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International Service Business Management -- Curriculum Guide

(Current version, August 13, 2006, 9:00 p.m. Toronto. See Old revisions for history).

This draft is an “ideal” version, without regard for scheduling of holidays and availability of lecturers. For a “living” version put into practice, refer instead to the Curriculum.

About this curriculum guide

This curriculum guide is a collaborative effort by David Ing, Taina Tukiainen and Minna Takala. We have these interests:

  • David plays a role as a Services Science Ambassador at IBM, working with the SSME (Services Science, Management and Engineering) initiative. He has taken curriculum development in services management at the master's level as a part of the open courseware challenge, with experiences both in teaching in graduate programs and executive education, and a professional history of consulting and services delivery.
  • Taina is Head of the Master's Degree Program at the Helsinki Polytechnic Stadia. She is initiating the program leading to a Master's degree in Industrial Management, a one-year program starting annually in September. She has a practical interest in establishing a curriculum for classes beginning in September 2006.
  • Minna plays a role guiding the direction and validity of services management graduate-level education for the Finnish business environment, related to her interests in competency development and quality at Nokia. In her prior research activities at the Helsinki University of Technology, she led the COINS (Configuration of Industrial Services) project.

Development of this curriculum guide has also benefited from external guidance:

This document is temporarily hosted on a wiki in an domain easily accessible over the Internet. (The page is accessible under multiple style sheets, so it looks different when printed, as compared to on a computer screen). As the content evolves, it is inevitable that that it will eventually be migrated to a more permanent location, with forks to suit specific interests.

Program description

Development of the curriculum is following an idealized approach, with both top-down and bottom-up evolution of the content. The program is described in the following sections:

  • Dimensions and threads
  • Prospectus
  • Themes and credits
  • Mapping themes and credits to sessions

With these contextual elements in place, the document then dives into structuring a curriculum, session by session.

Dimensions and threads

The description of this program is “international service business management”. This can analytically be partitioned to reflect three distinct dimensions:

  • Functional dimension: From the SSME framework, this curriculum emphasizes management of services over science and engineering. Students are presumed to have work experience, and may be attending this class while in parallel with a day job. As compared to a traditional curriculum, functional foundations (e.g. marketing, finance, accounting) have been kept in mind, with the most relevant business issues today drawn to the fore.
  • Sector dimension: As a way of drawing out intuitions on leading and operating a service business, cases (less formally, examples) are discussed. Comparisons of services across a wide variety of segments (e.g. professionalism in nursing, customer service in restaurants, coordination in courier delivery) illustrate practices and conventional wisdoms that may be adopted or challenged in other service sectors.
  • Cultural anthropological dimension: In the 21st century, information and computer technologies and open borders for shipping and travel have made international business a part of everyday life. Service business may operate multinationally, but each has evolved in a history from a country of origin, with adaptation to each new culture that it meets. Since a “global” business can not be understood as more than a stereotype, the approach in this curriculum is to build bridges. Thus, the challenge of globalization is understood as a bridge from the local culture (e.g. Finnish practices for Stadia students) to various foreign styles (e.g. Indian-style business, Chinese-style business).

Based on these three dimensions, the content is a blend of three threads:

  • Conceptual thread: A broad and deep set of readings is provided to draw out the most essential ideas and issues in service businesses today. In the interests of currency, articles have been prescribed rather than multiple textbooks.
  • Interpretive thread: Guest lectures from services practitioners (possibly supplemented by audio recordings or assigned television programs) can relay personal understandings of cross-cultural challenges and day to day work issues.
  • Experiential thread: Students will apply their learning to a business research project with a real business – potentially one in which each is employed. This will be supported with introductory content on research methods and coaching by course instructors.

The schedule was targeted to extend over 26 to 28 sessions, and has been set at 27. As a practical context, the Stadia program runs full days on Thursday and Fridays (with a few holiday exceptions). In the fall session, students will spend a half day (about 3 hours) in lecture, with the balance of the day left for group work and personal study. The research project initiated in the fall term is extended into a full-time concern for development of the master's thesis in the spring term. For the September 2006 entering class at Stadia, 20 students have been admitted from an applicant pool of 120.


As a practical starting point, this curriculum was founded on the description provided in the brochure on the Stadia web site. It reads:

Industrial Management combines the interests of engineering and business management, especially in telecommunications and service business. This program boosts your competencies for business management and international marketing as well as technology. The program is conducted in English. Due to the flexibility of the program the studies can be carried out along with regular work. This is one-year program with 60 ECTS credits, starting in September annually.
The Industrial Management program attracts students with both commercial and technical interests. This is the right challenge to take if you are entrepreneur-spirited and willing to develop your leadership skills. You need to be interested in business strategies and operational practices, have good language skills, a desire to study and develop your teamworking skills and to communicate effectively in intercultural settings.
This program uses Total Project Learning (TPL) as the learning approach. This means that technology management studies are integrated into real business and projects are carried out in teams. Faculty includes advanced researchers with many years of practical experience and PhD degrees.
If you have
• A BSc Tech/Eng, Degree in Industrial Engineering and Management,
• Work experience at least three years and
• Excellent conduct in English
this program will be inspiring for you.

The Total Project Learning method incorporating real-life learning projects (often with the students' employers), combined with a class schedule accommodating near-full-time work is innovative for graduate education. (Amanda Gregory validated this).

Themes and credits

The diagram on the downloadable Stadia brochure and the image on the web site don't match, as result of misdrawing. Further, since the applicant pool for Stadia has largely attracted professionals with study and work experience in telecommunications engineering (maybe a Finnish bias!), the three streams (i.e. telecom, international, project management) have been restructured into a more unified single stream. For clarity, the total number of credits has remained unchanged.

This is one-year program with 60 ECTS credits.

In order to accommodate the three dimensions and three threads described above within the 27 sessions prescribed, sessions blend topics in a tight schedule. To provide a clear linkage to credits, the following mapping gives primary emphasis to the conceptual dimension, and the cultural anthropological dimension:

  • The Business Project work runs concurrently with the classes (i.e. 26 to 28 sessions). Technically, these seem to appear as “no credit”, but really, they're the practical part of the lecture content provided (i.e. in the other half-day of the 26 to 28 sessions).

(Note: This may be a point of divergence between an “ideal” developed bottom-up by David, and the specific accreditation needs for Taina. Some remapping may be required).

Mapping themes and credits to sessions

Since each session has overlapping topics, mapping the themes and credits to specific lectures in a non-linear exercise. In the interest of clarity, here's a rough cut of analytics:

Principles: Business in a services economy, and business research methods

Advanced societies globally haved shifted from industrial, product-oriented economies to become services economies. Managing service-based businesses requires a different mindset and perspective than managing product-based businesses. This shift represents the primary motivation and foundation for an integrated curriculum on service business management. In support of a Total Project Learning approach, program research methods (e.g. action research) are established as ways for managers to support fact-based decision-making and strategies.

Sessions include:

Customers, business models and innovation

The management of a services business should be driven largely on customer wants and needs. Active listening and development of offerings and/or customer responses result in both business-to-consumer or business-to-business relationships. The relevance of the services business to customers is maintained through business model innovation. Scalability, replicability and efficiency may be continously improved by monitoring and innovating business processes.

Sessions include:

Services in an international context

The dawn of the 21st century has been characterized by the rise of globalization, and the stuggles of businesses in advanced societies having to compete with businesses in emerging economies. Globalization is, however, a result of blending business styles from a variety of cultures. While the culture within a service business is not necessarily bound to geographic region, common business practices often have foundations in local predispositions. One way to deepen an understanding of varying philosophies on services is to focus on cases where a business supports its local and/or regional society well. These discussions are paired with concepts complementary to the prevailing business practices.

Sessions include:

Service leadership, organizational development and teamwork

Although most organizational and leadership skills from managing product-oriented businesses are transferrable, the impact of services businesses as people businesses is more immediate. A wide range of behaviours – from sharing expertise across knowledge professionals, to encouraging empathy on customer-facing roles – can be coached and influenced by managers. In addition, service workers may be encouraged to be self-organization, increasing productivity through the exchange of experiences and/or contributions to organizational learning.

Sessions include:

Service delivery and technology architectures

Maintaining consistent and high-quality service delivery requires establishing standards for performance. These are enabled by information and communications technologies, which themselves continue to advance. The continued delivery of excellence in service and high customer satisfaction requires establishing procedures and infrastructure that enable and improve productivity.

Sessions include:

Strategic management, intra/entrepreneurship, alliances and venturing

Service businesses may not directly follow the economies of scale common in industrial businesses. Modularity and interdependence in cooperative arrangements may provide better service to end customers, as well as higher profitability to services organizations. Service providers may establish relationships with peers, with upstream and/or downstream partners, with universities, and/or with governmental agencies. These may enable greater immediate or future competitiveness for an independent service business, or an ecosystem of complementary service providers.

