Sunday, January 31, 2010

Question 5: Complexity vs. Divergence

Here are a couple of definitions related to business process design:
1. Complexity: number and intricacies of the steps in a process
2. Divergence: requirement of exercising judgment or discretion in a process
The way to spot complexity in a service blueprint is to count the number of steps. Complex procedures have many steps. Alternatively, divergence is seen in the nature of the steps. When there are multiple ways of handling steps there is high divergence.
1. Think about your focal company....in general, would it's service blueprint exhibit complexity, divergence, both, neither. Talk a little bit about where we might see either complexity or divergence (types of activities, why these are complex/divergent).

I feel that the actual process that Netflix uses to receive and distribute DVD's is not very complex, but also does not require a large amount of judgement or discretion in decision making by the employees. At the corporate level, however, Netflix gives its employees a great amount of freedom to try out new ideas and processes. In general, Netflix puts the decision making in its customer's hands since each individual has to make decisions about the order in which they wish to receive their DVD's, if they want to keep them, the order in which they return them, and how many they choose to view in a month.

2. If you had a choice between substituting divergence for complexity or vice versa, which would you do? Why? Under what circumstances?

I would mostly favor substituting divergence for complexity because it gives employees more room to make changes or "think outside of the box", rather than having an intricate step-by-step process to follow. Thinking back to some of the positions I've held in the past, I got more enjoyment and knowledge out of those positions that were not 100% defined and structured. Having the ability to tackle issues or daily tasks in a new manor kept the work enjoyable.

Friday, January 15, 2010

Question 4: Bank of America

To better prepare for our visit with MSU Federal Credit Union President Pat McFarlin and Vice President of Finance, Tiffany Ford, today's entry will focus on a financial institution instead of your focal organization.

1. Identify a product and/or service that you use from your financial institution (e.g., credit card, savings account, checking account, student loan, etc.) and describe the characteristics/benefits of the product/service.

I do the majority of my day-to-day banking with Bank of America, where I have a checking account, a savings account, and a credit card. The benefit of having all three of these services with one bank is the ease with which can transfer money and manage my accounts and balances.

2. How would you rate the financial service provider’s service?

Out of 10 I would rank Bank of America a 8. They've always been accommodating with disputes I've had on my credit card, and just this week I got a call because of suspicious activity on my account, which turned out to be fraud. They were quick to rectify the situation and were proactive in monitoring my account.

3. What is your level of customer satisfaction and why?

Again, out of 10 I would put my customer satisfaction level at a 7. I started my account with Bank of America when I was living in Charlotte, NC, where they are headquartered. It would be nice if there were more ATM's in the East Lansing area. Also, their website is very user-friendly. I do 90% of my banking online, so having a comprehensive site is very helpful.

4. Where do you think customer service / satisfaction fits in your financial service provider’s overall strategy? Why?

I think Bank of America strives to create a personal connection with its customers, or at least the feeling of a personal connection with them. It's much harder for a financial institution as large as they are to actually service each customer individually than it is for, say, a local credit union. By creating a feeling of personal service I think Bank of America is trying to make their customers comfortable banking with them and, as far as I can tell, it's working.

Thursday, January 14, 2010

Question 3: Porter's Generic Strategies

1. Using the cost generic strategies matrix, where is your organization positioned? What evidence do you have to support this positioning?

Netflix competes on a Differentiation/Cost Leadership strategy as their target scope is broad and they offer a fairly unique service to their customers, but also appeal to frequent renters as a low cost alternative to a traditional video rental store. They have very efficient distribution channels as well as a reputation for innovation.

2. Add two to three other competitors to the matrix. For your organization or those competitors focusing on differentiation or focus, what are the specifics?

Amazon has a cost leadership strategy as they sell a wide variety of products at very competitive prices. Blockbuster employes a focus strategy to differentiate themselves from Netflix. Since they generate a large portion of their revenues from physical stores, they have a narrow market segment, but as I mentioned in my previous post, they have moved into online DVD rentals, so they are attempting to emulate Netflixs' unique service offering, but most likely would have not done so on their own.

3. How well is your organization positioned? How might your organization be at risk (or not be as well positioned)? Why?

Netflix is positioned well on Porter's matrix, utilizing both a low cost strategy to attract and retain "heavy users" of their service as well as a differentiation strategy for those customers who don't want to spend time going to an actual store to rent DVD's. Additionally, the rating system Netflix uses suggests other videos a customer may be interested based on the unique ratings of past movies they've seen.

Netflix may be at risk to lose the low cost aspect of their business with increasing pressure from Amazon as well as profit erosion caused by increasing postage rates.

Question 2: Service Process Matrix

On the Service Process Matrix, where the x-axis measures the degree of interaction and customization, and the y-axis measures the degree of labor intensity, Netflix lies in the upper left quadrant, named "Service Factory". They are however, very close to the center of the matrix on the y-axis as their business has a low amount of interaction with the customer, and at the same time, a high degree of customization.

Netflixs' top three competitors are: Blockbuster, Amazon.com, and Bestbuy. Blockbuster and Bestbuy, both businesses that are inherently more labor intensive since they have actual store front locations, lie in the bottom left, "Mass Service", quadrant of the service matrix. Amazon is in the same quadrant as Netflix, "Service Factory", since both are online-only retailers whose businesses are run from warehouses throughout the country.

Blockbuster is facing a great disadvantage when compared to Netlix since they have a lot of capital tied up in physical stores, and this fact is evident when comparing the market capitalization of both companies (Netflix: $2.8B, Blockbuster: $97M).

Amazons' position is much better since they are a larger company that offers many products and services and are not dependent on DVDs to generate revenue. Since they are a much larger company, they also have a considerably higher amount of cash on hand to invest in new projects ($2.7B vs. $140M at Netflix). Also, both Amazon and Blockbuster offer online services that are similar to Netflix whereby a user can create a list of DVD's they want to watch and both have the ability to stream video to a compatible device.

Lastly, Bestbuy is a movie and technology retailer, and offers an alternative to Netflix for customers who would prefer to purchase a DVD rather than just renting it. Since Bestbuy is a retailer, they also sell Netflix-ready equipment to allow users to stream videos from Netflix (and Amazon) directly to their televisions.

Wednesday, January 13, 2010

Question 1: Why Netflix?

I choose Netflix not just because they are a service-oriented company that is increasingly gaining traction both with subscribers and financial institutions but also because they have created a corporate culture that is driven by innovative ideas and business practices.

The service winners of Netflix center around the ease of use. There are different service winners for different customers. A subscriber doesn't need to drive to a physical store to select a DVD, instead they are able to create a queue online and the movies are delivered in the mail. Recently, Netflix has launched an Instant Queue feature that allows a subscriber to watch a limited amount of movies or shows on their computer or a Netflix-ready device (Xbox 360, PS3).

In terms of service qualifiers, Netflix subscribers need to have internet access to prioritize their queue and a mailing address. Without these, customers would be unable to request and receive DVD's.

Finally, Netflix would experience a loss of subscribers if the mailings took too long to reach the customer. Having realized this, Netflix works hard to ensure a one-day turnaround in receiving and sending out a new DVD to a customer. Additionally, there are over 50 Netflix distribution centers nationwide to ensure timeliness of delivery.