MIT Sloan Management Review

Presently the service sector of our economy is characterized by both profusion and confusion. By profusion, I mean that it has done wonderfully well at generating jobs, for new kinds of services are sprouting continually. By confusion, I mean that service businesses seem to rise and fall from Wall Street grace with regularity. Moreover, as [...]

UNDERSTANDING CUSTOMER expectations is a prerequisite for delivering superior service; customers compare perceptions with expectations when judging a firm’s service.1 However, the nature of customer service expectations and how they are formed has remained ambiguous. Researchers have defined customer service expectations in a variety of ways but with no conceptual framework to link different types [...]

THE DOWNTOWN Chicago Marriott hotel had been open for fifteen years before its management determined that two-thirds of all guest calls to housekeeping were to request ironing boards. This discovery prompted the idea of simply placing irons and ironing boards in all of the hotel’s guest rooms, an idea that would cost $20,000. The hotel [...]

SUPERIOR SERVICE IS FASHIONABLE in the business press these days. From the American Banker to Fortune magazine, service cheer-leaders extol the virtues of investing to improve all types of customer service across industries ranging from financial services to manufacturing. One magazine notes that the rewards of service have never been clearer. Similarly, competitors in every [...]

DOES THIS SOUND familiar? A large retail company (or bank or fast food chain) designs its customer contact positions to be filled by people who are willing, at least temporarily, to work for wages marginally above statutory minimums. It simplifies the jobs, reducing them to a series of repetitive, boring tasks that require minimal training. [...]

Empowering service workers has acquired almost a “born again” religious fervor. Tom Peters calls it “purposeful chaos.” Robert Waterman dubs it “directed autonomy.” It has also been called the “art of improvisation.”
Yet in the mid-1970s, the production-line approach to service was the darling child of service gurus. They advocated facing the customer with standardized, procedurally [...]

Total quality management (TQM) has become accepted practice in services. Concepts from TQM in manufacturing, such as benchmarking, diagnostic tools (fishbone diagrams, Pareto charts, and so on), and customer-driven design (through quality function deployment), have joined with such concepts as service guarantees and service recovery planning to drive the quality philosophies of many service firms. [...]

In the 1970s, Theodore Levitt presented a “production-line approach to service” as the remedy for the sector’s problems of inefficient operations and dissatisfied customers. He argued that the secrets of the production-line approach could be discovered, quite simply, by looking at the world of manufacturing. Industrial practices such as the simplification of tasks and the [...]

A national preoccupation with U.S. international industrial competitiveness, driven by our continuing enormous balance of payments deficit, has tended to focus media and political attention during the 1980s on manufacturing. A torrent of books and articles has inundated business managers, offering guidance on how to improve manufacturing performance. Terms like “world class manufacturing” and “dynamic [...]

A Fortune “500” company uses discounted cash flow analysis to evaluate investment proposals. The company used the same discount rate from 1973 to 1986. Why? The formula for calculating the discount rate was established in 1973, the underlying methodology was never documented, and the person who derived the formula had left the company. Meanwhile, the [...]