Sessions include:



This curriculum is intended to balance state-of-the-art concepts in services (design, delivery and management) in a global business environment, with grounded examples in types of services (e.g in segments such as health, or logistics and transportion) and ethnocentric styles of business (e.g. Japan, China, India). There is no “one best way” to design and deliver services, so breadth is a major interest. Given the constraints of time, each session may contain both conceptual material and case-oriented material in a loosely coupled, but complementary way. This is not the most linear presentation of material, but an appropriate economical use of class time.

Date Topic
Sept. 06 01. Service businesses in a global economy
Sept. 07 02. The nature of services businesses
Sept. 14 03. Customer experience design and the voice of the customer
Sept. 15 04. Client management and relationship alignment
Sept. 21 05. Research methods: pragmatic and constructive designs
Sept. 22 06. Research methods: survey and hermeneutic designs
Sept. 28 07. Business model innovation
Sept. 29 08. Business process modelling and operations innovation
Oct. 05 09. Solution design; cases in financial services
Oct. 06 10. Service encounters and capacity management; cases in hospitality services
Oct. 12 11. Human capital and communities of practice; cases in health services
Oct. 13 12. Service leadership; cases in education services
Oct. 19 13. Service delivery teamwork and collaboration; cases in knowledge-intensive business services
Oct. 20 14. Service quality; cases in Japanese-style business
Oct. 26 15. Outsourcing; cases in Indian-style business
Oct. 27 16. Enterpreneurism; cases in Chinese-style business
Nov. 02 17. Telecom services; cases in European-style business
Nov. 03 18. Interim business project reviews (1)
(Nov. 04, 2006?) Saturday: All Saints Day (Finland)
Nov. 09 19. Interim business project reviews (2)
Nov. 10 20. Technology architecture; cases in information technology services
Nov. 16 21. Service supply chains; cases in logistics and transportation services
Nov. 17 22. Ventures; cases in Anglo-American-style business
Nov. 23 23. Alliances; cases in Latin-style business
Nov. 24 24. Industrial policy; cases in Scandinavian-style business
Nov. 30 25. Economic development; cases in third world-style business
Dec. 01 26. Sustainability and competitiveness
(Dec. 06, 2006?) Wednesday: Independence Day (Finland)
Dec. 07 27. Business networks, strategic balance and governance

Each of the days specified above is described below.

01. Service businesses in a global economy

This curriculum is founded on two principles:

  • business is shifting from a product-oriented, industrial economy to a services economy; and
  • globalization, thanks to information and communications technologies and (relatively) open national borders, has the advanced economies of the later 20th century challenged by workers in emerging and developing countries.

Primary concepts

Since most advanced economies have become service economies, it's probable that the students of this class will end up managing services businesses. They need to think somewhat differently.

  • Uday Karmarkar, “Will You Survive the Services Revolution?”, June 2004. (See the article at HBR)
    • Abstract: We are in the middle of a fundamental change, which is that services are being industrialized. Three factors in particular are combining with outsourcing and offshoring to drive that transformation: The first is increasing global competition, where just as with manufactured goods in the recent past, foreign companies are offering more services in the United States, taking market share from U.S. companies. The second is automation: New hardware and software systems that take care of backroom and front-office tasks such as counter operations, security, billing, and order taking are allowing firms to dispense with clerical, accounting, and other staff positions. The third is self-service. Why use a travel agent when you can book your own flight, hotel, and rental car online?
  • (We should include some references describing what a services economy really is. Services businesses include: financial services, health services, educational services, logistic and transportation services, hospitality services, and KIBS (knowledge intensive business services), including consultancy).

Case examples

  • (IBM is an example, and we should find others. GE?)

Supplementary references

The “world is flat” has become conventional business wisdom. You should take a quick read, if you haven't already!

02. The nature of service businesses

Services businesses are conventionally considered different from product-oriented business, but in what ways?

Primary concepts

Service-oriented businesses are somehow different from product-oriented businesses. How?

  • Stephen L. Vargo and Robert F. Lusch, “Evolving a Services Dominant Logic”, Journal of Marketing, Volume 68, Number 1, (January 2004), pp. 1-17.
    • A good summary of the shift from goods-centered model of exchange to a services-oriented model of exchange. Six attributes (on Table 2) and eight foundational premises are proposed.
    • (supplemental) Ruth N. Bolton (editor), “Invited Commentaries on 'Evolving to a New Dominant Logic for Marketing'”, Journal of Marketing, Volume 68, Number 1, (January 2004), pp. 18-27.
      • Some different perspectives on various sections of Vargo & Lusch (2004). Note that many of these commentaries are written by leading thinkers in marketing, and thus, they're pre-sold on the ideas! (Can you figure out which ones they are?)
    • (supplemental) Stephen L. Vargo and Robert F. Lusch, “ The Four Service Marketing Myths: Remnants of a Goods-Based, Manufacturing Model”, Journal of Service Research, Volume 6, Number 4, (May 2004) 324-335.
      • Some of this material is covered in Vargo & Lusch (2004a), but note that they speak here to four characteristics (including perishability) whereas they had previously mentioned three. The focus is in making the transition from a manufacturing orientation to a services orientation.

Although the conventional wisdom has been to focus on four characteristics of services (IHIP), ownership considerations may be more clarifying.

  • Christopher Lovelock and Evert Gummesson, “Whither Services Marketing? In Search of a New Paradigm and Fresh Perspectives”, Journal of Service Research, Volume 7, Number 1, August 2004, pp. 20-41.
    • In addition to the four characteristics (intangibility, heterogeneity, inseparability and perishability) that differentiate services from goods, these researchers suggest that the pattern of ownership is different.

Supplementary references


03. Customer experience design and the voice of the customer

Guest lecturer from a corporate market intelligence provider?

Customer orientation is something that product-oriented businesses and service-oriented businesses have in common. If a service is delivered with multiple customer contacts, however, there are more opportunities to “check in” to make sure the service is satisfying the client.

  • Customer experience go beyond the immediate tangible product, and even beyond service delivery, to the management of emotional cues.
  • The voice of the customer is balanced with other voices inside of the service provider to design appropriate capabilities with which customer requests are satisfied.

Primary readings

Customer experiences can be engineered, with an understanding of clues and emotional responses.

  • Leonard L. Berry, Lewis P. Carbone and Stephan H. Haeckel, “Managing the Total Customer Experience”, MIT Sloan Management Review, Spring 2002, Vol. 43, No. 3, pp. 85–89, (See at MIT Sloan Management Review).

Innovation can be developed from the perspective of customer experiences.

  • C K Prahalad, Venkatram Ramaswamy. “The new frontier of experience innovation”, MIT Sloan Management Review. Summer 2003. Vol. 44, Iss. 4; p. 12. (See at MIT Sloan Management Review).
  • Abstract: … the authors paint a picture of the “next practices” of innovation in which the locus of value creation will inevitably shift from products and services to “experience environments.” The intent of experience innovation is not to improve a product or service, per se, but to enable the co-creation of an environment in which personalized, evolvable experiences are the goal, and products and services are a means to that end. Profitable company growth will then result from individual consumers co-creating their own unique value, supported by a network of companies and consumer communities.

Supplementary references

  • B. Joseph Pine II and James Gilmore, The Experience Economy: Work Is Theatre & Every Business a Stage, Harvard Business School Press, 1999. (See at HBS Press or at Strategic Horizons).
  • Bernd H. Schmitt, Customer Experience Management : A Revolutionary Approach to Connecting with Your Customers, Wiley, 2003. (See at Wiley).
  • Gerald Zaltman, How Customers Think: Essential Insights into the Mind of the Markets, Harvard Business School Press, 2003. (See at HBS Press).
  • Vincent P. Barabba, Meeting of the Minds: Creating the Market-Based Enterprise, Harvard Business School Press, 1995. (See at HBS Press).
  • Vincent P. Barabba and Gerald Zaltman, Hearing the Voice of the Market: Competitive Advantage Through Creative Use of Market Information, Harvard Business School Press, 1991. (See at HBS Press).
  • Ian I. Mitroff and Harold A. Linstone, The Unbounded Mind: Breaking the Chains of Traditional Business Thinking, Oxford University Press, 1993.
  • C. West Churchman, The Design of Inquiring Systems: Basic Concepts of Systems and Organizations, Basic Books, 1971.

04. Client management and relationship alignment

Guest lecture from an experienced client executive?

Relationship management (and the related relationship marketing) is based on the finding that customer retention is less expensive than customer acquisition.

Primary concepts

All customers are not of equal value to a services organization.

  • Valarie A. Zeithaml, Roland T. Rust, and Katherine N. Lemon, “The Customer Pyramid: Creating and Serving Profitable Customers,” California Management Review, Vol. 43, No. 4, Summer 2001, pp 118-142.
    • Abstract: As relationships and service become increasingly pivotal in business, the profitability of customers is becoming more important than the profitability of products. …. This article presents a management methodology called the “Customer Pyramid” that enables a firm to supercharge its profits by customizing its responses to distinct customer profitability tiers. The Customer Pyramid provides a tool for managers to strengthen the link between service quality and profitability and to determine the optimal allocation of often scarce resources to maximize profitability. Product and service strategies, customized for each customer tier, become more closely aligned with an individual customer’s underlying utility functions.

