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From Dr. Scott Sampson's Understanding Services Businesses Book (click for table of contents)
SBP 4c: The Server-Ownership Perspective⇐Prior —[in Unit 4: Understanding Non-Services (manufacturing)]—

SBP 4d: Manufacturing in Sheep's Clothing

All manufacturing is not alike. Manufacturing where most of the value is added in product development is often mistaken for services. Other manufacturing is mistaken for services because of service symptoms not caused by the Unified Services Theory.

Why it occurs

This principle occurs because the symptoms of service, although caused by the UST, can also be caused by other factors. Also, manufacturers serve customers indirectly through their goods. (As discussed under The Server-Ownership Perspective Service Business Principle)

Details

Units 2 and 3 introduced some fundamental characteristics of service businesses. Those characteristics are “symptoms” of a service business-they occur as a result of a business being a service, but they do not conclusively define a service as a service. (A service is a service by the Unified Services Theory.)

First, an analogy. The symptoms of influenza include muscle soreness, nasal congestion, fever, and so forth. If a person has influenza, they are likely to experience those symptoms. However, if they have those symptoms, it does not necessarily mean they have the flu. Muscle soreness can be caused by strain, nasal congestion by allergies, fever by other viruses. Influenza is caused by the presence of the influenza virus, not by the symptoms. Just as symptoms of influenza can be attributed to other causes, the symptoms of services can sometimes be caused by things other than the Unified Services Theory. The presence of service symptoms does not make a process a service.

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For example, what input does an electric power generation company receive from customers in the production process? None. They can produce power to their heart's content without any inputs from customers. Therefore, the Unified Services Theory prescribes that electric power generation is a manufacturing process, not a service process. Then why is it that power is produced just as customers demand it (simultaneous production and consumption), and not inventoried? The answer is because of technical and cost limitations. Where would power companies inventory electricity? In huge batteries. However, it would be so costly (if not impossible) to construct batteries capable of storing much demand for power, that the companies resort instead to demand-driven (just-in-time) production.

Do movie studios require customer inputs in the process of making movies? If we consider the customers to be theaters or the movie viewers, the answer again is no. The studios may gain a survey of viewer preferences, but still do not require any inputs from individual customers in order to make movies. Even though movie production is not a service process, some of the symptoms of services still occur. Movie production tends to be very labor-intensive. Why? Probably because of the large creative element involved. The actual process of copying the finished film for distribution to theaters is probably not very labor-intensive. With movies it is difficult to measure output and quality, and there is certainly heterogeneous production. A 120 minute movie is not 20 percent better than a 100 minute movie. Again, these symptoms are probably caused by the large creative element involved in movie making.

The movie production example is one where most of the value of the finished product is generated in product devolvement (as per wording of the Service Business Principle). If one were to consider an actual roll of film, the film material itself is of very little value. It is the ideas and creative development recorded on the film that give the film value.

How it affects decisions

It is important to understand the Unified Services Theory. Service symptoms not caused by the Unified Services Theory should be addressed, but the overall process may still be managed as a manufacturing process.

For example

Let us consider software publishers. Are companies that write and mass-market computer software service providers? Surely the technical support process is a service process–dependant on the input of customer questions and problems. But what about the process of writing and producing the software? Again, there are no individual customer inputs involved (although most software publishers survey customers to identify bugs and get ideas for new product features). Software does involve a sense of intangibility–computer code may be represented in magnetic form, but the ideas it represents are quite intangible. The software writing process is somewhat labor-intensive, which keeps many computer programmers employed. However, the process of copying the finished product onto disks for distribution is probably not labor-intensive. Software is quite variable and heterogeneous, and it is difficult to measure output. These symptoms are likely to occur due to the creative nature of the software development process.

Is a cable-TV company a service company? What is the primary production process of a cable-TV company? Recalling the Identifying the Customer Service Business Principle, who is the customer? The cable-TV viewer seems to be the customer. What is the cable-TV company's production process. It is likely receiving satellite signals which are amplified and channeled to customers' homes. What customer inputs are there into that process? Probably none. The customer just selects and views the output. The signals are not inventoried by the company, although they could be inventoried on videotape. For legal reasons, cable companies are prohibited from recording signals and later distributing them for profit. Despite the presence of some symptoms of services, (non-interactive) cable-TV companies are assemblers of electronic signals which they procure from suppliers and thus fit the manufacturing model.

What about airwave broadcast television? Are they a service provider, or a manufacturer? Do airwave broadcasters require customer inputs in the production process? Are the customers the viewers? Well, they are not direct customers, but are the critical audience. Viewers do not compensate the airwave broadcaster, but advertisers do. The broadcasters receive advertisement inputs from customers, package them with programming, and thus try to get the critical audience (viewers) to watch the result. (This is different from cable-TV, which often has no advertising that is paid to the cable company.) Thus, the reason we would expect the symptoms of services to occur for airwave television broadcasting is because it is a service process, as defined by the Unified Services Theory.

My airline example

We previously established that as a highly custom jumbo jet manufacturer, Boeing in fact acts as a service provider. Another part of the company makes helicopters. For the sake of discussion, lets suppose that the helicopters are manufactured as a standardized product. Therefore, the process would be a manufacturing process. Even if they were standardized, they are probably still only produced as customers order them. Why? Not because the company is waiting for customer inputs. Instead it is likely because each helicopter may sell for the better part of a million dollars, and the costs of keeping finished helicopters in inventory would be too expensive. Therefore a symptom of service–Impracticability to Inventory–occurs for a reason other than customer inputs.

Analysis questions

  1. (These questions should be asked about a manufacturing process, perhaps one that provides facilitating goods for your service process.)
  2. Does the production process require customer inputs besides selection of output?
  3. What symptoms of services exist in the manufacturing process? Why? Are they caused by customer inputs, or other practicalities?

Application exercise

Think of a manufacturing process that could either substitute for your service process or provide facilitating goods for your service process. Write what that substitute is. Which of the ideas covered in the Fundamentals units seem to apply for that process? Why do they occur? (If it is actually a manufacturing process, then the reason for the symptoms will be other than “customer inputs.”)