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Key Challenges in Process Improvement in Services

Contributor: Abhishek Soni
Posted: 05/22/2012
Abhishek Soni
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Tertiary sector of the economy (or better known as Service sector) has grown by leaps and bounds over the last two decades. Today it constitutes 62% of the world’s total GDP and employs 40% of global labour force. As industry grows so does its complexity especially in a sector which produces intangible goods and deals with perceptions of the customer. To better appreciate the complexity of the service industry lets first understand the concept of services.

What is service? Service is an economic activity which delivers value to customer through interactions. Services are different from products, following set of features are unique to most of the services:

  • Intangibility: services are intangible in nature and they cannot be seen, felt or touched
  • Inseparability : services are produced and consumed simultaneously
  • Perishability: services must be consumed when they are offered and they cannot be stored for future sale.
  • Variability: Quality of service may vary depending upon who provides it and also on when, where and how service is rendered.

Government, Healthcare, Financial Services, Telecommunications, Consulting, Information Technology, Education are few examples of service sector industries.

Challenges in service environment:

Unique features of services pose some challenges for service industry. Service operations are often labour intensive task and hence susceptible to variations. These variations are complex to manage and can lead to customer dissatisfaction. Same service can be offered via multiple platforms (e.g. banking services are being offered via platforms such as net banking, telebanking or at bank branch) and it becomes a big challenge to deliver consistent quality of service across all the platforms.

Demand planning is another big challenge in services environment. Services are dynamic and perishable in nature and this can often lead to instances of idle capacity or opportunity loss. Compared to traditional manufacturing processes, processes in service industry are less visible and hence it is difficult to identify waste in a service processes. Further the quality in service environment is an experience and not just measurement against specification hence defect definition is a tricky task in a service setup.

Process Improvement techniques:

To overcome these challenges like other industries, service industry needs to innovate and continuously improve its processes. Following section suggests few process improvement techniques for service industry.

Develop Process Manual: Process manual is a set of instructions/directions to carry out day to day operations. It is one of the cost effective way of achieving certain degree of process standardization. Though it does not reduce human involvement, it prevents service providers from digressing from prescribed process steps while delivering services.

Expected benefits:

  • It increases consistency in service outcome as all service providers refer to same process manual
  • It acts as a quick reference guide to handle exceptions and questions.
  • It assists in transitioning process from one resource to another

Automate Processes: Service processes are people intensive tasks and hence there is high probability that variations would be infused in the processes during service delivery. Across service industry various organizations have achieved process standardization in certain areas to a large extent by deploying process automation solutions. Certain examples of process automation from industry are ATM (Automatic Teller machine), Self checking kiosks, IVR (Interactive Voice Response).

Expected benefits:

  • It reduces people involvement during service delivery
  • It increases productivity of service delivery process
  • It standardizes the service delivery process
  • It eliminates variations infused in the process at the service provider level

Reduce Failure Demand: Service organizations experiences two types of demands: failure demand and value demand. Value demand is the demand for a service from customer when they want something whereas failure demand is a demand caused by a failure to do something correctly for the customer. Failure demand is thus a demand that only exists because initial demand was not satisfied properly. For example; in call centers large proportion of calls received are either enquires pertaining to request made earlier or requests to correct earlier work that was not done properly. These calls do not deliver value to the customer and they consume the existing capacity of the call center.

Failure demand represents a common type of waste in service organizations. Service organizations must identify the proportion of failure demand in total demand received. Further they need to conduct root cause analysis for the failure demand and take steps to reduce the occurrence of failure demand. For example; in a call center which receives numerous failure demands, organization needs to analyze the reason why the customers are calling and should try to curtail the volume of failure demand instead of focusing on reducing cost per call answered.

Expected benefits:

  • It reduces wastes and increases efficiency of service delivery process
  • It increases customer satisfaction as more value per transaction/interaction is delivered.
  • It frees up capacity for new services

Conduct Service Blueprinting exercise: Service blueprinting is a customer focused approach to service innovation and improvement. Service blueprinting is an exercise of mapping out the service journey. It includes identifying key target customer segment, processes that constitute the service and graphically depicting sequence of user actions, service responses and touch points or interfaces that enables the service relationship. Figure below describes the different components of a service blueprint.

[Image 1 Service_Blueprint.jpeg]

Typical steps of service process improvement using Blueprinting technique are mentioned below:

  1. Choose a service which needs to be blueprinted.
  2. Determine the goal of blueprinting exercise.
  3. Identify the focal customer segment that are supposed to experience the service
  4. Identify other stakeholders of the service.
  5. Conduct blueprinting exercise
    1. Map the service from the customer perspective
    2. Map the actions of contact employees (both onstage and backstage)
    3. Link the contact activities to the required support functions
    4. Add evidence of service for every customer action.
  6. Note insights and action items throughout the process

Expected benefits:

  • Illustrates the customer’s role and demonstrates where the customer experiences value
  • Assists in identifying failure points and opportunities for service improvement
  • Provides a common point of discussion for new service development
  • Provides a customer-focused basis for developing metrics to track service performance.


Thank you, for your interest in Key Challenges in Process Improvement in Services.
Abhishek Soni
Contributor: Abhishek Soni