A client relationship requires an investment of energy.

  • David Maister, “Do You Really Want Relationships?” (2005). See at

Relationships are not only business-to-customer, but can also be inter-organizational.

  • Digest of “Symposium on Inter-Organizational Relations”, available on
  • “Aligning relationships: Optimizing the value of strategic outsourcing”, IBM G510-3464-00 (2003), available on .

Customers can be modeled as promoters or detractors from the business

  • Fred Reichheld. “The Microeconomics of Customer Relationships”, MIT Sloan Management Review. Winter 2006. Vol. 47, Iss. 2; p. 73
    • Abstract: The article focuses on research on the use of net-promoter score, a metric that can help managers evaluate how investments aimed at improving the customer experience actually affect a company's growth rate. Quantifying the value of a promoter or a detractor is the best way of understanding in numerical terms why and how customer relationships matter to a company's financial performance. A useful way of figuring out strategic priorities is to map your customer base on the promoter-passive-detractor scale and then to divide each category into high-profit and low-profit customers.

Services can be considered by the type of benefit offered, and the degree of service separability.

  • Leonard L. Berry, Venkatesh Shankar, Janet Turner Parish, Susan Cadwallader, Thomas Dotzel. “Creating New Markets Through Service Innovation”, MIT Sloan Management Review. Winter 2006. Vol. 47, Iss. 2; p. 56. (See at MIT Sloan Management Review).
    • Abstract: … by thinking about a service in terms of its core benefits and the separability of its use from its production, managers can more easily see how to outinnovate their competitors. Before they can do so, though, they must understand the different types of market-creating service innovations as well as the factors that enable them.
    • The authors introduce and describe a two-by-two matrix whose taxonomy helps managers think strategically about service innovations that can create new markets.

Supplementary references

Client relations are largely based on trust.

  • David H. Maister, Charles H. Green and Robert M. Galford, The Trusted Advisor, Free Press, 2001. (See at

Entrepreneurism can be framed as getting the right social and virtual embedded ties.

  • Thomas B. Lawrence, Eric A. Morse, Sally W. Fowler. “Managing Your Portfolio of Connections”, MIT Sloan Management Review. Winter 2005. Vol. 46, Iss. 2; p. 59
    • Embedded ties (social, virtual)
    • Abstract: To conduct business with customers, suppliers, partners and other external parties, companies have three options: arm's-length, socially embedded and virtually embedded ties. Arm's-length ties are connections that exist solely for a particular business transaction. The problem with arm's-length ties is that they have difficulty handling transactions that are uncertain, complex or opportunistic. Embedded ties are connections that overcome the weaknesses of arm's-length ties by inserting the transaction in a supportive context, either social or virtual. With a socially embedded tie, trust, sharing of proprietary information and joint problem solving form the foundation for an economic relationship to minimize the risk of transactions. In a virtually embedded tie, an economic relationship is facilitated and maintained through the use of electronic technologies that help minimize the risk of transactions through increased transparency, widespread information sharing and community-based problem solving. Companies in different environments are likely to benefit from the use of different combinations of those types of connections.

05. Research methods: pragmatic and constructive designs

Action research, and constructive designs.

Primary readings


Supplementary references


06. Research methods: survey and hermeneutic designs

Survey research and hermeneutic (interpretive) designs

Primary readings


Supplementary references


07. Business model innovation

Disruptive innovation, crossing the chasm, business architecture

Primary concepts

Disruptive innovation is one of today's basic concepts in business. The challenge is to find one of Christensen's articles that encapsulates the content. In his earlier work, he had first framed disruptive innovation in terms of technologies, but he later changed that to disruptive innovation in terms of business models.

  • Consider: Clayton M. Christensen and Scott D. Anthony. “Cheaper, Faster, Easier: Disruption in the Service Sector.” Strategy and Innovation 2, no. 1 (January/February 2004). at
  • Consider: Clayton M. Christensen, Matt Verlinden, and George Westerman. “Disruption, Disintegration, and the Dissipation of Differentiability.” Industrial and Corporate Change 11, no. 5 (November 2002): 955-993.
  • Consider: Clayton M. Christensen, “The Rules of Innovation.” MIT Technology Review (June 2002).
  • Consider: Clayton M. Christensen, “The Past and Future of Competitive Advantage.” Sloan Management Review 42, no. 2 (winter 2001).
  • Consider: Clayton M. Christensen, “Limits of the New Corporation.” Business Week (August 28, 2000): 180-181.
  • Consider: Clayton M. Christensen and Michael Overdorf. “Meeting the Challenge of Disruptive Change.” Harvard Business Review 78, no. 2 (March-April 2000): 66-76. (See the article at HBR)
    • Abstract: As a company grows, what it can and cannot do becomes more sharply defined in certain predictable ways. The authors have analyzed those patterns to create a framework managers can use to assess the abilities and disabilities of their organization as a whole. When a company is young, its resources–its people, equipment, technologies, cash, brands, suppliers, and the like–define what it can and cannot do. As it becomes more mature, its abilities stem more from its processes–product development, manufacturing, budgeting, for example.

A business organization has traditionally been viewed as a “firm” with a focus towards a single goal. In practice, the business may be reframed as having three different functions, operating in different styles.

  • John Hagel III and Marc Singer, “Unbundling the Corporation”, McKinsey Quarterly, 2003, Number 3, ((See the reprint at McKinsey Quarterly).
  • John Hagel III and Marc Singer, “Unbundling the Corporation”, Harvard Business Review, Volume 77, Number 2, March-April 1999, pp.133-141. (See the original article at HBR).
    • Abstract: No matter how monolithic they may seem, most companies are really engaged in three kinds of businesses. One business attracts customers. Another develops products. The third oversees operations. Although organizationally intertwined, these businesses have conflicting characteristics.

Optimistic managers of many startups assume that they want to capture the market by selling to everyone. If the products are oriented, in particular, to B2B markets, they won't be facing a volume operations model, but instead a complex systems model.

How should executives approach business when the industrial age paradigm has broken down? One view of leaders is as business designers, or as a chief business architect.

  • Stephan H. Haeckel, “Leading On-demand Businesses – Executive as Architects” IBM Systems Journal, August, 2003. (Available as an article from IBM).
    • (supplemental): Stephan H. Haeckel, Adaptive Enterprise: Creating and Leading Sense-and-Respond Organization, Harvard Business School Press, 1999.

Supplementary references


08. Business process modelling and operations innovation

Guest lecture experienced in business process modeling?

Business process modeling, work product methods, kaizen, six sigma, lean sigma).

Primary concepts

Moving from regional orientation to global process networks should come with a change in orientation from push to pull.

  • John Hagel III and John Seely Brown, “From Push to Pull: The Next Frontier of Innovation”, McKinsey Quarterly, 2005, Number 3. (See the article at McKinsey Quarterly).
    • Excerpt: … in “push” systems generally—the core assumptions are that companies and other institutions can anticipate demand and that mobilizing scarce resources in previously specified ways is the most efficient and reliable way to meet it. But the efficiency of push systems comes at a stiff price, for they require companies to specify, monitor, and enforce detailed activities and tasks. [….] This new approach might be called the “pull” system of resource mobilization. Its early elements began to emerge from Toyota Motor's lean-manufacturing system in the 1950s, when the company began pulling resources into the assembly line as needed rather than allowing inventories to pile up during production. But more versatile and far-reaching pull systems—which extend beyond production and, indeed, beyond the enterprise itself….

Although some think about innovation as a local phenomenon that gets diffused globally, it's also possible to reframe it as global.

  • Jose Santos, Yves Doz, Peter Williamson. “Is Your Innovation Process Global?”, MIT Sloan Management Review. Summer 2004. Vol. 45, Iss. 4; p. 31
    • Complexity of (market knowledge, technological knowledge)
    • Excerpt: some companies have managed to assemble an integrated “innovation chain” that is truly global, allowing them to outflank competitors that innovate using knowledge in a single cluster. They have been able to implement a process for innovating that transcends local clusters and national boundaries, becoming what we dub “metanational innovators” This strategy of utilizing localized pockets of technology, market intelligence and capabilities has provided a powerful new source of competitive advantage: more, higher-value innovation at lower cost. It is the logical next step beyond augmenting in-house R&D with external ideas in what has been called the “era of open innovation.”

Operating to scale requires developing processes that are mature. It's not enough to do it once, it must be repeatable. There are ways to measure and track this.

  • Thomas H. Davenport, “The Coming Commoditization of Processes”, Harvard Business Review, June 2005. (See the article at HBR)
    • Abstract: A broad set of process standards will soon make it easy to determine whether a business capability can be improved by outsourcing it. Such standards will also help businesses compare service providers and evaluate the costs vs. the benefits of outsourcing. Eventually these costs and benefits will be so visible to buyers that outsourced processes will become a commodity, and prices will drop significantly. The low costs and low risk of outsourcing will accelerate the flow of jobs offshore, force companies to reassess their strategies, and change the basis of competition. The speed with which some businesses have already adopted process standards suggests that many previously unscrutinized areas are ripe for change.

