Breaking the Trade-Off Between Efficiency and Service
What if a manufacturer had to deal with customers waltzing around its shop floor? What if they showed up, intermittently and unannounced, and proceeded to muck up the manufacturer’s carefully designed processes left and right? For most service businesses, that’s business as usual. In a restaurant or a rental car agency or most of the other service companies that make up the bulk of mature economies today, customers aren’t simply the open wallets at the end of an efficient supply chain. They’re directly involved in ongoing operations. The fact that they introduce tremendous variability—but complain about any lack of consistency—is an everyday reality.
Dealing with that variability is a central challenge in making a service offering profitable. But little in managers’ conventional training or tool kits equips them to deal with it effectively. Operations management theory, rooted in the manufacturing context, typically has only one thing to say about variability: It must be eliminated. Any educated manager learns to recognize it as the enemy of quality.
In the service context, the challenge is far more subtle. First, it wouldn’t be wise to drive out all variability; customers judge the quality of their experience in large part by how much of the variability they introduce is accommodated, not how sternly it is denied. Second, it wouldn’t be possible to do so. While manufacturers have virtually complete control over the cost and quality of their production inputs, service companies face this one, huge exception: Their customers are themselves key inputs to the production process. That form of input is, by its nature, capricious, emotional, and adamantly disinterested in the company’s profit agenda.
My research over the past several years has been aimed at helping service organizations overcome the challenge of customer-introduced variability. I’ve studied a wide variety of service companies, some of which prospered while others experienced escalating costs in the face of eroding customer satisfaction. The framework that has emerged from that study can help managers make better decisions about how and how much to reduce or accommodate the variability customers introduce. As the stories in the following article make clear, there are multiple ways to combat the effects of any type of variability, and the best solution is not always immediately apparent. But by using a systematic process to diagnose problems and design and fine-tune interventions, managers can reduce the impact of variability and enhance the competitiveness of their service.