Chapter 15:
Organizing for Change Management and Service LeadershipSlide
2007 by Christopher Lovelock and Jochen Wirtz Services Marketing
6/E Chapter 15 - 1
Overview of Chapter 15 Effective Marketing Lies at the Heart of
Value Creation Integrating Marketing, Operations, and Human
Resources Creating a Leading Service Organization In Search of
Human Leadership Change Management
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 2
Effective Marketing Lies at the Heart of Value Creation
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 3
The Service-Profit Chain(Fig 15.1)Internal External
Operating strategy and service delivery systemLoyalty
Satisfaction Productivity Employees and Output Quality Capability
Service Quality Workplace design Job design Selection and
development Rewards and recognition Information and communication
Tools for serving customersSlide 2007 by Christopher Lovelock and
Jochen Wirtz
Service Concept
Target MarketRevenue growth 1
4-7 Customers Service Value 3 Satisfaction 2 Loyalty
Profitability
Quality and Attractive value productivity Service designed
Improvements and delivered to yield higher meet targeted service
quality customers needs and lower costsServices Marketing 6/E
Lifetime value Retention Repeat business Referral
Chapter 15 - 4
Links in the Service-Profit ChainTable 15.1
1. Customer loyalty drives profitability and growth 2. Customer
satisfaction drives customer loyalty 3. Value drives customer
satisfaction 4. Employee productivity and retention drive value 5.
Employee loyalty drives productivity 6. Employee satisfaction
drives loyalty and productivity 7. Internal quality drives employee
satisfaction 8. Top management leadership underlies chains
successSlide 2007 by Christopher Lovelock and Jochen Wirtz Services
Marketing 6/E Chapter 15 - 5
Qualities Associated with Service Leaders Understands mutual
dependency among marketing, operations and human resource functions
of the firm Has a coherent vision of what it takes to succeed
Strategies are defined and driven by a strong, effective leadership
team Responsive to various stakeholders Value creates through
customer satisfaction
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 6
Integrating Marketing, Operations, and Human Resources
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 7
Reducing Interfunctional Conflict One challenge is to avoid
creating functional silos High-value creating enterprises should be
thinking in terms of activities, not functions
Top management needs to establish clear imperatives for each
function that defines how a specific function contributes to the
overall mission The marketing imperative The operations imperative
The human resources imperative
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 8
Defining the Three Functional Imperatives Marketing Imperative
Target right customers and build relationships Offer solutions that
meet their needs Define quality package with competitive
advantage
Operations Imperative Create and deliver specified service to
target customers Adhere to consistent quality standards Achieve
high productivity to ensure acceptable costs
Human Resource Imperative Recruit and retain the best employees
for each job Train and motivate them to work well together Achieve
both productivity and customer satisfaction
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 9
Creating a Leading Service Organization
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 10
From Losers to Leaders: Four Levels of Service Performance (1)
Service Losers Bottom of the barrel from both customer and
managerial perspectives Customers patronize them because there is
no viable alternative New technology introduced only under duress;
uncaring workforce
Service Nonentities Dominated by a traditional operations
mindset Unsophisticated marketing strategies Consumers neither seek
out nor avoid them
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 11
From Losers to Leaders: Four Levels of Service Performance (2)
Service Professionals Clear market positioning strategy Customers
within target segment(s) seek them out Research used to measure
customer satisfaction Operations and marketing work together
Proactive, investment-oriented approach to HRM
Service Leaders The crme da la crme of their respective
industries Names synonymous with outstanding service, customer
delight Service delivery is seamless process organized around
customers Employees empowered and committed to firms values and
goals
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 12
Dilberts Boss Loses Focus and His AudienceFig 15.3
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 13
Moving to a Higher Level of Performance Firms can move either up
or down the performance ladder Organizations that are devoted to
satisfying their current customers may miss important shifts in the
marketplace As a result, they may face difficulties attracting
demanding new consumers with different expectations Companies
defending their control of their competitive edge may have
encouraged competitors to find higherperforming alternatives
Organizations with a service-oriented culture may turn otherwise as
a result of a merger or acquisition that brings in new leaders who
emphasize short-term profitsSlide 2007 by Christopher Lovelock and
Jochen Wirtz Services Marketing 6/E Chapter 15 - 14
In Search of Human Leadership
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 15
Leading a Service Organization Involves Eight Stages (1)
Creating a sense of urgency to develop the impetus for change
Putting together a strong enough team to direct the process
Creating an appropriate vision of where the organization needs to
go Communicating that new vision broadly
Source: John Kotter Slide 2007 by Christopher Lovelock and
Jochen Wirtz Services Marketing 6/E Chapter 15 - 16
Leading a Service Organization Involves Eight Stages (2)
Empowering employees to act on that vision Producing sufficient
short-term results to create credibility and counter cynicism
Building momentum and using that to tackle tougher change problems
Anchoring new behaviors in organizational culture
Source: John Kotter Slide 2007 by Christopher Lovelock and
Jochen Wirtz Services Marketing 6/E Chapter 15 - 17