Supplementary references

Innovation is not just a function in research. Innovation can happen in many places in a business, in many ways.

  • Mohanbir Sawhney, Robert C. Wolcott, and Inigo Arroniz “The 12 Different Ways for Companies to Innovate”, MIT Sloan Management Review, Spring 2006. Vol. 47, Iss. 3; p. 75. (See at MIT Sloan Management Review).
    • Customer, processes, presence, offerings
    • Abstract: Surprisingly, traditional visions of innovation — a “myopic” focus on R&D, for example — can lead to systematic erosion in competitive position. This article draws on case studies to show that it is, in fact, possible to innovate across any of 12 different dimensions in order to achieve competitive advantage.

09. Solution design; cases in financial services

Guest lecture from a financial services organization?

Solution design, including pricing and e-delivery channels

Primary concepts

Services are often bundled with products to present a value proposition.

  • Glen Allmendinger and Ralph Lombreglia, “Four Strategies for the Age of Smart Services”, Harvard Business Review, October 2005. (See the article at HBR).
    • Αbstract: Businesses must now provide “smart services”–building intelligence (awareness and connectivity) into the products themselves. Citing examples …, the authors demonstrate how a product that can report its status back to its maker represents an opportunity for the manufacturer to cultivate richer, longer term relationships with customers. Four business models will emerge in this new, networked world. If you go it alone, it may be as an embedded innovator–that is, your networked product sends back information that can help you optimize service delivery, eliminate waste and inefficiency, and raise service margins. Or, you may pursue a more aggressive solutionist business model–that is, you position your networked product as a “complete solution provider,” able to deliver a broader scope of high-value services than those provided by the embedded innovator's product. In the case of a system that aggregates and processes data from multiple products in a building or home, you may be either an aggregator or a synergist, partnering with others to pursue a smart-services opportunity. An aggregator's product is the hub, collecting and processing usage information–and creating a high-value body of data. A synergist's product is the spoke, contributing valuable data or functionality.

A services pure play is not quite the same as a service supporting a product.

  • Byron G. Auguste, Eric P. Harmon, and Vivek Pandit, “The right service strategies for product companies”, McKinsey Quarterly, 2006 Number 1. (See the article at McKinsey Quarterly).
    • Abstract: … companies aren't always clear about whether services are intended to grow in their own right or to protect products. Although executives often say they want service businesses to expand independently, they keep services captive within the structure of product businesses.

Solutions selling means moving away from cost-pricing towards understanding value.

  • Eric V. Roegner, Torsten Seifert, and Dennis D. Swinford, “Putting a price on solutions”, McKinsey Quarterly, 2001 Number 3. (See the article at McKinsey Quarterly).
    • Abstract: … setting the right price for a solution is no easy matter: price too high and customers will meet their own needs; price too low and suppliers won't get paid for the value they are delivering and the effort that went into it. To price solutions effectively, suppliers need to understand the economic underpinnings of their customers' businesses and the incremental benefit their solution offers compared to the next best alternative.

In financial services companies, loyalty and customer retention are important to capitalize on investments in customers.

  • Giovanni Giuliani, Paolo Moretti, and Antonello Piancastelli, “Limiting churn in insurance”, McKinsey Quarterly, December 2004 (web exclusive). (See the article at McKinsey Quarterly).
    • Abstract: Customer turnover is high at property and casualty insurers. Executives often assume that customers leave only in search of less expensive coverage, but our research shows that many other factors, from age to claim histories, influence the decision to change insurers. By identifying valuable customers who are likely to leave and then taking simple steps to keep them happy, insurers can reduce churn and boost profits.

Supplementary references


10. Service encounters and capacity management; cases in hospitality services

Guest lecture from a hotel or food service business?

(include profitability, service recovery, location, yield management, call centers)

Primary readings

Poor service is most evident on the front lines.

  • Diane Brady, “Why Service Stinks” Business Week, Cover Story, October 23 2000, pp. 118-128. (See at Business Week).

Much of the customer experience is emotional, which means that front line representatives must be sensitive to what they are hearing.

  • Marc Beaujean, Jonathan Davidson, and Stacey Madge, “The 'moment of truth' in customer service”, McKinsey Quarterly, 2006 Number 1. (See the article at McKinsey Quarterly).
    • Abstract: The key to correcting frontline performance is the consistent handling of “moments of truth” — those few interactions where customers have an unusual amount of emotional energy invested in the outcome. Contrary to accepted wisdom, senior executives can take coordinated action to increase the emotional intelligence, or “EQ,” of employees. The necessary steps include working to give frontline jobs real meaning, aligning structures and processes, focusing on learning by experience, developing frontline leaders, and using them to serve as role models.

Call centers should not only been seen as cost-reduction devices, but as opportunities to improve customer service.

  • Andy Eichfeld, Timothy D. Morse, and Katherine W. Scott, “Using call centers to boost revenue”, McKinsey Quarterly, May 2006 (web exclusive). (See the article at McKinsey Quarterly).
    • Many companies can turn their inbound call centers into powerful engines for growth. For some telecom and credit card companies, call centers account for more than half of all new revenues. … successful efforts to cross-sell during inbound service calls could boost a retail bank’s sales of new products by 10 percent, based on a study of North American banks.

Case examples

Restaurants can be found in every city and town. Only a few can be described as excellent, with failures and turnover commonly driven by bad customer service or bad food. It is simply a case of getting the basics right?

  • Ramsey's Kitchen Nightmares – see a description on the Channel 4 Television web site, and try to schedule to watch at least two television episodes.

Supplementary references


11. Human capital and communities of practice; cases in health services

Guest lecture from a hospital or health care provider?


Primary concepts

Open innovation, across organizations and with customers, represents a paradigm different from the typical closed “research lab” mentality.

  • Henry W Chesbrough. “The era of open innovation”, MIT Sloan Management Review. Spring 2003. Vol. 44, Iss. 3; p. 35. (See at MIT Sloan Management Review).
    • Abstract: In the old model of closed innovation, enterprises adhered to the following philosophy: Successful innovation requires control. In other words, companies must generate their own ideas, then develop, manufacture, market, distribute and service those ideas themselves. [….] Such factors create a new logic of open innovation, in which the role of R&D extends far beyond the boundaries of the enterprise. Specifically, companies must now harness outside ideas to advance their own businesses while leveraging their internal ideas outside their current operations.
  • Consider: Henry Chesbrough: The Logic of Open Innovation: Managing Intellectual Property, California Management Review, Spring 2003.

The governance of an open innovation community needs to be different.

  • Mohanbir Sawhney and Emanuela Prandelli, “Communities of Creation: Managing Distributed Innovation in Turbulent Markets”. California Management Review, Summer2000, Vol. 42 Issue 4, p24-54
    • Excerpt: We propose a new governance mechanism for managing distributed innovation called a “community of creation.” The community of creation is a permeable system, with ever-changing boundaries. It lies between the closed hierarchical model of innovation and the open market-based model. Intellectual property rights are owned by the entire community. The community is governed by a central firm that acts as the sponsor and defines the ground rules for participation.

The private health system in the United States may have some unique challenges that socialized health systems don't, but bureaucratic organizations in general have both upsides and downsides.

  • Curing U.S. Health Care, 3rd Edition (HBR OnPoint Collection) contains:
  • Regina E. Herzlinger, “Why Innovation in Health Care Is So Hard”, Harvard Business Review, May 2006. (See the article at HBR).
    • Abstract: Three kinds of innovation can make health care better and cheaper: One changes the way in which consumers buy and use health care, another taps into technology, and the third generates new business models. However, the health care system erects an array of barriers to each type of innovation. More often than not, organizations can overcome the barriers by managing the six forces that have an impact on health care innovation: players–the friends and foes who can bolster or destroy; funding–the revenue-generation and capital-acquisition processes, which differ from those in other industries; policy–the regulations that pervade the industry; technology–the foundation for innovations that can make health care delivery more efficient and convenient; customers–the empowered and engaged consumers of health care; and accountability–the demand from consumers, payers, and regulators that innovations be safe, effective, and cost effective.
  • Clayton M. Christensen, Richard Bohmer, and John Kenagy, “Will Disruptive Innovations Cure Health Care?”, Harvard Business Review, June 2004. (See the article at HBR).
    • Abstract: … disruptive innovations are changing the landscape of health care. Nurse practitioners, general practitioners, and even patients can do things in less-expensive, decentralized settings that could once be performed only by expensive specialists in centralized, inconvenient locations. But established institutions are fighting these innovations tooth and nail. Not only is this at the root of consumer dissatisfaction with the present system, it sows the seeds of its own destruction.
  • Regina E. Herzlinger, “Let's Put Consumers in Charge of Health Care”, Harvard Business Review, July 2002. (See the article at HBR).
    • Abstract: … if companies embrace a new model of health coverage–one that places control over both costs and care directly into the hands of employees–the competitive forces that spur productivity and innovation in consumer markets can be loosed upon the inefficient, tradition-bound health care system. Moving to consumer-driven health care requires that companies revamp their health benefits in six ways: Give employees incentives to shop intelligently; offer a real choice of insurance plans; charge employees prices that accurately reflect the company's costs; let providers set their own prices; adjust payments for each enrollee based on need; and provide relevant information.
  • Steven J. Spear, “Fixing Health Care from the Inside, Today”, Harvard Business Review, September 2005. (See the article at HBR).
    • Abstract: … this article describes how doctors, nurses, technicians, and managers are radically increasing the effectiveness of patient care and dramatically lowering its cost by applying the same capabilities in operations design and improvement that drive the famous Toyota Production System. They are removing ambiguity in the output, responsibilities, connections, and methods of their work processes.

