SBP 1a: The Unified Services Theory

This principle occurs as a fundamental defining principle. It serves to unify, or reveal commonality among all service businesses. In addition, it forms the basis for a myriad of Service Business Principles–principles which define good business practice in service industries. In other words, by understanding what makes a service business a service business, we gain insights into the critical success factors of such businesses. That is the role of the Unified Services Theory.

Traditionally, the fundamental model of business operations is the following (called the I/O or Input/Output model):

This, of course, is the fundamental model in its simplest form. The model makes perfect sense in non-service operations such as manufacturing. For example, the suppliers to bicycle manufacturing provide components, labor, energy, etc., which is converted into finished bicycle. The production process–also called the “transformation process,” “conversion process,” and “value adding process”–is to change inputs into outputs. The objective is to produce outputs with which the customer will ascribe value, and thus express “willingness to buy.”

With service businesses, the model is somewhat different:

This distinction in fundamental operations models captures the essence of the Unified Services Theory. The distinction is that with services businesses, the customer provides significant inputs into the process. Therefore, the customer is more than merely the consumer of outputs.

Herein is the paradigm shift: It is not so much what a company does for the customer that makes it a service, but what the customer does for the company. Specifically, the customer provides essential inputs to the production process. (The next SBP, Defining by Customer Content, will discuss the types of inputs customers provide to service processes.)

Do customer inputs make a difference in the way a business should be appropriately run? It turns out, the involvement of customer inputs makes all the difference in the world. The purpose of this workbook is to explore the strategic and managerial implications of customer inputs. Each and every Service Business Principle covered in this workbook describes a direct consequence of customer inputs.

Technical note (ignore this paragraph if it is not clear to you): Scientists dealing with mathematical or logical proofs–proving that a relationship or condition exists–talk about “necessary” and “sufficient” conditions for something to be valid. “Necessary” means that the condition must be met in order for the proof to be true, but the condition could also be met in some cases where the proof is false. “Sufficient” means that if the condition is met, we know for certain that the proof is true. However, if the “sufficient” condition is not met, the proof could still be true. If a condition is both “necessary” and “sufficient,” then if the condition is met, the proof is true; if the condition is not met the proof is not true. The Unified Services Theory defines customer content as a “necessary” and “sufficient” condition for a business process to be a “service” business process. In other words, if a business process is a “service” process, then it requires customer inputs (“necessary”), and if a business process requires customer inputs, then it is a “service” process (“sufficient”).

One other technical note: The Unified Services Theory states that “nearly all” managerial themes unique to services are founded in the customer-input distinction. If the Unified Services Theory were given as a purely normative manner, it would include “all” managerial themes. However, for now we assume “nearly all” managerial themes are included.

The following are some service businesses from the front cover of the workbook, and examples of customer-inputs to that service process.

Examples of how to apply the Unified Services Theory are listed under each of the subsequent Service Business Principles. When you come to the various Service Business Principles, with examples for each, it will be shown how they tie back into the Unified Services Theory.

It is not expected that you will fully understand the validity and the far-reaching significance of the Unified Services Theory based on the brief explanations given above. The entire remainder of this workbook is devoted to explaining the implications of the Unified Services Theory. In fact, there is not a single Service Business Principle covered that does not tie back into the Unified Services Theory. As you proceed, you will be shown how the Unified Services Theory provides the foundation which uncovers the keys to successful service business management.

The remainder of this unit describes some fundamental concepts which will be helpful in subsequently applying the Unified Services Theory. Service Business Principles 1b through 1e are called “semantic” since they define basic terminology which will help the discussion and learning of other Service Business Principles.

With manufacturing, suppliers provide inputs and customers consume the production outputs. Individual customers provide no inputs, but simply select and pay for the outputs.

It is important to note in the Unified Services Theory that with manufacturing, “…groups of customers may contribute ideas to the design of the product,…” such as through market research studies. That information from groups of customers is not about a specific unit of production, but is about production in general. Therefore, we consider such general information to be an input in the design of the overall service or the overall service process, not an input into the process itself. Throughout this entire workbook, when we refer to “customer inputs” we are referring to inputs to be used in the specific customer's unit of production, not to general customer sentiment about the overall process or general product.

1. Are there customer-provided inputs in the process? What are they?
2. Where do they enter the process?
3. Where are they kept and for how long?
4. How are these inputs transformed by the process?

To illustrate the significance of customer-provided inputs to service production processes, imagine the condition of your service business if there were no customer inputs whatsoever. First, list what the customer normally provides as inputs to the production process. For each of those inputs, indicate what the service provider does with the input. Finally, with each input also describe what the service provider would do if the customer selected the service but did not provide the input. (For example, airline passengers provide themselves as inputs into the air transportation process. Airlines transport passengers to a desired location. If an airline customer purchases a ticket but does not show up for the flight, the plane will fly but the passenger will not be transported. It is impossible to complete the passenger transportation process without a passenger to transport.)