Posts Tagged ‘metrics’

Service Innovation – the Next Wave

Wednesday, January 21st, 2009

What is innovation?

Simply put, innovation is best defined as “Change that Adds Value”© La Salle 1999.

That is, take an existing product, process or service and innovate (or change) it in some way to add value, this is a very low risk way of business building.

A structured thinking matrix (or rectangular array of “Seeds” and “Catalysts”) for services had been developed that provides a rigorous way of innovating services.

What is less understood are the concepts of Service Efficiency and Quality in the service domain?

Efficiency and Quality in the World of Tangibles

In the world of tangibles, one of the best definitions of quality is “conformity to design”.

That is, decide what is it you wish to make and do it repeatedly without change to meet an agreed specification; and for many manufactured products there is absolutely no benefit to the customer in exceeding the specification or tightening tolerances.

For example, increasing the tolerance on the diameter of a 75mm long nail from say +/- 0.01mm to +/- 0.001mm would be of little benefit to anybody, but would no doubt cause all sorts of production problems and added costs.

In the manufacturing world, for the purpose of Process Innovation it is appropriate to define process efficiency as:

*Process Efficiency   =   Output/unit time ÷ Costs

*Consistent with the maintenance of quality.

Efficiency and Quality in the World of Services

In the services sector things are a little different.

Consider a call centre where the performance specification (or “Service Level”) states that staff shall always answer the phone within three rings.

Suppose somebody then finds a way to answer the phone every time, within two rings. This variance from the specification would be seen as advantageous to everybody, especially the callers. Indeed improving even further and answering after just one ring would be even better.

Unlike the manufacturing sector, in the services sector there is really no limit to the benefit afforded by improving service level (or quality of service). The important consideration is, at what cost, and what is the benefit to the customer.

Drawing an analogy from Process Innovation from the manufacturing sector leads to a useful metric for Service Efficiency as:

Service Efficiency    =   ­ *Service Level ÷ Costs

*The secret in the service domain is in properly defining “Service Level” as one of the key performance or quality measures.

Service Metrics are Essential

It is important to establish typically five metrics or KPI’s for key people and deliverables in your services enterprise and to use these as a basis to systematically “innovate” your service efficiency.

Without these properly defined and quantifiable metrics there is little point in attempting any sort of innovation at all.

Finally, even though the above metric for service efficiency refers largely to the service sector, remember that even a manufacturing enterprise has a significant element of service fulfilment in the interface with your customers. This too can be measured and innovated in much the same manner.

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