Supplementary references


12. Service leadership; cases in education services

Guest lecture from for-profit(!) educational institution?

(include organizational design)

Primary concepts

What is the balance between making the customer the primary constituent, and the balancing of resources within the company?

  • Erin Anderson, Vincent Onyemah, “How Right Should the Customer Be?”, Harvard Business Review, July-August 2006. (See the article at HBR).
    • Abstract: Sales force controls are the policies and practices that govern the way you train, supervise, motivate, and evaluate your sales staff. …. These controls let salespeople know which trade-offs the company would prefer them to make when the inevitable conflicts arise between what they want to do (spend lots of time and money to get a sale) and what they actually can do (use limited resources and still get the sale). …. The authors' research suggests there are significant differences between the control systems of companies that encourage salespeople to put the customer first–outcome control (OC) systems–and those that encourage reps to put their managers first–behavior control (BC) systems.

Should innovation units be separated from mainstream business operations? This article suggests that exploratory businesses need to be distinct from exploitative businesses. But is this true in services organizations, where knowledge is sticky and practices develop in communities?

  • Charles A. O'Reilly III, Michael L. Tushman, “The Ambidextrous Organization”, Harvard Business Review, April 2004. (See the article at HBR)
    • Abstract: [….] These organizations separate their new, exploratory units from their traditional, exploitative ones, allowing them to have different processes, structures, and cultures; at the same time, they maintain tight links across units at the senior executive level. Such “ambidextrous organizations,” as the authors call them, allow executives to pioneer radical or disruptive innovations while also pursuing incremental gains. Of utmost importance to the ambidextrous organization are ambidextrous managers–executives with the ability to understand and be sensitive to the needs of very different kinds of businesses.
  • Geoffrey A. Moore, “Strategy and Your Stronger Hand”, Harvard Business Review, Dec2005, Vol. 83, Issue 12 (includes “Two Organizational Models”, which is packaged separately on EBSCO) (See the article at HBR)
    • Abstract: There are two kinds of businesses in the world, …. One kind includes businesses that compete on a complex systems model. These companies have large enterprises as their primary customers. They seek to grow a customer base in the thousands, with no more than a handful of transactions per customer per year …. The other kind of business competes on a volume operations model. Here, vendors seek to acquire millions of customers, with tens or even hundreds of transactions per customer per year, at an average price of relatively few dollars per transaction.

Leadership can take a variety of forms and styles.

  • Robert E Kaplan, Robert B Kaiser. “Developing versatile leadership”, MIT Sloan Management Review. Summer 2003. Vol. 44, Iss. 4; p. 19
    • Leadership (forceful, enabling, strategic, operational)
    • Abstract: The article discusses key issues concerning the development of versatile leadership skills among executives within business organizations in the United States. Key issues discussed include the serious limitations suffered by modern conceptions of leadership and the requisite skills in industrial management such as cooperating with peers, giving directions, delegating and communicating with employees. Managers need to establish a balance between the task-oriented and people-oriented aspects of leadership to avoid inadequate management performance. INSET: Leadership Models and Measures as an Organizational Intervention.

Supplementary references


13. Service delivery teamwork and collaboration; cases in knowledge-intensive business services

Guest lecture from a consulting services organization? (speaking on his/her organization, not his/her clients!) (include organization development and culture)

Primary readings

Having the best product or service may not be sufficient. Entrepreneurs need to also connect to others who can help promote it.

  • Brian Uzzi and Shannon Dunlap, “How to Build Your Network”, Harvard Business Review, Dec2005, Vol. 83, Issue 12. (See the article at HBR)
    • Abstract: Many sensational ideas have faded away into obscurity because they failed to reach the right people. …. As Brian Uzzi and Shannon Dunlap explain, networks have to be carefully constructed through relatively high-stakes activities that bring you into contact with a diverse group of people. Most personal networks are highly clustered–that is, your friends are likely to be friends with one another as well. And, if you made those friends by introducing yourself to them, the chances are high that their experiences and perspectives echo your own.

Knowledge-intensive business services are a significant sub-segment of services businesses.

  • Consider: Lance A. Bettencourt, Amy L. Ostrom, Stephen W. Brown, and Robert I. Roundtree, “Client Co-Production in Knowledge-Intensive Business Services”, California Management Review, Summer 2002.
    • Abstract: A common characteristic of knowledge-intensive business service (KIBS) firms is that clients routinely play a critical role in co-producing the service solution along with the service provider. This can have a profound effect on both the quality of the service delivered as well as the client’s ultimate satisfaction with the knowledge-based service solution. Based on research conducted with an IT consulting firm and work done with other knowledge-intensive business service providers, this article describes clients’ key role responsibilities that are essential for effective client co-production in KIBS partnerships.

Supplementary references


14. Service quality; cases in Japanese-style business

Guest lecture experienced in Japanese-style business?


Primary readings


Supplementary references


15. Outsourcing; cases in Indian-style business

Guest lecture experienced in Indian-style business?

(include BPO, SLAs)

Primary readings

Offshoring can reduce costs, but it's can be a challenge to ensure a continued level of service.

  • Ravi Aron and Jitendra V. Singh, “Getting Offshoring Right”, Harvard Business Review, December 2005. (See the article at HBR).
    • Abstract: … half the organizations that have shifted processes offshore have failed to generate the expected financial benefits. …. A three-part methodology can help companies reformulate their offshoring strategies. First, companies … will want to keep their core (highest priority) processes in-house and consider outsourcing their commodity (low-priority) processes. Second, businesses should … look systematically at their critical and commodity processes in terms of operational risk (the risk that processes won't operate smoothly after being offshored) and structural risk (the risk that relationships with service providers may not work as expected). Finally, companies should determine possible locations for their offshore efforts, as well as the organizational forms–such as captive centers and joint ventures–that those efforts might take.

In a more prescriptive view, perhaps companies should be less focused on offshoring, and more focused on where they can redeploy the resources that are already in place.

  • Martin N. Baily and Diana Farrell, “Exploding the myths of offshoring”, McKinsey Quarterly, July 2004 (web exclusive). (See the article at McKinsey Quarterly).
    • Abstract: Far from damaging the economy of the United States, offshoring should enable its companies to direct resources to next-generation technologies and ideas—if public policy doesn't get in the way.

Low costs for educated talent was a motivation for offshoring. Now, however, is demand exceeding supply? Perhaps focusing on supply only in the major cities is misguided.

  • Diana Farrell, “Smarter Offshoring”, Harvard Business Review, June 2006. (See the article at HBR).
    • Abstract: … the most popular sites are now overheating: Demand for young professionals is outstripping supply, wages and turnover are soaring, and overburdened infrastructure systems are struggling to serve the explosive growth. …. According to a McKinsey Global Institute study, more than 90% of the vast and rapidly growing pool of university-educated people suitable for work in multinationals are located outside the current hot spot cities. …. The problems facing the hot spots, coupled with the emergence of many more countries able and willing to provide offshore services, mean that picking a site has become more complicated. In choosing a location, companies will have to focus less on low wages and much more on other ways that candidate cities can fulfill their business needs.

Although outsourcing in India is receiving a lot of press, it's a relatively small part of the economy.

  • Diana Farrell and Adil S. Zainulbhai, “A richer future for India”, McKinsey Quarterly, 2004 Special Edition. (See article at McKinsey Quarterly).
    • Abstract: The wealth generated by India's fast-growing information technology and business-process-outsourcing industries shows that the country has started living up to its economic potential. Unfortunately, they produce just 3 percent of GDP and employ less than one-half of 1 percent of the nonfarm labor force. By contrast, most sectors of India's economy remain shielded from global competition by high tariffs and restrictions on foreign direct investment and are thus woefully uncompetitive. Although some might argue that removing these barriers would threaten social objectives such as the protection of jobs and incomes, a robust economy would be more likely to realize them.

Internally, India has major issues with infrastructure, reform, and economic disparity.

