35
Critical Success Factors

• Issues of Customer as a Co-Producer
• Since customers will now be performing work like
  employees, you need to facilitate their ability
  to do work easily and well
• Easy to train employees, difficult to train
  customers
• Need to design systems both from a customer
  co-production as well as a customer
  consumption perspective
• Providing customers access to your critical
  business systems and processes exposes you to
  your current and future competition
• New strategic risks

36
Critical Success Factors

• Inter-Organizational Factors
• Suppliers systems are now linked to your
  e-service system
• Their mistakes will affect your quality of
  service
• Your customers perceptions of quality will be
  hurt
• Suppliers might not be hurt
• Your e-Service system mistakes will affect their
  ability to serve you
• They end up shipping incorrect items, or not
  shipping on time for the promises you make to
  customers
• You probably have to cover the costs of
  correcting problems

37
Summary

• Evolving views toward e-commerce are taking
  account of impact operations management has on
  e-commerce concepts
• Competitive environment has been changing
• Operations strategy stays the same, but with
  additional issues
• Critical success factors in e-Services change,
  based upon new issues in e-Service business model