Leadership versus Management Leadership Concerned with
development of vision and strategies, and empowerment of people to
overcome obstaclesmake vision happen Emphasis on emotional and
spiritual resources Works through people and culture Produces
useful change, especially non-incremental change
Management Involves keeping current situation operating through
planning, budgeting, organizing, staffing, controlling, and problem
solving Emphasizes physical resourcesraw materials, technology,
capital Works through hierarchy and systems Keeps current system
functioning
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 18
Setting Direction versus Planning Planning A management process,
designed to produce orderly resultsnot change Setting direction
Involves creating visions and strategies that describe a business,
technology, or corporate culture in terms of what it should become
over long term and articulating feasible way of achieving goal Many
of best visions and strategies combine basic insights and translate
them into realistic competitive strategy Stretcha challenge to
attain new levels of performance and competitive advantage that
might as first seem to be beyond the organizations reach Planning
follows and complements direction setting, serving as useful
reality check and road map for strategic execution See Service
Persp. 15.1 : Can Cirque du Soleil Stretch Further?Slide 2007 by
Christopher Lovelock and Jochen Wirtz Services Marketing 6/E
Chapter 15 - 19
Individual Leadership Qualities Possesses a special perspective
Able to believe in their employees and make communicating with them
a priority Love of the business Being driven by a set of core value
that they infuse into the organization Need not be charismatic, but
has to be principled Must have personal humility blended with
intensive professional will, ferocious resolve, and willingness to
give credit to others but take blame themselvesSlide 2007 by
Christopher Lovelock and Jochen Wirtz Services Marketing 6/E
Chapter 15 - 20
Change Management
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 21
Evolution versus Turnaround (1) Evolution involves continual
mutations designed to ensure the survival of the fittest Top
management must proactively evolve the focus and strategy of the
firm to take advantage of changing conditions and the advent of new
technologies
Turnaround situations are where leaders seek to bring distressed
organizations back from the brink of failure and set them on a
healthier course Example: Amex (Service Perspectives 15.2) Can be
advantageous to bring in a new CEO from outside the
organization
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 22
Evolution versus Turnaround (2) Hurdles that leaders face in
reorienting and formulating strategy Cognitive hurdles Resource
hurdles Motivational hurdles Political hurdles
Turning around an organization that has limited resources
requires concentrating those resources where the need and the
likely payoffs are greatest Example: William Brattons 20-year
police career in Boston and New York
A firms search for growth often involves expansioneven
diversification into new lines of business Example: IBMSlide 2007
by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E
Chapter 15 - 23
Role Modeling Desired Behavior Management by walking around
Provides insights to both backstage and front-stage operations The
ability to observe and meet both employees and customers, and
opportunity to see how corporate strategy is implemented on the
front line Best Practice In Action 15.2
This approach may lead to a recognition that changes are needed
in that strategy A risk of prominent leaders becoming too
externally focused at the risk of their internal effectiveness
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 24
Leadership, Culture, and Climate (1) Leadership traits are
needed of everyone in supervisory or managerial positions,
including those heading teams Effective communication is essential
for a leader
Organizational culture Shares perceptions or themes regarding
what is important in the organization Shares values about what is
right or wrong Shares understanding about what works and what
doesnt work Shares beliefs, and assumptions about why these things
are important Shares styles of working and relating to others
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 25
Leadership, Culture, and Climate (2) Organizational climate The
tangible surface layer on top of the organizations underlying
culture Factors of influence: Flexibility, responsibility,
standards that people set, perceived aptness of rewards, clarity
people have about mission and values, level of commitment to a
common purpose
Creating a new climate for service, based on understanding of
what is needed for market success, may require Radical rethinking
of HRM activities, operational procedures, and the firms reward and
recognition policies
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 26
Summary of Chapter 15: Change Management and Service Leadership
(1) Service profit chain provides useful summary of behaviors
required of service leaders to manage effectively Marketing,
operations, and human resource management functions need to be
closely coordinated and integrated in service businesses Four
levels of service performance Service Service Service Service
losers nonentitites professionals leaders
Service leadership is not based on outstanding performance
within a single dimension, but must cut across marketing,
operations and human resourcesSlide 2007 by Christopher Lovelock
and Jochen Wirtz Services Marketing 6/E Chapter 15 - 27
Summary of Chapter 15: Change Management and Service Leadership
(2) Leading a service organization involves eight stages To be
effective, leaders need to understand difference between leadership
versus management, as well as setting direction versus planning
Transformation of organization can take place in two ways:
Evolution Turnaround
Role modeling is one of traits of successful leaders Leaders
play a big part in nurturing an effective organizational culture
that transforms an organization into a successful oneSlide 2007 by
Christopher Lovelock and Jochen Wirtz Services Marketing 6/E
Chapter 15 - 28