  • Jayant Sinha, “Checking India's vital signs”, McKinsey Quarterly, Special Edition 2005. (See the interactive exhibits at McKinsey Quarterly).
    • For the vast majority of India's 1.1 billion people—more than a quarter of whom live in poverty—even … transformative growth can't come fast enough. The burgeoning services sector, for example, accounted for more than half of the country's GDP in 2003 but employs fewer than one-quarter of its workers. Some two-thirds of all Indians work in agriculture, where growth is slow and prospects are limited.

In attributes of selecting countries for offshoring, the Phillipines has some attractions, as well as some areas for development.

  • Christopher P. Beshouri, Diana Farrell, and Fusayo Umezawa, “Attracting more offshoring to the Philippines”, McKinsey Quarterly, 2005 Number 4. (See the article at McKinsey Quarterly).
    • Abstract: The Philippines' combination of rock-bottom costs and a desirable labor pool is helping to propel the country to prominence as an offshoring location. But research by the McKinsey Global Institute indicates that a poor risk profile, a deficient infrastructure, and a subpar business environment conspire to hinder the country's offshoring prospects.

Case studies

How do Koreans do business in India?

  • Pramath Raj Sinha, “Premium marketing to the masses: An interview with LG Electronics India’s managing director”, McKinsey Quarterly, 2005 Special Edition. (See the article at McKinsey Quarterly).
    • Abstract: In this interview, Kwang-Ro Kim shows how LG Electronics India has built a dominant position in India's consumer electronics and white-goods markets. The South Korean chaebol's wholehearted commitment—including local R&D, early investments in manufacturing, and empowerment in decision making—was one of the factors critical to its success. The company has overcome India's notorious distribution challenge, in the process pushing deeper into rural territories than have most competitors. Indian consumers, LG has found, will pay a premium for quality and service. India is also expected to become an important LG hub for exports to other parts of Asia and to Africa and the Middle East.

The opportunity for Indian-based companies is not only in the first world, but also in developing countries.

  • Ranjit V. Pandit, “What's next for Tata Group: An interview with its chairman”, McKinsey Quarterly, 2005 Number 4. (See the article at McKinsey Quarterly).
    • Abstract: In this interview, Tata Group chairman Ratan Tata discusses the strategies of India's huge steel-to- software conglomerate, his vision of India as a global knowledge center, and the trade-offs between business success and social responsibility. Rather than aspiring to be truly global, Tata Group seeks to expand in countries where it can achieve “a meaningful presence.” Tata, who is also the chairman of India's investment commission, explains why improving the infrastructure of his country is essential to retaining its best people and persuading those who have left to return.

Supplementary references


16. Enterpreneurism; cases in Chinese-style business

Guest lecture experienced in Chinese-style business?


Primary readings

Negotiations in Chinese style come from premises different from western approaches.

  • John L. Graham and N. Mark Lam, “The Chinese Negotiation”, Harvard Business Review, October 2003. See the article at HBR). (Note: this article is included in the “China Tomorrow: Prospects and Perils” NBR package, below).
    • Abstract: … have witnessed communication breakdowns between American and Chinese businesspeople time and time again. The root cause: the American side's failure to understand the much broader context of Chinese culture and values. Americans see Chinese negotiators as inefficient, indirect, and even dishonest, whereas the Chinese see American negotiators as aggressive, impersonal, and excitable. …. Four cultural threads have bound the Chinese people together for some 5,000 years and these show through in Chinese business negotiations: agrarianism, morality, the Chinese pictographic language, and wariness of strangers. Ignore them at any time during the negotiation process, and the deal can easily fall apart.

China internally has a huge economy. Many of its weaknesses are actually in the services sectors.

  • Jonathan R. Woetzel, “Checking China's vital signs: The social challenge”, McKinsey Quarterly, Special Edition 2006. (See the article at McKinsey Quarterly).
    • Abstract: The demise of the country's rural collectives and the dismantling of its stateowned enterprises have left hundreds of millions of people—primarily in rural areas—with little access to health care, education, or other social services. For China’s leaders, the challenge extends beyond meeting the countryside's needs and managing economic growth.

Although China represents a third world economy, all sectors are not advancing at a uniform rate.

  • “China Tomorrow: Prospects and Perils”, 2nd Edition (HBR OnPoint Collection). (See the article at HBR). It includes:
    • William McEwen, Xiaoguang Fang, Chuanping Zhang and Richard Burkholder, “Inside the Mind of the Chinese Consumer”, Harvard Business Review, March 2006. (See the article at HBR).
      • Abstract: … the Gallup Organization undertook an ambitious 10-year, nationwide survey of Chinese consumers and employees. …. Specifically, the findings belie at least four commonly held notions. …. Indeed, the survey found that most Chinese citizens are more interested in expressing their individuality than in getting rich. It also showed that Chinese workers are not as engaged by their jobs as the world might think. What's more, with the average citizen making less than $1,800 per year, only the affluent have extra money to spend. Finally, the average Chinese consumer is more interested in buying luxury and entertainment items than in purchasing basic household goods.
    • Kenneth Lieberthal and Geoffrey Lieberthal, “The Great Transition”, Harvard Business Review, October 2003. (See the article at HBR).
      • Abstract: Improvements in China's infrastructure, workforce, and regulatory environment are making it possible for companies to lower their costs to reap new competitive advantages. However, the reforms required for admission into the World Trade Organization will be politically difficult for China to implement, and its progress will be slowed by the scarcity of resources for the country's shaky banking system, the inadequacy of the social safety net, environmental problems, and local governments' cash shortage, among other things. But for at least the next ten years, multinationals should be the biggest winners in China.
    • Ming Zeng and Peter J. Williamson, “The Hidden Dragons”, Harvard Business Review, October 2003. (See the article at HBR).
      • Abstract: … Chinese companies like Haier, Legend, and Pearl River Piano have quietly managed to grab market share from older, bigger, and financially stronger rivals …. The authors outline the four types of hybrid Chinese companies that are simultaneously tackling the global market. China's national champions are using their advantages as domestic leaders to build global brands. The dedicated exporters are entering foreign markets on the strength of their economies of scale. The competitive networks have taken on world markets by bringing together small, specialized companies that operate in close proximity. And the technology upstarts are using innovations developed by China's government-owned research institutes to enter emerging sectors such as biotechnology.

China's financial services sector is not as mature as its manufacturing sector.

  • Diana Farrell, Susan Lund, and Fabrice Morin, “The promise and perils of China's banking system”, McKinsey Quarterly, June 2006 (web exclusive). (See the article at McKinsey Quarterly).
    • Abstract: … although the country's banks have come a long way, they are not yet out of the woods. Chinese banks still lend too much of their money to underproductive state-owned enterprises (SOEs) —- a problem that leaves them particularly vulnerable to changes in the economic climate and hinders the country from achieving its stated regulatory goals. China's government can certainly afford to bail out the banking sector again should the need arise. But it would be far better for the economy, and especially for the taxpayers (who foot the bill for bank bailouts), if regulators could accelerate the pace of reforms that encourage banks to lend more productively.
  • Diana Farrell, Susan Lund, and Fabrice Morin, “How financial-system reform could benefit China”, McKinsey Quarterly, June 2006. (See the article at McKinsey Quarterly).
    • Abstract: Reforming the financial system could not only raise GDP by as much as 17 percent, or $320 billion a year, but also help spread China’s new wealth more evenly. If the reforms directed additional funds to private companies—China's growth engine—the economy would generate significantly higher returns for the same level of investment and GDP would rise. Such a shift will stimulate mass job creation in the strongest areas of China's economy and increase tax revenues to finance social programs.

Case studies

How do the French operate in China?

  • Peter N. Child, “Lessons from a global retailer: An interview with the president of Carrefour China”, McKinsey Quarterly, 2006 Special Edition. (See the article at McKinsey Quarterly).
    • Abstract: In this interview, Jean-Luc Chéreau, the head of Carrefour China, discusses the French retailer's experience since opening its first Chinese store, in 1995. …. The Carrefour executive also discusses the importance of adapting to local tastes and—particularly as markets spread out from the biggest cities—to local budgets. Networks of Chinese partners and their knowledge of mainland consumers are crucial as well.

How do the British operate in China?

  • Georges Desvaux and Alastair J. Ramsay, “ Shaping China's home-improvement market: An interview with B&Q's CEO for Asia”, McKinsey Quarterly, 2006 Special Edition. (See the article at McKinsey Quarterly).
    • Abstract: n this interview, Steve Gilman, B&Q's CEO for Asia, reviews the chain's rise to the number-one position in China's home-improvement market. Chinese customers are evolving so quickly that the company's structure must change faster than it does in more mature markets. As a result, B&Q partly revamps most of its stores virtually every year. Of all the lessons Gilman learned in China, the most important, he says, is to “keep listening to the customers because they're going to be changing.”

Supplementary references


17. Telecom services; cases in European-style business

Guest lecture experienced in (multi-country) European-style business?

(include broadcasting and mobile multimedia)

Primary readings

Productivity is often based on industrial production figures, and French and German statistics don't seem to be doing as well on this dimension. How does a services economy impact this assessment?

  • Diana Farrell, Heino Fassbender, Thomas Kneip, Stephan Kriesel, and Eric Labaye, “Reviving French and German productivity”, McKinsey Quarterly, 2003, Number 1. (See the article at McKinsey Quarterly).
    • Abstract: In the late 1990s … Germany and France saw their productivity gap with the United States widen. Although many observers cite low investment in technology by the two European countries as the main cause of the shift, they are off target: the real problems are regulations that not only hinder the adoption and spread of innovation but also support fragmented industries, as well as differences in demand among these countries. Aging populations make it imperative for Germany and France to return to high productivity growth. More deregulation is needed to create competitive pressure that would make businesses adopt innovations more quickly.

Supplementary references


18. Interim business project reviews (1)


Primary readings


Supplementary references


19. Interim business project reviews (2)


Primary readings


Supplementary references


20. Technology architecture; cases in information technology services

Guest lecture from a technology services provider?

(include web services)

Primary concepts

Service is delivered not only by human beings, but also through technology.

  • Matthew L. Meuter, Amy L. Ostrom, Robert I. Roundtree and Mary Jo Bitner, “Self-Service Technologies: Understanding Customer Satisfaction with Technology-Based Service Encounters” Journal of Marketing, Vol. 64, Issue, 3 (July 2000), pp. 50-64. (See at the Journal of Marketing).

Establishing dominance in platforms enables companies a large degree of strategic control.

  • Michael A Cusumano, Annabelle Gawer. “The elements of platform leadership”, MIT Sloan Management Review. Spring 2002. Vol. 43, Iss. 3; p. 51

Organization and technology need to work together. Services business and service-oriented architecture should, in theory, follow from compatible thinking.

  • John Hagel III and John Seely Brown, “Flexible IT, Better Strategy”, McKinsey Quarterly, 2003, Number 4. (Available at McKinsey Quarterly).
    • (alternate): Out of the Box: Strategies for Achieving Profits Today & Growth Tomorrow Through Web Services, Harvard Business School Press (October 28, 2002)

Once services have been moved to information technology, does the location of infrastructure make a difference anymore?

  • Kishore Kanakamedala, James M. Kaplan, and Gary L. Moe, “Moving IT infrastructure labor offshore”, McKinsey Quarterly, June 2006 (web exclusive). (See the article at McKinsey Quarterly).
    • Abstract: The offshoring of IT infrastructure—machines and networks and the people who manage them—has been relatively slow to develop. But this is changing as leaders show how to offshore it effectively and vendors step up to meet a growing opportunity.

Supplementary references

Blogs and wikis can be a new medium for collaboration.

  • Andrew P. McAfee “Enterprise 2.0: The Dawn of Emergent Collaboration”, MIT Sloan Management Review. Cambridge: Spring 2006. Vol. 47, Iss. 3; p. 21

21. Service supply chains; cases in logistics and transportation services

Guest lecture from a logistics or transportation services provider?


Primary readings

Although some attention has been put onto open B2B exchanges, there continues to be a place for private exchanges.

  • William Hoffman, Jennifer Keedy, and Karl Roberts, “The unexpected return of B2B”, McKinsey Quarterly, 2002 Number 3. (See the article at McKinsey Quarterly).
    • Abstract: Open business-to-business marketplaces fulfilled many suppliers' worst fears about e-commerce by failing to deliver the promised volume and liquidity. Recently, however, B2B exchanges have made a comeback, in the form of private exchanges—and this time, suppliers might actually benefit. These invitation-only networks connect a single company to its customers, suppliers, or both. By providing secure one-on-one communication, private exchanges can enhance shared supply chain processes such as inventory management, production planning, and order fulfillment.

Supplementary references


22. Ventures; cases in Anglo-American-style business

Guest lecture from a venture capitalist or an experienced American business executive?


Primary readings

Ireland is often cited as a economic turnaround, but its services productivity could be improved.

  • Conor Kehoe and Jaana Remes, “Services and Ireland's long-term growth”, McKinsey Quarterly, 2006, Number 2. (See the brief article at McKinsey Quarterly).
    • Abstract: Only foreign-owned companies producing for export really excel. Service sector reform is an urgent priority. Ireland's long-run prosperity depends on boosting the productivity of services for domestic consumption.

Supplementary references


23. Alliances; cases in Latin-style business

Guest lecture experienced in Latin American business? (tbd)

Primary readings

The movement from integrated enterprises to business networks often makes individuals uncomfortable with working with external parties in a manner that is similar to internal parties. This is particularly true with alliance partners who operate internationally.

  • John Hagel III, John Seely Brown, “Productive Friction: How Difficult Business Partnerships Can Accelerate Innovation”, Harvard Business Review, February 2005. (See the article at HBR)
    • Abstract: Companies are becoming more dependent on business partners, but coordinating with outsiders takes its toll. Negotiating terms, monitoring performance, and, if needs are not being met, switching from one partner to another require time and money. Such transaction costs, Ronald Coase explained in his 1937 essay “The Nature of the Firm,” drove many organizations to bring their activities in-house. But what if Coase placed too much emphasis on these costs? What if friction between companies can be productive? Indeed, as John Hagel and John Seely Brown point out, interactions between organizations can yield benefits beyond the goods or services contracted for. Companies get better at what they do–and improve faster than their competitors–by working with outsiders whose specialized capabilities complement their own.

As an alternative to value chain thinking, business relationships can be considered multi-dimensionally.

  • Richard Normann, and Rafael Ramirez,. “From Value Chain to Value Constellation: Designing Interactive Strategy” Harvard Business Review, Volume 71, Number 4 (July-August 1993), pp. 65-77.
    • (alternate): Richard Normann and Rafael Ramirez, Designing Interactive Strategy: From Value Chain to Value Constellation, Wiley, 1998.

Companies in the first world worry about productivity compared to the third world, but emerging economies such as Mexico also need to be concerned.

  • Diana Farrell, Antonio Puron, and Jaana K. Remes, “Beyond cheap labor: Lessons for developing economies”, McKinsey Quarterly, 2005, Number 1. (See the article at McKinsey Quarterly).
    • Abstract: Mexico … has lost more than 270,000 jobs since 2000 in the assembly factories that sprouted on the US border before and after the passage of NAFTA. Although the fear of job losses to other countries is often exploited, economies can and must evolve to meet the challenge of foreign competitors. Instead of trying to win back low-wage assembly jobs, Mexico and other middle-income nations must create jobs in higher-value-added activities to continue moving up the development path. Unfortunately, the fixation on China — to say nothing of political rhetoric against globalization — is blocking reform efforts in many countries.

Supplementary references

Although there is often a focus on entrepreneurism, intrapreneurism works in different ways.

  • Robert A. Burgelman, Liisa Välikangas. “Managing Internal Corporate Venturing Cycles”, MIT Sloan Management Review. Summer 2005. Vol. 46, Iss. 4; p. 26
    • Abstract: For several decades, research about large companies' internal corporate venturing has shown that such activities frequently exhibit substantial cyclicality. Companies may enthusiastically launch ICV initiatives, later shut them down, and still later launch new ICV programs again. In this article, the authors describe four common situations that occur in cycles of corporate venturing. They argue that, unless properly managed, corporate commitment to ICV is apt to fluctuate according to the availability of uncommitted financial resources and the growth prospects of the organization's primary businesses. For example, if the corporation has uncommitted financial resources but the growth prospects of the main business are perceived to be insufficient, then the company may launch a top-down “all-out ICV drive” that is vulnerable to costly mistakes. If, however, the growth prospects of the primary business are perceived to be adequate and there are few uncommitted financial resources, top management is likely to perceive ICV as largely irrelevant. The authors examine factors contributing to ICV cyclicality; they then suggest that companies can achieve better outcomes if executives recognize the strategic importance of internal corporate venturing activities and view them as a way of gaining insights into emerging opportunities.

Consider: Africa Ariño, José de la Torre, and Peter Smith Ring, Relational Quality: Managing Trust in Corporate Alliances, California Management Review, Fall 2001

  • Abstract: Management scholars have often argued that “trust” plays a key role in economic exchanges, particularly when one or another party is subject to the risk of opportunistic behavior and incomplete monitoring or when problems due to moral hazard or asymmetric information arise. These conditions are almost always present in the case of corporate alliances and joint ventures. However, one attribute of relationships—“relational quality”—is fundamental to the maintenance of good working conditions in two-party alliances where past experience and the shadow of the future play important roles.
  • Philip Evans, Bob Wolf, “Collaboration Rules”, Harvard Business Review, July 2005. (See the article at HBR)
    • Abstract: Corporate leaders seeking to boost growth, learning, and innovation may find the answer in a surprising place: the Linux open-source software community. … The authors have, nonetheless, found surprising parallels between the anarchistic, caffeinated, hirsute world of Linux hackers and the disciplined, tea-sipping, clean-cut world of Toyota engineering. Specifically, Toyota and Linux operate by rules that blend the self-organizing advantages of markets with the low transaction costs of hierarchies. In place of markets' cash and contracts and hierarchies' authority are rules about how individuals and groups work together (with rigorous discipline); how they communicate (widely and with granularity); and how leaders guide them toward a common goal (by example). Those rules, augmented by simple communication technologies and a lack of legal barriers to sharing information, create rich common knowledge, the ability to organize teams modularly, extraordinary motivation, and high levels of trust, which radically lowers transaction costs.

24. Industrial policy; cases in Scandinavian-style business

Guest lecture from TEKES?


Primary readings

The economy is Sweden has improved in recent years, but productivity in the services sector lags behind that in the industrial sector.

  • Kalle Bengtsson, Claes Ekström, and Diana Farrell, “Sweden's growth paradox”, McKinsey Quarterly, June 2006 (web exclusive). (See the article at McKinsey Quarterly).
    • Abstract: Sweden's economic revival is explained largely by the private sector's strong productivity growth, driven mostly by deregulation and intensified competition. But productivity growth in the public sector must rise, and Sweden must improve its very poor record of creating new jobs. These shortcomings have to be tackled as jobs migrate offshore and Sweden's population grows older. Both of these developments will put the country's large public sector under severe strain. Swedish policy makers, companies, and trade unions must collaborate not only to remove barriers to competition in the private sector but also to improve the public sector's productivity and to create new jobs.

Supplementary references


25. Economic development; cases in third world-style business

Guest lecture experienced in third-world businesses?


Primary concepts

Customers is developing countries should be rethought of as coproducers.

  • Maria Flores Letelier, Fernando Flores, and Charles Spinosa, “Developing Productive Customers in Emerging Markets”, California Management Review, Summer 2004
    • Abstract: … this article demonstrates that companies can appeal to customers as productive agents who want to build and transform their lives. Offering customers productivity-enhancing systems coupled with culturally appropriate offerings will allow them to charge appropriately and succeed in lower-income, emerging markets.
    • Excerpt: Companies can in fact design new offerings for the core of low-income market segments and succeed. However, low-income markets should not be thought of as a downgraded version of mainstream markets.(n9) The key is to understand the particular value created for the end-user, which often can only be found through a deep cultural understanding of the issues faced by end-users in these markets. Developing this understanding requires that companies shift their views of potential customers: to stop viewing them as consumers and instead view them as producers. To view potential customers as consumers is to understand them as passive, desiring beings who want satisfaction. To view them as producers is to view them as designers and transformers who are actively engaged in seeking a good life.

Supplementary references


26. Sustainability and competitiveness

(include value migration and value capture)

Primary concepts

The measures in a traditional industrial business may not be valid for a services business.

  • Eric Harmon, Scott C. Hensel, and Timothy E. Lukes, “Measuring performance in services”, McKinsey Quarterly, 2006 Number 1. (See the article in McKinsey Quarterly).
    • Abstract: Service companies can't measure and reduce variance as easily as manufacturers can. Service tasks vary, depending on the person performing the service, differences in customer behavior, and the business environment. Services can be measured and their variance controlled by following three principles: benchmark internally, measure the drivers of cost, and make metrics accurate enough to identify all relevant costs. A cost tree is an invaluable tool for spotting activities and locations in which variance destroys margins.

Businesses need to stay relevant to their customers. Value propositions can not stand still, with a risk that organizations will end up at the losing end of value migration.

  • Adrian J. Slywotzky, David J. Morrison, and James A. Quella, “Achieving Sustained Shareholder Value Growth: Strategy in the Age of Value Migration”, Mercer Management Journal, Issue 10 (1998). (Available at Mercer Management Consulting).
    • (alternate): Adrian J. Slywotzky, Value Migration: How to Think Several Moves Ahead of the Competition, Harvard Business School Press, 1996.
    • (alternate): Adrian J. Slywotzky and David J. Morrison, The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits, Harvard Business School Press, 1997.

Supplementary references


27. Business networks, strategic balance and governance

(include open source)

Primary concepts

Organizations need to move away from industry alignment, towards business ecosystems where cooperative alliances can help develop both parties. (Note that these authors only use business ecosystem as a metaphor, and not as a rigourous model)

  • Marco Iansiti, Roy Levien, “Strategy as Ecology”, Harvard Business Review, March 2004. (See the article at HBR)
    • Abstract: Most companies today inhabit ecosystems–loose networks of suppliers, distributors, and outsourcers; makers of related products or services; providers of relevant technology; and other organizations. The analogy between business networks and biological ecosystems vividly highlights certain pivotal concepts. The moves that a company makes will, to varying degrees, affect the health of its business network, which in turn will ultimately affect the organization's performance.

Most services businesses are people businesses. Therefore, they need to measure differently.

  • Consider: Felix Barber, Rainer Strack, “The Surprising Economics of a “People Business”, Harvard Business Review, June 2005. (See the article at HBR)
    • Abstract: Avoid the trap of relying on capital-oriented metrics, such as return on assets and return on equity. They won't help much, as they'll tend to mask weak performance or indicate volatility where it doesn't exist. Replace them with financially rigorous, people-oriented metrics–for example, a reformulation of a conventional calculation of economic profit, such as EVA, so that you gauge people, rather than capital, productivity.

Supplementary references

As organizations go to network form or business ecosystem, the interaction between businesses becomes more and more important.

  • Ranjay Gulati and David Kletter “Shrinking Core, Expanding Periphery: The Relational Architecture of High-Performing Organizations, California Management Review, Spring2005, Vol. 47 Issue 3, p77-104.
  • Excerpt: According to our research, winning organizations are discovering that capital takes many forms, not just financial, and that effectively exploiting and leveraging relational capital is an important route to long-term success. Defined as the value of a firm's network of relationships with its customers, suppliers, alliance partners, and internal sub-units, “relational capital” is fast becoming one of the major currencies of modern commerce.

Planning a future without a track record can be a risk. How can the experience be made learning, rather than penalizing?

  • Vijay Govindarajan, Chris Trimble. “Strategic Innovation and the Science of Learning”, MIT Sloan Management Review. Winter 2004. Vol. 45, Iss. 2; p. 67
    • Theory-focused planning
    • Excerpt: A strategic experiment is a risky new venture within an established corporation. It is a multiyear bet within a poorly defined industry that has no clear formula for making a profit. Potential customers are mere possibilities. Value propositions are guesses. And activities that lead to profitable outcomes are unclear. Most executives who have been involved in strategic experiments agree that the key to success is learning quickly. In a face to define an emerging industry, the competitor that learns first generally wins. Unfortunately, habits embedded in the conventional planning process disable learning. A better approach, theory-focused planning, differs from traditional planning on six counts.

Alternative approaches to curriculum

In the interest of completeness, there's many different ways to orient services-oriented curriculum. Here's some pointers.

  • North Carolina State University
    • In the MBA program of the College of Management, NCSU offers a Services Management Concentration. The curriculum and course sequences describe two tracks, in relationship management (i.e. coproduction between the client and provider, and in innovation management (i.e. the analysis and optimization of business processes and value chains or networks).

Alternative source materials

The service business management class for Helsinki Polytechnic Stadia first reviewed some alternative textbooks, and then decided to start from scratch using journal articles, instead. This doesn't mean that those sourcebooks are not relevant, but it does speak to the economics of having students purchase multiple textbooks that overlap to some degree, and the appropriate at a master's level degree.

  • James A. Fitzsimmons (University of Texas at Austin) and J. Mona Fitzsimmons, Service Management: Operations, Strategy, and Information Technology, 2006, 5th edition, ISBN: 0072982306
    • McGraw-Hill cites this textbook as “the best-selling textbook in service operations”. From the table of contents, the emphasis certainly is on operations. Supplements on KIBS (knowledge-intensive business services) and strategy would likely be required.
  • Valarie A. Zeithaml (University of North Carolina-Chapel Hill), Mary Jo Bitner (Arizona State University-Tempe), and Dwayne D. Gremler (Bowling Green State University), Services Marketing: Integrating Customer Focus Across the Firm, 2006, 4th edition, ISBN: 0072961945
    • McGraw-Hill cites “services marketing issues, practice, and strategy”, “utilizing the GAPS Model of Service Quality as an organizing framework”. The table of contents demonstrates an emphasis on the customer-orientation. Supplements on service operations and transformation/innovation strategies would likely be helpful.
  • Christopher Lovelock (Yale University) and Jochen Wirtz (National University of Singapore), Services Marketing, 2004, 5th edition, ISBN: 0-13-113865-0
    • At 672 pages, this is a weighty book at Prentice Hall. The table of contents suggests a high degree of completeness in the marketing domain, including coverage of service delivery. A not-insignificant number of pages must result from the inclusion of numerous cases. There would seem to be the same weakness in de-emphasizing knowledge-intensive business services and global trends such as outsourcing.

At Brigham-Young University, Scott Sampson maintains a category on Teaching Resources on the Service Management Archive (SOMA).

At Arizona State University, the Center for Services Leadership has a Reading List for those “interested in learning more about strategic marketing”.

sbm.txt · Last modified: 2016/05/29 00:00 (external edit)